Healthcare M&A 2024 Comparisons

Overall, there was a marked decline in mergers and acquisitions (M&A) globally and in Singapore in terms of both deal volume and value in 2023. A similar trend has been observed for healthcare M&A in Singapore. Nevertheless, the long-term outlook for healthcare M&A remains positive, with strong interest from existing healthcare providers, pharmaceutical giants and investors active in the healthcare space.

While inflationary trends, changes in the financing market, the war in Ukraine and, now, the armed conflict between Israel and Hamas have created a cautious and subdued environment for overall deal activity, we believe there is cause for optimism for healthcare M&A in Singapore for the following reasons:

Increased Healthcare Demand

There is an increase in healthcare demand in Asia given the region’s rapidly ageing population, longer life expectancy, and expanding middle class. Healthcare demand is expected to increase even further in Singapore, with the Singapore Government consistently increasing the country’s healthcare expenditure and investing in additional healthcare infrastructure.

Opportunities in the Digital Healthcare Sector

Technological innovation is transforming the healthcare industry, including the delivery of healthcare services. This presents opportunities not just for investors but for traditional healthcare players (hospital operators and owners, and medical practices) looking to innovate and evolve.

While not immune to global economic headwinds, there is still a healthy interest in healthcare assets in Singapore, both among private equity funds and local healthcare providers.

Private Equity Funds/Family Offices

Given its status as an international financial centre, Singapore boasts a growing number of private equity funds and family offices, with many looking to deploy capital into promising healthcare assets in the Southeast Asia region. For instance, Sylvan Asia Growth Fund I (SAGF I) identified healthcare as one of its key focus areas, and in February 2022 acquired majority stakes in four Singapore healthcare and pharmaceutical companies for USD140.5 million. SAGF I is the maiden fund of the Sylvan Group, a Singapore-based private equity group backed by the Rockefeller and Hyundai families.

Strategic Acquisitions by Local Healthcare Providers

With the capital backing of private equity funds, healthcare providers in Singapore are increasing their local and regional presence and expanding service offerings through strategic acquisitions. In May 2023, HMI Group, a Singapore-based regional private healthcare provider, acquired local healthcare technology platform MHC Asia Group to boost its digital health capabilities to deliver integrated, comprehensive and seamless healthcare to patients.

Start-ups looking to venture into the Singapore healthcare market would typically incorporate in Singapore. Some South-East Asian start-ups similarly incorporate a Singapore private company to function as the holding company, while subsidiaries/joint ventures (where there are local ownership restrictions) are incorporated in the relevant jurisdictions to conduct operations.

Incorporation itself is a fairly quick process, given that it can be performed electronically. However, apart from the usual electronic filings to be made with the Accounting and Corporate Regulatory Authority of Singapore (ACRA), start-ups in the healthcare industry have to look out for any naming restrictions applicable to the healthcare service they intend to provide. For instance, names and terms containing “hospital”, “medical clinic”, “medical centre”, “dental clinic”, “specialist centre” or “medical laboratory” may not be used by any person who is not licensed under the Healthcare Services Act 2020 of Singapore (HCSA) to convey the impression that the person provides any service that is the same or similar to a service which may be provided only by a person licensed under the HCSA. There may also be specific restricted terms that cannot be used in the licensees’ business names without approval from the relevant accreditation board.

Similar to other kinds of businesses, the minimum issued capital required to incorporate a new company is SGD1 (or its equivalent in foreign currency).

A private company limited by shares is usually the preferred choice, as it has characteristics that are advantageous for entrepreneurs. For instance, the entrepreneur’s personal assets are protected from its business liabilities, since the company has a separate legal personality. There is also the advantage of ease of investment since investors can acquire shares in the company and participate in ownership without being directly involved in management.

A private company limited by shares also generally instils greater confidence among investors, since the corporate structure requires a clear framework for ownership and governance. Such confidence is particularly important for start-ups seeking early-stage financing.

Companies limited by guarantee, general partnerships, limited liability partnerships, limited partnerships and variable-capital companies are other types of entities that may be (but are generally not) used where entrepreneurs are concerned.

Similar to any early-stage financing, there are various sources of early-stage financing available for healthcare companies. These would include venture capital firms, government-sponsored/sovereign wealth funds, private family offices and established healthcare players looking to diversify or for synergistic business opportunities. Funding may also come from technology giants looking to venture into the healthcare space. In general, there is no particularly dominant source of financing in the area of healthcare.

Investments are often well documented through the usual private agreements – for example, a subscription/investment agreement and shareholders’ agreement.

Venture capital is available from multiple sources in Singapore, including local venture investors and government-linked corporations. Foreign venture capital firms are also often keen to provide financing. 

A typical venture capital investment would involve the subscription of shares through a subscription agreement and a shareholders’ agreement governing the relations of the shareholders of the start-up.

In Singapore, founders and investors may consider using the Venture Capital Investment Model Agreements (2022) (VIMA). VIMA is a suite of model venture capital documentation that aims to balance the interests of the investor and the start-up and help them reach common ground more quickly. Drafted with input from investors, law firms and the Singapore Venture Capital & Private Equity Association, VIMA contains a set of Series A documents such as a shareholders’ agreement, subscription agreement and model constitution, and a set of Pre-Series A documents such as the founders’ agreement and mutual non-disclosure agreement. Each document includes explanatory and drafting notes for the clauses in the documents and has been drafted based on Singapore law.

