Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • CapitaLand Limited
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • Bank of America Merrill Lynch
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek Holdings
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • China Ocean Shipping Group Company (COSCO)
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • Royal Ahold (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • Nishimura & Asahi (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Mannheimer Swartling (Stockholm)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Japan

JAPANESE UPDATE – Mergers & Acquisitions 2016

Editors’ Note:  Masakazu Iwakura is a Senior Partner at Nishimura & Asahi and a member of XBMA’s Legal Roundtable. As one of Japan’s leading M&A practitioners, Mr. Iwakura has handled a variety of groundbreaking M&A transactions and serves on the boards of several public companies: COOKPAD, Imperial Hotel and GMO Internet. Mr. Iwakura is also a Professor of Law at Hitotsubashi University, Graduate School of International Corporate Strategy and was a Visiting Professor of Law at Harvard Law School in the 2007-2008 and 2013-2014 academic year. This update was produced by Mr. Iwakura and his associate Tomohiro Takagi.

Executive Summary: 

Nishimura & Asahi has prepared a Q&A guide to public mergers and acquisitions law in Japan in The International Comparative Legal Guide to: Mergers & Acquisitions 2016.  The country-specific Q&A is an overview of current M&A legislation; the regulation of friendly and hostile bids; due diligence; stakebuilding; bidder and deal protection; defending hostile bids; and provides an update on the revised Companies Act that took effect on May 1, 2015.

The International Comparative Legal Guide to: Mergers & Acquisitions 2016 is available here.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

JAPANESE UPDATE – Overview of Recent Trends in M&A Activity and Relevant Legal Developments

Contributed by: Masakazu Iwakura, Nishimura & Asahi (Tokyo)

Editors’ Note: Masakazu Iwakura is a Senior Partner at Nishimura & Asahi and a member of XBMA’s Legal Roundtable. As one of Japan’s leading M&A practitioners, Mr. Iwakura has handled a variety of groundbreaking M&A transactions and serves on the boards of several public companies: COOKPAD , Imperial Hotel and GMO Internet. Mr. Iwakura is also a Professor of law at Hitotsubashi University Graduate School of International Corporate Strategy and is a Visiting Professor of Law at Harvard Law School in the 2013-2014 academic year. This update was produced by Mr. Iwakura and his associate Tsukasa Tahara.

Highlights:

  • During 2013, M&A deals in which at least one party was a Japanese company grew by approximately 10.8% from the previous year, the second consecutive year of growth in M&A deal volume.
  • Several large-scale and cross-border deals were completed, including (i) the combination of Applied Materials, Inc. and Tokyo Electron Limited to create a new company valued at approximately US$29bn (¥2.8 trillion), (ii) the acquisition of Sprint Nextel Corporation by SoftBank Corp for approximately US$21.6bn (¥1.8 trillion) in the telecom industry; (iii) the acquisition of Bank of Ayudhya Public Company Limited by the Bank of Tokyo-Mitsubishi UFJ, Ltd. for approximately Bt170.6bn (¥536.0bn) in the bank business, and (iv) the acquisition of Beam Inc. by Suntory Holdings Limited for approximately US$16bn in the liquor industry.
  • It was generally reported that in 2013 the economic environment in Japan was much improved under the series of the economic policies adopted by the Abe LDP Administration, called “Abenomics.”  It is expected that cross-border transactions will likely continue to increase due to the shrinking of the Japanese market.
  • New legal developments, such as the pending revisions of the Companies Act and revisions to insider trading regulations, and new court decisions are expected to impact M&A practice in Japan.

Main Article:

 In 2013, M&A transactions in Japan significantly increased, and several large-scale and cross-border deals were completed.  While it is not clear how the economic environment in Japan will proceed in 2014, it is expected that cross-border transactions will likely continue to increase due to the shrinking of the Japanese market.  There have also been many legal developments, such as submission of the amendment bill of the Companies Act to the Diet and new court decisions that are expected to impact M&A practice in Japan.

Overview

According to the data published by Recof, an M&A advisory boutique firm in Japan, during 2013 there were 2,048 M&A deals in which at least one party was a Japanese company.  This number grew by approximately 10.8% from the previous year, which marks the second consecutive year in which M&A deals increased.

The number of inbound M&A deals, in which Japanese companies are acquired by foreign companies, grew by approximately 33.0% and domestic M&A deals grew by approximately 14.7% in each case from the previous year.  On the other hand, the number of outbound M&A deals, in which foreign companies are acquired by Japanese companies, slightly decreased by approximately 3.1%.  However, the number of outbound M&A deal has remained at a high level in recent years and the geographic locations of the acquired companies were quite broad, ranging from North America and Europe to China and Southeast Asia.

It was generally reported that in 2013 the economic environment in Japan was much improved than in 2012 under the series of the economic policies adopted by the Abe LDP Administration, which are called “Abenomics.”  One example, which shows the favourable economic environment in 2013 in Japan, is that during 2013 the Nikkei Stock Average recovered to the level it achieved before the Lehman Brothers Collapse in 2008.  Many consider the recovery to be one of the reasons for the increase in M&A transactions in Japan in 2013.  On the other hand, since the beginning of 2014, the Nikkei Stock Average has fallen.  In addition, the consumption tax rate will be scheduled to rise from 5% to 8% in April 2014.  Therefore, it is unclear how the economic environment and trends in M&A activity in Japan will proceed in 2014.

