TAIWAN Law and Practice Contributed by: Lihuei Mao (Grace), Derrick Yang, Yu-Ting Su and Rose Huang, Lee and Li Attorneys-at-Law
depending on the target’s industry/business and the result of negotiation. 6.5 “Hell or High Water” Undertakings From the authors’ observations, risk-averse private equity buyers tend to avoid a “hell or high water” undertaking which imposes heavy burden on the buyer side to complete the deal, especially consid - ering the increased regulatory uncertainty in recent years. In practice, a “hell or high water” undertaking will involve obtaining regulatory approvals such as foreign investment approval, antitrust clearance and, where the targets are in highly regulated fields (such as the telecommunications and financial industries), ad hoc approval from the competent authorities. The new EU FSR may come into play for Taiwan - ese targets participating in public projects in the EU. Therefore, when structuring the deal, the parties will need to carefully negotiate these types of undertak - ings in terms of the required approval for completion or any potential conditions that may be imposed by the authority to enhance deal certainty. 6.6 Break Fees A break fee in favour of the seller may not be prevalent in deals with a private equity-backed buyer. However, these arrangements are sometimes used in cross- border public transactions or auctions as a deal pro - tection mechanism. In highly regulated industries such as banking, insurance or financial holdings, break fee arrangements may incite the regulator’s oversight and prolong the review process. Based on the authors’ observations, a typical trigger for the break fee or reverse break fee is tied to the fail- ure to obtain key governmental/regulatory approvals in the relevant jurisdictions. The break fee can range from 1% to 5% of the total purchase price, whereas the reverse break fee can be 1.5 to two times the break fee. The specific amount and conditions will still be determined through negotiations between the parties. For example, in 2025, Uber Technologies Inc. decided to terminate its bid to acquire Delivery Hero SE’s Foodpanda business in Taiwan, after the Taiwan Fair Trade Commission rejected the bid in December 2024 on the grounds that the combination of the two
would restrict competition. The reverse break fee is estimated to be about USD250 million. 6.7 Termination Rights in Acquisition Documentation Private equity deals may be terminated due to the following circumstances: • occurrence of a material adverse event; • failure to obtain shareholders’ approval; • deal prohibited by applicable laws or by the authorities; or • failure to fulfil the conditions before the longstop date. The longstop date generally aligns with the expected timeline to fulfil the conditions precedent agreed upon by the parties, especially for obtaining the necessary governmental/regulatory approvals for the deal, with a certain buffer built in for prudence. In general, a stand - ard foreign investment approval involving a private equity investment in non-highly-regulated industries might take at least two to three months, so the long - stop date would typically be five months or longer from the signing, subject to adjustments in view of the merit in each case. 6.8 Allocation of Risk A private equity seller may seek to shift the opera - tional risks of the target company to the buyer or other sellers given that a private equity seller usually pro - vides limited representations and warranties without exposing itself to any contingent liabilities. On the other hand, a corporate seller involved in the day-to- day operations and business decisions usually will be requested to undertake comprehensive representa - tions and warranties on the general business opera - tions of the target company. In case of a private equity buyer, the warranty and indemnification insurance could be used to external - ise potential risks, especially when the disclosures collected from due diligence are limited. 6.9 Warranty and Indemnity Protection Typically, a private equity seller will offer rather limited warranties and indemnities with customary limitations of liability, such as liability period, de minimis, tipping/
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