CHINA UPDATE – Workers at Cooper Chengshan Oppose Acquisition by Apollo Tyres: Importance of proactively addressing employees’ concerns
Following the PepsiCo-Tianyi transaction, where the acquisition aroused mass protests from workers of PepsiCo bottling factories and ended up with significant unexpected expenses paid to the employees, the Cooper-Apollo transaction is now facing similar challenges. It highlights the importance of addressing employees’ concerns proactively at the early stage, to ensure smooth consummation of an acquisition.
CHINA UPDATE – Chinese Court Refuses to Enforce an Arbitral Award Rendered by Post-Separation CIETAC Branch – Suggestions for Drafting Arbitration Agreements
The recent separation of the two former branches from the well-known Chinese arbitration institution-CIETAC and the branches’ establishment as independent arbitration institutions have brought confusion to the domestic and international arbitration community and businesses with regard to some arbitration agreements providing for arbitration at a CIETAC branch. The recent judgments of two Chinese courts in Suzhou and Shenzhen on the jurisdiction of the newly independent arbitration institutions are in conflict with each other and add more confusion to the relevant issues. In response to clients’ inquiries, we wrote this article to provide some suggestions on how to avoid potential confusion and protect parties’ interest under different scenarios relevant to these arbitration institutions’ jurisdiction.
- Global M&A volume in Q2 was US$498 billion, roughly the same as Q1 but down 25% from the same quarter last year.
- The United States had another comparatively strong quarter, accounting for four of the five largest deals globally in the quarter and 43% of global M&A volume in the first half of 2013.
- Cross-border M&A volume in the first half of 2013 accounted for 30% of total global M&A volume, down as compared to the corresponding period in 2012.
- Growing stability in U.S. markets, strong corporate earnings, readily available cash and the continued availability of cheap financing for certain borrowers continue to drive M&A activity, but concerns about rising interest rates and volatility in certain developed and developing markets would appear to be restraining deal activity. Global M&A volume is on pace to reach just under US$2.0 trillion for the year, down from 2012.
- Notwithstanding a 53% decline in private equity-backed M&A compared to Q1, private equity deals accounted for 16% of global M&A volume in the first half of 2013, an increase of 43% over the corresponding period in 2012.
Executive Summary: The Committee for Encouragement of Investments in Public Companies Engaged in R&D, formed by the Israeli Securities Authority, has recommended adopting three main solutions aimed at encouraging public funding of hi-tech companies: promoting IPOs of relatively large hi-tech companies; facilitating the establishment of publicly-traded venture capital funds and encouraging the establishment of publicly traded R&D partnerships. The Committee also recommends establishing two extra-stock exchange funding routes for seed-stage hi-tech companies: crowd-funding, and investor clubs. The article below details some specific recommendations made by the Committee.
Israel has set a goal of promoting and developing the hi-tech sector, which is the industry of the future and one of Israel’s primary growth engines. However, so far, the Tel Aviv Stock Exchange (“TASE”) has failed to present an efficient alternative for raising public funds for companies in this sector. In order to investigate ways of encouraging such investment in hi-tech companies via capital markets, the chairman of the Israeli Securities Authority (the “ISA”) appointed a Committee for Encouragement of Investments in Public Companies Engaged in R&D (the “Committee”). On 4 June 2013, the Committee issued its interim report and recommendations.
Among the issues explored by the Committee aimed at facilitating public fund raising for hi-tech companies, were the adjustment of prospectus and ongoing disclosure requirements; determination of specific rules of trade and the establishment of a designated trade list; encouragement of analysis; facilitating access of foreign investors and companies to the TASE; encouragement of institutional investment in hi-tech companies; issues of structure and corporate governance; investor tax benefits.
In its interim report, the Committee recommends adopting three main solutions aimed at encouraging public funding of hi-tech companies: promoting IPOs of relatively large hi-tech companies; facilitating the establishment of publicly-traded venture capital funds and encouraging the establishment of publicly traded R&D partnerships. The Committee also recommends establishing two extra-stock exchange funding routes for seed-stage hi-tech companies: crowd-funding, and investor clubs. In the following paragraphs, we have highlighted some specific recommendations made by the Committee.
IPOs: the Committee recommends enabling growth-stage companies (generally, with a post-IPO market cap of at least ILS 250 million, or sales of at least ILS 80 million per annum and a market cap of at least ILS 185 million) to go public on a designated trade list, to be known as “Tech Elite”. The Committee also recommends looking at ways to incentivize the creation of derivative markets for Tech Elite securities. The Committee further recommends that for a limited period of time and subject to additional conditions, investments of up to ILS 5 million in IPOs of Tech Elite companies may be written off and regarded and recognized as a capital loss in the year in which they were made.
