JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
the transaction sooner rather than later and to discuss the possibility of the transaction with the authorities in order to expedite the authorities’ review. 5.2 Market Practice on Timing Where there is a leak of information concerning a listed company that would have a material impact on investors’ decisions, the TSE will make enquiries of the listed company and, if necessary, may require it to make timely and appropriate disclosure of the matter. The TSE may provide an alert to investors if it consid - ers it necessary to do so when leaked information is unclear or otherwise requires the attention of investors to gain information about the relevant listed company or its shares. 5.3 Scope of Due Diligence In a negotiated transaction, due diligence generally includes a comprehensive review of a target compa - ny’s business, legal, financial/accounting and tax mat - ters. The scope of due diligence may vary, depend - ing on the size and nature of the deal or any time constraints in the parties’ negotiations, and may be focused on material issues by setting a reasonable materiality threshold. Depending on the level of antitrust issues involved, the parties may be restricted from exchanging cer - tain competitively sensitive information during due diligence so as to avoid so-called gun-jumping issues under the Anti-Monopoly Act. In short, the parties must operate as separate and independent entities until the applicable waiting period under the Anti-Monopoly Act has expired and therefore the par - ties must not engage in conduct that could facilitate unlawful co-ordination during that period. 5.4 Standstills or Exclusivity In a friendly transaction, a standstill provision (which generally prohibits a potential acquirer from acquir - ing a target company’s shares outside a negotiated transaction) is somewhat less common in Japan than in some other jurisdictions. However, even if there is no standstill provision (see 4. Stakebuilding ), in prac - tice, those bidders acquiring the shares of the target company without the target company’s prior consent have traditionally been viewed by Japanese listed companies as being unfriendly bidders. Therefore,
any acquisition of shares in advance of a negotiated transaction might jeopardise the friendly nature of the transaction. If the target is a listed company, prior to the execu - tion of a definitive transaction agreement, the target company is less likely to grant exclusivity (ie, a com - mitment by the target company not to negotiate a similar deal with any other third party for a certain length of time) to a particular bidder given that the board of the target company must faithfully consider any “bona fide offer” under the Takeover Guidelines (see 3.1 Significant Court Decisions or Legal Devel - opments ). However, exclusivity may be agreed upon to bind the acquirer and the target company in the context of a business integration (such as a merger) of the two parties. 5.5 Definitive Agreements It is permissible, and is becoming more common par - ticularly in large-sized deals, for an acquirer and a tar - get company to document a tender offer in a definitive transaction agreement. The terms of such definitive transaction agreement could include, among others, certain deal protection measures (see 6.7 Types of Deal Security Measures ). It is also common, immediately prior to the launch of a tender offer, for a buyer and principal shareholder of a target company to enter into an agreement where the shareholder agrees to tender its shares in the con - templated tender offer (see 6.11 Irrevocable Com- mitments ). 6. Structuring 6.1 Length of Process for Acquisition/Sale The length of the process for acquiring or selling a business can vary, depending on a number of factors, including: • the size and type of assets being acquired or sold; • the type of target company (whether public or private); • the level of due diligence required; and • the length of time needed to obtain required regu - latory approvals.
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