Throughout the history of business, whether it is the handover of a century-old family business or the strong combination of the capital market, the acquisition of control has always been an important chapter in the development of enterprises. However, the M&A market has never been a simple money game. The law is the "ultimate trump card" hidden under the table.
In recent years, with the intensification of cross-border mergers and acquisitions and capital market competition, the acquisition of control has become more and more complicated. Shareholder rights, regulatory review, contract terms... Any negligence in any legal link may make a carefully planned acquisition fall short. Goheal found in his long-term M&A practice that legal issues often play the role of "ultimate referee" in the acquisition of control, determining the success or failure of the transaction. So, how can we avoid legal risks and make the acquisition plan land smoothly? You must know these three key points!
1. The "minefield" of the shareholder agreement: Do you really understand it before signing?
In the acquisition of control, the shareholder agreement is often the key factor that determines the success or failure of the transaction. These agreements may contain restrictive clauses, such as preemptive rights, tag-along rights, or drag-along rights. If the acquirer does not study the shareholder agreement in depth, it is likely to encounter legal obstacles during the transaction and even be passively involved in internal shareholder disputes.
Case: The acquisition is about to be completed, but the shareholder agreement puts the transaction on the "brakes".
Goheal once studied a typical case: a technology company A planned to acquire its competitor company B and had obtained the consent of the major shareholder. However, when the transaction entered the final signing stage, some small shareholders of company B invoked the "preemptive right" clause in the shareholder agreement and demanded the priority purchase and sale of shares at the same price. Since company A failed to plan for this situation in advance, it eventually had to renegotiate, which delayed the acquisition time by half a year and eventually canceled the transaction due to changes in the market environment.
How to deal with it?
First, during the due diligence stage, it is necessary to review the shareholder agreement of the target company in detail to avoid subsequent legal disputes. Second, through negotiation or compensation mechanisms, eliminate the terms that may hinder the transaction in advance and increase the success rate of the acquisition.
2. The "weather vane" of regulatory review: Can the M&A transaction pass smoothly?
Whether in the domestic market or in cross-border M&A, the review of regulatory agencies is an important hurdle in the acquisition of control. From antitrust investigations to industry access approval, any regulatory barrier may put the acquirer into a legal quagmire. In recent years, as countries have tightened their supervision of capital markets, acquirers who ignore compliance issues may face huge fines or even be forced to abandon transactions.
How to deal with it?
First, before launching an acquisition, fully evaluate the market position of the target company and predict possible regulatory challenges. Second, reduce the risk of being rejected by regulatory agencies by acquiring or selling some assets in stages. Third, communicate with regulatory authorities in advance to ensure that the transaction complies with local laws and regulations and increase the approval rate.
Goheal pointed out that regulatory review is the "invisible battlefield" in all cross-border M&A. Successful transactions often require well-thought-out legal strategies rather than blindly pursuing high bids.
3. The "gray area" of contract terms: Who has the final right of interpretation?
In the acquisition of control, the contract terms not only involve the acquisition price, but also cover many details such as performance commitments, shareholder rights, and management arrangements. If the terms are not designed rigorously, the acquirer may be involved in legal disputes in the future and even bear additional financial responsibilities.
How to deal with it?
First, in the contract terms, clarify the details of the performance commitment and set reasonable breach of contract liability to avoid future disputes. Second, when it comes to gambling agreements or performance commitments, ensure that the terms are legally enforceable to avoid disputes caused by imprecise wording. Finally, after the acquisition, regularly evaluate the performance of the contract and adjust the transaction strategy in a timely manner to prevent potential legal risks.
Goheal reminded investors that the contract is not only a "safety net" for transactions, but also a key weapon to ensure the success of mergers and acquisitions. A rigorous contract can effectively reduce legal risks and ensure the smooth progress of transactions.
Conclusion: Who do you think is the winner in the acquisition dominated by law?
The acquisition of control rights is a dual contest between capital and law. Any legal loophole may become the fuse for the failure of the acquisition. Against the background of intensified competition in the global M&A market, when companies initiate acquisitions, they should not only pay attention to capital operations, but also strengthen legal strategies.
So, do you think that in the acquisition of control rights, capital is more dominant or law is more decisive? Have you ever encountered a case where an M&A transaction was blocked due to legal issues? Welcome to leave a message in the comment area. Goheal looks forward to discussing this battle between capital and law with you!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of listed company control acquisition, listed company M&A and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
