The M&A Process - Singapore_Corporate

Introduction

The M&A process often includes numerous steps.
However, very naturally, if the transaction was a simple one, some steps may be skipped.
And, of course, if it were a more complex transaction, some additional steps would be required.

Strategic Direction

Usually, well before buying or selling any company or business, a strategic direction is agreed upon.
This decision is best made after a very careful study of the acquirer's goals, options and resources.
Also, this decision could be made by the business owner alone or an M&A Executive Committee.
We strongly recommend you approach us as early as possible in your search, whether for as a buyer or as a seller. We can assist you strategize and come up with the best way to achieve your goals.

Target Identification

The next step is to generate as comprehensive as possible a list of potential targets in an organized way to ensure that no viable potential target is omitted.
From this list, those that are obviously not viable should be discarded from the remainder, the "Top 3" most suitable targets identified. Usually, this is determined by singling out those with the most synergistic elements as between acquirer and target (and with the least "dis-synergistic" elements).
Even at this initial stage, while identifying suitable targets, it is important to look out for the risk of breaching the Competition Act if the M&A went through.
Generally, we do not recommend contacting numerous potential targets at once. Pick the very best potential target and put your resources there. If that does not work out, only then, consider the next one on the list.

Confidentiality Agreement

Once contact is made and both parties wish to explore the prospects of the transaction further, a Confidentiality Agreement should be signed to protect both parties from the other side abusing the confidential information that is to be exchanged in the course of discussions.
By this stage, we strongly recommend you should have approached us already as the Confidentially Agreement should be carefully drafted to adequately protect both sides in the event the transaction goes through and also in the event it does not.
Once the Confidentiality Agreement is in force, the parties usually exchange top level (very high level) confidential information to determine whether and on what terms the transaction will proceed.
Only if all these exchanges of confidential information result in both sides being satisfied that they want to go ahead, only then will they move on to the next step.

Letter of Intent

Usually, the Letter of Intent is not binding but it will state the parties' intention to undergo the transaction at such price, for how many shares (or which assets or businesses), when, etc., etc.
It will also often state that the seller will allow and cooperate with the buyer's due diligence efforts which may continue for a period of between 30 to 90 days, depending on the complexity of the deal.

Due Diligence

Due diligence is the process where the buyer comprehensively (or rather, as comprehensively as it can) assesses the target's suitability for acquisition, often by a study of the target's key elements such as its assets, liabilities, income, expenses, commercial potential, whether stand alone or synergistic and "dis-synergistic" elements.
We would advise that this is normally one of the critical stages of the process and we should be instructed well in advance to do proper due diligence for our client.
The reason is that the next stage (if the client should choose to proceed) would result in be a legally binding and enforceable agreement for the seller to sell shares (assets or businesses) and for the buyer to buy them. By then, the buyer would have committed to having the funds ready (to buy when the time comes). Also, by then, both parties must have identified the warranties and representations (promises) that the seller must make for the buyer to go ahead with the M&A transaction.
Because of what this entails, by the end of due diligence, ideally, our client, the acquirer, should have been able to satisfy itself as to all the target's key elements (see above) and determine the target's value via a correct valuation model, identified the appropriate deal structure (whether to enter into a Share Purchase Agreement or Asset (or Business) Purchase Agreement, forward or reverse triangular merger, etc.) and so on.
Click here for an example where the buyer (who was not our client) failed to properly identify all the target's key elements before signing a binding agreement to acquire the target. The parties ended up suing each other in court.

M&A Agreement

The parties negotiate and then sign the binding M&A Agreement.
After the signing, there will often be some time set aside for the seller to get all the necessary documentation, approvals, consents, etc., in time for the completion.

Completion (aka Closing)

At completion, all necessary representations, warranties, documentation, approvals, consents, etc., are exchanged, often, for cashier's orders or funds transfer acknowledgements, etc.

Post-completion (or Integration)

Post-completion, there will often be numerous other follow up items which will have to be done.
Some are as basic as stamping the appropriate documents within 14 days after signing.
Others may include integrating two vast organizations, including their work forces, including operations, functions, inventories, infrastructure such as factories and offices, etc., markets including customers, product and service lines, etc.

References

Action

If you have any questions or need any help buying or selling a company or a business, please feel free to call Lam & Co. at 6535 1800.

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