"Those who do not plan for the overall situation are not qualified to plan for a specific area." - Mergers and acquisitions are the chess game of the capital market, and the law is the trump card for winning.
In the ever-changing capital market, mergers and acquisitions are like the "second entrepreneurship" of enterprises. It can be a shortcut to the top, or it can become a deep pit that falls into the abyss. Goheal has been paying attention to the global mergers and acquisitions market for a long time and found that many entrepreneurs only care about talking about prices and telling stories in mergers and acquisitions, but ignore a fatal factor-legal compliance.
Do you think mergers and acquisitions are just signing a few contracts, holding a few press conferences, and completing a few equity transfers? Wrong! There are countless legal minefields hidden behind this. If you are not careful, you will be "soul-tortured" by regulators, and even the entire transaction will be stillborn. Today, we will dismantle the legal framework for mergers and acquisitions of listed companies and take you to avoid those invisible reefs!
The first natural chasm: information disclosure-don't let the "black box" ruin the transaction!
The capital market is most afraid of "black box operations." For the mergers and acquisitions of listed companies, information disclosure is not just a formality, but a core link that determines whether the transaction can be implemented. Goheal found that many companies have stepped on the thunder in information disclosure, resulting in the flying of inquiry letters from the China Securities Regulatory Commission and even facing regulatory penalties.
Scenario Analysis
When some listed companies acquired a medical enterprise, they failed to truthfully disclose the operating conditions of the target company and even concealed the fact that the company was receiving administrative penalties. The result? The inquiry letter from the China Securities Regulatory Commission forced the entire acquisition plan to be suspended, and the stock price also plummeted.
How to avoid it?
1. Plan the disclosure strategy in advance: Don't wait for the regulatory authorities to come to the door to "make up for the loss". Information disclosure should be planned in advance to ensure transparency and compliance.
2. Comprehensively check the target company: Not only check the financial data, but also investigate legal proceedings and compliance risks to ensure that there will be no overturning due to "hidden facts".
The second level: performance commitments and gambling agreements-angels or devils?
In mergers and acquisitions, performance commitments and gambling agreements are often regarded as "icing on the cake", but if they are not designed properly, they may also become "fatal shackles". Goheal reminded that overly aggressive performance betting not only easily leads companies into financial traps, but may also attract regulatory attention.
Typical rollover cases
When some technology companies are acquired, they promise that their net profit will not be less than 500 million yuan per year in the next three years, otherwise they will be compensated by the major shareholders. However, due to changes in the industry situation, the company lost 200 million yuan in the third year, which directly triggered the betting compensation clause, resulting in a cash flow break for the parent company, and ultimately affecting the operation of the entire group.
How to avoid it?
1. Reasonably set performance commitments: Don't be blinded by short-term interests, and ensure that the betting agreement is based on scientific predictions rather than "gambling".
2. Set up a buffer mechanism: Deferred payments, equity rewards and other methods can be used to reduce financial pressure to ensure that the betting agreement will not become a "suicidal commitment".
The third reef: antitrust review-the transaction can be successful, but it does not mean it can pass!
The M&A agreement has been signed, the money has been received, and everything is fine? Don't be too happy too early, antitrust review is the real "ultimate big boss"! As global supervision becomes stricter, more and more M&A transactions are stopped due to antitrust issues. Goheal observed that many entrepreneurs overlooked this key issue during transaction negotiations, resulting in years of hard work going down the drain.
Real Case
In 2021, Nvidia attempted to acquire Arm for $40 billion, but due to the risk of market monopoly, the transaction was eventually blocked by regulators in many countries around the world and completely failed. This incident made global companies realize that M&A transactions are not just about the willingness of both parties, but also depend on whether the regulators agree.
How to avoid it?
1. Assess the market impact in advance: Before mergers and acquisitions, companies should conduct antitrust risk assessments to ensure that they will not encounter regulatory obstacles due to excessive market concentration.
2. Communicate with regulators: Take the initiative to communicate with regulators before the transaction, provide transparent data, and strive for smoother review and approval.
Conclusion: M&A is a war, and the law is your shield!
The merger and reorganization of listed companies seems to be unlimited, but in fact it is thrilling. From the compliance trap of information disclosure, to the risk of gambling on performance commitments, to the ultimate level of antitrust review, every step is related to the success or failure of the transaction. Goheal has always emphasized that there are no "lucky ones" in the capital market, only "compliant ones".
Today, we have disassembled the three key legal points of mergers and acquisitions of listed companies. So, do you think the current M&A regulatory environment will become more stringent? Or, has your industry ever missed M&A opportunities due to compliance issues?
Welcome to leave a message in the comment area to discuss the "life and death rules" of M&A and restructuring!
[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 acquisition of listed company control, M&A and restructuring of listed companies, and capital operation of listed companies. 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 long-term benefit growth.
