M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, November 15, 2010

2011 Asian M&A

Clifford Chance looks into its crystal ball (i.e. it's 2010 Asian M&A Survey) and suggests that the short-term future of M&A in Asia is bright. 

And our respondents believe this trend will continue. More than 70% expect cross-border outbound M&A from strategic acquirers based in the Asia-Pacific region as well as intraregional M&A within the Asia-Pacific region to show an increase on last year.  Even those who are not as bullish expect that it will stay at the same level with only 2% predicting cross-border outbound M&A will decrease year-on-year and only 1% predicting intra-Asia-Pacific M&A will drop compared with last year.

Mirroring the activity to date most of our respondents expect China to be home to the most buy-side activity: 62% of our respondents named China as the country that will produce the maximum number of investors and acquirers.  During the next 12 to 18 month period and a whopping 85% named China in their top three.

Almost as if on queue, there are concerns that Chinese investors might be lining up to take a large bloc of GM's IPO.


November 15, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Friday, October 1, 2010

Afsharipour on Indian Outbound M&A

The other great power of the 21st century tends not to get a lot of attention.  I don't know why.  In any event, that's changing.  Afra has just added to growing body of work that helps put the rise of India in context.  Her new paper, Rising Multinationals:  Law and the Evolution of Outbound Acquisitions by Indian Companies, is available on SSRN.  I find it ironic that Indian multinationals have finally begun to come into their own.  Maybe that just shows my age.  I really enjoyed this paper.

Here's the abstract: 

India is one of the fastest growing economies in the world and is predicted to become the third-largest economy in the world after the United States and China. India’s economic transformation has allowed Indian firms to gain significant attention in the world economy, particularly as acquirers of non-Indian firms. In the past decade, Indian companies have launched multimillion and multibillion dollar deals to acquire companies around the globe, with a significant concentration of targets in developed economies, in particular the United States and the United Kingdom.

Finance and business scholars have addressed outbound acquisitions by Indian multinationals, emphasizing the business and economic motivations for such transactions. However, there has been little analysis from a legal perspective of the significance of India’s legal norms and rules, including recent shifts in the country‘s regulatory and legal regimes, in the rapid expansion of Indian multinationals. This Article fills this void by analyzing the role of India’s post-liberalization legal reforms in outbound acquisitions by Indian companies. This examination presents a more complete picture of the legal environment and legal rules that have facilitated outbound acquisitions by Indian multinationals, but also reveals how limitations in India‘s legal reforms have constrained these deals.

This Article argues that Indian corporate law plays a number of important roles in the emergence of Indian multinationals. First, legal reforms since economic liberalization have set the stage for outbound acquisitions by Indian multinationals. Second, Indian legal reforms and legal history have shaped outbound acquisitions both in terms of transaction structure and transaction size. Third, legal constraints on Indian firms’ mergers and acquisition activity impose substantial restrictions not only on the methods that Indian multinationals use in pursuing outbound acquisitions, but also on the future potential of Indian multinationals.


October 1, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Thursday, July 29, 2010

Corporate Governance Around the World

I spent some of this week in Washington, D.C. at the XVIIIth International Congress of Comparative Law.  The congress, which is presented by the International Academy of Comparative Law and the American Society of Comparative Law is taking place all of this week and is hosted by three local law schools, American University Washington College of Law, George Washington University Law School and Georgetown University Law Center.  The conference is a wonderful gathering of jurists, lawyers and scholars from around the world.

Part of the week’s events involves the delivery of general and national reports on a variety of legal issues.  This year the International Academy of Comparative Law has decided to deal with corporate governance in a session at its 18th International Congress on Comparative Law and has commissioned a general report, as well as various country reports on the matter.  The general report, which is based on 32 country reports, focuses on (i) Corporate Governance: Concepts and General Problems; and (ii) the Board and the Shareholders as the Two Key Actors in Corporate Governance.  There are also links to specific country reports.  For those interested in a broad comparative survey of corporate governance issues, the reports are a useful summary. 

