Corporate M&A 2025 Comparisons

While deal value across Asia-Pacific had reportedly decreased over the course of 2024, M&A transactions in Malaysia saw a steady increase with robust activity. This could have been helped by the Malaysian government’s focus on developing advanced manufacturing capabilities and increasing Malaysia’s renewable energy capacity, particularly to cater for digital infrastructure assets, the weakened Malaysian ringgit, as well as companies looking to diversify their production base outside China. Total M&A volume reached USD8.3 billion.

Notable M&A transactions include:

• Global Infrastructure Partners and Abu Dhabi Investment Authority’s acquisition of Malaysia Airports Holdings for MYR12 billion;
• Sime Darby Bhd’s acquisition of Permodalan Nasional Bhd’s 61.18% stake in UMW Holdings Bhd for MYR3.574 billion, followed by a mandatory general offer for the remaining shares for approximately MYR2.27 billion;
• NTT Data Japan Corp’s acquisition and privatisation of GHL Systems Bhd, a listed payment service provider, for approximately MYR1.2 billion;
• privatisation of Boustead Plantations Bhd by the Armed Forces Fund Board, of approximately MYR1.11 billion;
• Pantai Holdings Sdn Bhd’s acquisition of Island Hospital Sdn Bhd from Comprehensive Care Sdn Bhd, for MYR3.92 billion; and
• Pantai Holdings Sdn Bhd’s acquisition of Timberland Medical Centre for MYR245 million.

The initial public offering (IPO) market remained active, with 55 listings on the stock exchange of Bursa Malaysia Securities Berhad (Bursa Malaysia) in 2024, raising a total amount of MYR7.42 billion in proceeds, and contributing a total market capitalisation of MYR31.37 billion. This was a 130% rise compared to 2023. Initiatives from Bursa Malaysia and the Securities Commission Malaysia contributed to the increase in IPOs, including (among others):

• expedited approvals for IPOs;
• widening the definition of sophisticated investors for the LEAP Market; and
• changes to the framework to allow companies to graduate from the LEAP Market to the ACE Market. 

With GDP in South-East Asia projected to grow by 4.7% in 2025, and with increasing domestic demand, it is expected that there will be increased potential for M&A transactions, particularly in the technology sector, the E&E/semiconductor sector, and the manufacturing and supporting sectors (including logistics), with projected strong investments from China and Japan – particularly in response to the need to change existing supply chains. 

Environmental, Social and Governance (ESG)

The Malaysian government has demonstrated its continued support for ESG commitments and climate change considerations. Some key initiatives include a commitment to be net zero by 2050 through initiatives such as the National Energy Transition Roadmap, and targeting to increase renewable energy power installed capacity to 70% by 2050. In the manufacturing space, focus has also been put on green manufacturing practices under the New Industrial Manufacturing Plan 2030.

Regulators such as the Securities Commission Malaysia, Bank Negara Malaysia and Bursa Malaysia have also increased their efforts towards ESG, with initiatives such as:

• the launch of the “Bursa Carbon Exchange” (Malaysia’s first voluntary carbon market exchange);
• the implementation of the International Financial Reporting Standards Sustainability Disclosure Standards; and
• the formation of the Joint Committee on Climate Change to facilitate collaboration in the Malaysian financial sector.

Digital Economy

The Malaysian government, through the Malaysia Digital Economy Corporation, has focused on developing capabilities around emerging technologies in areas such as big data analytics, artificial intelligence (AI), financial technology, data centres and cloud services. There have been significant investments by foreign corporations in this space, in particular the development of data centres.

The Malaysian Budget 2024 introduced initiatives to allocate funds for (among others) digital economy, cybersecurity and enhanced digital connectivity initiatives, as well as for 5G cybersecurity initiatives to combat online fraud.

Foreign Worker Policy

In March 2024, the Malaysian Home Ministry announced that existing quota allocations for the hiring of foreign workers would be cancelled if employers fail to obtain visas with reference (VDR) for their foreign workers by 31 March 2024. Additionally, previously granted quota allocations would also be cancelled if the foreign workers failed to enter Malaysia by May 2024.

The above policy met with criticism and faced a backlash from stakeholders such as the Federation of Malaysian Manufacturers (FMM), with the president of the FMM stating that the policy would lead to manpower shortages for manufacturers who had aligned their migrant worker recruitment with production demands.

Investments in 2024 saw increased transactions in the healthcare sector (with acquisitions such as Pantai Holdings Sdn Bhd’s acquisitions of Island Hospital Sdn Bhd and Timberland Medical Centre) as well as in the technology sector (with significant investments by global corporations such as Alphabet, Microsoft and Nvidia in data centres, AI and related digital infrastructure assets). It is expected that interest in the technology sector will continue into 2025 due to Malaysia’s proximity to Singapore, and it having the resources needed to run data centres.

Additionally – with the Malaysian government’s commitment towards building advanced manufacturing capabilities and increasing Malaysia’s renewable energy capacity – this has led to increased investment in the energy space.

Other sectors that have seen increased M&A activities include financial services, retail, utilities, distributive trade and education.

The two primary means for acquiring a company in Malaysia are by way of:

• share acquisition; and
• asset/business acquisition. 

Share Acquisition

Shares in private companies are generally acquired through a share purchase agreement and a transfer of shares in accordance with the Companies Act 2016 (CA). Some sectors – particularly those requiring licences to operate – may be subject to further approval requirements by the relevant authorities. 

Share acquisitions in public companies are made via open market transactions on the stock exchange. Such acquisitions are, however, subject to the Malaysian Code on Takeover and Mergers 2010 (the “Takeover Code”), which should be read together with the relevant guidelines issued by the Securities Commission of Malaysia (SC) – most notably the Equity Guidelines, which apply to, inter alia, issues and offerings of equity securities and any proposal that results in a significant change in the business direction or policy of a listed company. The Takeover Code applies to:

• a corporation listed on a stock exchange;
• an unlisted public company with more than 50 shareholders and net assets of MYR15 million or more;
• a business trust listed in Malaysia; or 
• a real estate investment trust listed in Malaysia. 

