The Rise of Mergers & Acquisitions in Singapore

Introduction

Business activities related to Mergers and Acquisitions (M&A) have made a strong comeback in Singapore after some slowdown during the Covid pandemic. As business confidence is gradually restored and the economic outlook becomes positive, growth-oriented businesses started looking for profitable M&As.

What are the key regulations relevant to M&A in Singapore?

The key regulations relevant to M&A in Singapore are as under.

• Singapore Companies Act 1967-ACRA
• Singapore Insolvency, Restructuring and Dissolution Act 2018 (IRDA)- Ministry of Law
• Singapore Securities and Futures Act 2001 (SFA)- MAS
• Singapore Code on Takeovers and Mergers (Takeover Code)- MAS
• Listing Manual of the Singapore Exchange Securities Trading Limited
• Singapore Competition Act 2004- Ministry of Trade and Industry

How are Private and Public M&A Transactions Structured?

Private and public M&A transactions in Singapore are normally structured either as a purchase of the issued shares of the company or as an acquisition of the business including the assets and liabilities of the company.

What are the main differences between the various structures?

Generally, the acquisition of shares becomes less cumbersome as compared to a business or asset sale as this involves the transfer of title to each of the assets from the target company to the purchaser. Moreover, a company’s assets and liabilities can be available in different forms including land, leases, premises, leases, book debts, intellectual property, etc. requiring different methods of transfer to pass title for each type of asset.

What factors typically influence the selection of structure?

Maximization of profit is the major factor followed by less time and resources requirements for due diligence and optimized tax consideration.

What documents are required during the preparatory stage of an M&A transaction?

A non-disclosure or confidentiality agreement before the start of the due diligence process and preparation of the transaction documents. A memorandum of understanding on key terms and conditions of the transaction may also be a document sometime.

What is Break Fee in M&A?

A break fee is a penalty paid by the party who breaks the M&A deal. Break fees are usually permitted in Singapore, although they are rare in the case of private acquisitions.

What is the code of takeovers and mergers in Singapore?

The Takeover Code needs all parties to a takeover or merger transaction to volunteer full and prompt disclosure of all relevant information. There must not be any statements made that may mislead shareholders or the market. Any breach of the takeover code may result in sanctions imposed by the Securities Industry Council, Singapore.

Is there any time limit for negotiations or due diligence?

For private M&A transactions, there are no time limits for negotiation or due diligence. In public M&A transactions, while there are no maximum periods specified for negotiations or due diligence, the Takeover Code however stipulates a strict timetable on the actual takeover process that must be fulfilled.

What are the means of acquisition of a publicly traded company?

The acquisition of a publicly traded company in Singapore is done through general offers, schemes of arrangement, reverse takeovers, and voluntary de-listings.

Are hostile takeovers common in Singapore?

Hostile acquisitions are allowed in Singapore, however, are uncommon.

Who makes decisions on behalf of a target company and what are shareholders’ roles?

In both public and private M&A transactions, the target company’s board of directors is the key decision-making body.

In a private M&A transaction, specific shareholder approval is not usually needed unless the transaction specifically requires shareholder approval as per Singapore legislation or a shareholders’ agreement.

Shareholders in a public M&A transaction will be able to either accept a takeover offer in respect of their shares or cast their vote to approve a scheme of arrangement.

What roles do employees and other stakeholders play?

Generally, employees have no statutory right to be consulted or otherwise to participate in the management of companies in Singapore.

Conclusion

M&A activity in Singapore has strong government support. The Singapore government announced enhancements to the Enterprise Financing Scheme – Merger & Acquisitions (Scheme) from 1 April 2022 to 31 March 2026 during budget 2022. The Scheme supports enterprises to scale and expand through M&A and provides financing for the acquisition of local or overseas targets. The government also encourages businesses to embark upon complementary businesses and emerging sectors and new-age businesses.