- AA

July 29, 2010 in Asia, Cross-Border, Europe | Permalink | Comments (0) | TrackBack (0)

Sunday, July 25, 2010

BP Asset Sales

Seems like BP is aggressively seeking to shed assets in a bid to generate cash to fund the $20 billion compensation account for the damages associated with its ongoing mess in the Gulf of Mexico.   BP started with series of sales of Alaskan, Canadian and Egyptian-based assets to Apache, raising $7 billion.  Now comes word from the Vietnam News Agency that BP plans to sell its interests in Vietnam.  These include the Lan Tay and Lan Do offshore gas fields which have been producing for more than a decade, the Nam Con Son gas field, as well as BP's 720MW Phu My gas-fired power plant    The sale may generate an additional $1.3 billion for Gulf compensation fund.


July 25, 2010 in Asia, Asset Transactions, Current Events | Permalink | Comments (0) | TrackBack (0)

Thursday, July 15, 2010

Corporate Governance Reforms in India

So I’ve been away for a while with a research trip to India and then madly trying to finish a couple of papers related to the trip.  Before I left, I blogged about some of Vice Chancellor Strine’s comments during his lecture at Stanford’s Rock Center for Corporate Governance.  I think that some of Chancellor Strine’s comments on the efficacy of independent directors should be a warning for those pushing for corporate governance reforms in other countries.  I have written previously about the potential pitfalls of importing US-style corporate governance rules with respect to India.  I’ve now posted another paper entitled "The Promise and Challenges of India’s Corporate Governance Reforms" which addresses some of the recent reform efforts following the Satyam scandal and the continuing barriers for effective corporate governance.  The paper is forthcoming in the inaugural issue of the Indian Journal of Law and Economics.

Recently, there has been some very interesting work on independent directors in India, particularly arising out of unprecedented independent director resignations following the Satyam scandal.  The Indian corporate law blog has a very useful post about recent academic literature on corporate governance norms, including the value of independent directors, in India.  For those interested in India, all of the papers are worth a careful read.

I think that while the independent director model has much to recommend, there are serious constraints to the model for the Indian context.  There is a danger that simply pushing for independent directors will not fully address some important corporate governance concerns in India, particularly the pervasive influence of promoters and controlling stockholders.  Others, in particular Umakanth Varottil, have also written on this issue.  I highly recommend Umakanth’s recent paper entitled “Evolution and Effectiveness of Independent Directors in Indian Corporate Governance” for anyone who is interested in corporate governance reforms around the globe.

I’ll soon be posting more on other projects related to this trip to India, including a paper on outbound M&A by Indian firms.  Stay tuned…


July 15, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Thursday, June 17, 2010

Japanese Mandatory Tender Offer Rules

Orrick has a two-part client memo on the mandatory tender offer rules in Japan (Part 1 and Part 2).


June 17, 2010 in Asia, Tender Offer | Permalink | Comments (0) | TrackBack (0)

Thursday, May 27, 2010

Continuing Problems with Prudential’s Plans to Purchase AIG’s Asian Assets

Back in March, Prudential announced a $35.5 billion purchase of American International Assurance, the Asian arm of A.I.G. (for more info see this prior post).  The deal hit some snags early on because of regulator concern about Prudential's capital.  Prudential is also encountering serious resistance from investors as it tries to complete a $21 billion rights offering in order to finance the deal.  The offering requires a shareholder vote (a whopping 75% of the shares that are voted) and the Prudential shareholder meeting is scheduled for June 7th.  The economist magazine has come out in favor of the deal, seeing it as more about "uniting competitors in Hong Kong and Singapore, which comprise about half of the activities in Asia of both AIA and Prudential" than about destiny and empire building.  But now RiskMetrics has now entered the fray and recommended a vote against the deal.  The concern is that Prudential may be overpaying for this deal, and that post-acquisition many of AIA’s people may leave to join the company’s rivals.

