ALM Properties, Inc.
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MALTAS EDGE FOR M&A
MALTA continued to experience a steady flow of M&A activity throughout 2012. Such activity is sustained by Maltas advanced legal framework which facilitates the otherwise intricate M&A implementation processes.
The Companies Act (Cap. 386) (the Act) is the cornerstone legislative instrument specifically dealing with mergers and acquisitions. In this regard it is relevant to note that the Act deals not only with the amalgamation of companies but also with the amalgamation of other vehicles and/or commercial partnerships which may be registered and incorporated in terms of the Act.
The Act is supplemented by a myriad of ad hoc legislative instruments and provisions which deal with specific aspects of M&A activity in Malta. In this regard, particular attention ought to be made to legal notice 294 of 2002, as amended, implementing Council Regulation (EC) No. 139/2004 in so far as M&A activity may potentially lead to a substantial lessening of competition. Reference is also to be made to the Employment and Industrial Relations Act (Cap. 452) since obligations may arise in relation to the employees of a transferor.
From a regulatory perspective, compliance is to be made with the applicable listing rules (the Listing Rules) issued by the Listing Authority established by virtue of the Financial Markets Act (Cap. 345) whenever a merger and acquisition transaction involves a listed company. The consent of the Malta Financial Services Authority is required whenever the M&A activity relates to licensed entities such as trustees under the Trusts and Trustees Act (Cap. 331) or financial institutions under the (Cap. 376).
Companies are mainly utilised within various transactions serving different structuring purposes. Horizontal mergers, driven by prospective synergies and increased market share, take place between companies operating in the same industry, who offer the same goods or services. Vertical acquisitions often aim at benefits of economies of scale. The merger of companies of different, unrelated businesses (or conglomerate) on the other hand, aims at investment diversification.
In a merger by acquisition a company acquires all the assets and liabilities of one or more other companies in exchange for the issue of shares in the acquiring company to the shareholders of the companies being acquired. A supplementary cash payment, if any, cannot exceed ten per cent of the nominal value of shares so issued.
An amalgamation results in a succession by the acquiring companies to all the assets, rights, liabilities and obligations of the acquired companies, the latter cease to exist. In a merger by formation of a new company two or more companies deliver all their assets and liabilities to a company which they set up in exchange for the issue of shares in the company to the shareholders of the merging companies. A supplementary cash payment, if any, cannot exceed ten per cent of the nominal value of shares so issued. The merging companies are dissolved.
Reverse take-overs are also possible in the framework of the Act. In a reverse take-over, a private company acquires a controlling interest in a publicly traded company. Upon such take-over the Listing Rules have to be observed. Subsequently, the shareholders of the private company exchange their shares against shares in the public company, the public company being the surviving entity. Accordingly a private company can become a listed public company without going through the process of listing.
A management buy-out or a management buy-in is a particular form of acquisition due to the nature of the acquirer. Whereas in a management buy-out an existing management acquires the company from the shareholders, external managers acquire the company in a management buy-in. Different commercial and financing considerations will have to be reflected in the transaction structuring and in the legal documentation.
Maltas pro-business approach, relative low cost and accessible regulator make Malta an optimal choice for implementing M&A activity.