M&A Guide 2025: Taiwan

In response to economic growth and supply chain reshaping, major technology companies in Taiwan are strategically positioning themselves for industry upgrading and transformation through offshore M&A.

WPG Holdings, an integrated circuit (IC) channel giant, completed its acquisition of Canadian IC distributor Future Electronics for $3.8 billion in 2024. This major transaction will not only enhance WPG’s product line but also maximise the group’s integration and synergy.

Another notable acquisition in 2024 was by AU Optronics (AUO), a leading display panel manufacturer, which completed its acquisition of 100% of the equity of German automotive electronics company Behr-Hella Thermocontrol for €600 million. The move allows AUO to expand its presence in the automotive electronics market and strengthen its vertical market applications.

These offshore acquisitions highlight the strategic moves made by major technology companies in Taiwan to better position themselves for industry transformation and capitalise on the growing opportunities in various markets.

Similar to recent years, the green energy sector continues to thrive. Investors’ interest in solar energy and offshore wind farm projects also fuelled the M&A market. Aside from the energy sector, there has been a significant trend of consolidations within the retail, biotechnology, and medical sectors.

Both private and public M&A transactions drive the M&A market in Taiwan. Aside from a few notable public M&A transactions in 2023 and 2024, there were quite a few private M&A transactions. For example, there have been several acquisitions in the energy sector, e-commerce, and retail chains, as well as M&A deals for AI and emerging technology companies. However, there may have been fewer investments by People’s Republic of China (PRC)-invested companies in Taiwanese companies due to the change in the political climate and cross-strait tension.

In 2024, a merger plan was announced by Taishin Financial Holding Company and Shin Kong Financial Holding Company that has drawn the public’s attention. This strategic move aims to enhance market competitiveness and broaden their service offerings within the financial industry.

Concurrently, China Trust Financial Holding Company sought approval from the Financial Supervisory Commission (FSC) for a public tender offer for shares of Taishin Financial, a request that was ultimately declined by the FSC.

These events underscore a trend towards consolidation and strategic manoeuvring among major financial institutions in Taiwan. They also reflect the FSC’s preference for amicable mergers over hostile takeovers, emphasising the importance of sound financial governance and the protection of public interests.

Another notable event in 2024 was Uber Eats’ announcement of its intention to acquire Foodpanda Taiwan. This move sparked controversy, primarily due to concerns regarding market competition and the potential for monopolistic practices. Critics argued that the merger could lead to fewer choices for consumers, increased prices, and an unfair competitive advantage for the newly combined entity in the food delivery market.

In response to these concerns, Taiwan’s Fair Trade Commission (FTC) conducted a comprehensive review of the proposed combination. After evaluating the potential impacts on competition and market dynamics, the FTC ultimately disapproved the merger clearance filing for the combination of these major food delivery platforms in Taiwan. This contentious case serves as a stark reminder of the ongoing debates surrounding market definition in emerging service sectors and its implications for the outcomes of merger control reviews.

In 2023, many companies approached M&A with caution due to high inflation and rising interest rates, leading to a lower number and total value of M&A transactions. However, in 2024, the economic landscape shifted towards greater stability, characterised by falling interest rates and increased corporate confidence, resulting in a significant rebound in M&A activities. Notably, sectors such as AI, technology, healthcare, and renewable energy saw a surge in merger opportunities, driven by technological innovation and evolving market demands.

The technology industry, in particular, is undergoing a significant transformation and upgrade, primarily through cross-border M&A, with the aim of establishing comprehensive and efficient supply chains. Furthermore, there is a trend towards the integration of the biotechnology sector and semiconductor supply chains. It is anticipated that strategic collaborations and investment integrations between related companies will accelerate in 2025.

In the renewable energy sector, in view of the Taiwanese government’s policy of promoting green energy, it is expected that there will be significant growth in M&A transactions pertaining to investments in offshore wind and solar energy projects, and other renewable energy companies.

This could include trends related to:

• Industry consolidation, M&A-driven growth, and financing considerations; and

• Distressed M&A work – takeover reorganisations, bidding, and post-M&A closings.