Prudential's management has not done an amazing job selling this rather expensive deal to their shareholders.  Will this be another big deal that goes bust?


May 27, 2010 in Asia, Current Events, Deals, Europe | Permalink | Comments (0) | TrackBack (0)

Friday, April 16, 2010

M&A in Hong Kong

Norton Rose has a memo on the in's and out's of M&A in Hong Kong.  Transactions involving Hong Kong companies are governed by the Codes on Takeovers and Mergers and Share Repurchases.   The Hong Kong takeover code is similar in many respects to the UK Takeover Code.  The Norton Rose memo notes:

Although the Code does not have the force of law, compliance with the Code is, in practice, mandatory because the Panel can impose sanctions on market participants considered to be acting in breach of the Code.  These sanctions can include: reprimand (both private and public); and "cold-shouldering" (prohibitions on certain persons from acting for the offending entity).  In addition, any breach of the Code by a listed company will constitute a breach of the Listing Rules by that company.

The Hong Kong Takeover Panel website is here.


April 16, 2010 in Asia | Permalink | Comments (0) | TrackBack (0)

Monday, March 8, 2010

The century of the (volatile) emerging market?

I’ve been blogging a lot about cross-border M&A, mostly covering Indian conglomerates purchasing firms outside of India.  Emerging markets are not just experiencing outbound deals, there is also a lot of interest by western firms in acquiring targets in these markets.  According to recent data by Thomson Reuters, 34% of deals announced thus far in 2010 involved a target or an acquirer (or both) in an emerging market. For example, just last week Prudential PLC, the British life insurance and asset management company, announced a $35.5 billion deal to purchase AIG’s Asian assets.  The deal would fundamentally transform Prudential, making it a major player in the Asian insurance market

These cross-border deals represent an important shift in deal-making and M&A activity.  This is pretty exciting stuff especially given the overall decrease in M&A activity in the west.  But cross-border M&A deals in emerging economies can also be somewhat thorny for deal makers.  As articulated in this recent article “while optimism toward emerging-market deals is palpable, and the macroeconomic signs are positive, the reality for deal makers may not be so rosy. Deals in emerging markets often run into surprises like onerous government intervention or corporate management that, at the last minute, changes terms or tactics.” 

Cross-border deals involve social, political, cultural and economic sensitivities that require sophisticated deal makers and counsel.  For example, due diligence may involve an investigation into deal risks that are not always common in domestic deals (FX issues, political instability, etc.).  Lawyers advising clients on emerging market M&A deals will need to be nimble and creative in their thinking, and have an understanding of the macro-economic and political environment beyond the typical domestic deal.  Moreover, they must be ready to ask tough questions to which there may not be easy answers.  It is not just the diligence process that is different.  Deal documents will often look quite different from those used in typical domestic deals.  I think some of the interesting questions for scholars and practitioners to investigate are whether, how and why deal documents differ, and to study the extent to which parties entering into acquisition deals in countries that seem to have very different legal rules nevertheless tend to develop roughly similar solutions to the characteristic problems that arise in acquisition transactions.


March 8, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Friday, February 26, 2010

Overview of Indian Takeover Regulation

Sandeep Parekh at IIM recently posted a paper that includes a short introduction to takeover regulation in India, Indian Takeover Regulation - Under Reformed and Over Modified.  Given the recent increase in cross-border transactions involving India, this paper is worth taking a look at. 

Abstract: The takeover of substantial number of shares, voting rights or control in a listed Indian company attracts the provision of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997. The regulations have been amended nearly 20 times since inception, though the amendments have mainly concentrated on areas which needed no amendment. At the same time a vast number of obvious problems have not been rectified in the regulations. The large number of amendments have also created requirement of a compulsory tender offer of such unnecessary complexity as to make it virtually unintelligible to even a well qualified professional.

