MOFCOM praised for simplified M&A clearance process
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With the international market developed, more and more China enterprises turn to the oversea market by merger and acquisitions. Recently, the government is quickening its pace of approving both domestic and foreign deals. Is it a good news for the China local enterprises planning to investor in the oversea market?
China's mergers and acquisitions watchdog is quickening its pace of approving both domestic and foreign deals, cutting legal costs for companies and improving its previous image as something of a thorn in the side of bankers.
The anti-monopoly bureau of the Ministry of Commerce (referred to by many as MOFCOM) has blocked just two deals since its inception in 2008.As well as being slammed for being slow to clear even small-sized deals, it has also been criticised for imposing conditions on deals such as business divestments by foreign-to-foreign mergers that barely touch the China market and have been cleared unconditionally by the United States and Europe.
The introduction of a new procedure, however, in April for what MOFCOM describes as "simple cases" has nearly halved the length of time it takes to win clearance, and lawyers say the move is part of a broader strategy which should increase efficiency at the resource-strapped regulator and help improve its professional image.This month, MOFCOM published its most comprehensive data yet - covering 20 transactions filed and cleared between May and the end of September - which tracked both transaction filing and approval dates - a milestone for the agency, observers said, for an agency.
"Our experience, and from what we are hearing from others, is that MOFCOM is getting much better at transparency and at getting on with it," said Mark Jephcott, head of the Asia antitrust practice at Herbert Smith Freehills in Hong Kong."We did a deal recently from start to finish in three months - that was phenomenal, and would not have been possible a year ago."
MOFCOM is making it easier too for companies to plan and execute acquisitions which is reducing legal costs by up to 40 percent to about $80,000 on average for simple cases, lawyers say.The regulator now takes an average of 26 calendar days to approve deals that are filed under the new simple case procedure, according to law firm Norton Rose Fulbright's analysis of the transaction data.
The fastest clearance - Rolls-Royce Holdings' move to take full control of its joint venture Rolls Royce Power Systems - was approved in just 19 days.A pre-acceptance period of around four to eight weeks during which lawyers work with MOFCOM to prepare the filing is not captured by this data.All told, however, lawyers say acquisitions that previously took five to eight months to clear can now be passed in between three and five, using the simplified process. (Date: October 27, 2014, Source: China daily )
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