Lawyer Monthly Magazine - February 2019 Edition

LM90-17 47 First Choice Lawyers www. lawyer-monthly .com FEB 2019 in the development of the Taiwan M&A market. They are right, Taiwan is much slower when compared to China, but China has just been on a dizzying pace all its own, relative not only to Taiwan but to the rest of the world. Nevertheless, I am much more optimistic now than I was in 2009, now that we have had several years of outbound deals. This means that Taiwan companies are learning from their PRC and South Korean peers, as they are developing experience in growingoverseas via acquisitions. I now hear, more frequently than before, of boardroom discussions where founders and senior management are actively seeking an M&A solution in order to acquire overseas management talent, rather than relying on overworked domestic executives to hire and grown the overseas business organically. Better late than never. How do the recent 24 November Taiwan midterm elections affect business outlook? Despite the significant gains made by the pan-blue KMT- led coalition, particularly in southern Taiwan, I think it is too early to tell. I think that Taiwanese companies will continue to pursue their dual- pronged strategy of dealing with the trade tensions between the US and China, which is to continue to acquire management talent and channels in the US and also to develop more production capability in Southeast Asia. One additional strategy Taiwanese companies could start to adopt, would be to shift production in China back to Taiwan, but this would depend very much on still developing government policies on like the BenQ - Siemens deal, were dismissed as utter failures. After 2008, the KMT was swept into power on the back of enthusiasm for the Ma administration. And with some relaxation of Cross Straits investment restrictions, as well as the advent of a number of PE funds and a growing group of professional dealmakers making connections with their Chinese counterparts, we saw significant cross-strait investment and M&A activity even during a period of global recession. In fact, owing to the fact that Taiwanese banks were very well capitalized and largely unaffected by the 2008- 2009 global financial crisis, Taiwan was one of the very few parts of the world were PE funds were able to close billion- dollar leveraged deals during that period. The US recovery from its Great Recession, however, did not benefit Taiwan companies at first. This was felt also in terms of M&A activity, which plateaued and then declined. There were several years of inactivity and lack of progress during the latter parts of the second Ma administration, and also the beginning of the Tsai administration, and I think the feeling that the high tech world was leaving behind Taiwanese companies (and partnering instead with PRC and South Korean companies) may be what has spurred the trend of outbound buyouts. Given the rapid pace with which the Chinese M&A market has evolved - and it is amazing to see as I also had the fortune of working on some large and sophisticated M&A deals in Beijing and Shanghai when I first came back to Taiwan- , I sometimes hear Taiwanese professionals complain about the slow pace corporate and tax laws. For example, the individual tax rate for professionals andexecutives is much too high in Taiwan, with virtually no deductibles, and this has resulted in decades of persistent exodus in managerial talent, and there is no academic or political will to tackle this issue. Do you have any 2019 predictions regarding M&A activity in Taiwan? I think there will continue to be a steady stream of M&A outbound activity and we will see this activity branch out into more industry sectors. In addition, if there is a global or regional sell-off in stock markets in 2019 or 2020, it is likely that there could be one or more waves of industry consolidation M&A activity, now that Yageo and others have set a precedent. How would you advise clients and businesses to make the most out of the aforementioned predictions? I think Taiwan businesses are al- ready starting to look outward and to adapt to a possible, long-term “cold trade war” between the US and China. This will likely result in many opportunities for coopera- tion amongst complementary Taiwanese companies with their partners based in North America, Europe, Japan, Aus- tralia, and Southeast Asia, and I would encourage businesses to seize those opportunities. For example, Taiwan commer- cial banks are still flush with cash and the lending rates for Taiwan companies, which is based on TAIBOR, is much low- er than the rest of the world; therefore, working with Taiwan- ese companies and Taiwan lenders will contribute to more efficient and profitable M&A and investment outcomes. LM ABOUT VICTOR CHANG AND THE FIRM Victor I. Chang has 20 years of extensivemulti-jurisdiction transactional experience in mergers and acquisitions (“M&A”), private equity fund formations, and cross-border anti-trust and supply chain transactions, frequently involving parties from the United States, Europe, Canada, Australia, Taiwan and China. Mr. Chang has been widely recognized as a leading attorney in the areas of private equity and venture capital by clients and independent periodicals. Prior to joining LCS & Partners (LCS) in 2004, Mr. Chang was deputy general counsel of Trader Classified Media, N.V., a leading classified media company traded on the Paris Bourse; he had also practiced for over seven years in Boston with the firm of Testa, Hurwitz & Thibeault, LLP. Since 2004, Mr. Chang has represented numerous principals in the formation of Greater China private equity and hedge funds, with aggregate LP commitments in excess of US$4.10 billion. LCS is a top-tier full-service law firm in Taiwan and regularly advises top-tier domestic and international clients on innovative and complex transactions. LCS has advised domestic and international clients on the largest and most significant M&A, securitization, and commercial real estate deals in Taiwan, and has been a market leader in capital markets transactions practices, including private equity fund formations and investments, project finance, debt and equity capital markets covering a wide variety of offerings, and anti-trust.