In addition, where transactions relate to a target company that is publicly listed on Bursa Malaysia, companies listed on Bursa Malaysia are required to comply with Bursa Malaysia rules and listing requirements and the applicable guidelines issued by the SC, which include the requirement to obtain shareholders’ approval in certain circumstances.  

Asset/Business Acquisition

Alternatively, an acquisition may be made via the purchase of a company’s assets and/or its business without purchasing shares in the company. An acquisition of assets or a business transaction will typically include the transfer of identified assets, contracts and employees of the target company by way of an asset/business transfer agreement.  

Stamp Duty/Capital Gains Tax/Taxation

Note that varying stamp duty rates will be applicable depending on the means of acquisition: 

• transfer of assets – up to 4% of the consideration or market value (whichever is greater); 
• transfer of shares in a non-listed company – 0.3% of the consideration of market value (whichever is greater);
• transfer of shares in a listed company – 0.15% of the consideration value.

Capital gains tax also applies on gains or profits from the disposal of unlisted shares or capital assets. 

Additional tax considerations include the following.

• In the case of share acquisitions, unused tax attributes and tax incentives of the target may be retained. However, in the same vein, historical tax and other liabilities will also be retained.
• In the case of asset/business acquisitions, any interest incurred to fund the acquisition of plant, equipment and other assets used in the trade or business is generally tax-deductible. However, the benefits arising from any losses or unused tax attributes and any other incentives accruing to the company will remain with the target.

Where transfer of real property is involved, real property gains tax may apply.

In Malaysia, the primary regulators for M&A activity are: 

• the SC, which regulates the Malaysian capital markets and enforces securities laws and regulations; 
• Bursa Malaysia, which administers and regulates Malaysia’s stock exchange; 
• the Companies Commission of Malaysia (CCM), which administers and enforces the rules and regulations under the CA; and
• the Malaysia Competition Commission (MyCC), which governs and regulates anti-competitive practices. 

In addition, it should be noted that some industries – particularly those which require licences to operate businesses – may require approvals or consents from their regulators before an M&A deal can be completed. With respect to real estate-related M&A, approval or consent from the land office/state authorities/economic planning unit of the Prime Minister’s Office may also be required. 

In general, there are no restrictions on foreign investment participation in Malaysian companies. However, some sector regulators may impose foreign investment restrictions that mandate a certain percentage of shares to be held by either Malaysian or Bumiputera interests.  

For clarity, Bumiputera interests means: 

• a Bumiputera individual;  
• a Bumiputera institution or trust agency; and/or  
• a locally incorporated company or institution where the persons listed above hold more than 50% of the voting rights in the entity. 

“Bumiputera” means a Malay, Aborigine or native of the states of Sabah and Sarawak as defined under Malaysia’s Federal Constitution.  

Sectors that impose foreign equity restrictions include:

• the telecommunications sector regulated by the Malaysian Communications and Multimedia Commission (MCMC);
• the financial services sector regulated by the central bank of Malaysia, Bank Negara Malaysia (BNM):
• distributive trade services regulated by the Ministry of Domestic Trade and Cost of Living; and
• the petroleum industry under the purview of Petroliam Nasional Berhad.  

Malaysia’s competition law is enshrined in the Competition Act 2010 (CPTA) overseen by MyCC, which prohibits anti-competitive practices such as anti-competitive horizontal and vertical agreements and the abuse of dominant positions. 

However, the CPTA does not currently have provisions regulating merger controls, though the Malaysian government is looking at tabling amendments in the current parliamentary session. The aviation services sector (regulated under the Malaysian Aviation Commission Act 2010) and the communications sector (regulated under the Communications and Multimedia Act 1998) are notable exceptions, with merger control regimes prescribed by their respective legislation. 

As of February 2025, the incumbent government has reportedly indicated that it plans to table amendments (such as the introduction of merger control regulations) to the CPTA in the current parliamentary sitting.

The introduction of a merger control regulation will allow MyCC to review proposed transactions and make necessary orders to maintain the competitiveness of the market. This will presumably empower MyCC to scrutinise prospective merger transactions and reject proposals that may result in a monopoly or be detrimental to healthy competition. 

Labour laws in Malaysia are generally pro-employee. 

The Employment Act 1955

The Employment Act 1955 (EA) is the primary legislation that governs labour law in Malaysia.

In general, the EA applies to any person who has entered into a contract of service. However, in relation to employees to whom certain provisions of the EA do not apply, their employer-employee relationships are governed by the terms of the employment contract and general tenets of Malaysian contract law.

Trade Unions 

Transactions involving businesses with unionised employees will be subject to the terms of the collective bargaining agreements. The following are some of the trade unions in Malaysia: 

• the National Union of Bank Employees; 
• the National Union of the Teaching Profession, Malaysia; 
• the Timber Employees Union, Peninsular Malaysia; and 
• the National Union of Hotel, Bar and Restaurant Workers, Peninsular Malaysia. 

The Industrial Relations Act 1967

Investors will also need to take note of the Industrial Relations Act 1967 (IRA), which regulates the relations between employers and workmen and their trade unions. Notably, the IRA prescribes provisions concerning unjust dismissals and the relevant proceedings.  

Transfer of Employees in an Acquisition

Where a business is acquired via an asset or business purchase (and not a share purchase), the employees of the acquired business will not be automatically transferred to the acquirer. As a change of employer occurs in such transaction, such transfer can only be effected with the consent of the employees. Where the acquisition is via a share transaction, such consent will not be required as there is no change of employer.  

