Corporate M&A 2025 Comparisons

While Bangladesh offers a liberal M&A regime and almost zero restrictions on country-specific foreign direct investment (FDI), the market of around 200 million consumers still operates an underdeveloped M&A market. Compared to global deals that involve M&A of assets located in Bangladesh, actual deals in local context are still outnumbered. However, as the country has become an attractive destination for FDI, which suggests that there is still ample space in the market, as a consequence, there has been rapid growth in the number of M&A transactions in Bangladesh in recent times.

As a result of a forced political regime change in Bangladesh in 2024, there was an instant downtrend in deal completions as investors undertook a “wait and see” strategy. The credit rating of Bangladesh was lowered during the turmoil by major institutions like Fitch, S&P and Moody’s for fear of political instability. However, recent deal trends suggest that investors are regaining their confidence in the market and transactions are going to supersede the earlier pace very soon.

Although quieter than 2024, the Bangladesh M&A market in 2025 is showing impressive levels of deal making, aided by a better regulatory environment and driven by continued business confidence and investor optimism about a reduction in corruption and long-term political stability following the turmoil in 2024. Some major trends in recent times include the following.

• Asset-based deals – in Bangladesh most acquisitions are led by mid-market and conglomerate buyers, and the acquisition of shares has been the most adopted structure. However, asset-based acquisition has been gaining popularity in recent years due to stronger enforcement of bad debts by local banks and a reduction in transaction costs for asset-based deals. The sale of business undertakings is also gaining popularity. 
• Off-market negotiated sale – this is a less common method of acquiring publicly listed shares but is gaining popularity in recent times as an off-market investment instrument in Bangladesh. The increased interest in such deals raises areas of new regulation such as valuation.
• Start-ups ‒ start-ups in Bangladesh have always been a major focus for both local and cross-border private equity funds and private investors. However, recently there has been a renewed interest in local start-ups by development organisations such as Asian Development Bank (ADB) Ventures, the Investment Fund for Developing Countries (IFU) and ResponsAbility Investments, albeit the acquisition of stakes in such businesses is more driven by sustainability interests rather than return.
• Diversification of investor portfolio ‒ deal making in several sectors continued and there was growing interest from multinationals and foreign investors due to the restoration of a more competitive regulatory framework for investors from diverse countries such as the USA and European countries. This is sometimes driven by diversification strategies to avoid an over reliance on countries like China and India.
• Infrastructure – infrastructure development through PPP was introduced in 2010, before which only power projects were allowed to be so developed. The PPP Act, 2015 further facilitated the development of infrastructure by the private sector. Accordingly, there has been a recent trend of M&A of such private sector infrastructure and power projects. As an example, the first toll road project, First Dhaka Elevated Expressway, was acquired by new investors in 2021 and 2024 to the extent of 49% and 100% respectively.

M&A activity in 2024 in Bangladesh was mostly focused on the energy and power sector, however, certain other industries stood out. Major industry concentration in the past 12 months for M&A activity includes the following industries.

• Healthcare and pharma ‒ this rise in M&A activity was driven by increased healthcare spending and traditional strengths in pharma manufacturing. Several pharmaceutical players, such as Gulf Pharma, GSK, Sanofi and Novartis, partially or fully exited the market due to strong local manufacturing capabilities and competition. Amid renewed Chinese, Turkish and Saudi interests in the healthcare sector, IFU invested in a local business for its country-wide set-up. Evercare acquired the two largest hospitals in Bangladesh in 2020 followed by its 2023 acquisition by Blackstone which in late 2024 merged with Aster to form the second largest healthcare facility in South Asia.
• Financial services/fintech – with the central bank enacting a framework for the merger of weak banks with strong banks, several interests have been engaged. Following the footprint of predecessors, another Sri-Lankan conglomerate CAL entered into the merchant banking and brokerage market. In the fintech arena, Softbank entered the market with a USD250m investment in the fintech unicorn Bkash.
• Infrastructure and energy ‒ the surge in this industry was led by renewables with investors’ interests driven by the demand potential of renewable energy, low production costs and encouraging policies and financial incentives like production-linked incentives given the government’s target to produce 10% of power by renewables by 2041. Also, investors like General Electric continued to procure significant stakes in local power plants. On the other hand, Chinese investors have continued leading investments in the energy sector.
• Start-ups – local start-ups continued impressing cross-border investors. ADB Venture invested in Tiger New Energy in expanding its country-wide battery swapping stations. Digital start-ups such as Loop Freight, Pathao and Paperfly have raised significant FDI from venture capital and angel investors.

• Manufacturing – there has been increasing trend in acquisition of manufacturing plants in Bangladesh led by foreign investors acquiring significant stakes in manufacturing entities such as garments, accessories, footwear and yarn. Japan Tobacco acquired Akij business for USD1.47 billion. There has also been extended activities in chemical and cement manufacturing sectors. 
• Technology ‒ there has been a surge in the acquisition of licensed telecoms operators especially in the area of gateway operators. In addition to renewed interest in datacentres, a number of deals are in the pipeline and several demergers of datacentres for potential joint collaboration initiatives with cross-border players are also under consideration. 

Acquisition of Shares

An acquisition of shares can take place either by purchasing existing equity in the target from another shareholder or by subscribing to fresh equity in a company.

