Given that Singapore is geographically well-connected, robustly upholds the rule of law and generally speaking one of the easiest places in the world to conduct business, multinational corporations (MNCs) with operations around the world inevitably consider Singapore to be an attractive jurisdiction to establish a branch, subsidiary or headquarters. Thus, as more businesses are conducted with a Singapore nexus, cross-border mergers and acquisitions (M&A) transactions which involve Singapore law have likewise increased significantly over the years.
For corporations which do not have an established presence in Singapore and those which are motivated to extend their presence here, M&A is an effective method for them to gain a foothold in the local market, acquire innovative technologies and resources developed by their acquisition targets, and improve operational synergies by capturing economies of scale. The alternative for such MNCs would be to grow their business organically. If corporations decide to go with the acquisition approach, however, they should be aware that the complexity of such transactions can pose significant challenges, especially when multiple jurisdictions are involved, with each of these having its own legal, regulatory, and business considerations.
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The focus of this article is the role of a lead transaction counsel in cross-border M&A transactions.
The general role of an M&A lawyer has been covered in another of our article which you can read here.
In cross-border transactions, the LTC plays the crucial role in overseeing that the transaction aligns with the legal, regulatory, and business requirements of both foreign and local jurisdictions. The LTC serves as the central point of contact for all legal matters, coordinating with local counsel in each relevant jurisdiction while ensuring the overall transactional strategy and direction remain aligned with the client’s business objectives.
The responsibilities of the LTC can be broadly divided into several key phases:
(a) Pre-Transaction Phase: Structuring the Deal
During the initial stages of a cross-border M&A transaction, the LTC plays a key role in advising on the overall deal structure. This phase typically involves determining whether the deal will take the form of a share purchase, an asset purchase, or a merger. This critical decision affects factors such as tax considerations, regulatory approvals, and the parties’ post-transaction obligations.
The LTC typically also collaborates closely with financial and tax advisors to fully appreciate the cross-jurisdictional implications of each deal structure. The advisers will evaluate the tax impact in the target’s and the subsidiaries’ jurisdictions, potential regulatory hurdles, and the possible benefits or disadvantages of structuring the deal as a share purchase, asset acquisition or merger. The LTC also coordinates with local legal counsel in each relevant jurisdiction to understand the specific requirements or restrictions that might apply to the local subsidiaries from a legal and regulatory perspective.
(b) Due Diligence Phase: Legal and Regulatory Review
After the structuring phase, the parties will work towards finalising the broad commercial terms of the proposed transaction. Thereafter, the parties will proceed to execute the term sheet.
Thereafter, the next key phase is usually the legal due diligence phase which is typically conducted by the purchaser. At this stage, the LTC will typically send the due diligence request list to the target group, and subsequently ensure that all relevant legal documents are reviewed, any liabilities are identified, and potential risks are managed across these multiple jurisdictions. This process typically involves reviewing documents such as the target group’s financial statements, commercial contracts, intellectual property rights, regulatory compliance, and litigation history, to determine the legal risks of the proposed acquisition.
The LTC also coordinates the scope of work of local counsel in different jurisdictions, ensuring they focus on the key relevant legal issues specific to each country. For example, while local counsel may focus on corporate governance, intellectual property, and regulatory compliance within their jurisdiction, the LTC will consolidate the legal issues into a holistic due diligence report to provide a good overview of the legal risks of the proposed acquisition.
Because the due diligence request list is often one of the first documents the target group receives, due diligence standards should take into account the local country’s legal regime and diligence practices to reduce friction with the seller. Failure to apply the due diligence standards in the seller’s jurisdiction may cause issues such as unnecessary delays, which may lead to the buyer missing key local issues. Thus, lead counsel coordinating a global due diligence exercise should adopt meticulous steps to control the accuracy and efficiency in the diligence reporting, including but not limited to: creating guidelines to control reporting conformity on the proper breakdown of work scope, defined terms and reporting timeline, and ensuring all relevant legal documents in the data room are properly reviewed.
Furthermore, the LTC should consult with local counsel at the kickoff meeting of the transaction to determine if there are statutory restrictions that may prohibit the buyer from carrying out the acquisition as originally contemplated.
Besides common restrictions on foreign direct investment in a country’s military, utilities infrastructure, high technology sectors and natural resources, many countries recently have also placed significant foreign direct investment restrictions on businesses, such as those relating to the medical device and medical therapies industries and those that hold sensitive personal data.
Foreign investment regulations also can be heavily influenced by political considerations as these statutes are often vaguely worded and subject to executive oversight, so an overseas buyer may need to implement a comprehensive communications strategy if resistance is likely. For acquisition of Singaporean businesses, the LTC must ensure compliance with local laws such as the Companies Act 1967, the Securities and Futures Act 2001, and the Competition Act 2004, and all other relevant regulations. The LTC may be required to work closely with regulatory authorities such as the Monetary Authority of Singapore (MAS) and the Competition and Consumer Commission of Singapore (CCCS) to secure necessary approvals and consents.