Occupational Safety and Health

Employers (in the specific industries provided for in the Occupational Safety and Health Act 1994) owe a general duty to their employees to ensure, as far as is practicable, their safety, health and welfare at work. Some examples of the employer’s duty include: 

• providing and maintaining plants and systems of work that are, so far as is practicable, safe and without risks to health; 
• ensuring, so far as is practicable, the safety and absence of risks to health in connection with the use or operation, handling, storage and transport of plants and substances;
• providing such information, instruction, training and supervision as is necessary to ensure, so far as is practicable, the safety and health at work of employees;
• a duty on every employer, self-employed person or principal to conduct a risk assessment in relation to the safety and health risk posed to any person who may be affected by their undertaking at the place of work; and
• a duty on an employer who employs five or more employees at their place of work to appoint one of their employees to act as an occupational health and safety co-ordinator to co-ordinate occupational health and safety issues.

Statutory Contributions

Employers are obliged to make contributions on behalf of their employees under certain legislation, including for:

• employees’ income tax;
• the Employees Provident Fund (EPF);
• the Social Security Organisation; and
• the Employment Insurance System.

The Malaysian Parliament passed the Employees Provident Fund (Amendment) Bill 2025, which will mandate EPF contributions for foreign workers, with the rate of contributions set at 2% of the amount of wages (by both the employer and employee). This policy will reportedly come into force in the fourth quarter of 2025.

Minimum Wage

Effective 1 February 2025, the minimum wage for all employment sectors in Malaysia will be increased from MYR1,500 to MYR1,700. Employers with less than five workers will be granted a deferment, with the raised minimum wage only being effective from 1 August 2025.

At present, there is no specific regulator that conducts national security reviews of acquisitions in Malaysia. Nevertheless, respective sector regulators may impose conditions or restrictions, including those related to foreign acquisitions, in order to protect national interests. 

Amendments to the Companies Act 2016

Any party looking to acquire interests in Malaysian companies will need to be aware of the amendments made to the CA, which came into force on 1 April 2024. The amendments were aimed at ensuring a stronger legal framework for the corporate sector and enhancing the beneficial ownership reporting framework, and include (among other things):

• revising the definition of “beneficial ownership”;
• imposing obligations on beneficial owners to self-disclose and provide relevant information in relation to themselves and their ownership of a company, to the registrar; and
• amendments to sections relating to scheme of arrangement, judicial management and corporate rescue mechanisms.

Amendments to the Personal Data Protection Act 2024

The Personal Data Protection Act 2024 (PDPA) which was enacted to regulate the processing of personal data in commercial transactions, was amended in 2024. The amendments were aimed at bringing the PDPA in line with international standards and practices, and include (among other things):

• the requirement for data processors to comply with the security principle;
• the requirement for data controllers to appoint data protection officers; and
• the requirement for data controllers to notify the Commissioner if they have reason to believe that a personal data breach has occurred.

Amendments to the Communications and Multimedia Act 1998

The Communications and Multimedia Act 1998 (CMA) was amended pursuant to the Communications and Multimedia (Amendment) Bill 2024. The amendments seek to expand the power of the MCMC and to provide for stricter penalties as a deterrent, and include (among other things):

• granting the MCMC the power to instruct any person to take such measures or comply with such requirements as may be necessary to prevent, detect or counter any network security risk;
• granting the MCMC the power to direct a content applications service provider to suspend its services, if specified circumstances occur; and
• a new section that provides for a right of action for relief in civil proceedings for any person who suffers loss or damage directly as a result of a contravention of Section 235 (damage to network facilities, etc) or Section 236 (fraud and related activity in connection with access devices, etc) by another person.

Passing of the Online Safety Bill

The Online Safety Bill was passed in December 2024, and will come into operation as the Online Safety Act (OSA). The OSA seeks to enhance and promote online safety in Malaysia by regulating harmful content and imposing duties and obligations on applications service providers and content applications service providers.

The OSA has extraterritorial application, and will (among other things) require licensed applications service providers and licensed applications service providers to:

• implement specified measures to mitigate risks of users being exposed to harmful content;
• issue guidelines that shall include a description of measures implemented by the providers to mitigate the risks of users being exposed to harmful content, and terms of use as a guide to users when using the service of the providers; and
• make available sufficient tools and settings to enable users to manage their online safety.

The Cyber Security Act 2024

The Cyber Security Act 2024 (CSA) came into force on 26 August 2024, introducing new regulations and measures to enhance cybersecurity governance. To support its implementation, four subsidiary legislations were subsequently enacted.

• The Cyber Security (Period for Cyber Security Risk Assessment and Audit) Regulations 2024, which requires entities designated as National Critical Information Infrastructure (NCII) entities to:
1. conduct cybersecurity risks assessments at least once a year; and
2. undergo cybersecurity audits at least every two years.
• The Cyber Security (Notification of Cyber Security Incident) Regulations 2024, which establishes reporting obligations for NCII entities to notify the National Cyber Security Agency (NACSA) and the relevant NCII sector leads in the case of a cybersecurity incident within a designated timeframe and manner as prescribed in the regulations.
• The Cyber Security (Licensing of Cyber Security Service Provider) Regulations 2024 defines the scope of cybersecurity services that require licensing under the CSA.
• The Cyber Security (Compounding of Offences) Regulations 2024 prescribes five compoundable offences, including non-compliance with risk assessment and audit reporting obligations.

Competition and Merger Guidelines for the Courier Services Sector

The postal services sector is regulated by the MCMC under the Postal Services Act 2012 (the “Postal Act”). The Postal Act establishes the licensing framework and contains competition law provisions addressing abuse-of-dominance licensees. 

On 30 September 2024, the MCMC released two key guidelines for the postal services industry:

• the Guidelines on Dominant Position (Postal Services Industry), which sets out the MCMC’s approach in determining relevant markets and assessing dominance of licensees within the postal services sector; and
• the Guidelines on Substantial Lessening of Competition (Postal Services Industry), which details the MCMC’s methodology for evaluating whether the conduct of Postal Act licensees may substantially lessen competition in the postal market, including in cases of M&A.

Proposed Amendments to the Malaysian Arbitration Act

The Arbitration (Amendment) Act 2024, which is expected to enter operation shortly, introduces significant revisions to the Arbitration Act 2005.