For publicly listed companies, the placement of shares by fresh issue (known as PIPE – private investment in public equity) is subject to regulatory approval. Nonetheless, shares issued to existing shareholders may also be bought either:

• through the stock exchange at market price;
• through the stock exchange at a negotiated price; or
• out of the stock exchange for non-cash considerations.

Merger (Amalgamation)

The target (amalgamating) merges into the acquiring (amalgamated) entity following a court order and the target is then dissolved. All assets and liabilities of the target are vested in the acquiring entity. The consideration is settled either in cash or by share swap. However, to be qualified as an amalgamation within the meaning of tax laws, the shareholders holding not less than 75% in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the merger by, or by a nominee for, the amalgamated company or its subsidiary) need to become shareholders of the amalgamated company.

Demerger

This structure is adopted to avoid the tax inefficiencies of an itemised sale of assets. The target’s undertaking or division is demerged from the target under a court order and then transferred to the buyer.

Asset/Liability Transfer (Itemised Sale of Assets and Liabilities)

Specific assets and liabilities are sold under a sale and purchase agreement with an itemised list of assets and liabilities to be transferred.

Asset Transfer (Sale as a Going Concern)

All assets and liabilities of an entity or a business division or plant are sold as a going concern under this structure. Like amalgamation, this may require approval from the court.

Joint Venture with Retained Control

In certain industries where the scope of foreign investment is limited up to a certain threshold, foreign investors maintain shares up to a permitted threshold but also retain contractual authority to nominate the majority of the board members to have control. 

Bangladesh Competition Commission

The Competition Commission of Bangladesh, constituted under the Competition Act, 2012, is responsible for supervising M&A activity in Bangladesh. However, the provisions including merger clearance set out in the Competition Act are currently operating in reactive mode only upon complaint from third parties pending the incorporation of the underlying competition rules needed to impose proactive measures such as merger filing.

Office of the Registrar of Joint Stock Companies and Firms

This Office regulates incorporation and all corporate governance requirements for incorporated companies in Bangladesh. In addition, it maintains the share register of incorporated companies in Bangladesh. Non-listed companies need to record any new allotment of shares by way of filing Form-XV. A change of shareholder is recorded by way of filing Form-117 and a change in director is recorded by way of filing Form-XII and the relevant consents.

Stock Exchanges

The two stock exchanges of Bangladesh, ie, Dhaka and Chittagong Stock Exchanges, maintain the trading platforms, issue trading right entitlement certificates (brokerage licences) as per the Bangladesh Securities and Exchange Commission (BSEC) rules, and supervise certain corporate governance aspects of public listed companies. Issuers need to adhere to relevant rules to be listed in the corresponding exchange house. In addition, in the case of a substantial acquisition of shares, it is possible to unfreeze relevant shares and/or give effect to such substantial acquisition as per the BSEC (Substantial Acquisition of Shares and Takeovers) Rules, 2018 as long as such transfer does not result in a reduction of the shares held by the sponsors of the directors of the issuer below 30%.

BSEC

The BSEC is the main regulator of publicly listed securities, including shares and other debt securities, with the power of enforcement of the underlying rules and regulations. Among other governance matters, it establishes the directives and rules related to public issues, issues licences to brokerage firms, depositories and other market participants, and approves initial public offerings or direct listings of securities/debt instruments. In the M&A landscape, approval from the BSEC is needed to implement any deal which may result in reducing the shares held by the sponsors of the directors of the issuer below 30%.   

Bangladesh Bank

It supervises the foreign exchange-related aspects of M&A deals such as the valuation of share transfer deals involving non-residents, repatriations and operational aspects of cross-border investment in public securities. In addition, companies need to keep it updated about foreign investment, debt and beneficiary owner-related information by way of filing periodic reports. It also imposes clearance requirements from lender banks for changes in the board or shareholding of any director in a company.

Investment Authority

The authority within the jurisdiction of which an industry/establishment is established and/or registered may need clearance from such authority for a change in shareholding. If such set up is not within the specialised zone of authorities such as the Bangladesh Economic Zone Authority, the Bangladesh Export Processing Zone Authority and Hi Tech Park Authority, then such set up is considered to be within the jurisdiction of Bangladesh Investment Development Authority.

National Board of Revenue

It supervises tax-related aspects of M&A deals in Bangladesh and double taxation avoidance treaty implementation. 

The Foreign Private Investment (Promotion and Protection) Act, 1980 grants protection to foreign investment in Bangladesh, including fair and equitable treatment and protection against discrimination, unilateral changes to adversely alter the operating conditions and unlawful expropriation.

Private investment is allowed in all sectors except (i) arms and ammunition and other defence equipment and machinery, (ii) forest plantation and mechanised extraction within the bounds of reserved forests, (iii) the production of nuclear energy, and (iv) security printing. In addition, there are 17 controlled sectors that require prior clearance/permission from the respective line ministries/authorities (by way of public procurement or licensing or public private partnership) as follows:

• fishing in the deep sea;
• bank/financial institutions in the private sector;
• insurance companies in the private sector;
• the generation, supply and distribution of power in the private sector;
• the exploration, extraction and supply of natural gas/oil;
• the exploration, extraction and supply of coal;
• the exploration, extraction and supply of other mineral resources;
• large-scale infrastructure projects (eg, flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station);
• crude oil refinery (recycling/refining of lube oil used as fuel);
• medium and large industries using natural gas/condensate and other minerals as raw material;
• telecommunications services (mobile/cellular and land phone);
• satellite channels;
• cargo/passenger aviation;
• sea-bound ship transport;
• seaports/deep seaports;
• VOIP/IP telephone; and
• industries using heavy minerals accumulated from sea beaches.

