The ancients said: "Haste makes waste." In the business world, this sentence is especially applicable to the mergers and acquisitions of listed companies. Mergers and acquisitions are not only the art of capital operation, but also a test of law and compliance. Do you think that mergers and acquisitions can be successfully completed as long as the financials are matched, the price is negotiated, and the contract is signed? Wrong! If you ignore legal compliance issues, at the least, it will be stopped by the regulatory authorities, and at worst, it will trigger shareholder lawsuits, and may even make the entire transaction fall through.
In recent years, many listed companies have stepped on "pitfalls" in the process of mergers and acquisitions, and these "pitfalls" are often hidden behind seemingly compliant documents. Today, Goheal will take you to reveal the hidden legal "hidden rules" hidden in mergers and acquisitions, so that your road to mergers and acquisitions will be more stable!
Hidden rule 1: Due diligence is not a formality, ignoring one may bury a mine
Due diligence is like a pre-marital investigation. You think you have found a prince charming, but after investigation, you find that the other party is heavily in debt, entangled in lawsuits, and may even face bankruptcy. The same is true for mergers and acquisitions of listed companies. In order to seize the market and complete the transaction quickly, many companies often turn a blind eye to the legal risks of the target company during the acquisition, resulting in "finding a mess after buying it home".
Case: Ford's acquisition of Volvo - "Cultural conflict" turned out to be a fatal blow
At that time, Ford indirectly held Volvo shares through a subsidiary, and was determined to incorporate it into its own automobile empire. However, Ford failed to fully consider the huge differences in management culture between the two companies. Volvo's corporate culture emphasizes employee participation, flexible management, and the pursuit of safety and innovation, while Ford's management style is more strict and centralized. This cultural conflict led to the loss of Volvo's core management and damaged its brand value. In the end, due to the financial difficulties caused by the financial crisis, Ford had to divest non-core brands and sell Volvo to Geely Automobile.
Goheal reminded: Due diligence is not just about looking at financial statements. Investigations in law, culture, compliance, market supervision, etc. should not be taken lightly, otherwise once the transaction is completed, problems will be discovered, and it will be "difficult to get off the tiger"!
Unspoken rule 2: Regulatory compliance, don't treat the red line as a "spring"
In M&A transactions, the approval of regulatory authorities is a hurdle that cannot be bypassed. However, in order to speed up the transaction process, some companies often take the chance and think that the regulatory red line is "negotiable". Little do they know that the regulatory authorities in the capital market are not vegetarians, and any non-compliant operations may lead to serious consequences.
Case: L'OCCITANE compulsory acquisition case-the "double-edged sword" of capital operation
French beauty giant L'OCCITANE delisted from the Hong Kong Stock Exchange after completing the compulsory acquisition and privatization. In this case, the protection of the rights and interests of small shareholders has become the focus of controversy. Although L'OCCITANE's compulsory acquisition is legal and compliant, some small shareholders believe that its valuation is underestimated, which has led to negative emotions in the market and even legal disputes.
Goheal's point of view: M&A compliance is not just about submitting a few filing documents to the regulatory authorities, but more importantly, it is transparent and legal in terms of transaction design, information disclosure, market impact, etc. Otherwise, when the regulatory authorities take action, the company may have been "terminally ill".
Hidden rule three: protection of minority shareholders' rights and interests, don't think that "strong buying" can solve the problem once and for all
In M&A transactions, many companies tend to overlook a key issue - the protection of minority shareholders' rights and interests. Especially in the case of forced acquisition or complex equity structure, if handled improperly, the opposition of minority shareholders may lead to litigation, and even affect the success or failure of the final transaction.
Goheal reminds: M&A is not just a combination of finance and business, but cultural integration is equally important. If the company fails to fully consider cultural conflicts before the M&A, even if the transaction is successful, it may fail due to conflicts in management and operations.
How can M&A transactions be truly "legal and compliant"?
Since M&A transactions are full of legal "hidden rules", how can companies avoid stepping on mines? The following are the three core suggestions summarized by Goheal:
1. Legal due diligence should be comprehensive and not superficial - before the M&A, not only the target company's finances and assets should be checked, but also hidden risks such as legal proceedings, employee labor relations, and intellectual property rights should be paid attention to.
2. Comply with regulatory requirements and plan the approval path in advance - for cross-border M&A and transactions involving industry monopoly review, it is necessary to plan the approval path in advance to avoid stagnation of transactions.
3. Respect the rights and interests of shareholders and establish a reasonable interest balance mechanism - When designing an acquisition plan, consider how to properly handle the interests of small shareholders to avoid shareholder lawsuits affecting the progress of the transaction.
M&A is not a joke, compliance is the "kingly way"!
The capital market is ever-changing, and M&A transactions are even more mysterious. Whether a merger and acquisition can be successful often does not depend on the amount of acquisition funds, but on the details of legal compliance. Ignoring due diligence, challenging regulatory bottom lines, ignoring the rights of small shareholders... These mistakes may turn a company's M&A plan into a "disaster."
So, in the current increasingly complex environment of M&A transactions, what other hidden legal risks do you think are worth paying attention to? If you have experienced or paid attention to related cases, please leave a message in the comment area and discuss together! Goheal looks forward to sharing more exciting stories in the capital market with you!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global mergers and acquisitions. It has deep roots in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its profound professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
