News that there are eight potential suitors doing second stage due diligence on the Thai-based consumer assets of Citibank is a reminder of the level of necessary redundancy in corporate transactions.

Eight law firms (and other advisers) running the ruler over the same set of assets, perhaps with different materiality criteria. Eight sets of due diligence reports essentially stating the same thing.

I have worked on numerous transactions where multiple due diligence reports were prepared by different firms. On one transaction, it seemed that most of the larger law firms in Bangkok had spent time in the due diligence data room.

If there are any potential issues within the business, it is always interesting to see which firms correctly identify them. On the sell side, tidying up physical data rooms at the end of each day made it easy to see what documents teams had focused on. Virtual data rooms make document reviews easier to monitor.

On one transaction working with the seller, the work habits of the potential buyer and its advisers were curiously observed. The buyer's team would leave the data room each day at 4.00pm, the lawyers left at 5.00pm and the accountants left at 9.00pm. On that transaction, I rated the accountants best able to identify relevant issues. (They would be emailing follow up questions at 11.00pm.) In saying that, none of the parties seemed to focus on potential tax concerns which were clearly identified in the data room and subsequently in the Disclosure Letter.

On another telecoms transaction, the potential buyer requested the seller pay for a team's five week trip around Thailand's provinces while a detailed study was undertaken of all the company's transmission towers and cell sites. The request was denied.

With one sale which dragged on for over a year, we became adept at refreshing the data room to ensure documents were up to date and were able to shift the entire data room from the company's HQ to the main external counsel's offices at a moment's notice without any of the company's staff learning we had done this. This was driven by the buyer's need for confidentiality. It was no secret that the business was for sale.

Best suggestion on the buy side is to clearly discuss due diligence goals with the buyer's management. Find out their concerns and their areas of particular interest. Work with them to establish appropriate materiality criteria. More often than not, they will have a better understanding of the seller's business than the lawyers. Quickly focus on crucial legal issues such as foreign ownership or other structural or compliance issues.

Weighty tomes reviewing every document ever signed by the seller's business are destined to gather dust on a shelf and crucial issues may be lost somewhere deep in the report.

At least 8 suitors vying for Citibank’s Thailand operations amid sales complications

September 2021

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.