Founders and investors may use VIMA to commence investment discussions and tailor any terms (or insert or delete any terms) as they require into/from the document based on the specific transaction or parties involved.

Generally, healthcare start-ups will remain as private companies limited by shares in the same jurisdiction throughout their stages of development.

However, Singapore-incorporated private companies are subject to the 50-shareholder limit (subject to certain exceptions). Where Singapore-incorporated private companies end up having more than 50 shareholders, such companies would usually convert to a public company, which would have no restrictions on the number of shareholders but are subject to additional requirements, including potentially under the Singapore Code on Take-Overs and Mergers (Takeover Code).

Where there is a viable opportunity to access a larger market, pool of talent or pool of investors, healthcare start-ups may choose to move their headquarters overseas. Healthcare solutions company Biofourmis is a successful example, having moved its headquarters from Singapore to the United States in 2019 as it eyes a larger market for its products and listing in the United States.

Both IPOs and trade sales are viable exit options, depending on a company’s stage of development, market conditions and its management’s vision. Investors in a start-up, particularly in the early stages of financing, would typically prefer to keep their options open, as reflected accordingly in the transaction documents.

Singapore-incorporated companies in traditional healthcare sectors would typically pursue a listing on the Singapore Exchange (SGX) due to recognition of its brand name and its presence in the local market. Where medical or pharmaceutical groups have a regional presence, they may also choose to pursue a secondary listing on a foreign exchange, such as the Bursa Malaysia or the Stock Exchange of Hong Kong, in order to access a larger pool of capital.

However, healthcare technology companies may increasingly look towards listing on foreign exchanges, such as the New York Stock Exchange or the Nasdaq, due to the better valuations available for technology companies in general.

The minority squeeze-out rule under the Companies Act 1967 of Singapore (Companies Act) will apply to all Singapore-incorporated companies, regardless of where they are listed. Any squeeze-out would, however, remain subject to the rules of the relevant stock exchange.

Both competitive bid and bilateral negotiation processes have been observed in the healthcare M&A space. Bilateral negotiations processes are often used with smaller companies, or where there is an existing relationship between the buyer and the seller. On the other hand, bid processes are increasingly used by the more sophisticated venture capitalist or private equity players looking to exit larger companies.

It is most common for venture capital investors to exit completely upon a trade sale since this is often done for strategic reasons between the buyer and target company. In such cases, the venture capital investor would not commonly have its interests aligned with the buyer to remain a shareholder in the target company.

The form of consideration typically depends on the identity of the seller.

Private equity/venture capitalist investors would usually expect a full exit, and thus typically require that the transaction be carried out on a cash basis.

In other cases, the buyer would want or expect the retention of key management of the target company. The consideration in such cases would usually be a combination of cash or issued shares in the buyer, particularly where the buyer is public or significantly larger than the target company.

Transaction terms are usually negotiated between the buyer and seller and are dependent on whether the party selling is a founder or a financial investor.

Founders are usually expected to stand behind representations and warranties and certain liabilities after closing. Any claims in connection therewith could affect the earn-out payable to the founders.

Warranty and indemnity insurance is increasingly popular in Singapore, particularly where founders are retaining a stake and where private equity and venture capital investors insist on there being no residual liability.

There have been multiple bioscience spin-offs from the Agency for Science, Technology, and Research (A*STAR), a statutory board under the Ministry of Trade and Industry of Singapore established to support research and development in key technology domains, one of them being Human Health and Potential. Notable spin-offs from A*STAR include the following:

• Respiree, a digital therapeutics company focused on the development of cardiopulmonary sensors that are integrated into its virtual care platform;
• MiRXES, a Singapore-headquartered RNA technology company that is a pioneer and leader in developing and commercialising miRNA test kit products for the early detection of cancer and other diseases; and
• Occutrack, a medical start-up developing a prototype eye-movement tracking system for the management of visual deterioration.

The key benchmark for considering a spin-off is when a technology or product reaches a level of maturity that warrants independent focus and investment, allowing the parent company to leverage resources more effectively while providing the spin-off with autonomy to further develop and commercialise its innovation. We anticipate that there will be more such spin-offs from A*STAR and other research institutes in Singapore focused on healthtech and biotech research as more research projects mature and reach the spin-off/licensing and commercialisation phase.

On the other hand, there have not been many spin-offs in the private healthcare sector in Singapore, with a trend towards consolidation and the formation of strategic partnerships instead.

The applicable taxes will depend on the structure of the transaction and the profile of the entities involved in the spin-off. We set out below the tax implications for typical transaction structures adopted for spin-offs.

Spin-Off by Way of Transferring Shares in the Spin-Off Entity from the Parent Company to the Shareholders of the Parent Company

For a spin-off involving a transfer of shares in the spin-off entity from the parent company to the shareholders of the parent company on a pro rata basis, stamp duty will be payable at shareholder level. The amount of stamp duty payable is 0.2% of the higher of the actual consideration paid or the net asset value (NAV) of the shares in the spin-off entity. If the spin-off entity owns any immovable property, the market value of any such immovable property must be taken into account for the calculation of the NAV of the shares.