While discrimination against foreign investors is not widespread, the government frequently promotes local industries, and some discriminatory policies and regulations exist. For example, the government requires majority or more than majority local ownership of new shipping, logistics, freight forwarding, banking and insurance companies, etc, albeit with exemptions for existing foreign-owned firms.

As per the Competition Act, 2012 any combination (including any M&A transaction) that would have an adverse effect on competition is prohibited. The Bangladesh Competition Commission (BCC, or the “Commission”) has wide powers, among other things, to investigate any combination, either on its own motion or following a complaint from a third party. Statutory and regulatory authorities can seek a reference from the Commission to determine whether a proposed combination is anti-competitive. The Commission will issue its decision within 60 days.

The Commission is yet to quantify the meaning of a “significant adverse effect” and the relevant thresholds for mandatory approval. Until these rules have been set out, the Commission enjoys the discretion to decide on the possible effects of any combination. If, during or after completion of an investigation, the respondent, the Commission and the complainant agree on the terms of an appropriate order, the Commission will confirm the agreement as a consent order, subject to:

• publication of the order in the Official Gazette within seven working days for comments within a period of 30 days;
• the Commission receiving, reviewing and hearing representations from third parties with material interest;
• the consent order being made as agreed and proposed with or without changes; and
• the Commission’s refusal to issue the order if additional information warrants this.

On a separate note, in the telecoms sector a company is considered to have significant market power when it holds 40% or more of subscriber, revenue or spectrum shares.

The key employment law statute is the Labour Act 2006 (the “Labour Act”) in Bangladesh read with the Bangladesh Labour Rules 2015 (the “Labour Rules” and together with Labour Act, the “Labour Regulations”). A “worker” is defined as any person, including an apprentice, employed in any establishment or industry (either directly or through a contractor) to do any skilled, unskilled, manual, technical, trade, promotional or clerical work, for hire or reward. Employees working in administrative, managerial or supervisory positions are regarded as “non-workers” and their employment is subject to mutual agreement.

There are no statutorily prescribed consultation or consent requirements under the Bangladesh Labour Regulations for undertaking a restructure such as an M&A deal unless so specified in any collective agreement. However, from a local perspective, employees generally seek provisioning of their accruals of various benefits before such change in control.

When an amalgamation or transfer of undertaking takes place as per Section 229 of the Companies Act, 1994, where the whole or any part of the undertaking and the property of any company concerned is to be transferred to another company, liabilities are also transferred with such transfer and generally include employees unless otherwise agreed among the parties and so ordered by the court. However, even in such transfer of undertaking, employees are not protected against dismissal unless otherwise agreed or ordered by the court. For workers the Labour Act has established two forms of redundancy as follows:

• retrenchment – means the termination of services of workers by the employer on the grounds of redundancy; and
• lay-off – means the failure, refusal or inability of an employer to give employment to a worker on account of shortage of coal, power or raw material or the accumulation of stock or the break-down of machinery.

If, by way of transfer, the workplace of an employee shifts within 40 km of the earlier usual workplace such employment contract can be terminated and the employee shall be entitled to benefit as would have been payable for such employee՚s voluntary resignation. If the workplace shifts beyond 40 km, then such employment contract can be terminated and the employee shall be entitled to benefits as applicable to a retrenched employee.   

In a business transfer by way of itemised sale of assets and liabilities where the transferor and transferee retain their identity, there is no automatic transfer of employment. The consent of employees is required for a transfer from one employer to another. As a result, the transfer of employment can be implemented through one of the following methods:

• a joint letter issued by both the transferor company and transferee company to the employees, informing them of the transfer of their employment following the Transfer Conditions which include provisions confirming termination by the transferor, reemployment by transferee and segregation of severance benefits or carry forwards; or
• voluntary resignation by each employee from the transferor company, and simultaneous engagement by the transferee company.

To date, the regulators have not established a national security review of acquisitions in Bangladesh. 

Since the Robi-Airtel merger (Robi Axiata Limited and another v Registrar, Joint Stock Companies and Firms and another, 22 BLC (2017) 337) case, which revisited the basic framework for amalgamation (merger) under Sections 228 and 229 of the Companies Act, 1994, there have not been any noteworthy court decisions. Other legal developments include the following.