Disclosure: the Committee recommends relieving Tech Elite companies from some of the more stringent disclosure requirements, during the first few years after listing. For example, such companies will be able to enjoy the reporting and disclosure benefits of small-cap companies. They will also be permitted to do their financial reporting according to GAAP (rather than IFRS), and will not be required to file quarterly management reports. The ISA will be authorized to allow further extenuations, depending on circumstances.
Corporate governance: Elite Tech companies will be permitted – during the first few years following listing – to implement less stringent corporate governance controls. For instance, they will not have to appoint a financial reports committee, their chief executive officer may also act as the chairman of the board, their compensation controls may be less strict, and they may simplify certain mechanisms for the approval of interested party transactions.
Delaware entities; language of reports: in order to encourage hi-tech companies incorporated in Delaware to list their securities in Israel, the Committee suggests permitting such entities to report in English (alongside a general recommendation to permit Tech Elite companies to file in English).
Listed VCs; R&D Partnerships: the Committee envisages two forms of publicly-traded VCs, which shall both act as mutual investment funds (under the applicable Israeli legislation): limited-period funds (of up to 15 years), and evergreen funds (whose duration may be terminated by resolution of the interestholders). These VCs will be permitted to invest up to 30% of their proceeds in Israeli, or Israeli-oriented, unlisted hi-tech companies. R&D partnerships are VCs that are co-managed by unaffiliated strategic investors (in the relevant field of investment) and financial investors (who will act as joint general partners), who will each have to hold a significant stake in the partnership. R&D partnerships will have durations of no more than 15 years.
Crowdfunding: following on the US JOBS Act, the Committee recommends excluding certain crowdfunding activities from the scope of securities regulation and provide safe harbour for crowdfunding financing. Funds raised by crowdfunding will be limited to ILS 2 million (approximately US$550,000) during each 12-month period. Generally, an investor will be permitted to invest up to ILS 20,000 (approximately US$5,500) during any 12-month period, with each investment limited to ILS 10,000 (approximately US$ 2,750).
Sophisticated investor clubs: the investor club model would enable companies to raise higher amounts of funding compared to crowdfunding, from fewer and more sophisticated investors. Contingent upon prescreening of such investors, so as to make sure they meet the “eligible investor” threshold set forth in Israeli security regulations, investments made through such clubs will also be exempt of stringent security regulation.
Assuming adoption of the Committee’s recommendations into law, these are set to revolutionize the ways in which hi-tech, bio-tech, bio-med and other R&D companies may raise funds in Israel.
Executive Summary: Goltsblat BLP has published a Case Study Guide to M&A Transactions in Russia that covers the full M&A process in Russia, from the initial negotiations and heads of terms, right the way through to completion and post-completion matters. Some of the highlights include:
- Preparation for sale, negotiating the initial terms and forming the deal teams.
- Properly scoping the due diligence process; carrying this out effectively; critically analysing the results and acting on them.
- Structuring the deal and dealing with complex multi-jurisdictional transactions.
- Negotiating the principle transaction documents, understanding the points for compromise and the areas of risk.
- Successfully navigating the deal execution and deal completion processes; avoiding last minute surprises.
- Post-completion integration and crisis-management, should the unexpected arise.
Goltsblat’s Case Study Guide to M&A Transactions in Russia sets out a Case Study of a typical acquisition and joint venture of a Russian business. It is aimed at both lawyers and non-lawyers and also at both experienced M&A practitioners and those with little or no experience. In order to cover such a wide readership we have therefore set out the background information and basic concepts of an M&A deal at each stage of our guide and then added to this practical tips and guidance, points to watch out for and ideas on some of the different negotiating positions that can be taken. Wherever relevant we have included Russia-specific practical guidance. The guide therefore also represents a series of case studies of some of our collective knowledge and experience, based on years of tough negotiating sessions, late night completion meetings and lots of colourful memories along the way!
In many ways, now is the ideal time to produce a guide of this nature. At the height of the economic boom, many deals relating to Russia were carried out under foreign governing laws and using offshore corporate structures, all too often with insufficient understanding of how the rights and obligations of the parties might be applied or enforced in practice, in the event of a dispute. One result of the prevailing financial crisis has been to expose the problems and weaknesses inherent in such transaction structures in cases where insufficient attention was paid to their relationship with Russian laws and the practicalities of enforcement here on the ground in Russia. Although this Case Study guide cannot possibly give all the answers in the space available, it aims to address some of those issues in a practical way.
Click here for the Foreword and Table of Contents.