Stamp-duty relief may be available if shares are transferred between associated entities and the ownership of the shares in the spin-off entity before and after the spin-off remains substantially the same, provided that the transferee (ie, the shareholders of the parent company) and the transferor (ie, the parent company) have been associated for at least 12 months prior to the date of the spin-off and remain associated for two years from the date of the spin-off.

Spin-Off by Way of Asset Sale

Another method would be for a new company to be incorporated, with the relevant assets thereafter transferred to it.

The supply of all sales of goods and services (including assets) by a Goods and Services tax (GST)-registered person is subject to GST at the rate of 9% from 1 January 2024. However, certain transactions are specifically disregarded as supplies, including the transfer of assets made under an agreement for the transfer of business as a going concern, provided that certain conditions are met, as follows:

• the supply of assets must be made in relation to a transfer of the business (or part of that business) to the transferee;
• the assets to be transferred must be intended for use by the transferee in carrying on the same kind of business as the transferor;
• if only part of the business is transferred, it must be possible to operate that part completely independently;
• the business (or part of that business) must be a going concern at the time of the transfer; and
• the transferee must already be a taxable person, or immediately becomes a taxable person as a result of the transfer.

If the spin-off by way of asset sale involves the transfer of an immovable property located in Singapore (assumed to be non-residential property – eg, a clinic premises), the buyer's stamp duty is payable at shareholder level. The buyer’s stamp duty is based on the consideration or market value of the property, whichever is higher, and the top marginal rate for non-residential properties is 5% with effect from 15 February 2023.

If the spin-off involves the transfer of an industrial property in Singapore (eg, a laboratory, or a unit in a science park), the seller’s stamp duty will be payable at the corporate level if the industrial property is being transferred within three years from its date of acquisition.

There is no restriction against business combinations immediately after a spin-off, nor are there any prescribed structures or specific requirements affecting them. However, if the spin-off involved a transfer of shares, and stamp-duty relief was granted for the transfer of shares between associated entities, the business combination must not result in the transferee and the transferor of the spin-off transaction becoming disassociated within two years of the date of the spin-off.

The time it takes to complete a spin-off varies depending on the structure of the transaction and the time required to obtain the necessary approvals, which are specific to each transaction.

For clarity and certainty on the tax implications of a proposed spin-off, parties may apply for an advance ruling from the Comptroller of Income Tax (or GST) to determine tax treatment of a proposed spin-off arrangement. The ruling only applies to the applicant and the specific spin-off arrangement submitted. The Comptroller must apply the tax treatment outlined in the ruling to the applicant and the arrangement specified in the ruling for the duration of the ruling’s validity.

Typically, the Comptroller aims to provide a ruling within eight weeks, depending on the complexity of the issue. If the request is complex, the Comptroller will notify the applicant that more time is needed and provide an estimated timeframe for issuing the ruling. In exceptional cases, if the Comptroller agrees to an express ruling request, the ruling can be issued within six weeks.

Stakebuilding in a public company would generally be subject to the Securities and Futures Act 2001 of Singapore (SFA) and the Takeover Code.

A potential offeror may acquire a stake in a target company listed on the SGX before making an offer by buying the listed target company’s shares on the SGX or by way of an off-market block sale, subject to the following disclosure obligations.

Disclosure of Interest

Under Section 135 of the SFA, the potential offeror must disclose its interest in the target company if it holds 5% or more of the voting shares in the listed target company, which is defined as being a “substantial shareholder” of the listed target company.

The disclosure must be made within two business days after the potential offeror becomes a substantial shareholder. The listed target company is then required to make the corresponding disclosures to the SGX within one business day.

Announcement

Under the Takeover Code, before the public target company’s board is approached, the responsibility for making an announcement will normally rest with the potential offeror. The potential offeror must make an announcement if the target company is the subject of rumour or speculation about a possible offer, or if there is undue movement in its share price or volume of share turnover. If an announcement of a firm intention to make an offer is premature or inappropriate, a holding announcement that the potential offeror is considering making an offer may be made.

A potential offeror may decide to acquire a stake in the target company prior to an offer being made for strategic reasons. However, the potential offeror will be subject to obligations and restrictions as follows.

• Voluntary offer: if the potential offeror makes a voluntary offer, the potential offeror’s minimum bid price is the highest price paid by it within three months prior to the commencement of the voluntary offer.
• Mandatory offer:the potential offeror must make a mandatory offer under the Takeover Code if its shareholding in the target company crosses the thresholds set out in 6.2 Mandatory Offer; the potential offeror’s minimum bid price will need to be the highest price paid by it within six months prior to the commencement of the mandatory offer.
• Insider-trading prohibitions: if the potential offeror comes into possession of confidential price-sensitive information regarding the target company, it cannot deal in the target company’s shares until such information has become public or is no longer price-sensitive.
• Squeeze-out mechanism: stakebuilding may make it more difficult for the potential offeror to invoke the squeeze-out mechanism (see 6.8 Squeeze-Out Mechanism) as the target company’s shares acquired by the potential offeror before the launch of the offer cannot be taken into account when determining if the squeeze-out threshold of 90% is satisfied.