This paper argues that the complexity in the trigger points for disclosure and tender offer introduced over the years lacks a philosophy, and most of the amendments can not only be deleted but a very simple structure can be introduced making compliance of the regulations straight forward and easy to understand by management of listed companies. Certain other areas which need amendments have also been discussed. Chief amongst these are the provisions relating to consolidation of holdings, conditional tender offers, hostility to hostile acquisitions, definitional oddities, payment of control premium in the guise of non compete fees, treatment of differential voting rights, treatment of Global Depository Receipts and disclosure enhancements.

This paper does not try to portray a particular combination of numbers as the best possible set of trigger points and compulsory acquisition numbers but advocates that whatever numbers are adopted should not be changed for several decades. Arguments that state that the changing economic condition requires constant changes with these numbers, it is argued is wrong.


February 26, 2010 in Asia, Takeovers | Permalink | Comments (0) | TrackBack (0)

Thursday, February 25, 2010

Hummer Deal Finally Dies

So it's hardly a surprise to anyone paying attention that GM's deal to seller its Hummer unit to an unknown privately owned company from the interior of China died yesterday.  (GM announcement here)  GM announced that it would begin to immediately shut down Hummer and its operations.   

Though the terms of the proposed deal haven't been made public, I'm assuming the sale agreement included a customary regulatory condition to closing.  Such a condition would permit either party to refuse to close and then terminate the transaction in the event the required regulatory approvals were not obtained by the deal's drop dead date.  The way these conditions are often written, the parties can then walk away without either party paying a fee.  

However, given the importance of Chinese regulatory approval to making this deal happen and the high degree of risk that was so evident early on, the parties (or GM) would have been smarter to include a reverse termination fee tied to the Chinese buyer's failure to secure approval for the deal.  Or, at the very least, they should have considered including a "ticking fee" after the deal's first deadline passed without an approval.  Hummer was always a money losing transaction venture for GM.  The longer it kept it going in hopes of this deal closing, the more money GM lost.  We'd have all been better off if the buyer had to pay for the delay.  Of the two, the buyer was in the better position to bear the risk of China not approving the proposed deal.  Were there a fee in place, the buyer would have been forced to make a decision sooner about the likelihood of this deal going forward rather than simply let it float along and cause further damage to GM.  

In any event, this is an example of a transaction that may be sensitive from a regulatory perspective.  In such transactions, reverse termination fees or ticking fees might play a useful role in efficiently shifting onto buyers the risks of the deal collapsing.


February 25, 2010 in Asia, Miscellaneous Regulatory Clearances | Permalink | Comments (0) | TrackBack (0)

Monday, February 22, 2010

Cross-Border M&A and National Pride

This morning I opened my email to see news on two multi-billion dollar deals by Indian conglomerates.  Bloomberg reported that Reliance Industries Ltd., one of India’s largest companies and owner of the world’s largest oil-refining complex, raised its offer for bankrupt LyondellBasell Industries AF to about $14.5 billion.  In addition, India’s Bharti Airtel has been able to line up almost $9 billion in loans for its $10.5 billion bid for Zain’s African assets.  These types of large-scale deals generally receive a lot of positive popular press attention in India, some of it with nationalistic sentiments touting the rise of India Inc.  Whenever I read these stories they make me wonder about a recent paper by Ole-Kristian Hope, Wayne Thomas and Dushyantkumar Vyas, entitled “The Cost of Pride: Why do Firms from Developing Countries Bid Higher?” which examines whether companies from developing countries bid higher (relative to companies from developed countries) in their quest for international expansion and national glory.

Abstract: Using an extensive panel of cross-border M&A transactions between 1990 and 2007, we find that firms from developing countries (versus those from developed countries) bid higher on average to acquire assets in developed countries. We are interested in why these higher bids occur. We find that bids of firms from developing countries are higher in cases where the transaction displays “national pride” characteristics, where national pride is identified through a manual examination of media articles. These results, which are robust to numerous specifications (including alternative measures of national pride) and control variables, are both statistically and economically significant and highlight a source of pride beyond personal hubris which potentially influences corporate decision makers.

