TAIWAN Law and Practice Contributed by: Eddie Chan, Derrick Yang, Winnie Lin and Yuan-Yuan Lo, Lee and Li Attorneys-at-Law
4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process If the sale of the company is chosen as a liquid- ity event, it will mostly be conducted in a bilat- eral negotiation with a chosen buyer, rather than through an auction. In Taiwan’s local M&A trans- actions, auctions are mainly seen in the financial sector; in the technology industry, auctions are more likely to be used in asset sales than share deals. 4.2 Liquidity Event: Transaction Structure In Taiwan, for a sale of a privately held technol- ogy company that has a number of VC investors, a sale of the entire company is more commonly seen than a sale of controlling stake, as there are usually drag-along and tag-along provisions in the investment agreement. Generally, buyers also consider it efficient to acquire the entire company as this could simplify the transaction process and avoid complexity and uncertainty in the future. 4.3 Liquidity Event: Form of Consideration Cash is most commonly used as the considera- tion for a sale of a privately held venture capital- financed company in Taiwan, as VC investors typically expect a cash return on their invest- ment. Nevertheless, it is also possible to use shares or a combination of cash and shares as the consideration, particularly where the buyer is a listed company, depending on the nature of the transaction, the preference of the parties and the approval from competent authorities.
ments and regulations, and the ease of access to local investors and stakeholders who better understand the company’s operations and prod- ucts. By listing on a local exchange, the com- pany can also enhance its visibility and reputa- tion in the local industry. Other considerations include the ease of communications with the regulators/investors and the relatively low list- ing/maintaining costs, etc. A few Taiwanese companies also choose to do a dual listing by issuing GDR (Global Deposi- tary Receipt), which allows them to access both local and international capital markets and to diversify their investor base. This approach can also enhance the company’s global visibility and facilitate the development of its overseas busi- ness. 3.3 Impact of the Choice of Listing on Future M&A Transactions Listing rules vary according to stock exchanges in different countries. If a company chooses to list on a foreign stock exchange, it must thor- oughly understand relevant regulations that might come into play in order to properly evalu- ate the potential implications for and impact on the company’s future operations and M&A transactions. Companies are usually required to comply with the laws and regulations of both their place of incorporation and the foreign exchange. A Tai- wanese company seeking to list on a foreign exchange will conduct a restructuring first to tailor to the foreign exchange’s regulations.
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