There have been several driving forces in the structuring of M&A deals in Taiwan. For example, given that the amendment to the Business Mergers and Acquisitions Act (the BMA Act) that came into effect in 2016 allows for more flexibility in terms of the form of the consideration that an acquirer may offer to the shareholders of a target company, it becomes easier for an acquirer to achieve a 100% equity interest acquisition. This was evidenced by the increasingly popular cash-out share exchange structure in 2018 and 2019. From 2020 to 2024, the slowing down of major transactions appears to reflect public calls for more stringent disclosure and voting requirements for cash-out deals and delistings.

Meanwhile, Taiwan’s government promulgated amendments to laws and regulations governing PRC investors’ investment in Taiwan to prevent the circumvention of investment control. For example, according to the amendments:

• Stricter criteria were adopted for identifying PRC investments made through a third-area intermediary; and

• PRC investors wishing to control a Taiwanese company (other than those listed on the TWSE or the Taipei Exchange, or traded over the Emerging Stock Market of the Taipei Exchange) via a contractual arrangement are also required to apply for regulatory approval.

Given the above, transactions must be carefully structured to meet the requirements applicable to PRC investors when making an investment in Taiwan.

During the past decade, big-ticket M&A in Taiwan has been mostly driven by strategic investors. Financial investors have primarily participated in M&A as co-investors or as acquirers of minority stakes in companies.

Since 2018, however, there has been a trend of financial investors returning to the market after being silent for almost a decade. A series of deals – including KKR’s take-private acquisition of LCY, Morgan Stanley’s take-private acquisition of Microlife, Blackrock’s acquisition of a solar portfolio, and Permira’s investment into aquaculture feeds company Grobest – were led by private equity funds. There were still several transactions initiated by private equity funds from 2020 to 2024, such as:

• The take-private acquisition of On-Bright by Magicapital, Pavilion Capital, and Axiom Capital in 2020;

• The take-private acquisition of Ginko by Baring Private Equity Asia in 2021 and 2022; and

• The acquisition of TE Connectivity’s Hirschmann Car Communication segment by Phi Capital in 2023.

In response to the Taiwanese government’s ambitious effort to promote renewable energy, M&A transactions in the energy sector continued to thrive in 2024, largely driven by foreign and local financial investors. The notable examples are several sell-downs of offshore wind farm developers, and a number of large to mid-sized investments in the solar power plant industry. There have also been quite a few global asset management firms continuing their involvement in building and acquiring Taiwan’s internet data centres.

Additionally, Gogoro and Gorilla Technology Group went public on the Nasdaq through mergers with SPACs in 2021. In 2022, Perfect Corp. went public on the New York Stock Exchange through a merger with a SPAC. In 2024, Taiwan Color Optics and TNL Mediagene went public on the Nasdaq through mergers with SPACs. Even though the review process and timeline can be protracted due to recent regulatory enforcement, there are still chances for Taiwanese-based companies to seek IPOs in the US market through de-SPACs, and a revival is expected in 2025.

The main statutes governing M&A activity in Taiwan are the BMA Act, the Company Act, the Securities and Exchange Act, and the Fair Trade Act. The Securities and Exchange Act includes tender offer rules that regulate tender offers for acquiring shares of public companies. Other statutes that may also be relevant in M&A activity include the Labor Standards Act, investment regulations on foreign investors and investors from the PRC, and tax laws and regulations.

The Securities and Futures Bureau (SFB) of the FSC, the government agency responsible for public companies, is the main regulatory body in charge of public M&A transactions. The other relevant regulatory bodies include the FTC, the authority in charge of merger clearance, and the Department of Investment Review, the authority in charge of reviewing foreign and PRC investments. If the target engages in businesses that require a special licence, the competent authority for the special licence may also review the transaction.

After the overhaul of the Company Act in November 2018, shareholders holding over 50% of shares may now call a shareholders’ meeting without needing the board to do so. This enables insurgent shareholders to replace the incumbent board as soon as they acquire a majority stake and is worth noting for hostile takeovers.

The latest amendments to the BMA Act came into effect in December 2022. The amendments aim to improve the flexibility of M&A activities, while also protecting shareholders’ rights. The key amendments include the following:

• Enhancing disclosure before the shareholders’ meeting – the directors should explain their personal interests and reasons for supporting or opposing the transaction at the board meeting and the shareholders’ meeting. The amendment further requires that such information be stated on the shareholders’ meeting notice so that shareholders are informed beforehand.

• Relaxing restrictions on appraisal right – previously, dissenting shareholders had to abstain from voting to exercise the appraisal right. The amendment now permits dissenting shareholders to vote against the proposal (instead of abstaining) and still exercise the appraisal right.

