FINANCIAL INSIGHT: MERGERS AND ACQUISITIONS
Hong Kong to remain attractive to M&A Hong Kong remains a key hub for investors looking at mergers and acquisitions throughout the region, as well as other interactions in the company market.
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ong Kong followed suit with the global trend in merger and acquisition activity in 2020, beginning with a slow start to the year, and then enjoying a slight rebound in the second half. In a report, Latham & Watkins noted that Hong Kong was hit with several challenges as the Covid-19 pandemic raged, from logistical difficulties to geopolitical tensions. These have led to longer deal timetables and market uncertainty. But as parts of the world slowly recover from the pandemic, Simon Cooke, Deputy Managing Partner for Asia of Latham & Watkins, says Hong Kong has the potential to become an M&A hub. “As the world gradually emerges from Covid-19 pandemic, Hong Kong remains an attractive hub for investors and the firm continues to see a solid appetite for both Greater China and broader regional M&A deals in the market,” Cooke said in an interview with Hong Kong Business. “Despite a mild slowing of activity in the middle half of last year, both private and public M&A transactions rebounded towards the end of 2020 and this trend has largely continued in the first half of this year, driven partly by private equity funds which have significant amounts of dry powder to deploy on acquisition opportunities.” Trade tensions between the US and China have made Hong Kong particularly attractive to Chinese companies
The strength of the equity capital markets in Hong Kong and the US has also provided a genuine exit alternative for many sellers, further supporting the high valuations in the market
Hong Kong remains an attractive hub for investors in the M&A and company markets
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HONG KONG BUSINESS | Q3 2021
who do not wish to deal with regulatory pressures from the US. The legislation governing public takeovers in Hong Kong is the Code of Takeovers and Mergers, and is administered by the Securities and Futures Commission, Securities and Futures ordinance, and Listing Rules. In 2020, a new legislation called the Limited Partnership Fund Ordinance enabled the formation of limited partnerships to be registered in Hong Kong, to attract private equity and venture capital funds. “Hong Kong SAR’s merger control legislation currently only applies to M&A transactions that involve an undertaking that directly or indirectly holds a carrier license within the meaning of the Telecommunications Ordinance. The Competition Commission is thought to be reviewing the existing framework of its broader anti-competition regime; however, whether the merger regime will expand to other sectors remains to be seen,” the Latham & Watkins report read. It added that Hong Kong’s legislation on M&A transactions is still based on English law, as opposed to Mainland China’s civil law regime. If anything made its mark on how M&A deals were executed last year, it was the pandemic. Cooke noted that it became difficult to conduct on-the-ground due diligence, with potential buyers wary about the impact Covid-19