Notable M&A deals in 2013

In 2013, several large-scale and cross-border deals were completed.  For example, the business integration between Applied Materials, Inc. and Tokyo Electron Limited, both of which are among the largest companies in the world in the semiconductor and display manufacturing technology industry, attracted broad attention due to the deal size, which values the new combined company at approximately US$29bn (¥2.8 trillion), and the novel structure in which the holding company for both parties after the business integration was incorporated in the Netherlands.  Other examples of large-scale and cross-border deals include (i) the acquisition of Sprint Nextel Corporation by SoftBank Corp for approximately US$21.6bn (¥1.8 trillion) in the telecom industry; (ii) the acquisition of Bank of Ayudhya Public Company Limited by the Bank of Tokyo-Mitsubishi UFJ, Ltd. for approximately Bt170.6bn (¥536.0bn) in the bank business; and (iii) the acquisition of Beam Inc. by Suntory Holdings Limited for approximately US$16bn in the liquor industry.

It is expected that the number of Japanese companies seeking to conduct business on a wider and more global scale through outbound M&A transactions continues to increase from now on because of social and economic conditions in Japan, mainly due to the shrinking of the market and the decline in the birth rate.

With respect to M&A deals in which both parties are Japanese companies, integrations between or among companies in the same industry or business continued to increase in 2013.  Examples of these transactions include (i) the acquisition of the Peacock Store and the Daiei Inc. by AEON Co., Ltd. and the acquisition of the Nissen Holdings Co., Ltd. by Seven & i Holdings Co., Ltd. in the retail industry; (ii) the integration of system LSI businesses between Panasonic Corporation and Fujitu Limited in the electronics industry; and (iii) the acquisition of the Honda Elesys Co., Ltd. by NIDEC Corporation in the electronic control units for automobiles industry.

In Japan, it is said that since there is oversaturation of companies in the same industry or business area, many companies are competing despite the shrinking size of the market.  It is expected that in order to survive in the highly competitive market situation these companies will need to strengthen their business bases through mergers between or among companies in the same business areas.  Therefore, it is expected that the number of such M&A deals will continue to increase in the future.

In addition, much attention has been given to the proposed acquisition of Japanese companies by foreign entities.  One example is the proposal of acquisition provided by the Wuthelam group, a major paint maker in Singapore, to Nippon Paint Co., Ltd.  Another example is the business proposal by Third Point LLC to Sony Corporation to spin-off and list the entertainment business of Sony Corporation.  Both cases did not result in unsolicited or hostile take-over attempts.

However, the possibility that these transactions may increase in the future cannot be ruled out and in some of them unsolicited or hostile take-overs may be attempted because foreign companies, which are attracted to the brand, advanced technology and sophisticated expertise of Japanese companies, may aim to acquire Japanese companies with such resources.

Legal development

Revisions of the Companies Act

An amendment bill of the Companies Act was submitted to the Diet on November 29, 2013.  The amendment bill is under Diet deliberations now, and is expected to be adopted in this regular Diet session.  The effective date of the revised Companies Act is not clear yet, but is expected to be April or May in 2015.

The amendment is composed mainly of revisions to the corporate governance system, but also includes the following important revisions that have the potential to impact M&A practice in Japan.

Revising the rules on third-party allotment of new shares.  Under the current Companies Act, third-party allotments of new shares are required to be approved only by a resolution of the board of directors, but not by a resolution of the shareholders’ meeting unless the amount to be paid for the subscribed shares is particularly favourable to the subscribers.

As to this point, some cases in which large-scale third-party allotments of new shares were made to new shareholders and the largest shareholder was altered without a resolution of a shareholders’ meeting have faced severe criticism from cross-border institutional investors as unfair issuances of new shares.

Therefore, under the revised Companies Act, a third-party allotment of new shares that results in the replacement of the controlling shareholder is expected to be subject to a resolution of a shareholders’ meeting under certain conditions.  To be more precise, a company willing to conduct such a third-party allotment of new shares shall provide a notice to shareholders or public notice.  If shareholders who hold 10% or more voting rights of the company notify the company that they are opposed to the third-party allotment of new shares within two weeks from the date of such notice to shareholders or public notice provided by the company, the third-party allotment of new shares is required to be approved by a resolution of a shareholders’ meeting.

Revising the rules on transfer of the shares of a subsidiary.  Under the current Companies Act, the transfer of the shares of a subsidiary is not required to be approved by a resolution of the shareholders’ meeting, but the assignment of a significant part of the business must be approved by a special resolution of a shareholders’ meeting.

In order to resolve this imbalance under the current Companies Act, under the revised Companies Act, the transfer of the shares of a subsidiary will be required to be approved by a special resolution of a shareholders’ meeting if the book value of such shares is more than 20% of the total asset value of the transferring company or if, following the transfer, the transferring company will not be the parent company of a company of which shares are transferred.

Revising the rules on cash squeeze-outs and introducing a new cash-out method.  Although under the current Companies Act, a company is able to conduct a squeeze-out of minority shareholders with cash using a particular class of shares, the procedures for doing so are complex and time-consuming.  For example, the special resolution of a shareholders’ meeting is required for revisions of the articles of incorporation.

Under the revised Companies Act, special controlling shareholders, who have 90% or more voting rights of the target company, will have rights to purchase the remaining shares from other shareholders.  This procedure will require the resolution of the board of directors, but not a resolution of a shareholders’ meeting of the target company.

Therefore, it is expected that the amendment will simplify the procedures for cash squeeze-outs.

It is worth noting that the other shareholders, who object to the sale price proposed by the special controlling shareholder, may file a petition to the court for a determination of a fair sale price.