The key amendments include the following (among others):

• The law applicable to arbitration agreements – introduction of a default rule where, in the absence of an agreed choice of law, the law applicable to the arbitration agreement shall be the law of the seat of the arbitration.
• Automatic recognition of arbitration awards – arbitral awards from Malaysia or “foreign states” (ie, member states of the New York Convention 1958) will automatically be recognised without the need for an application to the High Court.
• Third-party funding arrangements and champerty – the amendments formally recognise third-party funding arrangements for arbitration proceedings, provided that such fundings comply with public policy considerations. Parties benefiting from such arrangements are required to disclose the existence of the funding agreement and the identity of the funder to the opposing party and the arbitral tribunal.

Proposed Amendments to the Competition Act 2010

See 2.4 Antitrust Regulations on the proposed amendments to the CPTA.

MyCC has been actively investigating and penalising companies for anti-competitive practices, and reportedly fined eight companies MYR92.8 million in February 2025 for allegedly participating in a bid-rigging cartel involving government tenders.

Additionally, there have been reports from governmental sources that MyCC is actively investigating 13 cases of alleged bid rigging (involving 561 businesses and tenders, valued at MYR2.3 billion), and was also assessing complaints concerning 463 enterprises in tenders worth MYR9.27 billion.

Statutory Contributions/Minimum Wage

EPF contributions will become mandatory for foreign workers (expected to be in the fourth quarter of 2025), and Malaysia’s monthly minimum wage was raised from MYR1,500 to MYR1,700 effective 1 February 2025 (see 2.5 Labour Law Regulations).

As of February 2025, the Malaysian government had reportedly stated that the amendments to the CPTA to introduce merger control regulations are targeted for tabling in the current parliamentary sitting (see 2.4 Antitrust Regulations).

While there are no requirements for a bidder to build a stake in the target prior to launching an offer, it is fairly common for bidders to do so.  

A common strategy is for bidders to negotiate and purchase shares from a person holding a management position in the company or a main shareholder and invite such person to be a person acting in concert in the takeover exercise. Such person would continue with or assist with the management of the company on a day-to-day basis for a specified transitionary period following completion of the takeover exercise, or possibly stay on in the company. This would help ensure a smoother transition. 

Any stakebuilding strategy should also take note of the relevant disclosure thresholds (see 4.2 Material Shareholding Disclosure Threshold) and the mandatory offer threshold (see 6.2 Mandatory Offer Threshold). Prospective bidders may also consider acquiring irrevocable commitments from the selling shareholders (see 6.11 Irrevocable Commitments). 

Under the CA, a shareholder is required to give notice to the company of their interest related to any particular shares of the company (if any) when they first become a substantial shareholder (being any persons holding not less than 5% of the total number of all voting shares of a company), and thereafter, each time their interest in such shares changes.  Interests in shares include, inter alia, where a person has entered into a contract to purchase shares and where a person has a right to acquire a share under an option.

Such notice must be given by the substantial shareholder: 

• within three days if the company in question is listed on Bursa Malaysia; or 
• within five days in any other case. 

Generally, companies may introduce higher (but not lower) reporting thresholds in their constitutions as long as it is not inconsistent with the minimum requirements set by law, though it is uncommon for them to do so.  

Other hurdles to stakebuilding include regulatory approval requirements and other conditions imposed by the licences held by the particular company, which will vary depending on the industry in which the company is operating. 

Dealings in derivatives are allowed. However, it should be noted that any acquisition of an option or derivative that causes the acquirer to have a long economic exposure (whether absolute or conditional) to changes in the price of securities will be treated as the party having acquired those securities.  

Any person who will acquire control or cross the creeping threshold as a result of such acquisitions must seek prior consultation with the SC to determine whether a mandatory offer is required, and the terms on which such offer ought to be made. In making such a determination, the SC will consider (among other things):

• the time when the option or derivative is entered into;
• the consideration paid for the option or derivative; and 
• the relationship and arrangements between the parties to the option or derivative. 

The Capital Markets and Services Act 2007 (CMSA) requires any person dealing in over-the-counter derivatives to report relevant information regarding the transaction – other than those transactions that include BNM or the government of Malaysia as a party – to a trade repository approved by the SC. Any further amendment, modification, variation or changes to the information should also be reported.  

At present, there are no competition laws requiring the filing or reporting of dealings in derivatives. 

In the context of private M&A transactions, shareholders are not required to make known the purpose of their acquisition and their intention regarding control of the company. Public M&A transactions are subject to applicable requirements and guidelines of Bursa Malaysia and the SC. 

In addition, with respect to public M&A transactions where the Takeover Code applies, offerors are required by the Rules on Takeovers, Mergers and Compulsory Acquisitions (the “Rules”) to disclose in the offer document their intentions regarding (among other things): 

• whether the business of the target will be continued; 
• the major changes that will be introduced into the business;  
• whether the employees of the target will continue to be employed; 
• the offeror’s objective and rationale for the takeover offer; and 
• whether the acquirer will maintain the target’s listing. 

Disclosure by Target

Once the target’s board has been approached by the offeror, the primary responsibility for making an announcement will normally rest with them.  

Among other things, the Rules also require the target to keep a close watch on its share price and volume, and to make an announcement when the following occurs. 

• The target’s board receives notification of a firm intention to make an offer from the offeror or its advisers.
• Following an approach to the target, the target 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.
• Negotiations or discussions between the parties are about to be extended to include more than a very restricted number of people.
• The target’s board is aware that there are discussions between a potential offeror and the shareholder(s) holding more than 33% of the voting shares of the target, or when the target’s board is seeking potential offerors, and: 
1. the target 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 purchasers or offerors are about to be approached. 

Disclosure by Offeror

There are circumstances where the offeror is required to make disclosures; these are discussed in 7.1 Making a Bid Public. 

The Rules provide a specific timeline for disclosures to be made, and market practice on the timing of disclosures generally does not deviate from the legal requirements. 

If required, and in the context of a public M&A that falls under the purview of the Rules, the SC has general discretion, on application by an offeror or target, to extend the time for compliance with the disclosure (and other) requirements if it is satisfied that there are mitigating factors that justify such extension. 

