MALAYSIA Law and Practice Contributed by: Munir Abdul Aziz, Ee Von Teo and Addy Herg, Wong & Partners
5.4 Multiple Investors It is common for a consortium to include and involve existing shareholders or management of the target/ assets (see 7.1 Public-to-Private ) to further harness the value of the key operational know-how and experi - ence of the owner/senior management of the target. There are private equity deals involving a consorti - um of private equity sponsors (including such spon - sors investing alongside other investors), but these are subject to the size and nature of the transaction where the transaction in question is of high value or complexity. 6. Terms of Acquisition Documentation 6.1 Types of Consideration Mechanism The involvement of a private equity fund (whether as a seller or buyer) typically results in slightly more com - plex consideration mechanisms, such as purchase price adjustments (instead of a fixed-price acquisi - tion), and given that some acquisitions are financed through debt, which may be collateralised by the tar - get’s operations and assets, which are in turn subject to financial assistance restrictions in Malaysia. The pricing structures of private equity transactions in Malaysia are typically based on locked-box or com - pletion accounts. It is also not uncommon to see earn- outs used in transactions, to help retain and incentiv - ise seller-managers who remain in the business for a fixed period of time post-completion. 6.2 Locked-Box Consideration Structures To the extent that the parties have agreed to a fixed price locked-box consideration structure, interest is generally not charged on the fixed price. It is also not typical to charge interest on any leakage that may have occurred during the period between the locked- box date and the completion date. 6.3 Dispute Resolution for Consideration Structures It is common to have a dedicated expert or bespoke dispute resolution mechanism to address any poten - tial disagreement or uncertainties related to valuation, adjustments or performance metrics associated with
acquisition do not deviate significantly by virtue of the transaction being negotiated through bilateral nego - tiation or through an auction process. For public listed companies/assets, the acquisition will typically be structured by way of general offers imple - mented pursuant to the TO Rules. In recent years, there has also been an increasing trend of adopting court-approved schemes within the scope allowed under the TO Rules. 5.2 Structure of the Buyer It is not uncommon for the private equity fund to estab - lish a holding company, which will in turn establish a special purpose vehicle/company as the acquisition entity. Depending on the mandate and strategy of the private equity fund, it is common for representatives of the private equity fund to be appointed as board members of the acquisition entity, who will in turn make key investment/operational decisions. Through this structure, the acquisition entity will be the con - tracting entity to the transaction document. The pri - vate equity fund is not the contracting entity while it is involved in the acquisition, but it may provide com - mitment to the seller (see 5.3 Funding Structure of Private Equity Transactions ). 5.3 Funding Structure of Private Equity Transactions It is common for private equity funds to seek out conventional bank financing to support their private equity deals. Depending on the structure and nature of the assets, the banks will work with the private equity investor to structure the leveraged finance transactions (and address financial assistance and/ or debt push-down restrictions/limitations), and have generally shown willingness to support private equity deals on the basis that the banks passed their internal assessment of the target assets and also the sponsors and/or the private equity fund. Equity commitment letters are common in Malaysia. In competitive auction processes in particular, the seller will also often request evidence of the availability of financing or debt financing.
391 CHAMBERS.COM
Powered by FlippingBook