Revising the rules on company splits.  Many professors of the Companies Act have stated that the current rules on company splits are not sufficient to protect the rights and benefits of the creditors of the splitting company.  In addition, many lawsuits and important court precedents related to this issue have arisen in recent years.

The creditors of the splitting company may not exercise their credit upon successor companies after the company splits if the credits are not included in the splitting assets under the current Companies Act.

Under the revised Companies Act, the rights and benefits of the creditors of the splitting company will be better protected.  To be more precise, if the splitting company conducts the company split with the knowledge that the split is harmful to the creditors of the company, the creditors may exercise their credit upon the successor companies.

Revisions to insider trading regulations

In 2013, there were two important revisions to insider trading regulations concerning M&A transactions.

Scope of regulations in M&A transactions.  Firstly, a revision was implemented concerning the scope of application of the regulations to the transfer of shares in M&A transactions.

Under the past regulations, the transfer of shares in a merger or corporate split was not subject to the insider trading regulations, while share transfers in a business transfer were subject to such regulations.

Under the revised regulations, the transfer of shares in a merger or corporate split, as well as in a business transfer, is subject to the insider trading regulations.  On the other hand, transactions in which there may be little potential for insider trading are exempt from insider trading regulation regardless of the methods of such transactions.

In short, the revised regulations allows businesses to be more neutral in selecting the method or type of the transaction in light of the insider trading regulations.

Insider trading regulations concerning Tender Offers.  Secondly, insider trading regulations concerning Tender Offers were revised.  The two main points of this revision, which was published in June 2013 and will be enforced beginning on April 1, 2014, are as follows:

  • Extension of the range of “Person Concerned with Tender Offeror”:  In recent years, the frequency of insider trading by officers and employees of a company which is the target of a tender offer, or persons who receive insider information from them, has increased.

Under the new regulations, if officers or employees of the target company come to know the relevant fact in the course of their work or business, they become a “Person Concerned with Tender Offeror” to whom insider trading regulations are applied.  In addition, persons who receive insider information from officers or employees of the target company are also subject to insider trading regulations.

  • Exemption applied to persons who receive insider information from a Person Concerned with Tender Offeror:  Under the past regulations, if an entity (X) which makes a decision to launch a tender offer tells another entity (Y), a possible tender offeror, any information or fact concerning the launch of the tender offer by X before publication, then Y is subject to insider trading regulations and unable to launch a tender offer for the same company.  The regulations effectively limit unreasonably competitive tender offers.

Under the revised regulations, Y may not be subject to the regulations and could launch a tender offer in the following two cases:  (i) when Y publicises such information or fact concerning X’s launch of a tender offer by a Tender Offer Notification or (ii) six months after Y receives the information or fact from X.

However, the exemption shall apply to only to information or a fact concerning other entity’s launch of a tender offer.  Therefore, an entity that receives insider information concerning the business or other matters of a target company from an entity that makes a decision to launch a tender offer, shall not launch its own tender offer for such target company.

Court decisions

In 2013, there were several important court decisions which are expected to affect M&A practice in Japan.

Court decisions concerning representation and warranty clauses are particularly important.  In the past, it was not necessarily usual for a party to an M&A transaction in Japan to file a suit against the other party for indemnity due to a breach of a representation and warranty clause.  However, in recent years, the number of lawsuits concerning M&A transactions has been increasing.

Court decisions in cases where a buyer knows or is able to know of any breach of representation and warranty by sellers are divided into two types.  Some court decisions have said that there is no need to give a remedy to such a buyer and dismissed such buyer’s claim for indemnification.  Other court decisions have said that a seller who made representations and warranties shall take on risk of liability for breach even if the buyer knows of a breach of one of the seller’s representation and warranty clauses and have allowed the buyer’s claim for indemnities.

Although it is still not clear how court decisions will proceed in the future, it is necessary to monitor the future development of court decisions with regard to representation and warranty clauses.  Furthermore, it is important to pay attention to the risk that a buyer’s claim for indemnity will not be allowed in Japan in accordance with the wording of the agreement if a buyer knows or should know of the seller’s breach of a representation and warranty clause.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

JAPANESE UPDATE – Letters Of Intent In Japanese M&A Transactions

Editors’ Note: Masakazu Iwakura is a Senior Partner at Nishimura & Asahi and a member of XBMA’s Legal Roundtable. This paper was co-authored Stephen D. Bohrer, Foreign Law Partner, and Daisuke Morimoto, Partner, of Nishimura & Asahi. As one of Japan’s leading M&A practitioners, Masakazu Iwakura has handled a variety of groundbreaking M&A transactions and serves on the boards of several public companies: COOKPAD Corporation, Imperial Hotel and GMO Internet. Mr. Iwakura is also a Professor at Hitotsubashi University Graduate School of International Corporate Strategy and is a Visiting Professor of Law at Harvard Law School in the 2013-2014 academic year.

Highlights:

  • A letter of intent is especially helpful in a cross-border transaction to memorialize the basic terms of a proposed deal when differences in culture, deal structuring techniques, due diligence styles, and documentation standards can add layers of challenge.
  • Typical provisions in a letter of intent are discussed below. The default rule under Japanese law is that a letter of intent is a binding agreement, unless the letter of intent expressly states that all or a portion of its terms are non-binding.
  • Japanese law provides for a “breach of trust” claim where one party has led the other party to reasonably believe that a definitive agreement between the parties would be subsequently executed. The article sets forth some of the elements of such a claim.
  • A listed company should disclose a letter of intent if (i) the proposed transaction is “material,” and (ii) a decision has been made by a party to proceed with the proposed transaction—this requirement to publicly disclose a transaction as a result of signing a letter of intent could increase interloper risk. It is a standard practice in Japan for a local anti-trust filing to be made only after the execution of an acquisition agreement that has been approved at a meeting of the target’s board of directors.

