Issues

CHINESE UPDATE – Variable Interest Entity (VIE) Structure for Foreign Investment in the PRC May Face Challenge

Published on: October 19 2011
Contributed by: Xu Ping, King & Wood (Beijing)

Executive Summary/Highlights: The VIE structure (i.e. reliance upon contractual arrangements to control a PRC operating company) has been a popular structure in the last decade for both foreign and Chinese investors alike. A number of recent cases involving companies using a VIE structure have exposed the inherent defects and potential legal and regulatory risks inherent … Continued

Editors’ Note:  Xu Ping is a partner at King & Wood and a member of XBMA’s Legal Roundtable. Ms. Xu heads King & Wood’s corporate practice and is a leading expert in representing international companies in their investments in China, with extensive experience in structuring foreign direct investment, M&A and technology transfer transactions.

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INDIAN UPDATE – New Takeover Regime Provides Clarity for Indirect Acquisitions in India and Overhauls Old Regime

Published on: October 18 2011
Contributed by: Cyril S. Shroff, Amarchand & Mangaldas & Suresh A. Shroff & Co. (Mumbai)

Executive Summary/Highlights: New regulations overhaul the Indian takeover regime, increase transparency, and represent a significant improvement. One of the key changes is the new principle-based treatment accorded to “indirect” acquisitions, where a substantial acquisition of shares, voting rights or control of a target company occurs indirectly through the acquisition of shares or control of an … Continued

Editors’ Note:  Cyril Shroff is the managing partner of Amarchand & Mangaldas & Suresh A. Shroff & Co. and a member of XBMA’s Legal Roundtable.  Mr. Shroff is one of the deans of the Indian corporate bar and a leading authority on Indian M&A, with extensive experience handling many of the largest and most complex domestic and cross-border takeover, banking and project finance transactions in India.

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GLOBAL STATISTICAL UPDATE – XBMA Quarterly Review for Third Quarter 2011

Published on: October 17 2011
Contributed by: Raaj Narayan, Editor, XBMA Quarterly Review

Executive Summary/Highlights: Global M&A volume in Q3 was relatively sluggish at US$507 billion, marking the second consecutive quarterly decline, but aggregate global volume for 2011 year-to-date is still 4% higher than volume for the first three quarters of 2010. Cross-border transactions have rebounded somewhat since 2009, with 36% of 2011 global M&A involving an acquirer … Continued

Editors’ Note:  XBMA’s Review is published on a quarterly basis using consistent metrics and sources of data in order to facilitate a clearer understanding of trends and developments.  We welcome feedback and suggestions for improving the Review or for interpreting the data.

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EU UPDATE – European Commission Considers Whether All Chinese SOEs should be Considered a Single Economic Entity for Merger Clearance Purposes

Published on: October 13 2011
Contributed by: Kees Peijster, Eric Pijnacker Hordijk and Geert Potjewijd, De Brauw Blackstone Westbroek (Amsterdam/Beijing)

Executive Summary: The European Commission recently issued clearance under the merger control rules for the proposed joint venture between DSM and Sinochem. The Commission considered the question of whether all Chinese State-Owned Enterprises (so called “SOEs”) should be considered a single economic entity, but left the question open for future determination after concluding that even … Continued

Editors’ Note:  Kees Peijster, Eric Pijnacker Hordijk and Geert Potjewijd are partners at De Brauw Blackstone Westbroek, resident in Amsterdam and Beijing, respectively, and are members of XBMA’s Legal Roundtable.  As leading Dutch M&A lawyers, they have broad expertise handling significant cross-border transactions involving China and the Netherlands, including the DSM/Sinochem transaction described below.  The issue of whether to view all Chinese SOEs as a single economic entity, and therefore to aggregate their ownership interests, could have important implications under many regulatory regimes and could prove to be rather controversial.  We invite comments and additional papers on this topic.

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BRAZILIAN UPDATE – Recent Restrictions on Foreign Investment in Agribusiness in Brazil Could Have Broader Implications for Cross-Border Acquisitions of Brazilian Companies that own Land

Published on: October 11 2011
Contributed by: Antônio Corrêa Meyer, Machado Meyer Sendacz Opice (São Paulo)

Executive Summary/Highlights: An August 2010 legal opinion of the Federal Attorney-General of Brazil (Advocacia Geral da União) extended the Brazilian law that restricts the acquisition of rural land by foreigners to apply also to acquisitions of land by Brazilian companies controlled by foreigners. As a result, cross-border change of control transactions involving Brazilian companies that … Continued

Editors’ Note:  Antônio Corrêa Meyer is a founding partner of Machado Meyer and a member of XBMA’s Legal Roundtable.   Mr. Meyer is one of Brazil’s leading experts in the internationalization processes of Brazilian companies, mergers and acquisitions, and large infrastructure projects, all of which might be affected by the opinion discussed in this paper.

