Cross-border M&As
Feb 21, 2022
Our firm is also capable of handling cross-border mergers and acquisitions.
However, it may be difficult to discuss such matters in a casual manner. Therefore, we will describe some precautions.
The following is a brief description of the procedures to be followed in the case of stock transfers, which are particularly common.
1. Target selection and consultation for the acquisition
There are various motivations for an acquisition. It is usually unthinkable to acquire a company for no purpose without having a clear motive. It is necessary to clarify when, by when, for what purpose, with what budget, and how the acquisition will be made.
You also need to think about the specifics of how you are going to get them to fit into your company’s culture and how you are going to manage them properly. You need to think one by one about how you can communicate with them about things that are different, not things that work the same way as your company.
Assuming you have decided on target selection, acquisition may be 90% difficult. This is because the situation is usually that what you want is what other companies want, and what you don’t want, other companies don’t want.
If you still want it, the only way to get it is to gradually ask for it through a third party if you don’t know the company. In the case of large Internet companies, if they cannot be acquired, they may try to acquire a rival company. However, in Japan, except for a few companies, such behavior is not very common.
The other party will take the stance that they would like to hear what you have to say, and will try to specify the purpose of the meeting.
2. When meeting with the other party, how much should you disclose about your purpose?
I think it is difficult to get someone to disclose all of their corporate information from the beginning. It is also necessary to offer a reasonable amount of money in order to get them interested. In most cases, even if you offer a reasonable amount, the other side will refuse.
The only thing you can do is to make an offer that will not be rejected by the other party, while having a certain amount of ice breaker, exploring the other party’s attitude and interest, and offering options that the other party may want. In addition, when you make an offer of a certain amount, you have to assume how much you can resell it later. Therefore, you need to research the resale price.
In terms of how much synergy will be generated, it is better to convey to the other party that you are working together rather than on opposing sides. How much confidential information should be disclosed at this time is a question, and a confidentiality agreement should be signed at the right time.
3. Send in a letter of intent
First of all, you need to lay the groundwork within your company. Before signing this agreement, draft a letter of intent and consult with certain directors to formulate it based on your future plans. Once a consensus is reached at the board of directors meeting, we will present it to the other party.
4. Due diligence
We will conduct due diligence depending on the amount of the offer and other factors. We conduct business due diligence, accounting due diligence, tax due diligence, legal due diligence, labor due diligence, intellectual property due diligence, etc. as necessary. We identify legal issues. We find solutions to antitrust and other issues.
Legal and other issues will be negotiated as factors for reduction. If there is an obstacle in the acquisition, it may be necessary to suspend it.
5. Main contract
If there are any issues that cannot be determined through due diligence, you will be responsible for them through representations and warranties. There are various incentives and clauses to prevent moral hazard and to hedge risks. In some cases, you may have to make two payments and make adjustments to make sure that the other party is cooperating.
This point is much more complicated, so I will explain it separately.
6. Execution of the Agreement
The conclusion of the Agreement is not the end of the process. In fact, it cannot be said to have been completed unless a mechanism is in place to ensure proper collection after the Agreement has been executed and payment has been made. Changes in representative directors and other board members, registration, and tax-related matters must all be arranged. It is also necessary to take care of the details such as payments to directors, and to plan how to take over the business.
7. Post-acquisition procedures
After the acquisition, the company needs to comply with laws and regulations as a subsidiary.
It is also important to determine the extent of organizational changes, system changes, and staff changes.
Although it may be difficult to make changes to the organization until the organization is settled, it is necessary to make a general decision at the time of the fourth stage. There is a saying that you should strike while the iron is hot, but it is necessary to transform the company into a profitable one as soon as possible. In this case, we need to consider whether we should become a company that emphasizes job functions, whether we should emphasize profit margins like the company system, and whether we should adopt new methods. In the current situation, it would be a good idea to make it clear that the emphasis should be on profit margins and communicate this to each individual.
We also need to have them do a proper job of formulating rules, standardizing, and reporting on system modifications. If the parent company’s will is overridden in this process, the profit margin will decline. Instead, it is necessary to decide what not to do in the future, to increase transparency, and to create a system that allows the parent company to receive information without receiving reports.
In addition, we need to change the atmosphere by selecting young people as staff.
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