Public M&A

In the context of public M&A transactions, the scope of due diligence in a negotiated business combination is generally restricted to publicly available information. While parties may agree to additional disclosure of information and/or documents, they should be mindful of the information disclosed to avoid falling foul of insider trading laws. Penalties are severe, and on conviction, penalties may include imprisonment for a term not exceeding ten years and/or a fine of not less than MYR1 million. 

Further, if, in the course of due diligence, sensitive information that is not publicly available is inadvertently disclosed, the offeror may be precluded from proceeding with the transaction.  

Private M&A 

Due diligence for private M&A transactions will generally cover at least the following areas: 

• corporate secretarial matters; 
• financing arrangements; 
• material contracts; 
• taxation matters; 
• operational matters; 
• regulatory compliance/licensing; 
• real property and assets; 
• intellectual property and information technology; 
• employment matters; and 
• litigation to which the target is subject or a party. 

The above is not exhaustive, and the scope of due diligence may vary depending on the transaction, negotiations and agreement reached between parties, and may cover other areas such as insurance or technical matters, where necessary. 

Impact of the COVID-19 Pandemic

As a result of the pandemic, the diligence conducted on health and safety obligations has become more stringent in order to ensure the target company has the requisite protocols and precautions implemented to ensure the safety of its employees and customers. There is also increased scrutiny on contractual termination rights (including force majeure clauses) to address events such as the pandemic and the coverage of insurance policies. 

Generally, standstill agreements are relatively uncommon in Malaysia save in a debt restructuring exercise.  

In contrast, exclusivity arrangements for a prescribed duration are common features in the M&A process, especially in private M&A transactions. 

In the context of private M&A and public M&A transactions generally, it is common for offer terms and conditions to be documented in a definitive agreement that is negotiated between the parties.  

In a takeover transaction, the terms of an offer are disclosed as part of the offer document in accordance with the requirements of the Rules, which prescribe the minimum content that must be included in it.  

The offer document should contain the following, inter alia: 

• the offeror’s intention regarding the target and its employees; 
• the conditions of offer; and 
• the arrangements in connection with the offer. 

It is common, however, that an offeror may enter into an arrangement to acquire certain shares from a major shareholder, which triggers a mandatory general offer obligation. In that context, the definitive agreement will often be a share sale and purchase agreement, which may be conditional on certain agreed terms or the fulfilment of certain conditions. 

In the context of public M&A transactions involving a takeover transaction, the timeline is set out in the Rules, with the process taking between four to five months. Where 90% or more of the shares in the target have been acquired pursuant to a takeover offer, the time taken to complete the compulsory acquisition of the remaining shares (if pursued) may potentially take longer if the remaining shareholders do not co-operate. 

Generally, in public M&A transactions, timing will be subject to whether the listed entity is required to obtain approvals, particularly from its shareholders or other third parties, and these would be subject to the guidelines promulgated by the SC and/or Bursa Malaysia (the “Guidelines”). For example, SPACs are required under the Guidelines to complete a qualifying acquisition no later than 36 months from the date on which the SPAC was listed on Bursa Malaysia. 

Private M&A transactions generally require between three to six months depending on the complexity and assuming there are no unforeseen complications. Where there are limited conditions and financing is not an issue, private M&A transactions may be completed in a shorter period. 

Where the Takeover Code applies, the Rules prescribe a mandatory offer threshold where an acquirer is obligated to make an offer to acquire all the shares in the company upon obtaining control over a company or triggering the creeping threshold. 

Control 

“Control” is defined by the CMSA to mean the acquisition or holding of, or entitlement to exercise or control the exercise of, voting shares or voting rights of more than 33% in a company, or such other amount as prescribed in the Takeover Code, howsoever effected.  

Notably, a party who has acquired shares amounting to just under the mandatory offer threshold may also trigger the mandatory offer obligation. The obligation will be triggered in certain circumstances, including where the SC determines that the party is acting in concert with a shareholder or shareholders, therefore allowing them to acquire a significant degree of control over the shares retained by said vendor.  

Creeping Threshold

Any party holding more than 33% (but less than 50%) of shares of a company is free to acquire voting shares up to 2% in a six-month period without triggering the mandatory offer obligation. However, an obligation to make a mandatory offer will arise if: 

• the party’s holding is increased by more than 2% in any six-month period; or 
• following a reduction of the party’s holding to 33% or less, it is increased to more than 33% once again. 

Acquisition Through an Upstream Entity

A mandatory offer obligation may also be triggered where the party or persons acting in concert with it acquire more than 50% of a company or upstream entity, thereby acquiring or consolidating control over a second company to which the Rules apply (downstream company). 

Voluntary Offers

Where an acquirer does not trigger a mandatory threshold, it can nonetheless decide to proceed with making a voluntary offer to acquire the voting shares or rights.  

Cash is the most common form of consideration in Malaysian M&A transactions. Shares and securities are sometimes also included in the consideration package, but this is less common. Parties may use a mixture of cash and shares. 

For public M&A transactions, the Rules require that the offer price in a takeover offer be no less than the highest price paid or agreed to be paid by the offeror for any voting shares or rights to which the offer relates during the offer period and within a specified timeframe prior to the beginning of the offer period (three months for voluntary offers and six months for mandatory offers). With respect to voluntary offers, the price offered by an acquirer shall not be substantially below the market price (ie, more than a 50% discount) of the shares in the target without first consulting the SC. 

Where securities in a SPAC are issued as consideration for the qualifying acquisition, the Guidelines state that such securities should generally be subject to a moratorium for at least six months from: 

• the date the securities are listed on Bursa Malaysia; or  
• the date of issue if the securities are not listed. 

In the context of private M&A transactions, some common tools used to bridge valuation gaps include share warrants and price adjustment arrangements, such as completion accounts and earn-outs. 

