Best practices in addressing corruption
risk
- Corruption risk is on the rise in Asia, with over 100
pending FCPA investigations in the region compared with 40 in
Africa;
- But the US has seen relatively few M&A related
enforcement actions since 2014. Connected hires and corporate
hospitality featured prominently in 2015 actions;
- FCPA remains the most feared of the international
frameworks. The UK Bribery Act has not lived up to
expectations in terms of enforcement, even though its
prohibitions are wider than the FCA;
- There has been a seachange in the last few years insofar
as business people realising the risk and engaging outside
counsel more, as personal liability increases;
- Companies’ counsel are increasingly spending
up to six months on anti-corruption diligence in red flag
countries China and Indonesia.
The art and science of post-merger
integration
- As M&A volumes continue to rise, acquirers are
dedicating more time and resources to post merger
integration;
- But a one-size-fits-all approach won’t work,
and bidders should prioritise the process;
- Planning should include attempts to retain talent within
the target company and pure financial incentives are often
not enough;
- Sometimes the best solution is to treat the two companies
as separate entities with separate HR strategies and
different remuneration strategies;
- Some companies, especially serial acquirers, have
dedicated post-acquisition integration teams. But in other
cases the local teams are left to manage the process
themselves.
Tech M&A: key issues in today’s
convergence-driven TMT market
- Tech M&A is on the rise. It’s driven by
consolidation, with a large number of smaller players. Also
driven by private equity interest in the industry;
- Asia is still difficult to acquire in the TMT sector.
Regulatory restrictions are high, especially in
Indonesia.
- Employment restrictions are also holding acquirers
back;
- Cfius arises frequently. It’s a difficult
hurdle to get over. Some deals expected to be caught by it
end up sailing through, while others are unexpectedly caught
by the US rules.
- Data security regularly features on operational lists for
risk registers, but doesn't feature heavily on due diligence
which tend to be quite high level.
- Look at what other approaches successful acquirers took,
especially when investing from the US to Asia.
Don't’ be afraid to follow the same principles
and practices.
Vietnam and TPP: A new wave of M&A
- The inflation rate now being kept at one percent, while
the Vietnamese dong is stable. There has been a huge
accumulation of non-performing loans;
- The government is focusing more on the private sector by
working with Asian Development Bank;
- Historically they didn’t regulate the IT
sector, but this has seen the strongest growth.
- The new Investment Law and New Enterprise Law exempt
foreign investors from applying for an investment
certificate;
- The new investment regime allows foreign corporates to
get a controlling stake in local companies in various
sectors, such as insurance and manufacturing, with
registration for sensitive sectors taking 15 days and five
for less important ones;
- There is huge diversification in the Vietnamese market
and foreign investors, mainly from China, are looking how
they can diversify in the country.
Developments in outbound M&A into
Europe
- Chinese companies are increasingly looking to buy
international brands to enhance their own image and
competitiveness;
- New investment in private equity funds from finance
buyers is showing such a huge increase, which has totaled
$192 billion in deals and 1062 transactions, a 69% change
from 2014;
- Targeted areas in Europe remain TMG, consumer healthcare
and real estate;
- China’s One Belt One Road will offset the
country’s slowing growth domestically and it
will give rise to investment opportunities. It will close the
gap between the coastal regions and the rest of China;
- There is no framework or a blueprint for the execution of
this initiative, but it will have a big impact and will be
felt across Europe.
Privacy and data security issues in M&A
deals
- A lot companies’ data assets are digital so
due diligence involves trade secrets and intellectual
property;
- The EU set up a data protection framework in 1995 and a
lot of countries have followed, with Hong Kong’s
modelling the EU’s;
- The fines for breaching data protection laws now reach up
to four percent of your global turnover;
- Foreign organisations headquartered in the EU will still
be fined even if even the breach has been committed in Hong
Kong.
Distressed M&A: Leveraging opportunity in a down
market
- In some areas of China, political jurisdictions cannot be
relied upon because they aren’t predictable and,
on top of that, they are organs of the local
governments;
- The distress situation often lacks transparency;
it’s not unusual to see subsidiaries disappear
due to an accumulation of debt;
- There is a host of regulatory issues arising from
governments with large ownership stakes in public companies
that have made it difficult to deal with issues relating to
corporate structure;
- There is a lot of activity in the non-performing loan
space and a shift from offshore debt to onshore debt, which
has created a need for regulators to step in.