Under Rule 14.1 of the Takeover Code, except with the consent of the Securities Industry Council (SIC), in the event that:

• any person acquires shares which (taken together with shares held or acquired by persons acting in concert with them) carry 30% or more of the voting rights of a company; or
• any person who, together with persons acting in concert with them, holds not less than 30% but not more than 50% of the voting rights and such person, or any person acting in concert with them, acquires in any period of six months additional shares carrying more than 1% of the voting rights,

such person must immediately make a mandatory general offer to the other shareholders of the company.

The concept of persons “acting in concert” under the Takeover Code is very wide, and the Takeover Code presumes certain categories of persons to be acting in concert. For example, an entity’s parent company, subsidiaries, fellow subsidiaries, associate companies, companies whose associated companies include the foregoing, and any person who has provided financial assistance (other than a bank) to any of the foregoing for the purchase of voting rights will be deemed to be acting in concert with such entity. The buyer must aggregate their own shareholding in the target company with those acting in concert with them when determining if the mandatory general offer threshold above is triggered.

Typical transaction structures include the following.

General Offers

There are three types of offer, as follows.

• Mandatory offer: the buyer is obliged under Rule 14.1 of the Takeover Code to make an offer to all shareholders of the target company for all voting shares in the target company, save for any person acting in concert with the buyer.
• Voluntary Offer: an offer for the voting shares of the target company made by a buyer when it has not incurred an obligation to make a general offer for the target company under Rule 14.1 of the Takeover Code.
• Partial Offer: an offer to acquire a specified percentage of the target company’s voting shares which may only be made with the SIC’s consent and subject to the conditions set out in the Takeover Code and/or as stipulated by SIC. SIC will not consent to any partial offer which could result in the offeror and persons acting in concert with them holding shares carrying not less than 30% but not more than 50% of the voting rights of the target company.

Schemes of Arrangement (“Scheme”)

A Scheme is a court process pursuant to the Companies Act that allows a company to agree on matters with shareholders, including an agreement to sell all its shares to the buyer.

• A Scheme requires a majority of the shareholders present and voting at a meeting, representing at least 75% in value of the shares voted at the meeting, to approve the Scheme before an application can be made to the court for sanction. Once an order sanctioning the Scheme has been issued by the court and lodged with the ACRA, the Scheme binds all the target company’s shareholders, irrespective of whether they attended the meeting and how they voted at the meeting.
• The Scheme process will be driven by the target company, with the target company being the party making the court application. As such, the feasibility of a Scheme is heavily dependent on whether the target company is cooperative; a Scheme would therefore not be feasible for a hostile takeover.
• Subject to certain exceptions under the Takeover Code, a Scheme involving a public company is also subject to the Takeover Code. However, the SIC may, subject to conditions, exempt the Scheme from specific provisions of the Takeover Code.

Acquisitions involving public companies typically involve cash offers, and this is not necessarily unique to the healthcare industry. Subject to the limitations under the Takeover Code, the offeror may choose to structure the acquisition as a stock-for-stock transaction in order for existing shareholders to be given an option to merge into the offeror group.

Requirement for a Cash or Cash Equivalent Offer

A mandatory offer must be made in cash or be accompanied by a cash alternative, while a voluntary offer can be in the form of cash or securities (or a combination thereof).

Notwithstanding the above, Rule 17.1 of the Takeover Code requires offers to be in cash or accompanied by a cash alternative if:

• the offeror and persons acting in concert with them have bought for cash, during the offer period and within the six months prior to its commencement, shares of any class under offer in the target company carrying 10% or more of the voting rights of that class; or
• the SIC is of the view that a cash offer is necessary.

In such cases, the offer price must be no less than the highest price paid by the offeror and persons acting in concert with them for shares in the target company during the offer period, and within six months prior to its commencement.

Minimum Price

The offer price must be at least the highest price paid by the offeror (or persons acting in concert with them) during the offer period, and within six months of the start of the offer period for a mandatory offer or three months for a voluntary offer. If shares are acquired by the offeror (or persons acting in concert with them) after the offer announcement at a price in excess of the offer price, the offeror must increase their offer price to the highest price paid for the shares acquired.

Mandatory Offer

Except with the consent of the SIC, mandatory offers must be subject to a condition that the offeror receives acceptances for shares under the mandatory offer which result in the offeror and parties acting in concert with the offeror owning more than 50% of the target company’s voting shares.

Voluntary Offer

Similarly, a voluntary offer must be conditional upon the offeror receiving acceptances that would result in the offeror and parties acting in concert with the offeror holding more than 50% of the voting rights in the target company. A higher minimum acceptance condition and other conditions may be attached with prior approval from the SIC. Conditions whose fulfilment depend on the subjective interpretation or judgement by the acquirer or lie in the acquirer’s hands are not permitted.

In typical public takeover scenarios, where a buyer wishes to acquire a target company by way of a general offer, the buyer does not usually enter into a transaction agreement with the target company. Instead, an offer document containing details of the offer is made available to the shareholders of the target company so they can consider the offer by the buyer.