• Offshore indirect transfer (OIT) rules – the Income Tax Act 2023 (repealed Income Tax Ordinance, 1984) imposes a 15% capital gain tax over the acquisition/transfer of securities, stocks and assets. With the necessity triggered from divestment of telecoms assets of Warid to Airtel, the OIT Rules, 2022 have been enacted to outline the methods of computation of such tax liabilities arising out of an offshore indirect transfer of any asset in connection to Bangladesh.
• Prohibition on insider trading revisited ‒ the BSEC (Prohibition on Insider Trading) Rules, 2022 have been enacted to replace their predecessor. The new law obligates companies to develop their own policy to restrict insider trading and provides an extended coverage of matters to be treated as price-sensitive/material information as outlined in 5.1 Requirement to Disclose a Deal.
• Disclosure of beneficial ownership ‒ the Bangladesh Financial Intelligence Unit of the central bank has enacted the Guidelines for Beneficial Owners making it mandatory for any individual beneficiary owner to declare its identity once such person becomes the beneficiary owner of 20% or more shares or control over any business in Bangladesh.
• New tax law – the Income Tax Act, 2023 repealed Income Tax Ordinance, 1984 and additionally outlines the qualification of demerger deals to be tax exempted. The threshold of shareholders of the amalgamating company holding shares in the amalgamated company has been reduced to 75% from the previous 90% for such amalgamation to be considered tax-exempt.
• Restructure of transaction costs ‒ the stamp duty payable on a share purchase agreement and share transfer instrument (for non-listed company) remain the same at 0.2% and 1.5% of the consideration respectively. However, the registration fee and stamp duty over the transfer of real properties have both been reduced to 1% and 1.5% respectively.

There have been no significant changes to takeover law since the enactment of the Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules, 2018.

Reportedly, the BCC has prepared a draft Bangladesh Competition Commission Combination Rules, 2023 but the draft is yet to be circulated for public consultation.

For non-listed companies, the acquirer needs to directly negotiate with the selling shareholders. For listed companies, agreements on the purchase of shares of the sponsors prior to launching any public offer are a common strategy, given that a substantial number of listed companies are owned by sponsor groups who also have control of the board of directors.

Under the Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules, 2018, the acquisition of shares corresponding to 10% or more of the issuer’s total voting shares is considered a “substantial acquisition” of shares. The following activities require disclosure in the stock exchange’s online news circular:

• any buy order or transaction that would result in the 10% threshold being met or exceeded; or
• once an initial shareholding corresponding to a 10% or more of the voting rights in the issuer has been achieved, any further acquisition of shares.

For private companies, it is possible to contractually agree or incorporate in their articles that the selling shareholder must first offer their shares to the existing shareholders on identical terms to the terms being offered to the proposed acquirer. This is not possible for public limited companies, listed or non-listed.

It is not possible to introduce different rules such as disclosure thresholds in the articles of incorporation or by-laws, and the disclosure requirement as stated in 4.2 Material Shareholding Disclosure Threshold needs to be adhered to. The possible major hurdle to stakebuilding is that approval from the BSEC is needed to implement any deal which may result in reducing the shares held by the sponsors of the directors of the issuer below 30% or the acquisition of locked in shares such as required for post initial public offer (IPO) lock in.

Currently in Bangladesh, derivatives and hedging are allowed only for genuine business needs and cannot be used for speculative business. However, only banks can participate in derivative transactions to profit from such business. Such products include raw material and commodity derivatives, foreign currency options, forward rate agreements and interest rate swaps. Private companies must access these facilities through a scheduled bank licensed by the central bank of Bangladesh.

Although the Bangladesh Securities and Exchange Commission (Exchange Traded. Derivatives) Rules, 2019 have already been enacted, the trading of derivatives through stock exchanges has not yet been formulised in Bangladesh. Short sales and/or blank sales effected to manipulate the price of listed security or derivative contracts are also prohibited.

Banks are required to submit prescribed reports and related statements to the central bank in respect of their and their clients’ derivative transactions from time to time, including disclosing the risks, losses, profit variations of their derivative business and any extraordinary situations, according to the financial disclosure requirements in force.

Currently, there is no express requirement that shareholders have to disclose their intention regarding control of the company but the purpose of acquisition, in case it triggers a substantial acquisition of share rules, is required to be disclosed in the public announcement.

Non-listed companies are not subject to disclosure requirements except under antitrust laws or in a court/tribunal-approved scheme of arrangement/merger/amalgamation, in which case such disclosures become mandatory to the tribunal and to members and creditors for the approval of such scheme.

For listed companies, the mandate of disclosure depends on the principle of materiality as outlined in the BSEC (Prohibition of Insider Trading) Rules, 2022. The company’s board is required to frame a policy for determination of materiality based on the criteria and guidelines prescribed by the BSEC and make such policy available online. In addition, the following events are required to be disclosed by the company within two hours from the occurrence of the event.

Price sensitive information includes:

• reports in respect of the financial position, financial performance or any basic information in respect thereof;
• information relating to dividends and corporate declarations;
• information relating to changes in corporate structure; namely merger, demerger, acquisition, disposal, conversion or transfer;
• information regarding changes in capital structure;
• information regarding expansion of business activities, changes, etc;
• any other rules or regulations or order or instructions or circular/notification prescribed as price sensitive information made or approved or issued by the Commission;
• any other information determined by the Commission by notification published in the Official Gazette from time to time;
• disclosure of modification opinion and emphasis of matters (if any) in the auditor’s report of Audited Financial Statements shall be disseminated as price sensitive information; and
• the credit rating result shall be disseminated as price sensitive information.

