TO GC Talk Series #53 – Public & Private M&As in Bahrain

The Oath GC Talk Series hosted its inaugural session in Bahrain in association with Hassan Radhi & Associates offering legal, financial and industry perspectives on mergers and acquisitions.

The session was held at the Wyndham Grand Hotel in Manama on June 26, 2024.  Hassan Radhi, founder and senior partner of Hassan Radhi and Associates, delivered the welcome address. This was followed by the topic presentation led by experts Noora Janahi (partner – Hassan Radhi and Associates), Farhad Chothia, CFA (director, head of deal advisory – KPMG Bahrain) and Abhijit Singh (chief strategy officer – Solidarity Group Holding) who shared their expert insights on ‘Public and Private M&As in Bahrain’, offering legal, financial and industry perspectives to the corporate counsel audience. In light of the ongoing trend of M&As among private and public entities supervised by the Central Bank of Bahrain, and the vision of merging smaller entities to form mega companies capable of competing regionally, the speakers discussed the legal framework and considerations of M&As under Bahraini law. This session also covered the financial considerations and practical aspects of the process and showcased successfully closed transactions to demonstrate how such deals are managed in-house by the investment teams of the relevant entities. Below, we highlight key discussion points.

Noora Janahi commenced the session talking about the existing legal and regulatory frameworks with regard to M&As in Bahrain. Under the Commercial Companies Law (CCL), there is a brief description of mergers by way of absorption or combination. However, Noora noted that there are other detailed rules and regulations that must be referred to while managing a M&A transaction. On acquisitions, Article 319(bis) defers to the CBB laws and regulations in relation to acquisition of shares in publicly listed companies. The CCL is also silent on other types of acquisitions in this section, hence the general rules of share purchase and transfers is applicable. Next, Noora differentiated between the two forms of M&A – public (for publicly listed companies) and private (for unlisted companies) and elaborated on the process involved in both forms in the full deal cycle. In public M&As, Noora focused on the TMA route. There are three types of offers under the TMA module – Mandatory, Partial and Voluntary. According to the firm, the most common offer in the Bahrain market is Voluntary, while one Partial offer was seen in the past few months. The price in consideration in the various offers is either in cash, shares or a combination of both. Noora also shared that the CBB is heavily involved throughout the process in the TMA route. Finally, she talked about general aspects that have to be considered when embarking on a M&A transaction which includes: staying within the thresholds set by the Competition Law, ensuring key requirements are met for disclosures and announcements that are closely monitored by authorities and insider dealing should be tackled effectively.

Farhad Chothia focused on the financial and commercial aspects of M&As. Using Constellation Software’s mergers and acquisitions portfolio as a case study, he talked in details about the different stages of the M&A lifecycle. He shared that each stage of the M&A lifecycle is critical to the overall success of the transaction, and careful planning, execution, and monitoring are essential to achieving the desired strategic objectives. Further, he elaborated on the role of M&A advisors, who are vital to manage the strategic, financial and commercial aspects of the transaction. This includes market analysis, target identification, valuation, due diligence coordination, deal structuring and negotiation. Next, he talked about the two intrinsically linked processes in an M&A transaction – valuation and due diligence. Valuation is the process of determining the financial worth of a target company while due diligence provides the factual foundation and risk assessment necessary for a credible and accurate valuation. Both these processes have an impact on determining the deal price. Farhad took the audience through the various methodologies and types available under both processes. He concluded his segment with a focus on the commercial aspects of M&A focusing on deal negotiation. In this stage, the commercial input provided by M&A advisors is highly pertinent for critical aspects of a transaction be it in term negotiation, bid strategy and transaction documentation.

Abhijit Singh, based on his experience of leading successful M&A transactions at Solidarity Group Holding, shared his learnings from an industry perspective. He talked about the significant M&A transactions that the Group has been involved in over the years and how these transactions have contributed to the company’s exponential growth. He shared at the outset that it is important to have a clear and defined rationale for engaging in M&A with an aim to achieve a strategic advantage for the business. Secondly, he has seen the ‘one man’s trash is another man’s treasure’ concept in the context of M&As as well. A company may struggle to succeed on its own due to various reasons, however, it may be an attractive target for another business who can possibly extract value by integrating the company into its larger ecosystem. Abhijit shared the example of the lucrative acquisition of Marvel Entertainment by The Walt Disney Company. In the cash vs. shares swap in M&A deal, Abhijit said that his preference would always be for a cash swap as equity is extremely valuable for a successful business. He stressed on the need for organisations to have in-house capabilities with dedicated teams to manage and execute all M&A transactions. He also offered insight on the integration process between companies in M&A. While cultural integration is important, Abhijit believes that IT integration should take priority especially for businesses that deal mainly with digital products and services. He concluded emphasising on the importance of approaching negotiations in a structured manner. Businesses can gain an advantage at the negotiating table by prepping in advance with scenario planning and well-defined objectives. The event closed with the speakers leading an interactive Q&A and discussion with the attendees.

Hassan Radhi & Associates, the exclusive LexMundi member firm in Bahrain, continues to deliver exceptional legal services, combining a wealth of expertise in international business law with a deep understanding of commercial laws. The team of highly skilled attorneys provides comprehensive legal assistance to clients operating in diverse industries. They take pride in their unwavering commitment to professionalism, integrity, and client satisfaction. With a track record of success and a forward-thinking approach, they remain at the forefront of the legal industry, offering innovative solutions tailored to meet the unique needs of their clients in Bahrain and beyond.