Taiwan proposes changes to M&A regulations

Under the proposed amendments, which have been submitted to Taiwan's Legislative Yuan, or parliament, for debate, a privatization would require support from at least two thirds of shareholders.

As it stands, transactions can go through if a straight majority of shareholders representing at least two thirds of the outstanding shares vote in favor. The two thirds majority only applies when the extraordinary general meeting is attended by voters representing half the total outstanding shares.

While the amendment is intended to protect minority shareholders' interests and could make it more difficult for a private equity investor - working in partnership with company management - to complete a privatization, industry participants value clarity above all else.

Speaking to AVCJ earlier this year, C.Y. Huang, president of FCC Partners and chairman of the Taiwan M&A and PE Council (MAPE), said investors would prefer a higher threshold and consistent application to a lower threshold and arbitrary rulings on deals.

For example, a KKR-backed management buyout of Yageo in 2011 had received more than two thirds support from shareholders when the government intervened and nixed the transaction for reasons that have never been fully explained.

This shook investor confidence and other deals withered away. Having reached $9.4 billion in 2006-2007, private equity investment in Taiwan has topped $300 million just once in the past four years. It came to $56.9 million in 2012, the 16th highest total in Asia, sandwiched between Sri Lanka and Pakistan.

Industry efforts to secure a more transparent approvals process include calls for publication of guidelines on investment criteria, the release of a list of sectors and companies in which foreign PE investment is unwelcome, and detailed explanations from the regulator as to why particular transactions are being rejected.

Amendments to the M&A Act and the Statute for Investment by Foreign Nationals are seen as vital first steps in improving the process. However, market watchers warn that there must also be a change in longstanding attitudes that impact the discipline with which any new rules are followed.

Referring to the amendments in full - changes are proposed to numerous articles, covering more than just privatizations - the Executive Yuan, or cabinet, said in a statement that they should simplify acquisitions and permit greater flexibility in deal structures.

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• Topics
• Regulation
• Greater China
• Buyouts
• buyout
• regulation
• Taiwan (China)