Material information includes:

• factors related to changes in financial conditions;
• information relating to corporate declaration;
• information regarding changes in corporate structure, such as:
1. acquisition or disposal of any assets of 5% or more of the existing assets;
2. merger with another company or substantial acquisition of shares of any company and acquisition of any company, etc;
3. demerger of any unit of the company;
4. conversion or winding up of any unit of the company;
5. changes of corporate activities through capital reorganisation or merger or demerger;
6. proposals to take over the authority of any company or proposal for acquisition of internal services;
7. changes of ownership which may affect the control of the company; and
8. changes of name or address, etc; and
• information regarding changes in capital structure, such as:
1. any decision relating to private or public or rights offer of securities or changes in its capital structure;
2. systematic repurchase or redemption of securities;
3. any decision relating to consolidation of shares, exchange of shares, conversion of any security into equity security or conversion of debentures into shares; and
4. significant changes relating to the rights of security-holders, etc.

In line with the requirements outlined in 5.1 Requirement to Disclose a Deal, market practice on the timing of disclosures conforms with the legal requirements. Companies disclose the deal upon entering into binding definitive agreements.

Purchasers generally engage separate teams to perform legal, business and financial due diligence on the target. Legal due diligence in general covers the following aspects:

• share capital and corporate governance;
• indebtedness and financial arrangements;

• regulatory matters, and compliance with public listing regulation (for listed companies);
• licenses and government authorisations;
• material contracts;
• tax;
• intellectual property;
• employment and pensions;
• real estate;
• environment;
• information technology and data management;
• litigation and disputes; and
• insurance.

Exclusivity is usually demanded during the negotiation of the term sheet until closing. Unless multiple bidders are involved, parties generally agree to exclusivity for an agreed time. In general, once definitive agreements are executed, parties to such agreements undertake not to:

• take any action other than in the ordinary course of business;
• deal in any asset or contract beyond a pre-agreed pecuniary threshold;
• effect any substantial change in the financials of the company;
• do anything that would have a material adverse effect on the business of the company; or
• act in derogation of the obligations undertaken under the definitive agreements.

It is common for the parties to incorporate terms and conditions documented in a definitive agreement for M&A deals or tenders concerning non-listed companies and negotiated deals concerning listed companies. However, such definitive agreement has no scope of application in the case of purely open public offers.

Non-Listed Companies

The length of time for acquiring/selling a business depends on the type of transaction (an acquisition of shares or amalgamation), the scope of due diligence, negotiations, and regulatory approvals (industry specific and/or competition-related).

Listed Companies

With regard to listed companies, with the generic timeline as described below, a takeover bid may take 12-20 weeks from the date of definitive agreements if such acquisition deals with post IPO locked shares belonging to sponsors or institutional investors or minimum maintenance of 30% shareholding by sponsors and directors as express BSEC approval is required in these cases.

Purchase through exchange at market price

The typical timetable for an offer is one to two weeks, as follows.

• Once an irrevocable offer has been filed, together with the relevant documents, with a corresponding stockbroker or merchant bank, this notice will be circulated immediately.
• The corresponding stockbroker or merchant bank will complete the purchase as per the offer and report to the regulator within a week of completion. The offer may be cancelled if there is no seller for the shares.

Purchase through exchange at negotiated price

The typical timetable of an offer is 12 weeks, as follows.

• A detailed sale and purchase agreement is executed between the seller and the purchaser.
• The seller gives an irrevocable sell order to the corresponding broker or merchant bank.
• The broker freezes the shares and sends a confirmatory notice to the exchange.
• The purchaser deposits 20% of the purchase price at the exchange by cheque (in cases where the consideration is non-cash consideration).
• The exchange immediately circulates news of the transaction.
• Once the news has been circulated, the broker will complete the transaction.
• On completion, the purchaser shall report to the regulator within a week.
• If applicable, upon completion, the cheque, as stated above, will be returned to the purchaser.

The BSEC has discontinued mandatory takeovers in its latest enactment of Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules, 2018 and, accordingly, there is no mandatory offer threshold at present.

Non-Listed Companies

There are no restrictions on the consideration for general acquisitions and issuance of shares of a target. However, all transfers involving foreign shareholders must take place at a fair price determined by a valuation by a chartered accountant/merchant bank. For foreign sellers, up to BDT10 million in sale proceeds may be repatriated without valuation and up to BDT100 million in sale proceeds may be repatriated by the bank based on a valuation by a chartered accountant/merchant bank without central bank approval. Prior approval must be sought from the central bank for repatriable sale proceeds over BDT100 million. In situations involving local shareholder to foreign buyer transfers and foreign seller to foreign buyer transfers, a simple post-closing notification to the central bank along with the valuation report is sufficient.

The fair market valuation must be conducted by an accredited chartered accountant or a licensed bank, following an approximate mix of the following valuation approaches:

• the asset-based approach;
• the market value approach; and
• the income approach.

However, such valuation is exempted for repatriating the sale proceeds if the fair value of the shares is determined on the basis of the net asset value (NAV) approach, based on the latest audited financial statements together with tax returns (excluding intangible assets). In such circumstances, an undertaking is issued by the target company confirming that the asset impairments have been accounted for in the NAV; and the remitting bank is satisfied that there is no abnormal growth in the total assets in any of the last three years, particularly in the last year.