 

MAIN ARTICLE

Inbound Japanese M&A may have found an unexpected lifeline!  With the introduction of Abenomics and support from the Bank of Japan, from fourth quarter of 2012 through September 24, 2013, the Japanese Yen has depreciated approximately 27% against the U.S. Dollar and approximately 35% against the Euro. While the Nikkei has catapulted in value during this same time period, thereby increasing the trading prices of many publicly traded companies (which softens the greater purchasing power that overseas acquirors could have enjoyed through foreign exchange gains), not all of the quality publicly traded companies have seen their trading prices commensurately increase and the value of privately held Japanese companies does not always correlate to gains in stock exchange indices.

With the value of target Japanese companies potentially lower when expressed in foreign currency terms and Prime Minister Abe’s statement on June 19, 2013 that he is resolved to use all of his political power to double foreign direct investment into Japan to JPY35 trillion by 2020, M&A professionals could soon face a boom in inbound Japanese M&A and commercial transactions not seen for decades.  Should the ice thaw on inbound Japan transactions, then practitioners may need to sharpen their pencils and wipe the dust off their precedents in response to increased deal flow.  This article, provides an information booster shot on issues and drafting tips to consider when preparing a letter of intent for an inbound Japanese M&A transaction.

Why Have a Letter of Intent?

In Japanese M&A transactions, a letter of intent, memorandum of understanding, and term sheet essentially cover the same ground and follow the same practices, though the format and style of each document differs.  For purposes of this newsletter, we collectively refer to each as a “letter of intent.”

The letter of intent is often one of the first transaction documents that deal parties consider when undertaking an M&A transaction, and frequently sets the tone for the rest of the transaction in terms of negotiating style and establishment of trust.  The significance of this document can be heightened in the cross-border context.  While negotiating and documenting a corporate transaction is often a complicated and time consuming process in itself, a cross-border transaction adds further layers of challenge.  Additional hurdles in a cross-border transaction include differences in culture, deal structuring techniques, due diligence styles, and documentation standards.  Thus, a letter of intent is especially helpful in a cross-border transaction as this document memorializes the basic terms of a proposed deal, thereby providing the parties with basic assurances that they have reached a common understanding of the transaction before undertaking costly and time consuming due diligence and deal document preparation.  Of course, if the execution of a comprehensive letter of intent could require a party to publicly disclose the transaction or could expose a party to damages if it fails to execute a definitive agreement (as discussed below), then memorializing specific deal terms in a letter of intent could be counter-productive for a transaction party.

Typical Provisions in a Letter of Intent

There is no one-size-fits-all letter of intent for an inbound Japanese M&A transaction.  The following items could be considered baseline information to include in a letter of intent used in a non-auction context for an acquisition that is not a merger of equals:

  • a description of the structure of the transaction and a valuation of the target, including the purchase price or a purchase price range, and the material assumptions underlying the formulation of the purchase price (e.g., all outstanding stock options being cancelled, all target debt being paid off or assumed at closing, etc.);
  • the expected timetable for due diligence, signing of the definitive agreement and the closing;
  • the key conditions to signing (e.g., completion of due diligence, receipt of board approval, etc.);
  • a mutual confidentiality covenant concerning deal publicity; and
  • binding deal protection devices, such as a covenant by the seller not to engage in discussions with other parties pending the execution of the acquisition agreement, a conduct of business in the normal course covenant, walk-away fee, and other restrictive covenants.

When determining the use and scope of a letter of intent, practitioners also should consider whether the dynamics of the deal and time/expense concerns warrant the parties to (i) verbally agree on the major structuring points for the transaction (as opposed to preparing a written agreement), and thereafter (ii) promptly proceed to the operative agreement preparation stage.

Binding versus Non-Binding Letters of Intent

The default rule under Japanese law is that a letter of intent is a binding agreement, unless the letter of intent expressly states that all or a portion of its terms are non-binding.  While there are a number of ways to distinguish the binding from the non-binding provisions of a letter of intent (such as placing all of the binding provisions in one section of the letter of intent and the non-binding sections in another section), the practice in Japan is to include an express statement that the letter of intent is not intended to be a binding arrangement, except for specified provisions.

The following language could be used to indicate that an entire letter of intent is non-binding (with the understanding that the parties would need to carve out from this statement any provisions that they intend to be binding, such as confidentiality obligations and any walk-away fee payments):

 This letter of intent is for discussion purposes only and does not create or constitute a legally binding obligation between the parties or any of their affiliates.  Unless a definitive [acquisition agreement] is executed by the parties with respect to the matters contemplated by this letter of intent and all subsequently determined matters, none of the parties or any of their affiliates shall be entitled to any damages or other form of relief whatsoever based upon or arising from this letter of intent, the discussions related thereto, or the failure to enter into an [acquisition agreement].

Notwithstanding the inclusion of a provision stipulating that all or a portion of a letter of intent is non-binding, a party that seeks to break off discussions will need to consider whether such withdrawal can lead to liability.

