M&A Bytes: Third-Party Approvals – The Hidden Dealbreaker
Deals don’t fail because of price; they fail because someone else hasn’t said yes. Are all your approvals in place?
One overlooked approval can stall – or even sink – an otherwise well-negotiated deal.
In many M&A transactions, third-party approvals are one of the most underestimated hurdles. Whether from regulators, landlords, banks, or key customers, these approvals can materially affect the deal timeline, risk allocation, and even price negotiations.
What are third-party approvals?
- Approvals required from parties outside the buyer and the seller.
- Often tied to contracts entered into by the target company, licences, financing documents or regulatory requirements.
- Frequently a “must have” when a change of control occurs.
Typical third-party approvals in Malaysian M&A
- Regulator approvals:g. MCMC, MITI, local councils – where the validity of licences is impacted.
- Landlord approvals: Required for tenancies/leases containing change-of-control clauses.
- Bank approvals: Commonly required for financing documents restricting assignment or change of shareholders.
- Key customer approvals: Particularly where contracts are exclusive or high-value.
Why it matters for the deal?
- Affects timelines – additional steps required to procure third-party approvals, resulting in a prolonged deal timeline.
- Affects risk allocation – buyers typically want procurement of third-party approvals as Conditions Precedent (“CP”), while sellers prefer to limit CP.
- Affects certainty – failure to obtain third-party approvals may delay completion or even trigger renegotiation.
🔑 Key Takeaway:
Third-party approvals are more than procedural – they directly impact deal timing, risk, and commercial certainty. Spotting them early through legal due diligence helps prevent avoidable delays and keeps the deal moving.
In Essence:
Disclaimer: The content of this article is intended for general informational purposes only and does not constitute formal legal advice.
Our Corporate team regularly advises local and international corporations on mergers and acquisitions (M&A), cross-border transactions, joint ventures, and corporate restructuring. We also provide comprehensive support for shareholders’ agreements and general commercial advisory to help businesses navigate the Malaysian regulatory landscape.
For legal assistance or further inquiries regarding your corporate matters, please feel free to contact us.