The Rules generally restrict the use of conditions in a takeover offer. In the case of a mandatory offer, with the exception of a scheme, it must be conditional solely on the offeror having received acceptances which would result in the offeror and persons acting in concert holding in aggregate more than 50% of the voting shares or voting rights of the target. 

A voluntary offer must also be conditional on the offeror having received acceptances which would result in the offeror holding in aggregate more than 50% of the voting shares or voting rights of the target. This threshold can be set at a higher level (eg, at 90% so as to trigger compulsory acquisition) but may not be less than 50%. A voluntary offer may include other conditions, except for conditions whose fulfilment depends on: 

• the subjective interpretation or judgement of the offeror; or 
• whether or not a particular event happens, being an event that is within the control of the offeror. 

In essence, these exceptions operate to prevent a situation where the offeror can unilaterally decide whether the conditions have been fulfilled. 

As discussed in 6.4 Common Conditions for a Takeover Offer, the Rules generally restrict the use of conditions for takeover transactions in Malaysia. The acceptance threshold for mandatory offers is 50% of the voting shares or rights of the target, whereas the threshold for voluntary offers can be set at 50% or more. Parties making voluntary offers have slightly more freedom to impose additional conditions. 

Private M&A

In the context of private M&A transactions, a business combination may be conditional on the bidder obtaining financing or other conditions, based on the agreement reached between the parties. Smaller transactions are usually funded through internally generated funds or equity, while larger transactions often involve some debt financing. Some transactions may also involve share swaps, where shares are issued by the purchaser as consideration for acquiring the target’s shares or assets/business. 

Public M&A 

For takeover transactions, a mandatory offer cannot be conditional on the offeror obtaining financing and the same applies to voluntary offers. The Takeover Code and the Rules require that offerors must satisfy themselves and their financial advisers that they have sufficient financial capabilities to implement the takeover and that each offeree who accepts the offer can be paid in full. Additionally, offerors have to include a confirmation that the resources available to the offeror are sufficient. The SC may require evidence to support that statement.  

Public M&A transactions that are not subject to the Takeover Code may, however, be conditional on the offeror obtaining financing, if the parties so agree.  

In the case of a qualifying acquisition by a SPAC, the provisions of the Guidelines allow the SPAC to obtain financing through the issuance of securities provided that the securities are issued by way of a rights issue. However, the SPAC may issue securities other than by way of a rights issue or obtain debt financing, provided that: 

• the shareholders’ approval of the qualifying acquisition has been obtained; 
• the funds raised will be applied to the financing of the qualifying acquisition, defraying related costs or enhancing the target business; 
• where applicable, such issuance complies with the relevant requirements under the Bursa Malaysia listing requirements; and
• where applicable, the details of the facility shall be disclosed in a circular to shareholders. 

The qualifying acquisition is ultimately subject to shareholder approval. 

For private M&A transactions and public M&A transactions, parties may seek deal security measures such as guarantees, negative covenants, non-solicits, exclusivity or undertakings by shareholders. The type of security measure that is sought will typically vary from deal to deal.  

In relation to takeover transactions, an offeror may obtain irrevocable undertakings from other target shareholders to accept the takeover offer as a form of deal security measure. The offeror will be required to disclose the type and total number of voting shares or voting rights of the target in respect of which the offeror or person acting in concert with it has received an irrevocable undertaking.  

As a result of the COVID-19 pandemic, there has been an increased focus on the use of Material Adverse Event (MAE) clauses, with acquirers negotiating for greater flexibility and scope with regards to consequences arising from an MAE. It was also common for acquirers to request additional disclosures on the liabilities and impact of COVID-19 on the target. 

In the context of private M&A transactions, a shareholders’ agreement or a direct amendment to the constitution can provide for additional rights (ie, by specifying that certain actions require the agreement of one or more parties, including the acquirer). These “reserved matters” are fairly common. 

In the context of public M&A transactions, generally no additional governance rights can be sought outside shareholdings. An acquirer may seek to appoint a director of its choosing, but there is no guarantee that their nominated director will be appointed. For completeness, while uncommon, it is possible to amend the constitution of a public-listed company to afford additional rights to a particular party. 

In the context of SPACs, where the target is the subject of a qualifying acquisition by way of a business combination, the composition of the board of directors or key management of the SPAC can be changed to afford the acquirer additional governance rights, if parties so agree. 

Shareholders can vote by proxy in Malaysia. Under the CA, where a member entitled to vote on a resolution has appointed one or more proxy/proxies, said proxy/proxies shall be entitled to vote on their behalf. 

Where a takeover offer has been accepted by the holders of not less than 90% in the nominal value of those shares of that class (excluding shares already held at the date of the takeover offer by the offeror or persons acting in concert), the offeror may, within four months of making that offer, compulsorily acquire shares from the dissenting shareholders. The offeror’s intention to exercise the compulsory acquisition powers must be included in the offer document. 

The offeror is required to give notice to the dissenting shareholders in the forms stipulated in the Rules within two months from the date on which the 90% acceptance condition has been achieved. This notice is to indicate the offeror’s desire to acquire shares and should include a copy of a statutory declaration by the offeror that the conditions for the giving of the notice are satisfied. 

It is common for the offeror to seek to obtain irrevocable commitments to tender or vote in favour of an offer by principal shareholders of the target company. Negotiations between the offeror and certain shareholders are commonly undertaken prior to the takeover offer being made, but the parties must take into account the requirements for announcements to be made under the Rules. Irrevocable undertakings obtained are required to be disclosed in the offer document. 

The offeror must be mindful that such irrevocable undertaking could, in certain circumstances, give rise to such shareholders being regarded as a person acting in concert.  

Separately, the general position is that all shareholders should be treated equally. Accordingly, save where written approval has been obtained from the SC, offerors and persons acting in concert with them are prohibited from making any arrangements with favourable conditions in favour of selected shareholders which are not extended to all shareholders. The provision of an out for the principal shareholder if a better offer is made is not common in Malaysia. However, it can nonetheless be done if the parties agree to it and set out the relevant information in the announcement and offer document. 