Consequences of Breaking Off Discussions – Breach of Trust

Clearly, where a letter of intent states that it is a binding arrangement, a party withdrawing from discussions could face a breach of contract claim.  The situation is somewhat more complex with a non-binding letter of intent.

On one hand, under Japanese law a party can normally freely break off discussions after the entry into a non-binding letter of intent and refuse to execute a definitive agreement. On the other hand, such party could be exposed to damages under Japanese law if it has led the other party to reasonably believe that a definitive agreement between the parties would be subsequently executed.  Such false signaling by the withdrawing party would constitute a “breach of trust” under Japanese law.  Unlike other jurisdictions, Japanese law does not specifically focus the foregoing analysis on the existence of any express or implied covenant for a contracting party to negotiate in good faith.  Given the elements typically required to support a breach of trust claim, however, the distinction in this context between breaching a covenant to negotiate in good faith versus committing actions that cause a breach of trust to occur is most likely inconsequential.

There is no Japanese statute or other fixed criteria that Japanese courts use to evaluate whether a breach of trust occurred.  The existence of a breach of trust is highly fact specific and possibly influenced by the result that a particular judge considers as fair.  However, the existence of all or most of the following factors immediately before a party unilaterally withdraws from negotiations may likely lead a Japanese court to find the occurrence of a breach of trust:

  • the letter of intent is very detailed, providing an outline of essentially all of the principal terms of the proposed transaction;
  • the withdrawing party did not seriously intend to enter into a definitive agreement and used the letter of intent negotiations for ulterior motives;
  • the withdrawing party delays informing the counter-party of the existence of an event that requires it to withdraw from discussions or does not clearly indicate the non-fulfillment of a condition to proceed to documentation (e.g., the withdrawing party knows that it cannot obtain a third party consent to move forward with the proposed transaction, but it fails to promptly notify the other party of this impossibility or uses unequivocal language about its ability to satisfy such condition);
  • the withdrawing party knew that the counter-party expected that a definitive agreement would be executed; and
  • the non-withdrawing party did not breach any obligations owed to the withdrawing party.

In Advantage Partners KK, et al. v. Minowa Koa KK (2005), the Tokyo District Court provided helpful guidance on the scope and application of the breach of trust doctrine in the M&A context.

In the Advantage Partners case, Minowa Koa and Advantage Partners and other sellers (collectively referred to for ease of reference as “Advantage Partners”) entered into the equivalent of a letter of intent pursuant to which Advantage Partners agreed to sell to Minowa Koa shares that Advantage Partners held in Fuji Kikou Denshi KK.  The recitals in the letter of intent stipulated that the parties had essentially agreed to the Fuji Kikou Denshi share sale, but the share sale was subject to Minowa Koa being able to refinance a specified Fuji Kikou Denshi bank loan.  Shortly before the targeted execution date for a definitive share purchase agreement for the Fuji Kikou Denshi shares, Minowa Koa notified Advantage Partners that it would need to withdraw from the transaction because it could not obtain the requisite bank’s consent to refinance its loan to Fuji Kikou Denshi.  Advantage Partners sued Minowa Koa for damages.

The Tokyo District Court held that even though the letter of intent was a non-binding arrangement and any purchase of the Fuji Kikou Denshi shares by Minowa Koa was subject to the refinancing of a bank loan to Fuji Kikou Denshi, Minowa Koa breached its trust relationship with Advantage Partners by not disclosing for approximately one month that it was encountering difficulties obtaining the requisite bank’s consent to refinance its loan to Fuji Kikou Denshi (and, to the contrary, during this one-month period gave Advantage Partners the impression that obtaining such bank’s consent was a foregone conclusion).  The Tokyo District Court awarded Advantage Partners approximately JPY50,000,000 in damages.

The following are further points to consider when evaluating potential liability under Japanese law arising from breaking off discussions after the execution of a non-binding letter of intent:

  • Delicate balance of detail.  A heavily negotiated non-binding letter of intent that covers all of the essential terms for a proposed transaction will inherently have a higher probability of exposing a party to damages if it refuses to execute the deal (through a breach of trust argument) in comparison to a simple letter of intent negotiated over a short time period.  However, an analysis of potential damage exposure should not be made in isolation when considering the degree of specificity for a letter of intent, since due diligence traditionally commences after the execution of a letter of intent.  Thus, a party may strategically decide to execute a very detailed and highly negotiated letter of intent before it undertakes or permits due diligence even if there is a greater possibility for breach of trust damages as such potential damages may pale in comparison to the immediate costs that would be incurred in connection with a full due diligence exercise that screeches to a grinding halt because the parties subsequently learn that the basic parameters of the deal were not mutually understood.
  • Available damages.  In the Advantage Partners case, despite demonstrating that a breach of trust occurred, the Tokyo District Court awarded Advantage Partners only reliance damages.  Without receiving expectation damages (i.e., diminution in value, coupled with consequential and incidental damages), an aggrieved party may experience only a bittersweet victory.  The range of available damages may not only impact the eagerness of an aggrieved party to pursue an action, but may also influence a party’s calculation whether to walk away from a transaction as it can estimate its potential monetary exposure.
  • Termination Date.  A party may wish to include in a letter of intent a specific termination date for discussions (e.g., “this letter of intent will terminate on the earliest to occur of December 31, 2013 and a date nominated by buyer if it is not satisfied with the results of its due diligence investigation over the company”).  With a built-in termination date, a Japanese court may find that a counterparty could not form a reasonable expectation that a definitive agreement would be executed since a looming termination date always existed.  Of course, a termination date would not be an effective shield if a party simply refuses to negotiate or offers false pretenses in order for the termination date to lapse.