Listed Companies

For listed companies, consideration is based on the following.

• Purchase through exchange at market price: as per the market price.
• Purchase through exchange at a negotiated price: the regulation has not imposed any valuation method for this method. However, in the case of an acquisition of shares subject to BSEC approval, as stated in 4.3 Hurdles to Stakebuilding, the BSEC often seeks the basis of the consideration and may require a valuation certificate.

Non-Listed Companies

There are no conditions that are mandated by regulations. The main substantive clauses in an acquisition agreement include:

• purchase considerations and modality of payment;
• interim adjustment, hold-back and escrow arrangement;
• conditions precedent to the acquisition;
• conditions subsequent to the acquisition, including perfection;
• closing and closing-related actions;
• post-closing obligations;
• representations, warranties and covenants;
• indemnities, particularly tax indemnities;
• governing law and dispute resolution process;
• non-compete restrictions; and
• payment of costs and expenses.

Listed Companies

For public takeover offers, the only conditions mandated by regulation are:

• disclosure by way of public disclosure through the exchange of the intention to purchase, which would include conditions of the purchase offer; and
• irrevocable instruction to the broker or merchant bank to acquire shares up to the target limit at the market price.

Common conditions for a takeover offer include a minimum level of acceptance. The acquirer is bound to disclose all such conditions for a takeover offer in the detailed public statement and letter of offer.

There are no minimum acceptance conditions mandated by regulations. An open offer should be for at least 26% of the target company, which ensures that the acquirer acquires a simple majority in the company if all the shareholders who are made an offer accept the offer.

However, in the case of a voluntary offer for a listed company, the acquirer would be required to acquire at least the number of shares that would entitle them to exercise 10% of the voting rights in the target company.

Small-scale transactions are primarily financed by equity, while larger transactions are financed by a mix of debt and equity.

Non-Listed Companies

While not mandatory, a business combination may be conditional on the bidder obtaining financing as long as the parties agree to such arrangement.

Listed Companies

There is no obligation for the acquirer to obtain financing for the public offer (at the market price or through a negotiated deal), however, the acquirer must ensure that firm financial arrangements for fulfilment of the obligations under the public offer are in place and suitable disclosures in this regard have been made in the public announcement. The broker firm is also responsible for ensuring that adequate funds have been provisioned.

In an acquisition of shares off-exchange using non-cash considerations such as share swap, a valuation of the assets used as consideration must be conducted and 20% of the consideration is required to be deposited to the stock exchange as security, which is returned upon completion.

However, for schemes requiring express approval from the BSEC, the bidder can propose a scheme that is conditional on it obtaining financing by a predetermined deadline. If the BSEC approves the scheme, the public offer may be floated once such condition is fulfilled. The same approach is taken for the takeover of distressed companies as outlined in 9.1 Hostile Tender Offers.

Non-solicit and confidentiality clauses, standstill provisions, etc, are frequently used as deal security measures in acquisitions in Bangladesh. “Material adverse effect” clauses are also widely adopted, enabling a party to walk away in specified situations. Support clauses ensuring seller and/or target company assistance for regulatory approval is also very common.

Break fees are not common practice, although in some cases a break cost payment obligation is incorporated in the sale and purchase agreement. Generally, when a sale and purchase agreement is close to closing, the defaulting party is required to pay the non-defaulting party the break cost. For the purchase of shares from other shareholders, the seller and/or the buyer assumes such liability. In an asset sell and share issue, the target and/or the buyer assumes such liability. However, as “break cost” is not defined in the foreign exchange regulations, it is difficult to make such arrangements in cross-border deals in practice. Often, the parties agree to pay the accrued management fees in the form of consultancy or legal fees.

Representation and warranties (R&W) insurance as a security is also gaining popularity in large scale transactions where either the seller procures such insurance or the cost is shared among the parties.

In Bangladesh, proportional representation on the board is not mandated. For listed companies, the BSEC has stipulated the maximum and minimum number of board members and required number of independent directors. While voting is the generic tool for members to appoint/remove directors, entitlement to extra representation on the board can also be granted under a contractual agreement.

Acquirers of majority shareholdings are also well placed to appoint their own nominee to be the chief executive officer (who is also a deemed director). While under local regulations the right to appoint the majority of the board without a majority shareholding is not prohibited and does not need approval from the BSEC as long as other requirements such as the following are met, this may be considered a change in control subject to the relevant competition regulations:

• mandated board composition;
• a mandatory 2% shareholding by each non-independent director (or its nominee); or
• a composite 30% shareholding by sponsors and directors.

Shareholders of a company are allowed to be represented by a proxy at any general meeting of members. Companies are also allowed to conduct shareholder meetings through audio-visual methods.

Non-Listed Companies

In an acquisition, there is no way to acquire the remaining shares belonging to dissenting shareholders unless there are drag along or call option agreements among the shareholders.

In the case of a merger, after the court’s approval of the scheme and on approval of at least 75% of the shareholders, the transferee company can give 21 days’ notice to acquire the shares of the dissenting shareholders. Unless the dissenting shareholders apply to the court on the grounds that their individual rights have been prejudiced, within 30 days from receipt of the notice, the transferee company can acquire the shares.