Announcement Upon Firm Intention

Under the Rules, a bid is generally made public immediately after the offeror has a firm intention to make a takeover offer and has every reason to believe that it can and will continue to be able to implement the offer. Such announcement must include a press notice. The offeror is also required to send a written notice to the target’s board or an adviser designated by the target’s board, the SC and the relevant stock exchange in Malaysia if the target is listed. 

Other Announcements

Further, in cases where the offeror has yet to approach the target’s board about its offer, the offeror is required to make an announcement: 

• when the target 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 offeror or potential offeror’s actions that have directly contributed to it;  
• where negotiations or discussions are about to be extended to include more than a very restricted number of people; or 
• upon the signing of the sale and purchase agreement for the voting shares or voting rights of the target which will lead to the offeror triggering the mandatory offer obligation. 

Disclosures by the Target 

See 5.1 Requirement to Disclose a Deal for obligations for disclosure by the target. 

In M&A transactions where a listed company issues new shares, the listed company must comply with the relevant disclosure obligations set out in the Bursa Malaysia listing requirements. Among other requirements, the company must announce: 

• the number and type of securities to be issued;
• the persons to whom the new issuance of securities will be allotted; 
• the basis of allotment (where applicable); 
• the issue price; and 
• the basis of determining and justifying such price.  

Where an M&A transaction involves the issuance of shares by a SPAC, its prospectus must contain sufficient disclosure to investors about the discounts on the securities issued to the management team and the proposed timing of the realisation of their rewards, so that investors may make an informed decision about its appropriateness after taking into account the SPAC’s business strategy and the management team’s contributions. 

In addition, private companies and public companies not listed on Bursa Malaysia that allot new shares will have to lodge a return of allotment of shares with the CCM and document such allotment in its register within 14 days from the date of allotment. The return of allotment will include: 

• a statement as to the amount of shares comprised in the allotment; 
• the amount paid or payable on the allotment of each share; 
• the class of shares to which the allotted shares belong; and 
• the full name and address of each allottee and the number and class of shares allotted to them. 

In contrast, public-listed companies are not required to comply fully with this, since publicly traded shares are recorded via the central depository (Bursa Malaysia) system.  

In a takeover, the announcement of an offer (discussed in 7.1 Making a Bid Public) should include the following financial information relating to the offeror in the offer document:  

• details, for the last three financial years, of turnover, profit or loss before and after tax, net earnings per share and net dividends per share; 
• statement of assets and liabilities shown in the last published audited financial statements;  
• particulars of all known material changes in the financial position of the company subsequent to the last published audited financial statements or a statement that there are no such known material changes; 
• details relating to the first two items above in respect of any interim statement or preliminary announcement made since the last published audited financial statements; 
• significant accounting policies together with any points from the notes of the accounts that are of major relevance for the interpretation of the accounts; and 
• where, because of a change in accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated. 

Reporting Standards 

Larger Malaysian entities (including listed companies) use the Malaysian Financial Reporting Standards (MFRS), which are generally aligned with the International Financial Reporting Standards, while smaller “private entities” use the Malaysian Private Entity Reporting Standards, which are less stringent than the MFRS. 

Private M&A Transactions

For private M&A transactions, there are generally no requirements to disclose any of the transaction documents in full. 

Public M&A Transactions

In public M&A transactions involving takeovers, the offeror is required under the Rules to issue and dispatch an offer document to the board, shareholders and holders of convertible securities of the target within 21 days from the date of the written notice. The Rules stipulate the minimum content required in the offer document, some of which have already been discussed in 5.5 Definitive Agreements. 

The offeror must also provide the form of acceptance and transfer for securities of the target and the procedures for acceptance of the takeover offer, together with the offer document.  

Other than that, companies that are listed on Bursa Malaysia should also be mindful of their disclosure obligations under the applicable listing requirements. Material documents are typically required to be made available at the registered office of the company for review by its shareholders. 

General 

Directors owe a fiduciary duty to company shareholders under common law, and have prescribed duties under the CA, CMSA, Bursa Malaysia listing requirements (if the company is listed) and other relevant rules and regulations. Of these, the CA is the primary legislation, and it prescribes the statutory duties and responsibilities that must be observed. Specifically, directors owe a duty to the company to exercise their powers for a proper purpose and in good faith in the best interests of the company, and must exercise reasonable care and diligence with all the knowledge, skill and experience that they factually have, or which may be reasonably expected of them. The Guidelines also require directors to maintain the highest standards of corporate governance, integrity, accountability and responsibility. 

Takeovers

Under the Rules, directors of an offeror must jointly and severally: 

• accept full responsibility for the accuracy of information contained in all documents issued in relation to a takeover offer; 
• confirm that the opinions expressed therein were made after careful consideration; and 
• confirm that there was no omission of facts that would cause the document to be misleading. 

Separately, directors of a target company are prohibited from: 

• resigning from the target’s board if the offer period has commenced, or if the target’s board has reason to believe that a bona fide offer is imminent (whichever is earlier) – this obligation will persist until the first closing date of the takeover offer or when the takeover offer becomes or is declared wholly unconditional (whichever is later); and 
• undertaking any action or making any decision that would frustrate a bona fide takeover offer or result in the shareholders being denied an opportunity to decide on the merits of a takeover offer, unless the approval of the shareholders is obtained at a general meeting. 

In general, it is uncommon for boards of directors to establish special or ad hoc committees in business combinations.  

In the event that some directors have a conflict of interest, they are statutorily required to disclose their interest to the company. These conflicted directors would then be excluded from any deliberation and voting on such matter. 

Malaysia recognises and provides statutory recognition for the business judgement rule under the CA. 

Under the CA, a director of a company is deemed to have exercised reasonable care, skill and diligence when making a business judgement if the director: 

• makes the business judgement for a proper purpose and in good faith; 
• does not have a material personal interest in the subject matter of the business judgement; 
• is informed about the subject matter of the business judgement to the extent that the director reasonably believes to be appropriate under the circumstances; and 
• reasonably believes that the business judgement is in the best interest of the company. 