In my opinion, the next stage of this research is to see whether deals with national exuberance create positive wealth effects for the shareholders of the bidding companies.


February 22, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

PCCW Highlights Corporate Voting Problems

Here's a case out of Hong Kong that is highlighting some of the real problems associated with corporate voting.  If you think Florida is bad (apologies to Florida), then you haven't been paying attention to the deficiencies associated with corporate voting.  In the PCCW case, controlling shareholder Richard Li unsuccessfully attempted a $2.1 billion buyout of the public shareholders.  From Forbes:
Bloomberg reports that the company's offices were searched by police earlier this month, along with those of Fortis Insurance Co. (Asia), a local insurer that was once controlled by Li through his Pacific Century Regional Developments (PCRD).

Hong Kong's Securities and Futures Commission won a court ruling in April, 2009 to block Li’s bid after the regulator alleged that hundreds of people, including Fortis Asia agents, were given shares in the phone carrier to boost support for the deal.

Li, the son of Hong Kong's richest man, Li Ka-shing and a billionaire in his own right with a fortune we estimate at $1.1 billion, has not been implicated in any wrongdoing.
Although minority shareholders were vocally opposed to the transaction, it succeeded at the ballot box.  It's all still a little fizzy what was going on here.  The Hong Kong police have since raided Mr. Li's home apparently and sealed up the ballot boxes.  At this point, there is no indication that Mr. Li violated any laws.   It's an odd situation.  It's hard to imagine the police intervening in a US corporate election, but there you have it.   

While we're on the subject, Marcel Kahan and Ed Rock have a paper, The Hanging Chads of Corporate Voting, that appeared in the Georgetown Law Review a couple of years ago that's worth reading again.


February 22, 2010 in Asia, Going-Privates | Permalink | Comments (0) | TrackBack (0)

Monday, February 15, 2010

Joining the M&A Party

Many thanks to the M&A Law Prof Blog for inviting me to be a contributor.  A devoted reader, I am very flattered to be among such fabulous company.  Hopefully there will be much to blog about in the M&A world.  At least according to the March 2010 issue of Bloomberg Markets Magazine, a recent survey of M&A professionals indicates that almost all expect a resurgence in M&A activity in 2010.  Of course, no one expects a quick return to the dizzying heights of 2007, but hopefully 2010 will beat the dismal 2009 numbers.  Given my interest in comparative law and outbound M&A deals, I was happy to see that the Asia-Pacific region is expected to be the leading hot spot for M&A activity in 2010.  Asian companies have been quite active in cross-border M&A activity in this first quarter, see for example the recent $10.5 billion bid by Bharti Airtel, an Indian telecom company, for Zain’s African assets.  I think that these types of South-South deals, and their political/legal challenges, will continue to be a major feature of M&A news in 2010.  I'll try to keep our readers updated on the legal angles of these and other hot M&A stories.


February 15, 2010 in Asia, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 19, 2010

Japan's Premerger Notification Regime

MoFo has memo on the recent amendments to the Japanese Anti-Monopoly Act that went into effect Jan. 1, 2010 here.


January 19, 2010 in Antitrust, Asia | Permalink | Comments (0) | TrackBack (0)

Monday, January 11, 2010

Chinese Merger Control

Zhang and Zhang have an article, Chinese Merger Control: Patterns and Implications, appearing in the Oxford Journal of Competition Law and Economics assessing the efficacy of the recent Chinese Anti-Monopoly Law.  (There's also a version on SSRN, if you don't have a subscription to the Oxford journal.)  Premerger notification and review is obviously an important deal planning issue and China's entry onto the scene in this respect is important.  It's also raised a number of concerns, in particular how China's government would use its power to block deals or seek remedies.  The fear, of course, is that authorities might be motivated by nationalism or parochial politics in approving or blocking deals as anti-competitive.  Zhang & Zhang take on this and other issues in their review.  