Public Disclosure and Antitrust Filings

A requirement to publicly disclose a transaction as a result of signing a letter of intent could increase interloper risk.  Accordingly, deal publicity is a sensitive issue to transaction parties.  The rules and regulations of the Tokyo Stock Exchange (and not Japanese corporate or securities laws) govern letter of intent disclosure obligations of a public company in Japan (private companies are not subject to mandated disclosure obligations).

Under Tokyo Stock Exchange rules, a listed company should disclose a letter of intent if (i) the proposed transaction is “material,” and (ii) a decision has been made by a party to proceed with the proposed transaction.  The materiality of a proposed transaction is assessed according to Tokyo Stock Exchange rules, a discussion of which is beyond the scope of this newsletter given their length.  As to whether a party has made a decision to proceed with a proposed transaction, factors considered include whether the letter of intent is binding or not, the degree of specificity of the letter of intent, and if the aim of the letter of intent is only to kick-start the due diligence and negotiation process.  Whether the letter of intent has been executed or omits a price or merger ratio will not have an outcome determinative impact on a public company’s disclosure obligations under Tokyo Stock Exchange rules, so long as the public company’s board of directors has reviewed the letter of intent and consented to move forward on the basis of such document.

There is a potential exemption from the requirement to disclose a letter of intent that details a material transaction that a party has decided to pursue.  If the public disclosure of the proposed transaction is likely to jeopardize the ability of the parties to consummate the transaction, then there is room to argue under Tokyo Stock Exchange rules that public disclosure of the letter of intent can be waived.  However, if news of the transaction has leaked to the public, then legal counsel should be consulted as the Tokyo Stock Exchange may more heavily scrutinize the public disclosure obligations of a listed company under such circumstances (and a “no comment to market rumors” response adopted by a listed company to such leak could be viewed by the Tokyo Stock Exchange as an unacceptable communication).

It is a standard practice in Japan for a local anti-trust filing to be made only after the execution of an acquisition agreement that has been approved at a meeting of the target’s board of directors.  Unlike other jurisdictions, an anti-trust filing cannot be submitted to the Japanese regulator merely upon the execution of a letter of intent, regardless of the binding nature of the letter of intent, the level of detail in the letter of intent, or the antitrust sensitivity of the proposed transaction.  The antitrust filing sequence in Japan is primarily due to (i) the requirement under Japanese antitrust laws that a copy of the executed acquisition agreement be furnished to the Japan Fair Trade Commission upon the first antitrust submission to the agency, and (ii) the practice adopted by most boards of directors in Japan that the board must approve the final version (and not a close-to-final version) of a material acquisition agreement.  Thus, a buyer eager to initiate a Japanese antitrust review process upon the execution of a letter of intent may face an impregnable wall.

* * * *

A letter of intent that is ambiguous or not carefully drafted may impose obligations and liabilities that one or both sides did not anticipate, and even serve as an invitation to litigation.  The advice of legal counsel ordinarily should be obtained to determine whether a letter of intent is desirable under the circumstances and, if so, which provisions should be binding and which should be non-binding, and how to effectively shield a party from breach of trust and other claims.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

JAPANESE UPDATE – Progress of the M&A transaction practice in Japan under the New Business Combination Investigation Procedures of the Antimonopoly Act

Editors’ Note:  Masakazu Iwakura is a Senior Partner at Nishimura & Asahi and a member of XBMA’s Legal Roundtable. This paper was co-authored with Kenta Ogata, an associate of Nishimura & Asahi. As one of Japan’s leading M&A practitioners, Masakazu Iwakura has handled a variety of groundbreaking M&A transactions and serves on the boards of several public companies: COOKPAD Corporation, Imperial Hotel and GMO Internet. Mr. Iwakura is also a Professor at Hitotsubashi University Graduate School of International Corporate Strategy and will be teaching at Harvard Law School in 2013-2014 as a Visiting Professor.

Highlights:

  • Since the implementation of the Japan Fair Trade Commission’s business combination investigation procedures, two large mergers have passed anti-trust approval: SMI’s merger into NCS to form the largest steel company in Japan and second largest in the world, and the merger of the TSE Group and the OSE, Japan’s two largest financial instrument exchanges.  This article briefly outlines the new policies.
  • In both cases the merger parties consulted with the JFTC prior to notification, submitted written opinions and other materials to the JFTC, and held multiple conferences with the JFTC during the business combination investigation process.
  • NSC and SMI and their attorneys collaborated closely while analyzing the M&A structure and preparing for the requisite stages of investigation. TSE Group and OSE and their advisors prepared adequately in the early stage of the transaction considering the fact that the corporations submitted a written opinion stating that the acquisition does not materially restrict competition and other materials to the JFTC, and consulted several times with the JFTC as requested by the corporations in the Consultation procedure.
  • We expect that the number of business combination investigations carried out by the JFTC under the New Policies will increase, and as a result, corporations and the JFTC will gain more experience and become more efficient and quick with respect to the process of business combination investigations of M&A transactions.

MAIN ARTICLE

I. Introduction

We presented previously, in this forum, an outline of the formulation of the new “Policies Concerning Procedures of Review of Business Combination” (the “New Policies”) and the partial revision of the “Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination” (the “Guidelines”) by the Japan Fair Trade Commission (the “JFTC”), and their possible influence on M&A transactions in Japan focusing on the New Policies (the “Prior Article” as of December 7, 2011).