The offer document must include the following information:

• the shareholdings of the buyer in the target company;
• the price or other considerations to be paid for the securities;
• all conditions attached to acceptances, in particular whether the offer is conditional upon a minimum number of acceptances being received and the last day on which the offer can become unconditional as to acceptances;
• whether or not the bidder intends to avail itself of powers of compulsory acquisition; and
• any special arrangements such as an agreement, arrangement or understanding between the buyer or any person acting in concert with them and any of the directors or shareholders of the target company having any connection with or dependence upon the offer.

For a Scheme, an implementation agreement is usually entered into between the buyer and the target company setting out the terms under which the transaction will be implemented, the conditions precedent to the implementation of the Scheme; and subject to the consent of the SIC, certain prescribed occurrences that would permit either the buyer or the target company to terminate the implementation agreement.

As set out in 6.5 Common Conditions for a Takeover Offer/Tender Offer, a mandatory offer is conditional upon the offeror receiving acceptances that would result in the offeror and persons acting in concert with him holding more than 50% of the voting rights in the target company.

For a voluntary offer, the offer may be conditional upon receipt of a higher level of acceptance with the consent of the SIC. A threshold of 90% is typically set when the offeror is seeking to privatise the target company by relying on the compulsory acquisition mechanisms described in 6.8 Squeeze-Out Mechanisms.

Under Section 215(1) of the Companies Act, the buyer can exercise the right of compulsory acquisition to buy out the remaining shareholders of the target company if it receives acceptances pursuant to the offer in respect of not less than 90% of the target company’s shares, excluding those already held by or treated as held or acquired by the buyer or its related corporations (or their respective nominees) as at the date of the offer.

Generally, attaching financing conditions to takeover offers is not permitted. Under the Takeover Code, an offer announcement must contain an unconditional confirmation from the acquirer’s financial adviser or appropriate third party (normally a bank) that the buyer has sufficient financial resources to satisfy full acceptance of the general offer. “Certain funds” provisions will be expected to be included in financing documents entered into in connection with an offer. This may be contrasted with private acquisitions, whereby the acquisition may be subject to the buyer securing financing to fund the acquisition.

Under the Takeover Code, if the board of the target company has reason to believe that a bona fide offer is imminent, the board must not, except pursuant to a contract entered into earlier, take any action without the approval of shareholders at a general meeting on the affairs of the target company that could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits.

That being said, deal protection measures may be granted by a target company in the following circumstances.

Exclusivity/Non-solicitation Agreements

Exclusivity or non-solicitation agreements preclude the target company’s board from proposing alternative bids to shareholders and from actively shopping for or responding to other bidders during the agreed exclusivity period with the buyer. Such agreements may be seen in public takeovers involving Schemes where the target company’s board is supportive of the buyer’s offer and prepared to convene a Scheme meeting to table the buyer’s offer.

Break Fees

The SIC will need to be consulted in all cases where a break fee is proposed. Where a break fee is proposed, certain safeguards must be observed. In particular, a break fee must be minimal (normally no more than 1% of the value of the target company calculated by reference to the offer price) and the target company’s board and its financial adviser must provide written confirmation and justification of the break fee to the SIC. The break-fee arrangements should be agreed as a result of normal commercial negotiations, and the target company board and its financial adviser must believe the fee to be in the best interests of its shareholders.

If a bidder does not acquire 100% ownership of the target company as a result of the takeover offer, no additional rights are usually granted to the bidder by reason of its significant shareholding unless already provided for in the Constitution of the target company or pursuant to applicable laws and regulations.

It is not uncommon to obtain irrevocable commitments from the target company’s significant shareholders to accept (or vote in favour of) the offer for deal certainty. Such undertakings may specify circumstances in which they will cease to be binding ‒ eg, if a higher offer is made.

When a firm intention to make an offer is announced, commitments to accept an offer must be disclosed at the time of the offer announcement and specify in what circumstances, if any, they will cease to be binding. Any document evidencing an irrevocable undertaking to accept the offer should be made available for inspection.

Approval by SIC and SGX

Whether the offer needs to be approved by the SIC or SGX prior to being made will depend on the specifics and structure of the transaction. SIC’s prior approval must be sought in certain situations specified in the Takeover Code, including in the following situations:

• where the offer will be carried out by way of a Scheme;
• where the voluntary offer has unusual conditions or is conditional on a high level of acceptances; and
• where there are particular special-deal arrangements that benefit certain shareholders but not others.

The SIC review period is not stipulated under the Takeover Code, and depends on the nature and complexity of the transaction in question.

Timeline

The Takeover Code prescribes certain timelines for an offer, as follows.

• Offer document: the offeror must post the offer document no earlier than 14 days but no later than 21 days from the date of the offer announcement.
• Initial offer period: the offer must initially be open for at least 28 days following the date on which the offer document is posted.
• Extension of offer period: an offer may be extended or, if the offer is unconditional as to acceptances, a statement may be made that the offer will remain open until further notice. In the latter case, those shareholders who have not accepted the offer should be notified in writing at least 14 days before the offer is closed. Except with the permission of SIC, no offer (whether revised or not) will be capable of becoming or being declared unconditional as to acceptances after 5.30 pm on the 60th day after the date the offer document is initially posted nor of being kept open after the expiry of such period unless it has previously become or been declared unconditional as to acceptances.
• Competitive offer: in a competitive offer, the competing offeror must either announce a firm intention to make an offer or make a “no intention to bid” statement within 53 days of the date on which the first offeror posted its initial offer document. Where the first offeror’s offer is being implemented by way of a Scheme, a trust scheme or an amalgamation, the deadline for the potential competing offeror to clarify its intention would normally be no later than seven days before the shareholders’ meeting to approve the relevant Scheme or amalgamation. If a competitive situation still exists at a later stage of the offer process, the SIC will normally require revised offers to be announced in accordance with an auction procedure, the terms of which will be determined and announced by the SIC. The procedure will normally follow the auction procedure set out in Appendix 4 of the Takeover Code.

