June 28, 2019
In light of the results of the discussions by the Fair M&A Study Group and other information, the Ministry of Economy, Trade and Industry (METI) fully revised the Guidelines for Management Buyout (MBO) to Improve Corporate Value and Secure Fair Procedures (hereinafter referred to as the “MBO Guidelines”) formulated in 2007 and newly formulated the “Fair M&A Guidelines: Enhancing Corporate Value and Securing Shareholders’ Interests.” It hereby announces the official release of the Guidelines.
1. Background and purpose
On September 4, 2007, METI formulated the MBO Guidelines, aiming to present fair rules for MBO.
Some called for revision of the MBO Guidelines based on the experience of Japanese companies accumulated over nearly 10 years since the formulation of the MBO Guidelines on practical and legal matters and amid changes in the environment which listed companies face, including the progress of corporate governance reform. Others pointed out that it is necessary to discuss issues regarding conflicts of interest in M&A transactions other than MBO, such as acquisitions of controlled companies by controlling shareholders.
In response to these calls, in light of such experience accumulated on practical and legal matters and environmental changes since the formulation of the Guidelines, METI launched the Fair M&A Study Group (Chairman: Hideki Kanda, Professor, Gakushuin University Law School) in November 2018 to discuss the issue of whether or not the MBO Guidelines should be revised and to examine future directions. The study group held discussions from the viewpoint of further healthy development of M&A in Japan.
Based on the discussion results of the study group, METI also targeted the acquisition of controlled companies by controlling shareholders as a new discussion topic in addition to the existing main topic, MBO. It then decided to focus on ideal approaches to fair M&A that the Japanese business community should share in the interest of enhancing corporate value and securing shareholders’ interests, in particular, and to present anew [i] a re-organized list of fundamental ideals, including general principles and [ii] practical measures based on the ideals. To this end, METI fully revised the MBO Guidelines and newly formulated the Fair M&A Guidelines: Enhancing Corporate Value and Securing Shareholders’ Interests.
2. Overview of the Fair M&A Guidelines
The guidelines mainly focus on MBO and the acquisition of controlled companies by controlling shareholders, where issues with respect to structural conflicts of interest and information asymmetries typically exist. They provide ideal approaches to fair M&A for the Japanese business community mainly in terms of procedures. Through these approaches, the guidelines aim to enhance global trust in Japanese capital markets and to promote the type of M&A that contributes to the enhancement of corporate value.
Chapter 1 of the guidelines outlines the position, scope, etc. of the guidelines. Chapter 2, titled “Principles and Basic Perspectives”, clarifies the principles that businesses should observe in mutual transactions and basic perspectives that businesses should take in studying practical measures toward achieving the principles.
Chapter 3 titled “Practical Specific Measures (Measures to Ensure Transaction Fairness)” explains specific, practical and functional measures that ensure that M&A are conducted using fair procedures, and in particular features typical measures that are considered generally highly effective, including establishment of an independent special committee.
3. Results of the call for public comments
From May 14 (Tue.) to June 12 (Wed.), 2019, METI broadly opened a call for public comments on the draft Fair M&A Guidelines: Enhancing Corporate Value and Protecting Shareholders’ Interest.”
As a result of the call, METI received comments from 18 individuals and associations. METI highly appreciates the contributions of these people and their cooperation.
For the outline of the major opinions and METI’s approaches to them, see Appendix 2 titled “Results of the Call for Public Comments.”
4. Future actions
Aiming to enhance global trust in Japanese capital markets and promote M&A contributing to enhancement of corporate value, METI will further raise public awareness of the guidelines and strive to disseminate practices in accordance with the guidelines across companies.
- Appendix 1: Fair M&A Guidelines (PDF:896KB)
- Appendix 2: Results of the call for public comments (in Japanese)(PDF:520KB)
- Appendix 3: H30 Survey report (Survey of M&A) (in Japanese) (PDF:26,162KB)
Division in Charge
Corporate System Division, Economic and Industrial Policy Bureau