(c) Negotiation Phase: Managing Multiple Stakeholders
In cross-border M&A transactions, the LTC coordinates negotiations involving multiple stakeholders, including management teams, financial advisors, and legal representatives across various jurisdictions, whilst ensuring that their client’s interests are adequately represented.
During these negotiations, the LTC tend to draft the key legal documents required for the transaction, including the definitive agreements, and any ancillary agreements such as employment contracts, ensuring that all documents are in compliance with the legal requirements of the jurisdictions involved while also ensuring that they align with the commercial objectives of the client.
The LTC is also responsible for negotiating key deal terms such as the conditions precedent to completion, representations and warranties, indemnities, and post-completion obligations. While negotiations in different jurisdictions may follow different cultural or legal norms, the LTC must maintain a consistent approach across the transaction and ensure that all stakeholders are aligned. Often a sensitive issue can be resolved not only by the words chosen and the substance of the proposed compromise, but by the manner in which it is raised and the stage at which it is discussed, taking into consideration these norms.
(d) Drafting and Finalising the Definitive Agreements
Typically, the drafting and finalisation of the definitive agreements are simultaneously carried out at the negotiation phase. This step is important to ensure that the transaction is legally binding. The agreements should clearly sets out the rights and obligations of the parties. In a cross-border deal, the LTC is responsible for overseeing the preparation of documents such as the share purchase agreement (SPA) or asset purchase agreement or merger agreement. The LTC will work closely with local counsel to ensure that the terms of these agreements comply with the laws of each relevant jurisdiction while also protecting the client’s interests. Some of the key elements of the SPA include representations and warranties, covenants, conditions precedent, post-completion obligations, and dispute resolution mechanisms. For more detail on these agreements, please refer to another of our article on this topic.
The LTC’s role in this phase also involves coordinating the completion process. Besides overseeing the signing and completion processes, the role of the LTC includes ensuring that all necessary approvals and consents are obtained from regulatory authorities, shareholders, or other third parties prior to the signing and/or completion of the transaction.
(e) Post-Transaction Phase: Integration and Compliance
After the transaction is completed, the LTC continues to play a crucial role in the post-transaction phase if there are post-transaction matters which have to be resolved with the guidance of a lawyer.
This phase involves the integration of the target group into the acquiring entity’s business, and ensuring a smooth transition of management to the buyer’s appointed directors.
The LTC assists the client with post-completion compliance, including the filing of necessary documents with local regulators, updates to shareholder registers, and the execution of any additional agreements or arrangements required by the transaction. Additionally, the LTC may assist with any disputes or claims arising post-transaction, ensuring that the client is well-prepared to address any legal challenges that might emerge during the integration phase.
Cross-border M&A transactions present unique challenges that make the role of the LTC especially critical.
These challenges include:
Generally speaking, an experienced M&A lawyer who has completed numerous transactions of varying deal sizes and has worked on transactions in a broad range of industries will have the requisite specialised knowledge and experience to protect their clients’ interests and to guide their client to completing the transaction.
As with choosing a medical specialist to treat an illness, clients tend to prefer working with a lawyer who is able to provide a fair and transparent fee structure, is detail-oriented and highly responsive, and last but not least, one who has a wealth of experience in completing M&A transactions over the course of the lawyer’s career.
A good rule of thumb to adhere to when considering which M&A lawyer to appoint is to ask the lawyer for a list of past M&A transactions which he or she was involved in, and the specific nature of their involvement in such transactions. Ideally, this should give the client a good sense as to which shortlisted lawyer is the best person for the job. On the contrary, if the lawyer cannot explain the entire legal process of a proposed M&A transaction, it should give you an indication that the lawyer may not be up to the task.
Our firm specialises in representing the buy-side, the sell-side, investors and target companies in cross-border mergers and acquisitions transactions.
The author, Waltson Tan, is a corporate lawyer based in Singapore. He is qualified as an advocate and solicitor in Singapore and has more than eight years of post-qualification experience.
Prior to founding the firm as a managing director in 2023, Waltson practised at some of the top law firms in Singapore and thereafter, at a leading international law firm, which was the second largest law firm in the United States and one of the ten largest in the world.
Waltson focuses his practice on mergers and acquisitions, private equity, joint ventures, investment funds and other general corporate and commercial transactions. He has also represented numerous leading multinational organisations on a broad spectrum of corporate, regulatory, cross-border restructuring and employment matters.
Waltson also advises clients on a monthly and yearly retainer basis, where he provides dedicated services to each client in relation to the issues which clients face, including general corporate and employment related matters.
Waltson Tan Director +65 8079 0028 waltson.tan@28falconlaw.com |
Office address: 101A Upper Cross Street #13-11, People’s Park Centre Singapore 058358 |