Listed Companies

There are no provisions on the squeeze-out of any remaining minority shareholders and there is no possibility for minority shareholders to “sell out” in general. However, according to the listing regulations of the current active stock exchanges, once a consortium ends up owning 90% of the shares in the target, it can forcefully purchase the remaining 10% at the price below (whichever is highest):

• the last trade price;
• the weighted average price over the last six months; or
• the NAV per share, as per the latest financial statements.

Non-Listed Companies

There are no restrictions for a purchasing company to obtain irrevocable commitments to tender or vote by the principal shareholders of the non-listed target companies.

Listed Companies

Although such commitments are not common for listed companies, as the regulators do not view them favourably, in a negotiated deal off the exchange or on the exchange, parties may negotiate such provisions to be incorporated in the share purchase agreement before a public offer/notice is floated. This may include arrangements as to the board composition within the BSEC-provided framework and certain reserve matters that are critical to the business and composition of the company.

If an acquisition of shares in a publicly listed company triggers the 10% threshold under the Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules, 2018 as outlined in 4.2 Material Shareholding Disclosure Threshold, the public announcement of the open offer must be made before acquiring any further shares in the company. In a negotiated deal such announcement must be made the following day as soon as any definitive agreement is entered into with any sponsor or other shareholder before acquiring any further shares in the company.

Such public announcement has to be made by sharing information in the prescribed format with the relevant stock exchanges, which then publicise the information instantly upon receipt. The announcement is also required to be sent to the BSEC.

The public announcement discussed in 7.1 Making a Bid Public is required to contain:

• the target and targeted number of shares;
• the purpose, conditions and proposed value of shares;
• the detailed identification of the purchaser including nationality;
• the relationship with sponsors, directors and other significant shareholders and with the capitalisation of the company;
• details of any memorandum of understanding or agreement already executed and the terms contained therein in connection to the purchase of the shares;
• if the purchaser is a sponsor, director, placement holder or other significant shareholder, confirmation as to their declaration such as maintenance of 30% shares by sponsors and directors;
• the acquisition offer date and date until which the offer is valid;
• the settlement process including date, time and method;
• for non-cash settlement, the valuation report should include details of the consultant, the valuation date and the method;
• the planned share acquisition proportion from each class of shareholders such as sponsors, directors, placement holders, other significant shareholders or public;
• declaration of approval from the board of the company, if applicable; and
• any pertaining terms as to other laws such as foreign exchange regulations.

Another declaration from broker is needed confirming the availability of the fund. These are disclosed as public disclosure through the exchange.

As of now, bidders are not needed to produce financial statements unless so agreed contractually.

Financial statements in Bangladesh are needed to be prepared as per the Bangladesh Financial Reporting Standards (BFRS), which are substantially based on the IFRS.

While the disclosure of any transaction document is not required in full, details of any memorandum of understanding or agreement already executed and terms contained therein in connection to the purchase of the target shares are required to be disclosed with the announcement, as outlined in 7.1 Making a Bid Public.

The directors are responsible for duties and care to the company. The general doctrine under company law and in Bangladesh is that a director has a fiduciary duty to act in good faith in the best interest of the company and for the benefit of its shareholders as a whole. In addition to acting in good faith in the best interest of the company, the directors also need to consider the interests of employees, the wider community, and certain factors such as the environment and financial dealings.

As to the acquisition or business combination, there is no express obligation imposed but in line with the above, the board of directors of the target company is required to ensure the running of the business in its ordinary course, and that there is no alienation of material assets or change in capital structure, etc, when a takeover offer is open. Also, directors must not cause the company to enter into a contract which they reasonably believe the company would be unable to fulfil. 

Directors of publicly listed target companies who may be related to the acquirer (or persons acting in concert with the acquirer) are precluded from being involved in or voting on the acquirer’s offer.

In Bangladesh, it is not common for boards of directors to establish special or ad hoc committees in business acquisitions or combinations as this is not mandated by local regulations. However, listed companies are obliged to constitute certain special committees of the board with certain duties prescribed by the BSEC regulations.

Bangladesh law mandates that directors disclose their interests in other entities before any decision making in a meeting in relation to such related entities. For listed companies, and non-listed companies which are public limited companies, directors are required to ensure that their interests do not conflict with those of the company, and any interested director is not allowed to participate in meetings or vote on matters in which they have an interest.

The business judgement rule is not a recognised concept in Bangladesh.

While there is no specific mechanism requiring a board of directors to form a judgement in relation to a merger/acquisition or takeover in the case of non-listed companies, unless otherwise agreed contractually among the shareholders, the directors in general reserve a right to reject any share transfer proposal in private companies. Given that directors are nominees in most cases in non-listed companies, such takeover proposals are ultimately decided by shareholder consensus. 

While for listed companies, the directors may make recommendations only, the board would not be able to implement any of the commonly used takeover avoidance mechanisms without the consent of the shareholders. In Bangladesh, the board is ultimately answerable to the shareholders and a sale or merger needs to be approved by the shareholders of the company.

