JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
5.4 Standstills or Exclusivity In a friendly transaction, a standstill provision (which generally prohibits a potential acquirer from acquiring a target company’s shares out - side a negotiated transaction) is somewhat less common in Japan than in some other jurisdic - tions. However, even if there is no standstill pro - vision (see 4. Stakebuilding ), in practice, those bidders acquiring the shares of the target com - pany without the target company’s prior consent have traditionally been viewed by Japanese listed companies as being unfriendly bidders. Therefore, any acquisition of shares in advance of a negotiated transaction might jeopardise the friendly nature of the transaction. If the target is a listed company, prior to the exe - cution of a definitive transaction agreement, the target company is less likely to grant exclusivity (ie, a commitment by the target company not to negotiate a similar deal with any other third party for a certain length of time) to a particular bidder given that the board of the target company must faithfully consider any “bona fide offer” under the Takeover Guidelines (see 3.1 Significant Court Decisions or Legal Developments ). However, exclusivity may be agreed upon to bind the acquirer and the target company in the context of a business integration (such as a merger) of the two parties. 5.5 Definitive Agreements It is permissible, and is becoming more com - mon particularly in the large size deals, for an acquirer and a target company to document a tender offer in a definitive transaction agree - ment. The terms of such definitive transaction agreement could include, among others, certain deal protection measures (see 6.7 Types of Deal Security Measures ).
conduct third-party hearings, the parties may prefer to disclose the transaction sooner rather than later and to discuss the possibility of the transaction with the authorities in order to expe - dite the authorities’ review. 5.2 Market Practice on Timing Where there is a leak of information concern - ing a listed company that would have a mate - rial impact on investors’ decisions, the TSE will make enquiries of the listed company and, if necessary, may require it to make timely and appropriate disclosure of the matter. The TSE may provide an alert to investors if it considers it necessary to do so when leaked information is unclear or otherwise requires the attention of investors to gain information about the relevant In a negotiated transaction, due diligence gener - ally includes a comprehensive review of a target company’s business, legal, financial/accounting and tax matters. The scope of due diligence may vary, depending on the size and nature of the deal or any time constraints in the parties’ nego - tiations, and may be focused on material issues by setting a reasonable materiality threshold. Depending on the level of antitrust issues involved, the parties may be restricted from exchanging certain competitively sensitive information during due diligence so as to avoid so-called gun-jumping issues under the Anti- monopoly Act. In short, the parties must operate as separate and independent entities until the applicable waiting period under the Anti-monop - oly Act has expired and therefore the parties must not engage in conduct that could facilitate unlawful co-ordination during that period. listed company or its shares. 5.3 Scope of Due Diligence
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