MALAYSIA Law and Practice Contributed by: Munir Abdul Aziz, Ee Von Teo and Addy Herg, Wong & Partners
the consideration structures, given the more complex valuation structures that are typically applied in private equity transactions. The dedicated expert or dispute resolution mechanism applied will vary based on the type of consideration or valuation mechanics applied in the transaction, the specific terms of the transactions, the parties involved and the complexities that may be associated with the particular industry of the target. 6.4 Conditionality in Acquisition Documentation As the regulatory framework in Malaysia imposes for - eign equity restrictions and/or Bumiputera (generally refers to native or indigenous people of Malaysia) and local participation requirements, it is very common for conditions precedent to include receipt of the neces - sary regulatory approval for the transfer of shares or change of control of a licensed target company. It is also not uncommon to see third-party consents of key customers/suppliers and shareholder approvals (due to the relevant thresholds set out in the Companies Act/Bursa Malaysia Listing Requirements being trig - gered) featured as conditions to completion in defini - tive transaction documents. In addition, it is becoming increasingly common to have material adverse effect conditions in transac - tions in Malaysia, particularly where the buyer is a private equity fund. 6.5 “Hell or High Water” Undertakings It is not common for private equity-backed buyers to accept “hell or high water” undertakings where they relate to regulatory conditions in Malaysia, given the prevalence of equity restrictions/requirements across various industries in Malaysia. Commitments to com - pleting the acquisition and fulfilling regulatory condi - tions (if any) will need to be carefully negotiated in light of such challenges. The specific carve-outs to “hell or high water” under - takings will vary based on the industry and the indi - vidual deal dynamics. To the extent that there is cer - tainty regarding the lack of any equity restrictions or requirements, it is then not uncommon for buyers
to demonstrate their commitment to completing the transaction by accepting such undertakings. Where applicable, merger control and the new EU Foreign Subsidies Regulation regime may also fea - ture in negotiations in respect of such undertakings. The inclusion or carve-out of such issues from the undertakings will require the necessary multi-jurisdic - tional merger control analysis to be carried out and an understanding of the type of subsidies or financial support that may have been received by the parties in question. 6.6 Break Fees The concept of break fees is not common in Malay - sia. Occasionally, a seller may request a break fee as part of an auction sale process letter, but it is typically dropped during the negotiation process. 6.7 Termination Rights in Acquisition Documentation The circumstances under which a private equity party (whether buyer or seller) can terminate an agreement will vary based on negotiation, legal requirements and individual deal dynamics. Common termination events include: • material adverse change events, pegged to finan - cials or the performance of the target company, that have occurred prior to completion; and • failure to fulfil the relevant conditions precedent, such as receipt of the necessary regulatory approvals or completion of financing arrange - ments required by the purchaser within a specified timeframe. The long-stop date for transactions varies based on the complexity of the transaction, the regulatory requirements involved and the types of conditions precedent agreed between the parties. Long-stop dates must be tailored to suit the specific circum - stances of each deal. Where the transaction is complex and requires multi - ple third-party approvals, including regulatory approv - als, the long-stop date might be as long as six months (if not more) from the date of signing of the agreement.
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