• Expanding the scope of asymmetric M&A – asymmetric M&A, where a company acquires a significantly smaller target, can now be approved by a special board resolution if the transaction meets either of these conditions:

  • The new shares issued by the merging company are less than 20% of its voting shares; or

  • The consideration paid by the acquirer does not exceed 20% of the book value of the target.

The Securities and Exchange Act was amended in 2023, with a few noteworthy changes:

• Restricting independent directors’ authority – the following supervisory functions should be exercised by the audit committee rather than by an independent director alone, such as:

  • Bringing a lawsuit against a director;

  • Calling a shareholders’ meeting; and

  • Representing the company when a director engages in self-dealing with the company.

• Lowering the threshold for shareholder reporting – any shareholder individually or jointly acquiring more than 5% (previously 10%) of a company’s shares should fulfil the reporting and disclosure obligations under the securities laws.

A draft amendment to Taiwan’s Statute for Industrial Innovation is under discussion by the legislators. This amendment aims to attract more investment into the startup sector. First, the benefits of pass-through taxation currently enjoyed by venture capital firms will apply to a lower paid-in capital of the venture capital firms, reduced from TWD300 million to TWD150 million. Second, to promote angel investments, investors who invest TWD500,000 or more in startups established for less than five years and hold their interest for at least three years will be eligible for a 50% deduction on their individual income tax, with a cap of TWD5 million.

In addition, to prevent the outflow of critical technologies, the draft amendment specifies that pre-approval is required for outbound investments over TWD3 billion in specified countries/regions and critical industries/technologies. Failure to obtain pre-approval will result in fines ranging from TWD50,000 to TWD1 million, and if such outbound investment is not corrected, halted, or withdrawn after the initial fine, the penalties will increase to between TWD500,000 and TWD10 million.

Information disclosure and insider trading are crucial for public companies in Taiwan. Unfortunately, local management often neglects their significance and fails to make the proper disclosures. Insider trading violations have frequently occurred in large public M&A transactions, leading to numerous criminal investigations. Management has repeatedly tried to manipulate the stock prices of public companies or to intentionally buy or sell the shares of the target before the material non-public information is legally and properly disclosed to the market, for its own improper gains. There were reports of insider trading issues in several notable deals in recent years.

This type of misconduct harms the buyer’s trust and the seller’s credibility. For example, if the price increases unreasonably before the information is disclosed, the buyer might ask for a cooling-off period or even choose to cancel the transaction.

Public companies should pay more attention to information disclosure when they plan M&A transactions. This includes understanding what information should be disclosed and the proper timing for disclosing certain pieces of information to the market. Most importantly, public company insiders must refrain from trading any shares in the public company before proper information disclosure. Professional advice should be sought regarding this issue.

In Taiwan, M&A transactions are often subject to regulatory approvals, such as foreign investment approvals or PRC investment approvals. Industries that require a special licence/permit – such as banking, securities, and insurance – need to obtain prior approval from the competent authority, such as the FSC. Meanwhile, any M&A transaction that triggers the pre-closing merger filing threshold must obtain merger clearance before closing. Given all these requirements, obtaining the proper regulatory approvals is critical to the completion of an M&A transaction in Taiwan. As such, investors intending to conduct an M&A transaction in Taiwan should seek professional advice in advance to better understand the regulatory requirements and application process.

Technology facilitates more efficient and thorough due diligence processes. Virtual data rooms allow for secure sharing and reviewing of documents, eliminating the need for the potential acquirers to carry out onsite due diligence in the target’s physical location. Communications among the stakeholders are also enhanced by technology. Public companies may hold video-aided shareholders’ meetings, and the use of videoconferencing in corporate meetings has become prevalent in private companies in the post-COVID era. Moreover, technology plays a vital role in post-closing integration. Project management software and integration platforms assist in planning and aligning the disparate systems and cultures between the entities.

Given that under the Taiwanese Company Act, material decisions require the approval of shareholders holding two-thirds of the voting shares present at a shareholders’ meeting, in order to gain absolute control of a public company, an acquirer should aim to acquire or control at least 67% of the shares. In practice, given that not all shareholders attend shareholders’ meetings, to control the management or operation of a listed company, it is sometimes enough for one investor to control 30% to 40% of the voting rights in a listed company. In sum, this would largely depend on the dispersion of the shareholding structure of the listed company.