Reinforcing this, the Malaysian Federal Court in the case of Tengku Datu’ Ibrahim Petra Tengku Indra Petra v Petra Perdana Bhd & Another Appeal [2018] 2 CLJ 641 reiterated that the Malaysian courts will generally be reluctant to substitute their own decision in place of the business and management decisions of the directors. 

Any person intending to make a takeover offer should seek advice from a recognised principal adviser (RPA) licensed by the SC. Save where the SC approves otherwise, only RPAs are permitted to submit proposals under the Rules and the Takeover Code. 

The target’s board is required to appoint an independent adviser to provide comments, opinions, information and their recommendation on a takeover offer in the form of an independent advice circular.  

Financial, taxation and legal advisers are commonly appointed by the parties. 

Conflicts of interest of directors are not uncommon subjects of judicial scrutiny in Malaysia.  

General 

Directors are required by the CA to disclose their interests in (among other things) shares, debentures and contracts, first upon becoming directors and subsequently when any event giving rise to a change in their interest occurs. Directors are also required to disclose their interest, whether directly or indirectly, in a contract or proposed contract with the company at a meeting of the board of directors. Further, interested directors shall not participate in any discussion or voting on the matters they are interested in. 

Takeovers

In the context of public M&A transactions subject to the Takeover Code, the SC should be consulted on whether controlling shareholders, directors and their respective persons acting in concert can vote at the shareholders’ meeting, where an actual or potential conflict of interest exists.  

Independent advisers must also declare their independence from any actual or potential conflict of interest to the SC within three days of their appointment by an offeror or an offeree. The independent adviser must remain independent throughout the offer period. 

Public-Listed Companies 

Under the Bursa Malaysia listing requirements, a public-listed company is required to disclose any conflict of interest its directors and key senior management may have with the company in its annual report. Additionally, if advisers to the company in respect of a transaction may potentially, or do in fact, have a conflict of interest with the company, such conflict must also be disclosed in the relevant transaction circulars. Interested parties are not allowed to deliberate and vote on various matters, including related-party transactions and approving transactions. 

In the context of SPACs, members of the management team and persons connected to it are prohibited under the Guidelines from voting on a resolution approving the qualifying acquisition. 

While the Rules do not prohibit hostile tender offers, historically it has been uncommon. 

In the context of takeovers, directors are not expressly prohibited under the Rules from employing defensive measures.  

However, as discussed in 8.1 Principal Directors’ Duties, unless approval has been obtained from the shareholders of the target, the target’s board shall not undertake any action or make any decision that could frustrate a bona fide takeover offer or deny shareholders the opportunity to decide on the merits of a takeover offer.  

Actions or defensive measures that could result in such circumstances include: 

• the issuance of any authorised but unissued shares of the target and the selling of treasury shares into the market; 
• the issuance or granting of options in respect of any unissued shares of the target;  
• the sale, disposal of, or acquisition of material assets of the target;  
• the entering into contracts outside the ordinary course of business of the target; and 
• the declaration of dividends outside the normal course or usual quantum. 

As mentioned in 9.2 Directors’ Use of Defensive Measures, directors are generally not allowed to frustrate any bona fide takeover offer. Defensive measures could be construed as a frustration of an offer. Where shareholders’ approval has been obtained, the target company may consider employing defensive measures, such as those listed in 9.2 Directors’ Use of Defensive Measures. 

The target’s board is also required under the Rules to provide a firm recommendation on whether the takeover offer should be accepted or rejected. The target’s board could recommend that its shareholders reject the offer by setting out its justifications, as a kind of defensive measure. 

Shareholders who are against the takeover may also band together and persuade other shareholders to vote against it. 

Impact of the COVID-19 Pandemic on the Prevalence of Defensive Measures 

No change has been observed in the prevalence of defensive measures as a result of the pandemic.  

When enacting defensive measures, directors should be mindful of their duties as discussed in 8.1 Principal Directors’ Duties. In particular, directors should ensure that the enactment of the defensive measures is for a proper purpose and in good faith in the best interests of the company.  

The directors of a target do not have the liberty to “just say no” and prevent a business combination. As discussed in 8.1 Principal Directors’ Duties, directors are prohibited from undertaking any action or making any decision that would frustrate a bona fide takeover offer or result in the shareholders being denied an opportunity to decide on the merits of a takeover offer, unless shareholders’ approval is obtained at a general meeting. 

Litigation in connection with M&A deals is relatively uncommon in Malaysia. 

Parties may bring forth a claim at any stage during the transaction process, though this will more commonly be in respect of breaches of representations or warranties post-closing. 

As discussed in 6.7 Types of Deal Security Measures, there has been an increased focus on the use of MAE clauses as a result of the COVID-19 pandemic. Parties are advised to give due consideration to the construction of said clauses to ensure that their interests are protected and their risks managed. 

To ensure that the allocation of risk reflects the parties’ agreed intentions, parties should also be cautious with respect to force majeure clauses and clearly state whether or not said clauses should include pandemics or government-enforced movement restrictions, or measures such as force majeure events. 

Shareholder activism has not been significant to date, and has not had a decisive impact on corporates in Malaysia.  

However, shareholder activism is expected to play an increasingly important role in Malaysia. As revealed in the SC’s Capital Market Masterplan 3 (2021–2025), it intends to continue encouraging meaningful engagements between the board, senior management and shareholders of companies. Greater investor activism and advocacy through investor education is a key priority for the SC, and the SC has indicated its intention to work together with BNM to elevate financial literacy among Malaysians. The SC is also seeking to enhance retail shareholder awareness and understanding of corporate governance and sustainability issues. 

To date, it has been uncommon for activists to seek and encourage companies to enter into M&A transactions, spin-offs or major divestitures. As discussed in 1.2 Key Trends, there has been a stronger emphasis on ESG compliance by Malaysian corporates, which is also in line with the policies of their foreign shareholders.

To date, it has been uncommon for activists to interfere with the completion of announced transactions in Malaysia.