Typical M&A process
The process of acquiring a company would normally start with a search for potential acquisition candidates (or in the case of mergers, merger partners). Prior to approaching the target company, the management of the acquiring company should have an indicative value that they would pay for the assets to be acquired. Negotiation would normally commence as soon as the management (or owners) of the target company is interested to deal. Sometimes, there are circumstances where approvals from regulatory authorities would have to be obtained for the affected party to commence negotiation.
The regulations
If the transactions involve the sale or purchase of substantial assets by a public company, the regulations which govern such transactions are under Section 32 of the Securities Commission Act 1993 (SCA) and the Companies Act 1965. Where an acquisition involves the acquisition of voting shares which results in a change of control in a company, certain laws and regulations are put in place to protect the interests of shareholders, i.e. under Section 33 of the Securities Commission Act 1993 and the Malaysian Code on Take-overs and Mergers 1998 (Take-over Code). The regulations aim to ensure that all take-overs and mergers shall take place in a competitive, informed and efficient market, and to ensure fair and equal treatment of all shareholders of a company involved in a take-over and merger situation.
What happens to the shareholders in a take-over offer situation?
Where an acquisition is carried out through a take-over offer to all the remaining shareholders of a company, the party which proposes to take-over the target company will issue an offer document to the shareholders. The offer document will state all the important information on the offer. The shareholders will be offered as consideration either cash or shares of another company in exchange for their shares in the target company, or a combination of both shares and cash. In a share exchange situation, shareholders should find out more about the company whose shares are being offered as consideration.
In such exercise, shareholders of a target company must ensure that they get the best possible deals.
The shareholder of the target company is expected to read and understand thoroughly the terms of the offer document and recommendations in the independent advice circular before deciding whether to accept or reject the offer. They should weigh all aspects of the exercise in their decisions.
Shareholders who wish to accept the offer will need to fill up the acceptance form and mail it within the stipulated time. If they are unsure of the next course of action, they should consult a licensed investment adviser or a remisier. The investment adviser or remisier should be able to assist them in understanding the offer document and the independent advice circular. Whatever it is, shareholders MUST read and understand the offer document before making any decisions.
Lastly, in today’s dynamic business environment, many companies often face difficulty in making decisions about this issue. As it is management’s job to maximise shareholders’ value, in most cases, undertaking a take-over or merger exercise can increase a company’s competitive advantage and ultimately increase shareholders’ wealth. As an investor or shareholder of a company, you must be well-informed of your company’s activities or decisions so that your rights as a shareholder will not be compromised.
Hence, it is wise for shareholders to keep abreast with the latest development of their company by reading the reports sent by the company and business sections of the newspaper.
|
