CHINA Law and Practice Contributed by: Bing Zhai, Commerce & Finance Law Offices
5.4 Standstills or Exclusivity In Chinese M&A deals, “standstill” provisions are commonly used, especially in listed company acquisitions. These clauses restrict the acquirer from trading the target’s shares during nego - tiations or due diligence to protect the target’s interests and prevent equity changes before deal terms are finalised. They also block hostile takeovers in the open market during the confi - dentiality period, preventing the acquirer from exploiting insider knowledge to the detriment of the target’s shareholders. Exclusivity clauses, which prohibit the target from negotiating with other parties for a speci - fied period, are also frequently included in LOIs or term sheets to protect the acquirer’s interests It is permissible and common for tender offer terms and conditions to be documented in a definitive agreement in China. 6. Structuring 6.1 Length of Process for Acquisition/ Sale The process for acquiring or selling a business in China typically takes 3 to 12 months, depending on the complexity of the transaction, regulatory approvals and the involvement of SOEs. Key factors influencing the timeline include: during the negotiation process. 5.5 Definitive Agreements • due diligence – comprehensive financial, legal and operational due diligence can take one to three months. • regulatory approvals – antitrust reviews, national security reviews and sector-specific approvals may extend the process by several months; and
• negotiations and documentation – drafting and finalising transaction documents, includ - ing share purchase agreements, can take one to two months. 6.2 Mandatory Offer Threshold China has a mandatory offer threshold under the Measures for the Administration of Takeovers of Listed Companies. If an acquirer obtains 30% or more of a listed company’s shares, they are required to launch a mandatory tender offer to all shareholders unless an exemption is granted. 6.3 Consideration Cash is more commonly used as considera - tion in China due to its simplicity and certainty. However, shares are sometimes used in mergers involving listed companies. To bridge value gaps, common tools include: • earn-outs – payments are contingent on future performance; • escrow arrangements – funds are held in escrow to address post-closing adjustments; and • valuation adjustments – mechanisms used to adjust the purchase price based on financial metrics. 6.4 Common Conditions for a Takeover Offer Common conditions for a takeover offer include regulatory approvals, shareholder approval and the absence of material adverse change (MAC). Regulators, such as the CSRC, restrict overly broad or subjective conditions to ensure fairness and transparency. 6.5 Minimum Acceptance Conditions The minimum acceptance condition for tender offers is typically 50% of the target’s shares, as
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