The evolution of Asia deal protections

Author: Ashley Lee | Published: 11 Mar 2015

Panellists at IFLR’s Asia M&A Forum on Tuesday agreed that material adverse changes (Macs) are rarely triggered, despite their popularity. The speakers favoured protection mechanisms involving payment, such as deposits.

Deal protection is a focus in Asia, due to many factors including warranty and indemnity concerns, domestic regulatory regimes and general counterparty risk.

Questions remain about the enforceability of Macs both in the region and globally. As such, panellists recommended parties protect themselves with more specific – and enforceable – measures, such as deposits and break fees.

KEY TAKEAWAYS

An increasing number of parties to Asian M&A are looking to deposits and break fees versus more contractual deal protections such as Macs;Buyer-paid deposits are becoming more popular, which highlights Asia’s seller-driven market;Break fees may also incentivise a party to get a deal done;Macs are...