Abstract: China's Anti-Monopoly Law went into effect on August 1, 2008. Even though enforcement authorities tend to build their capacity progressively, China has already seen three milestone case decisions in the past year: InBev/Anheuser-BuschCoca-Cola/Huiyuan, and Mitsubishi Rayon/Lucite. In this article, we elaborate the background of each case and provide in-depth analysis of each decision. In particular, we explore the common characteristics of the cases, the economic theories on which the merger control authority has relied in its merger decisions, and the patterns regarding China's merger policy.

Along the same lines McDermott Will & Emery's China office has client memo on the new regulations on merger notification that went into effect on January 1, 2010.  The regulations start to lay out premerger notification processes that corporations wishing to merge will have to comply with.


January 11, 2010 in Antitrust, Asia | Permalink | Comments (0) | TrackBack (0)

Friday, November 20, 2009

Insider Trading in India

Here's a relatively recent empirical study of insider trading in India in advance of merger announcements, Merger Announcements and Insider Trading in India: An Empirical Investigation.  Shorter version:  insider trading is rampant.  Don't be surprised.  It's apparently rampant here.  Why shouldn't it be in India as well? 

Abstract: Insider trading activity is investigated prior to merger announcement in Indian capital market. An attempt is made to check it out whether trading takes place on the basis of asymmetric and private information. For examining the behaviour of stock prices a modified market model is used to estimate the parameters for the estimation window. These estimates are used to compute average return and cumulative average returns for the event window, which are measures of abnormal returns. Besides price run-ups, it is also common to see unusually high levels of share trading volume before public announcement of merger. Daily trading volume pattern of the target companies is also investigated. The analysis carried out in this study is based on a sample of 42 companies for which merger announcement date was announced during the period of 1996-1999. Based on the analysis for each company individually, we recommend investigation in six companies for existence of possible insider trading.


November 20, 2009 in Asia, Insider Trading | Permalink | Comments (1) | TrackBack (0)

Tuesday, October 27, 2009

PE in Vietnam

Yesterday, the FT carried a piece announcing that TPG would be investing $35 mln in a private Vietnamese company, Masan Group.  I'm noting this for a couple of reasons. First, I have a long-standing personal/professional interest in things that happen in Vietnam.  Second, this investment comes against the backdrop of reports earlier in the month that PE investors had turned off the spigot to new Vietnam country funds.   To be honest, that's not altogether surprising.  It's still a relatively small (85 million people!) place and investments there are hands-on projects that require more spade work than you can probably imagine.  At the same time the past few years have seen an explosion in the growth of PE interest in the country resulting in much more money chasing deals.  That said, the Masan Group is a real company that's enjoyed quite a bit of success with a strong management team. 

Third, you can be sure that this deal will be well documented.  I wouldn't be surprised if a recognizable US- or UK-based law firm did the work.  I can guarantee you though that TPG is holding its breath a bit and hoping it will all work out as it signs up.  TPG would be smart to negotiate a tight deal with an airtight offshore dispute resolution clause.  If not, remember that Masan Group is a Vietnamese company and disputes amongst the stockholders will be resolved by the Vietnamese economic courts.  Let's be charitable and just say that these courts are not quite the Chancery Court of Delaware.  


October 27, 2009 in Asia | Permalink | Comments (0) | TrackBack (0)

Sunday, October 11, 2009

Pre-Merger Notification in Japan

Jones Day's overview of pre-merger notification rules in Japan.


October 11, 2009 in Antitrust, Asia | Permalink | Comments (0) | TrackBack (0)

Friday, October 2, 2009

Hostile Takeover Market ... in India?

An article in The Economic Times of India raises that prospect.  But, the takeover market in India is governed by the Securities and Exchange Board of India and is organized along the lines of the UK's Takeover Panel.   So while there may be the prospect of unwelcome offers on the horizon, targets won't have the benefit of the defensive measures that have stymied the hostile acquisition in the US for years.


October 2, 2009 in Asia, Cross-Border, Transaction Defenses | Permalink | Comments (0) | TrackBack (0)