More than one year has passed since the JFTC implemented the new business combination investigation procedures, based on the New Policies and Guidelines, on July 1, 2011.  During the past year, the JFTC conducted investigations of large cases in Japan which were closely watched overseas, including, for example (i) the merger between Nippon Steel Corporation (“NSC”) and Sumitomo Metal Industries, Ltd. (“SMI”), which was publicly announced on December 14, 2011, following the results of the investigation, and (ii) the integration of the Tokyo Stock Exchange Group, Inc. (“TSE Group”) and the Osaka Securities Exchange Co., Ltd. (“OSE”).  In the latter transaction, (i) the TSE Group acquired, through a TOB, OSE shares equivalent to over 50% of the voting rights, and after that, (ii) they will conduct an absorption-type merger (kyushu gappei) between TSE Group and OSE, whereby OSE will be the surviving company and TSE Group will be absorbed and, other foundation of new corporation by OSE and divestitures required for the integration, and finally (iii) OSE will become a holding company after the merger.  It was publicly announced on July 5, 2012 following the results of the investigation.  The M&A transaction practice in Japan has progressed as a result of the experiences of these investigations under the New Policies.

Below, we first briefly outline the New Policies once again for your understanding, and next provide a short explanation of the outline and background of the two cases mentioned above and the key points relating to the M&A transaction practice in Japan, and give you an update on the content of the Prior Article.

II. Outline of the New Policies

A brief review of the New Policies:

(i) A corporation planning to notify the JFTC can, prior to such notification, voluntarily consult with the JFTC regarding how to complete the notification form, etc. (the “Consultation”).

(ii) The corporation can submit to the JFTC materials that it believes are necessary for it to receive appropriate explanations from the JFTC during the Consultation.  The JFTC can also collect information from the corporation that it thinks are necessary in order for it to give its explanations during the Consultation.  Once the JFTC has gathered such information, the JFTC will then provide explanations to the extent it can based on the currently available information and in accordance with the Guidelines and its precedent cases (with regard to above, the New Policies 2).

(iii) After a corporation submits the notification form regarding its business combination plan to the JFTC, the JFTC will commence its review to decide whether the proposed business combination poses any problems with respect to the Antimonopoly Act (the “Act”) during the 30-day period following the date of receipt of the notification.  The review during this period is called the “Primary Review.”  If the JFTC finds that there are no such problems, the JFTC will provide a written notice stating that the JFTC will not issue an order to divest all or part of the acquired stock, an order to transfer part of the acquired business or any other measures necessary to eliminate violations of the regulations in Article 10, Paragraph 1, etc. of the Act (the “Cease and Desist Order”) (the New Policies 5 (2)).

(iv) If during the Primary Review the JFTC determines that it needs to conduct a more detailed review, it will request reports, information or other materials, such as information on products or market share (a “Request for Reports”), and will commence hearing third party opinions (the New Policies 6 (1) and (2)).  The JFTC ordinarily sends only one Request for Reports (in response to the suggestions received during public comment procedures).

(v) If after sending a Request for Reports and receiving all reports requested thereunder, the JFTC determines that the business combination plans do not pose any problems with respect to the Act, it will provide a notice that no Cease and Desist Order will be issued for 120 days after the date of receipt of the original notification from the corporation or 90 days after the date of receipt of all requested reports, whichever is later (the New Policies 6 (3)).  However, if the JFTC determines that the business combination plans are problematic from the point of view of the Act, it will notify the subject corporations that it will issue a Cease and Desist Order in advance (Article 10, Paragraph 9, etc. of the Act).  The review during this period is called the “Secondary Review.”

III. Practice under the New Policies, Outline of the two cases, and Key points relating to the M&A transaction practice

We set forth below an outline of two actual and remarkable, large-scale cases under the New Policies mentioned above.

(I) The merger of NSC and SMI

The merger of NSC and SMI is an absorption-type merger (kyushu gappei) between two corporations involved in the manufacture and sale of steel products, whereby NSC will be the surviving company and SMI will be absorbed.  With regard to hot-rolled steel sheets (which are the typical steel products), in 2011, NSC was the biggest company (approximately 30%) and SMI was the fourth biggest company (approximately 10%) in Japan (according to JFTC’s disclosed materials), and with regard to crude steel production, in 2010, NSC was the fifth biggest company (approximately 3%) and SMI was the 25th biggest company (approximately 1%) in the world (according to Metal Bulletin).  The merger was expected to close on October 1, 2012.  The JFTC conducted a review of the merger plan.

The Consultation (approximately two months), the Primary Review (30 days) and the Secondary Review (approximately five and a half months) have been completed.  The JFTC identified approximately 30 fields of trade for competitive goods and services, including steel products, titanium products and engineering business, in which competition could potentially be restrained by the merger.  Based upon its review, on December 14, 2011, the JFTC decided that the merger would not substantially restrain competition in any one of these fields of trade, taking into account the remedies proposed by the parties concerning non-oriented electrical steel sheets and the high-pressure gas pipeline engineering business and notified that JFTC will not issue the Cease and Desist Order.

Although this was a large case involving corporations in the same line of business, and the JFTC conducted a detailed review of the potential issues, in the fields of trade including non-oriented electrical steel sheets and the high-pressure gas pipeline engineering business, the review was effectively and efficiently completed in approximately six and a half months from the notification date (May 31, 2011) to the public announcement of the results of the investigation (December 14, 2011).