If regulatory approvals are required as part of a takeover offer, they would typically be obtained prior to the firm intention to make the offer (by way of a pre-conditional offer announcement) to minimise any uncertainty on whether the regulatory approvals may be obtained within the offer timetable. A buyer may announce a pre-conditional offer if the announcement of a firm intention to make an offer is subject to the satisfaction of certain regulatory pre-conditions. The announcement must specify a reasonable period in which the pre-conditions must be fulfilled or, failing which, the offer will lapse.

Appendix 3 of the Takeover Code provides guidance on compliance with the merger provision of the Competition Act 2004 of Singapore (Competition Act) by prescribing specific situations in which a favourable decision by the Competition and Consumer Commission of Singapore (CCCS) is required as a pre-condition that must be satisfied and the offer would lapse if approval from the CCCS is not obtained.

The healthcare industry in Singapore is heavily regulated. Most healthcare companies will require some form of approval or licence from either the Ministry of Health (MOH) or the Health Sciences Authorities (HSA).

Licensing Regime Under the Health Products Act 2007 of Singapore (HPA)

The manufacturing, importing or supplying of medical devices and therapeutic products are regulated by the HSA under the HPA.

Apart from obtaining a dealer’s licence, the medical devices and therapeutic products themselves must be approved for distribution and registered with the HSA. For therapeutic products, retail pharmacies will also have to obtain a retail pharmacy licence to operate its business. Generally, the turnaround times for these applications vary – it may take around ten working days for licence applications but a much longer time for product registrations, depending on whether the product is new or generic.

Health supplements and Malay and Indian traditional medicines are not subject to approvals and regulation by the HSA for their importation, manufacture and sale. Chinese proprietary medicines (CPM) – ie medicinal products used according to traditional Chinese medicine system of treatment – are regulated by the HSA, and a product listing approval and dealer’s licence are required to import, wholesale, manufacture or assemble them for sale and supply in Singapore.

Licensing Regime Under the HCSA

Healthcare companies looking to provide various inpatient, outpatient and clinical support healthcare services will be licensed by MOH under the HCSA. These are also known as licensable healthcare services (LHS). Each LHS has a set of specified services (SSes) and modes of service delivery (MOSD) that are allowable, which will be specified in the licence conditions.

An example to illustrate the above is as follows:

• Licensable Healthcare Services (LHS): Outpatient Medical Services
• Specified Services (SSes): Collaborative Prescribing, ECG Stress Testing
• Modes of Service Delivery (MOSD):
1. Collaborative Prescribing: Permanent Premises, Temporary Premises, Conveyance, Remote
2. ECG Stress Testing: Permanent Premises, Conveyance

Please see 8.1 Significant Court Decisions or Legal Developments for more details on the HCSA.

The SIC oversees the takeovers and mergers of public companies and the implementation of the Takeover Code, while the SGX oversees the compliance with the Listing Manual of the SGX (Listing Manual) applicable to companies listed on the SGX.

There are generally no restrictions on foreign investments in Singapore’s healthcare industry. However, an investor should note possible implications under 7.4 National Security Review/Export Control.

On 9 January 2024, the Parliament of Singapore passed the Significant Investments Review Act 2024 of Singapore (SIRA), which aims to protect the national security interests of Singapore by regulating significant (both foreign and local) investments in, and control of, certain Designated Entities.

Under SIRA, which came into effect on 28 March 2024, any entity incorporated, formed or established in Singapore, any entity that carries out any activity in Singapore, or any entity that provides any goods and services to any person in Singapore, may be nominated as a Designated Entity if the Minister for Trade and Industry (the Minister) considers that the designation is necessary in the interest of Singapore’s national security. While the term “national security” was not expressly defined in the Act, the Minister clarified in Parliament that it would cover areas critical to Singapore’s sovereignty and security, including its economic security and the continued delivery of essential services. Designated Entities will then have to notify and seek approval for a change in shareholding or control, where they exceed certain thresholds.

In addition, the Minister is empowered under SIRA to review control-related transactions, even if the entity is not a Designated Entity, within a period of two years from the transaction, if said entity has acted against the national security interests of Singapore. The Minister may then make certain directions to undo the transaction.

No entity has been designated as a Designated Entity at the time of this article.

