Lawyer Monthly Magazine - February 2019 Edition

46 First Choice Lawyers www. lawyer-monthly .com FEB 2019 Mergers&Acquisitions M&A Round-Up: The Rise of Taiwan Often seen as the bridesmaid and never the bride, Taiwan is continuously developing in order to catch up with its neighbour: the ever-progressing and somewhat unconquerable, China. Nonetheless, things are looking bright for Taiwan and its evolving investment sphere. We speak with Victor I. Chang, who summarises the 2018 M&A scene in Taiwan and what is on the horizon for 2019. Is it time to invest in Taiwan? Read on to find out. It was predicted that M&A activity was expected to pick up in 2018; can you expand on whether it has, and how your 2018 in the M&A sector progressed? The rumors of a pick-up in M&A activity was sourced from a few large outbound M&A transactions in 2016 in semiconductor and TMT, which stalled out in 2017. Based on my perspective, and also being on the commission for the Taiwan PE and M&A association which monitors activity as well as recognise annual awards for the top deals and deal-makers in Taiwan, I see some clear trends. What are some of the trends that you had spoken of? First and foremost, despite a general slowdown, there continue to be a few, large sized outbound deals from 2016 to 2018. I think this is a significant trend, as I have not recalled this much sustained interest in larger Taiwanese listed companies doing CONTACT Victor I. Chang, Partner (Foreign Registered Attorney) Direct: +8862 2729 8000 ext. 7722 Fax: +8862 2722 6677 Email: victorchang@lcs.com.tw www.lcs.com.tw outbound deals. I recall commenting in a conference that this is the trend that is worth watching, and in the last 12 months we have seen further, sustained interest in outbound deals in multiple sectors in addition to IT and TMT, such as in pharmaceuticals, IoT and passive components. Another significant trend is Taiwan companies’ attempts to deal with the still-evolving trade situation between the US and China. In the past few years, my clients have started to look to move its Chinese operations to Southeast Asia, or to the US, in order to manage exposure from increasing trade tension between the Trump administration and Chinese policymakers. CFIUS is also an important issue in this environment. All of this simply means that Taiwanese companies see acquiring companies in the US and in SE Asia as viable alternatives to their traditional strategy of building and growing their own affiliates (which in many cases will take too long). From this, can you share which industries boomed in 2018, regarding investment? One clear benefactor, on a short-term basis, was the passive components industry. Yageo, which was one of the global market leaders, embarked on an M&A strategy between 2017 and 2018 which saw their stock price skyrocket. Since summer, however, interest in the sector has died down. One thing to note is that Yageo was making both domestic and cross-border deals. Even before Yageo, the interest in consolidation was shown by the ASE hostile takeover of SPIL, and now there is continuing interest in consolidation in industrial computers and pharmaceuticals (e.g. acquisitions by Posiflex and Bora). Meanwhile, we continue to see large-sized semiconductor and TMT deals, such as the sale of CNS and acquisition of Belkin, Linksys, and Wemo by Foxconn. Overall, there is now sustained interest amongst Taiwanese companies in using M&A as a strategy to acquire new business lines and to re-position itself globally. How did you come to practice in Taiwan and how has the Taiwan M&A market evolved over the years? I joined LCS & Partner in 2004, which at that time was known as a smaller M&A boutique. I was a fund formation and M&A lawyer, having practiced for 8 years in a big firm environment in Boston, then I was seconded to a public company client in Paris to act as deputy general counsel, overseeing several of their M&A deals in Asia and Europe. In Taiwan back in 2004, there were no strategies available for using the newly established M&A law and corporate tools, such as PIPEs and preferred shares, and my partners and I were fortunate to lead many of the largest and most innovative M&A deals at the time, such as the Standard Chartered acquisition of Hsinchu International Bank and the leveraged MBOs of Oaktree, Primax, Nien Made, Data Systems, and others. Eventually, there was enough activity and know-how built up amongst the investment banking professionals in Taipei where several of them formed their own PE funds and became my clients. During this earlier period, most of the deals were either inbound deals or purely domestic deals. A few large outbound deals,