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CHINESE UPDATE – China Inc.’s Revamped Cross-Border Takeover Strategy Shows Signs of Success, Correcting the Mistakes of the First Wave of Chinese Foreign Acquisitions

Published on: October 10 2011

How China Reset Its Global Acquisition Agenda, by Peter J. Williamson and Anand P. Raman Executive Summary/Highlights: The first wave of cross-border takeovers by Chinese companies, between 2000 and 2007, was unsuccessful because of a number of strategic and tactical mistakes, including pursuit of inexpensive deals and troubled companies that were difficult to turn around; … Continued

Editors’ Note:  Peter J. Williamson, one of the authors of this very interesting article, is Professor of International Management at Cambridge Judge Business School and a founding director of XBMA.  Professor Williamson is one of world’s the foremost experts on the internationalization of Chinese companies and their global impact, cross-border mergers and acquisitions, and the implications for corporate strategy of globalization, among other areas, and also has extensive experience in prominent positions in the business world.  This article was published in the Harvard Business Review in April 2011.

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SINGAPOREAN UPDATE – Methods, Trends and Developments in Singaporean M&A

Published on: October 9 2011
Contributed by: Rachel Eng, WongPartnership LLP (Singapore)

Executive Summary/Highlights: As at June 2011, overall M&A activity in Singapore was up 40.8 per cent to US$23.3 billion, making it the busiest half-year opening since 2008. The rise has been driven by various factors, not least the amount of capital funds flowing into South-East Asia. Singapore recently liberalized its banking regulations to allows banks … Continued

Editors' Note: This paper was contributed by Rachel Eng, Managing Partner of WongPartnership and a member of XBMA's Legal Roundtable. It was authored by Andrew Ang, Deputy Head of WongPartnership's Corporate/Mergers & Acquisitions Practice and Elaine Chan, Joint Head of the firm’s Financial Services Regulatory Practice. Ms. Eng, Mr. Ang and Ms. Chan are leading experts in both domestic and cross-border M&A in Singapore and other jurisdictions in Southeast Asia.

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ITALIAN UPDATE – Formation of New Italian Fund to Protect Italian National Champions, in Reaction to the Takeover of Italy’s Parmalat by France’s Lactalis

Published on: October 7 2011
Contributed by: Alberto Saravalle and Umberto Nicodano, Bonelli Erede Pappalardo (Milan)

Executive summary: The recent acquisition of Parmalat — one of the biggest Italian listed companies — by the French dairy group Lactalis, caused a huge debate in the financial and political communities in Italy. Lactalis’ bid was initially met with stiff Italian resistance, including encouragement of potential local “white knights,” issuance of an emergency decree … Continued

Editors' Note: Alberto Saravalle and Umberto Nicodano are senior partners of Bonelli Erede Pappalardo and members of XBMA's Legal Roundtable. As two of Italy’s leading M&A practitioners, they bring an invaluable perspective to Italy's reaction to the Parmalat takeover, which differs markedly from the UK's reaction to the Cadbury takeover discussed in Nigel Boardman’s recent paper. This paper raises interesting questions about the defensive use of Sovereign Wealth Funds, which is sure to be a topic of discourse in the coming years.

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CHINESE UPDATE – New National Security Review Rules: A Justifiable Cause of Anxiety?

Published on: October 5 2011
Contributed by: Zhao Bing and Susan Ning, King & Wood (Beijing)

Executive Summary/Highlights: On 25 August 2011, the Ministry of Commerce (MOFCOM) released the MOFCOM Rules for Implementation of Relevant Issues regarding National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (NSR Rules). One of the key provisions states that foreign investors shall not evade the NSR regime via alternative transaction … Continued

Editors' Note: This paper was written by Susan Ning, Huang Jing and Yin Ranran, and contributed by Susan Ning and Zhao Bing, partners at King & Wood. Ms. Ning heads King & Wood's International Trade and Antitrust and Competition Group and is widely recognized as one of the leading experts in the field, with many years of experience working with MOFCOM to secure merger clearance. Susan Ning and Zhao Bing are members of XBMA's Legal Roundtable.

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UK UPDATE – Changes Adopted to UK Takeover Regime to Strengthen Position of UK Targets, Prompted by Kraft’s Successful Hostile Takeover of Cadbury

Published on: October 3 2011
Contributed by: Nigel Boardman, Slaughter and May (London)

Executive summary: A revised edition of the UK Takeover Code took effect on 19 September 2011. The revisions were prompted by Kraft’s hostile takeover of Cadbury in 2010, which triggered debate about the weak position of UK target companies. The revised Code introduces rules to strengthen the target’s position, namely an enforced “put up or … Continued

Editors’ Note: Nigel Boardman is a partner at Slaughter and May and a founding director of XBMA.  As one of the leading M&A lawyers in the UK, Mr. Boardman’s perspective on the UK’s response to the Cadbury takeover is informed by broad experience in a range of significant solicited and unsolicited cross-border transactions over many years.  Mr. Boardman’s paper is the first in a series of posts that will focus on various jurisdictions’ reactions to foreign takeovers of important domestic companies.

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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.