The main provision applicable to takeover offers/business combinations is Section 54 of the Competition Act. Under this section, mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore for goods or services are prohibited. In determining whether the merger will result in a substantial lessening of competition, the CCCS will have regard to qualitative rather than purely quantitative criteria. One of the quantitative criterion the CCCS relies on for determining that there is a substantial lessening of competition is: (a) where the merged entity has market share of 40% or more; or (b) where merged entity will have market share between 20% to 40% and post-merger combined market share of the three largest firms in the market is 70% or more. Notification in Singapore is voluntary, and there is no mandatory requirement for merger parties to notify the CCCS. However, if the CCCS carries out its own initiated investigations and finds that there is a substantial lessening of competition, it may impose consequences such as requiring the merged entity divest all or part of its business and unwind the merger and imposing financial penalties on the merged entity.

The main legislation governing labour law in Singapore is the Employment Act 1968 of Singapore (Employment Act). Where there is a business acquisition (as opposed to a share transaction) under Section 18A of the Employment Act, all the seller’s rights, powers, duties and liabilities under or in connection with an employment contract will be transferred to the buyer on completion of the business acquisition. It follows that the buyer will become liable for all acts or omissions in respect of the employee prior to the completion.

The buyer should therefore conduct proper due diligence in respect of employment matters to uncover any potential liabilities. Further, an employee whose contract is being transferred should be subject to the same terms and conditions as those enjoyed by the employee immediately prior to the transfer. Given that the Employment Act sets a minimum standard to abide by, new terms may be added to the employment contract on the condition that it is no less favourable to the employee.

If the target company has a unionised workforce, the buyer should check the existing collective agreement between the union and the seller to assess whether notification has to be made to the union for the transference of the employees and other relevant terms that are triggered by the transaction.

There are currently no currency control regulations, and no central bank approval is required for M&A transactions.

The most significant legal development in Singapore for the healthcare industry is the three-stage implementation of the HCSA, with the final phase coming into effect on 18 December 2023. The HCSA replaces the Private Hospitals and Medical Clinics Act (Chapter 248) of Singapore (PHMCA), and marks a fundamental shift in the regulatory philosophy of healthcare services there. As HCSA enables the regulation of a wider scope of healthcare services, a risk-based regulatory approach is taken to calibrate the regulatory obligations imposed on the different types of healthcare services based on their varying risk levels.

Scope of the HCSA

Although individual professionals practising allied health, nursing and TCM are being licensed, the premises/business where such health services are extended have not previously been regulated. Under the HCSA, it is intended that the provision of allied health services, nursing services, and traditional, complementary and alternative medicine services fall within the purview of the HCSA. However, MOH has indicated that it will not be licensing such services under the HCSA at the moment. In time to come, we can expect such services to be regulated under the HCSA.

Service-Based Licensing Framework

The HCSA adopts a service-based licensing framework in place of the premises-based licensing framework under the PHMCA. Under HCSA, healthcare providers need to apply for approval to hold licences for the licensable healthcare services (LHS) they provide, as well as the appropriate modes of service delivery (MOSD) applicable for the LHS.

Specified Services (SSes)

The introduction of SSes for each LHS is another significant change under the HCSA. SSes generally involve complex or higher-risk procedures provided in a LHS and have distinct requirements for patient safety. Licensees will need approval from MOH prior to offering these SSes. The approval regime for SSes builds on the approval process that was in place for special-care services in medical clinics and specialised procedures and services in private hospitals set out under the repealed Private Hospitals and Medical Clinics regulations.

Appointment of Key Office Holders

Governance and oversight of healthcare services are also strengthened under HCSA with the formalisation of the appointment of suitably qualified persons as key office holders of licensees.

The board of directors of a target company can decide, based on their duty to act in the best interests of the target company, the level of information and documents provided to potential bidders (if at all).

Where public companies are concerned, there would be further considerations under the Listing Manual, the SFA and the Takeover Code, as follows:

• a public company would usually not provide to bidders price-sensitive information as any further dealings in respect of shares of the target company may give rise to insider trading concerns;
• information disclosed may also be subject to the target company’s continuing disclosure requirements under the Listing Manual; and
• if there is a competing bid, the Takeover Code requires that any information given to one bidder must be provided equally and promptly to any other bona fide bidder that requests such information.

The Personal Data Protection Act 2012 of Singapore (PDPA) is the main statute in Singapore that seeks to protect the misuse of personal data by governing the collection, use, disclosure and care of personal data in the country, and is administered/enforced by the Personal Data Protection Commission.

Patient information would constitute personal data and, as such, where a healthcare provider is concerned, access to such information for the purposes of due diligence would need to comply with the provisions of the PDPA. In general, the PDPA prohibits the disclosure of personal data without consent. However, the PDPA contains an exception that allows for disclosure of personal data solely for purposes related to a business asset transaction (which would include both share and business acquisitions). That said, the exception is subject to limitations under the PDPA, and it is unlikely that such an exception would extend to due diligence of the company and business assets.

Under Rule 2 of the Takeover Code, there must be absolute secrecy before an announcement of a takeover offer. All persons privy to confidential information, particularly relating to an offer or contemplated offer, must treat that information as secret and pass it to another person only if it is necessary to do so and if that person is made aware of the need for secrecy.

Under Rule 3.1 of the Takeover Code, the offeror must make an announcement:

• when, before an approach has been made to the offeree company (ie, the target company), the offeree company is the subject of rumour or speculation about a possible offer, or there is undue movement in its share price or a significant increase in the volume of share turnover, and there are reasonable grounds for concluding that it is the potential offeror’s actions (whether through inadequate security, purchase of offeree company’s shares or otherwise) which have directly contributed to the situation; or
• immediately upon an acquisition of shares that gives rise to a mandatory offer obligation.