Generally, licensed merchant banks in Bangladesh are engaged to validate the structure and feasibility of an acquisition or merger or take matters forward with the BSEC in relevant instances, and in the case of non-listed companies, advising on future prospects of public listings and returns. Other independent advice procured from outside includes valuation certificates from independent auditors, due diligence reports and opinions from legal counsel on compliance with applicable laws and due issuance of shares, and tax advice from tax advisors.

As mentioned in 8.2 Special or Ad Hoc Committees, directors are required to disclose their interests in other entities. Directors are required to ensure that their interests do not conflict with those of the company, and any interested director is not allowed to participate in meetings or vote on matters in which they have an interest.

The BSEC (Prohibition of Insider Trading) Rules, 2022 imposes stringent disclosure rules for insiders (directors, managers, shareholders or advisers) to address any concerns around conflicts of interest, including the framing of internal policies, limitations on trading and disclosures on conflicts of interest.

Bangladesh regulations do not expressly recognise the term “hostile offer”, which is understood to be an unsolicited bid without any agreement with the persons in control of the target company. Hostile tender offers are not prohibited but are not common, due to complications in their implementation as compared to negotiated transactions.

Under the Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules, 2018 there is another mechanism prescribed for the acquisition of listed distressed businesses. Distressed businesses have been defined as those companies which:

• are financially weak;
• have a negative net worth;
• have a share price below face value for three continuous years;
• have not paid any dividends for five years; or
• any other company so listed by the BSEC.

For such bail out takeover mandated for acquisition of listed distressed businesses share may be purchased in cash, swapped or a mix of these can be adopted.

The bailout scheme is publicly announced in a newspaper by a financier, including provisions for future corporate governance frameworks. Thereafter the financier (or the lead institution in the case of a consortium) needs to evaluate the share purchase tenders to select an appropriate offer or, in case of a purchase from existing shareholders, negotiate a purchase price to implement the scheme.

A bailout takeover may be exempted from certain substantial share acquisition requirements, such as the mandatory purchase of shares through the exchange for cash considerations.

While there are limited defences available to non-listed companies as stated in 8.3 Business Judgement Rule, no defences are available for listed companies. As soon as a consortium acquires a shareholding of 75% or more in the target, it can control the board.

As stated in 9.2 Directors’ Use of Defensive Measures, there are no common defensive measures available to the board of a listed company. One possible strategy could be to convince the sponsors and directors with frozen shares not to sell their shares and find a friendly new investor. 

As stated in 9.3 Common Defensive Measures, available defensive measures are very limited. Nonetheless, as per 8.1 Principal Directors’ Duties the board of directors of the target company is required to ensure the running of the business in its ordinary course, and that there is no disposal of material assets or change in capital structure, etc, when a takeover offer is open. Also, directors must not cause the company to enter into any contract which such directors reasonably believe that the company would not be able to fulfil. 

As stated in 9.2 Directors’ Use of Defensive Measures, while directors of non-listed private companies may hold certain rights unless otherwise pre-agreed by the shareholders, there is no such defensive measure available to the board of a listed company.

In general, litigation is not very common among parties in connection with M&A deals in Bangladesh. However, there have been frequent actions brought by employees in connection to M&A deals regarding the provision of employment-related benefits to which such employees are entitled.

At the deal-making stage, term sheets are typically non-binding and parties can walk away if there is no consensus on the final deal terms. The employment claims, as stated in 10.1 Frequency of Litigation, are often brought after the binding agreements are executed and are instituted before closing.

There are instances where acquirers discover undisclosed liabilities, such as tax arrears, regarding the target after the acquisition. It is very common to have arbitration clauses in deal documents, and the parties present the disputes before selected arbitration fora rather than litigate before courts.

Broken deal disputes are rare in Bangladesh as parties generally agree that the agreement shall terminate should the conditions precedent not be met before completion or a long stop date.

Shareholder activism in Bangladesh is not as important for listed companies as it is for non-listed companies. Most cases of activism arise when the majority shareholders move forward with a deal that is unfairly prejudiced against the minority shareholders.

Shareholders have the following protection under the Companies Act of Bangladesh.

• It provides for the institution of class action suits (filed by a minimum of 10% of shareholders in that class) against any mismanagement or misconduct in the affairs of a company.
• If the affairs of a company are being conducted in a manner that is prejudicial to the public interest or the interest of any member or depositor of the company to the opinion of 10% of shareholders.
• If any person or group of persons are affected by any misleading statements or the inclusion or omission of any matter in the prospectus.
• In the case of an approved (by 75%) restructure (including merger) if there is forced acquisition of the dissenting shareholders’ shares and such shareholders believe that their rights are prejudiced.

Under such circumstances, proceedings may be instituted under the provisions of the Companies Act. However, in most cases, the end result is the divestment of shares in return for appropriate compensation.

Activism is mostly aimed at improving governance, enhancing positive outcomes or improving company performance; it often addresses inefficiencies and seeks to increase minority representation on boards. However, in connection with M&A deals, the views of activist shareholders depend on whether there has been prejudicial treatment of minority shareholders. In most cases, the end result is the divestment of shares in return for appropriate compensation.

On the other hand, when shareholder activism faces a deadlock with management or the sponsors, M&A can become a possible option to resolving the conflict by way of divestment keeping the company in operation.

Interference with completion by shareholder activists is rare in Bangladesh.