The merger mentioned above was effective as of October 1, 2012; as a result, Nippon Steel & Sumitomo Metal Corporation, which is the biggest company (approximately 30%) in Japan and the second biggest company (approximately 3.5%) (according to news on the web) in the world in crude steel production, has been inaugurated.

(II) Integration of the TSE Group and the OSE

In the integration transaction planned between the TSE Group and the OSE, the TSE Group will acquire OSE shares equivalent to over 50% of the voting rights of OSE through a TOB.  TSE Group is the parent company of several subsidiaries including the Tokyo Stock Exchange Inc. (“TSE”), a financial instruments exchange in Japan that has a first section, second section and Mothers section.  With regard to services related to listing stocks, the TSE’s market share, calculated based on aggregate market value as of the end of 2011 for the first section and second section, was the biggest in Japan (approximately 45%) (according to JFTC’s disclosed materials), and with regard to aggregate market value in 2011, the TSE’s market share was the third biggest in the world (approximately 6%) (according to the World Federation of Exchanges’ disclosed materials).  The OSE is a financial instruments exchange which has a first section, second section and JASDAQ.  With regard to services related to listing stocks, the OSE’s market share, calculated based on aggregate market value as of the end of 2011 for the first section and second section, was the second biggest in Japan (approximately 25%) (according to JFTC’s disclosed materials), and with regard to aggregate market value in 2011, the OSE’s market share was the 26th biggest in the world (approximately 1%) (according to the World Federation of Exchanges’ disclosed materials).  The JFTC conducted a review of the share acquisition plan.

The Consultation, the Primary Review (30 days) and the Secondary Review (approximately five months) have been completed.  The JFTC identified several relevant fields of trade for competitive services, such as services related to listing stocks, trading stocks and trading Japanese equity index futures, and on July 5, 2012, decided that the share acquisition in question would not substantially restrain competition in any particular field of trade taking into account the remedies proposed by the parties concerning services related to listing stocks, trading stocks and trading Japanese equity index futures and notified that JFTC will not issue the Cease and Desist Order.

Although this transaction was also a large case involving corporations in the same line of business, and the JFTC especially conducted a detailed review of the issues about those concerning the field of services related to listing stocks, trading stocks and trading Japanese equity index futures (the JFTC did not point out that it would materially restrict competition in field of services other than these), the review was effectively and efficiently completed in approximately six months from the notification date (January 4, 2012) to the public announcement of the result of the investigation (July 5, 2012).

(III) Key points for the M&A transaction practice resulting from the above two cases

When we analyze the above two cases from the perspective of scheduling, what they clearly have in common is that in both cases the corporations consulted with the JFTC prior to notification, submitted written opinions and other materials to the JFTC, and held multiple conferences with the JFTC during the business combination investigation process.

With regard to the merger between NSC and SMI, the corporations and their attorneys collaborated closely while analyzing the M&A structure and preparing for the requisite stages of investigation.  For example, the corporations nominated certain people to be exclusively in charge of notifications, collecting basic information and gathering data requested by attorneys.  They also held strategy conferences to coordinate explanations to be provided to the JFTC and worked together in preparing written opinions.

With regard to the acquisition by TSE Group of OSE shares equivalent to over 50% of the voting rights through the TOB, the corporations and their advisors prepared adequately in the early stage of the transaction considering the fact that the corporations submitted a written opinion stating that the acquisition does not materially restrict competition and other materials to the JFTC, and consulted several times with the JFTC as requested by the corporations in the Consultation procedure.

Although these points do not necessarily apply generally because the strategy involved for each case will depend on the type and scale of the case, they indicate that it is helpful for corporations and their attorneys to be well-prepared, to provide a full picture of the major potential issues in a well-organized manner from the perspective of strategy and to focus their attention on those issues in the early stage of the business combination investigation conducted by the JFTC, in order for the corporations to pass the investigation effectively and quickly (especially in large business combination cases which the JFTC is expected to thoroughly investigate).

We pointed out in the Prior Article that it is advisable for a corporation to address expected issues arising under the Act, and adequately prepare materials regarding products or market share, etc. and written opinions to submit to the JFTC, together with accounting, legal, and economic experts during the initial planning stages of a transaction to ensure a quick and effective business combination investigation under the New Policies, and it seems that this practice has grown (especially in large business combination cases, which the JFTC is expected to thoroughly investigate).

We expect that the number of business combination investigations carried out by the JFTC under the New Policies from now and the types of cases examined will start to grow.  As a result of the increase in these investigations, corporations and the JFTC will gain more experience and become more efficient and quick with respect to the process of business combination investigations of M&A transactions depending on the type and scale of the case in Japan.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

JAPANESE UPDATE – MERGERS AND ACQUISITIONS GUIDE 2012/13

Editors’ Note:  Masakazu Iwakura is a senior partner at Nishimura & Asahi and a member of XBMA’s Legal Roundtable. This paper was co-authored with Takeshi Nemoto, a senior associate of Nishimura & Asahi. As one of Japan’s leading M&A practitioners, Masakazu Iwakura has handled a variety of groundbreaking M&A transactions and also serves as Professor (of Corporate Law and M&A Law) at Hitotsubashi University, Graduate School of International Corporate Strategy and as an independent member of the board of directors of COOKPAD Inc., listed on the Tokyo Stock Exchange and the other listed companies.

Executive Summary:

Nishimura & Asahi has prepared a Q&A guide to public mergers and acquisitions law in Japan.  The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; as well as any proposals for reform.

The Japanese guide is available here.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

Subscribe to Newsletter

Enter your Email

Preview Newsletter