Under Rule 3.2 of the Takeover Code, the offeree board must make an announcement:

• when the offeree board receives notification of a firm intention to make an offer from a serious source, irrespective of whether the board views the offer favourably or otherwise;
• when, following an approach to the offeree company, the offeree company is the subject of rumour or speculation about a possible offer, or there is undue movement in its share price or a significant increase in the volume of share turnover, whether or not there is a firm intention to make an offer;
• when negotiations or discussions between the offeror and the offeree company are about to be extended to include more than a very restricted number of people; and
• when the board of a company is aware that there are negotiations or discussions between a potential offeror and the holder, or holders, of shares carrying 30% or more of the voting rights of a company or when the board of a company is seeking potential offer, and:
1. the company is the subject of rumour or speculation about a possible offer, or there is undue movement in its share price or a significant increase in the volume of share turnover; or
2. more than a very restricted number of potential buyers or offerors are about to be approached.

Under Section 240 of the SFA, a prospectus is only required when a person makes an offer of securities or securities-based derivative contracts to the public. A prospectus is not required for a transaction that falls under the Takeover Code.

The buyer’s shares do not need to be listed on a specified exchange in a stock-for-stock takeover offer or business combination.

Under Rule 23.4 of the Takeover Code, the offer document must include the following financial information, whether the offer consideration is securities or cash:

• details for the last three financial years of turnover, exceptional items, net profit or loss before and after tax, minority interests, net earnings per share and net dividends per share; and
• a statement of the assets and liabilities shown in the last published audited accounts.

In a stock-for-stock transaction, additional information relating to the offeror’s shareholdings will need to be included in the offer document.

It bears noting that Singapore-incorporated companies that are in the process of being listed, or are listed, in Singapore are required to adopt the Singapore Financial Reporting Standards (International) for annual reporting periods beginning on or after 1 January 2018.

Under Rule 27 of the Takeover Code, copies of all public announcements made and all documents bearing on a take-over or merger transaction must be lodged with the SIC at the same time as they are made or despatched.

Directors serve as fiduciaries of the company on whose board they sit and owe fiduciary duties. These fiduciary duties include (but are not limited to) the duty to act in good faith and in the best interest of the company and the duty to avoid conflicts of interest. In addition, directors are subject to statutory duties under Section 156 and 157 of the Companies Act, which codify some of the common law duties.

Where the Takeover Code applies, directors have the primary responsibility to ensure compliance with the provisions of the Takeover Code. Amongst others, directors have a duty when it receives an offer, or is approached with a view to an offer being made, to seek competent independent advice. Further, under Rule 13 of the Takeover Code, directors of an offeror or an offeree company have a duty to have regard to the interests of the shareholders as a whole, and not to their own interests or those derived from personal or family relationships.

Under the Takeover Code, whilst a board of directors may delegate the day-to-day conduct of an offer to individual directors or a committee of directors, the board as a whole must ensure that proper arrangements are in place to enable it to monitor that conduct so that each director may fulfil his responsibilities under the Takeover Code.

Where directors have a conflict of interest, it is becoming increasingly common for boards to establish special or ad hoc committees in order to address conflict-of-interest issues. In any event, directors who have an irreconcilable conflict of interests may be exempted by the SIC from making recommendations to shareholders.

The board’s role largely depends on the structure of the transaction.

In a general offer, and particularly where the offer is an unsolicited one, the board of the target company would typically not be involved in negotiating a takeover offer. On the other hand, in a scheme of arrangement, given that a Scheme will need to be driven by the target company, the board would be expected to be actively involved in negotiations, which would culminate in the signing of a scheme implementation agreement.

While the board of a target company may not be involved in negotiating a takeover offer, the target board may consider running a sale process to ensure that the company accepts an offer with the best merits.

It is not common to have shareholder litigation challenging the board’s decision to recommend an M&A transaction, especially when competent independent advice has been sought in relation to that transaction. That said, there has been a current increasing trend in shareholder activism regarding the acquisition of public companies, although none of this has amounted to shareholder litigation challenging the board’s recommendation of an M&A transaction.

Under Rule 8 of the Takeover Code, an offeree board which receives an offer or is approached with a view to an offer being made, is required to obtain competent independent advice on the offer, and the advice must be made known to its shareholder.

Further, the Listing Manual requires the appointment of an independent financial adviser (IFA) and an IFA opinion for exit offers and interested person transactions. In relation to exit offers, an IFA opinion should contain a clear and unequivocal opinion that they are fair and reasonable. An offer can be assessed to be “fair and reasonable”, “not fair but reasonable”, “not fair and not reasonable” or “fair but not reasonable”.

On 3 July 2023, SGX RegCo issued a set of Guidelines on Independent Financial Advisers and an accompanying Regulator’s Column setting out expectations and guidance for IFAs and their opinions, and the role and expectations for directors in procuring an opinion from independent financial advisers, in the context of the Listing Manual. The guidelines are in addition to existing rules in the Takeover Code that are applicable to the appointment of IFAs, as well as the advice given by IFAs.