The local practice is that:

• The conditions of a tender offer usually include the minimum and maximum number of shares that the shareholders of the target company agree to tender during the tender offer period;

• The tender offeror obtains the required government approvals, if any (such as merger clearance and foreign investment approval); and

• There is no occurrence of any material adverse event (subject to the approval of the FSC).

Among others, with respect to the condition of obtaining the required government approvals, given that the securities regulator has changed its position and no longer requires the tender offeror to launch a tender offer immediately after the deal is announced, the tender offeror may elect to file the applications for government approvals with governmental authorities in relevant jurisdictions much earlier than the time the tender offer is launched so as to obtain the required government approvals before the expiry of the tender offer period.

A no-shop clause restricting the selling party from pursuing a transaction similar to the proposed transaction during the exclusivity period is not uncommon. In recent years, break fee arrangements have been structured based on the occurrence of certain trigger events. Buyers may also negotiate with major shareholders of the target companies and enter into tender agreements or voting agreements to increase the certainty of the deal.

Large private M&A transactions often adopt a completion accounts mechanism under which the purchase price is adjusted in accordance with the post-closing audit of the financial status of the target company, as at the closing date. For transactions with a smaller value, it is more common for the parties to adopt the locked-box mechanism, which has become more and more popular in recent years. Earn-out mechanisms and escrow arrangements are commonly seen in private M&A transactions. Recently, warranty and indemnity insurance has been increasingly adopted in local deals by sellers and buyers, but the prevalence has fallen post COVID.

The customary closing conditions attached to a private takeover offer usually include that:

• The seller’s representations and warranties remain true and correct;

• The required government approval (if any) has been obtained;

• The required third-party consent (if any) has been obtained;

• No material adverse event has occurred;

• No action or government order is seeking to deter or enjoin the proposed M&A transaction; and

• Other commercial arrangements required by the parties have been completed or achieved (this would usually be structured based on the due diligence findings).

If any party in a private M&A transaction belongs to a foreign corporate group, that party would normally require that the transaction documents be governed by the law of the foreign country where the headquarters of the foreign corporate group is located. Any dispute arising from the transaction documents will then be resolved via the court of a foreign jurisdiction or an arbitration proceeding conducted outside Taiwan. Local parties would normally accept such arrangements.

The IPO market in Taiwan is generally perceived as serving the purpose of fundraising rather than exiting, due to lock-up requirements, minimum shareholding requirements, legal requirements, and limitations on selling shares that are applied to major shareholders, directors, and supervisors. For the major shareholders of a public company who wish to sell their shares to a potential buyer, a mandatory tender offer may be triggered if more than 20% of the shareholding will be transferred within 50 days. Consequently, a major shareholder’s exit in the open market may be treated as a trade sale.

On the other hand, trade sales or sales to financial sponsors have always been a major exit route. Other than highly regulated industries (such as media or cable TV) or acquisitions involving PRC funding, there should be no substantial hurdle for an exit, albeit that the regulatory approval process may sometimes take a long time. As for highly regulated industries and investments involving PRC funding, the Taiwanese government has been criticised for a prolonged regulatory approval process and lack of transparency in its decision-making process.

Considering the government’s conservative attitude towards PRC investment, similar to the trend in 2024, transactions involving PRC funding are expected to be less likely to take place in 2025. Given that investments made by PRC investors through the ‘control via contract’ structure (e.g., a variable interest entity structure) also require regulatory approval under the amended scheme, it is anticipated that there will be more enquiries regarding the alternative structures to achieve cross-strait collaboration.

In addition, Taiwanese companies are increasingly seeking investment opportunities in other countries. In recent years, Southeast Asian nations have been popular targets for M&A among Taiwanese firms, as they aim to expand their markets and reduce operational costs. Furthermore, a growing number of Taiwanese companies are also opting to acquire Japanese firms to access the Japanese market and leverage advanced technologies. Given these trends, the authors expect that M&A activity in Southeast Asia and Japan will continue to thrive in 2025.

On a related note, given that the Taiwanese government is continuing to promote renewable energy and that some developers in the renewable energy sector are divesting their project investments, the authors envisage that M&A transactions in the energy sector will continue to thrive in 2025. Besides, more transactions are also expected in the AI, biotech, TMT, and financial industries in 2025.