Corporate Acquisition Process in Malaysia: Board Approvals, Due Diligence, SPA and Completion

A company decides that it wants to acquire another business.

The process is often reduced to four words: LOI → due diligence → SPA → completion.

For a corporate buyer, that is usually too simple.

A properly managed acquisition is also a sequence of information and authority gates. Management receives information. The Board decides whether the opportunity deserves further resources. A working group investigates the target. The findings come back to the Board. The commercial decision is tested again. The definitive agreement should then reflect what the buyer has actually learned and what it has actually approved.

That matters because excellent due diligence cannot fix a transaction where nobody established who had authority to make the offer. A sophisticated SPA cannot repair a Board decision made without understanding the material findings. And discovering immediately before signing that the constitution, shareholders' arrangements or internal approval framework requires another approval can place an otherwise viable transaction under unnecessary pressure.

This article explains the buyer-side corporate acquisition process in Malaysia from the first expression of interest through Board review, due diligence, the SPA, conditions precedent and completion.

For the broader commercial overview, see our Business Acquisition: Step by Step Guide. This article concentrates on the governance and approval flow inside a corporate buyer.

For this roadmap, LOI means the buyer's initial Letter of Intent or expression of interest, while LO means a more developed Letter of Offer after preliminary information and internal consideration. Transaction teams use these labels differently. The legal effect of a document depends on its wording and context, not merely its title.

The 15 phases of a corporate acquisition

1. Initial Letter of Intent (LOI)

2. Information Memorandum (IM)

3. Initial Board review and constitution / authority check

4. Establish the Due Diligence Working Group (DDWG)

5. Draft the Letter of Offer

6. Board review and obtain any required corporate approval

7. Letter of Offer signed / issued

8. Due diligence

9. Due diligence report

10. Board review of due diligence findings

11. Final Board / corporate approval

12. SPA drafting and negotiation

13. SPA execution

14. Conditions precedent and long-stop date

15. Completion and transfer

Phase 1: Initial Letter of Intent — are we interested enough to investigate?

An acquisition usually starts before the buyer has enough information to make a final investment decision.

Management may have identified a competitor, supplier, distributor, operating company or strategic target. Alternatively, an investment banker, shareholder, founder or corporate adviser may have approached the buyer with an opportunity.

The first LOI should therefore be treated as an early transaction document, not as the final acquisition decision.

Its function may be to establish enough seriousness for discussions to continue. Depending on the deal, it may indicate an indicative price or valuation range, proposed structure, assumptions and an intention to conduct due diligence.

But "preliminary" does not necessarily mean "without legal effect". Confidentiality, exclusivity, access, costs, deposits, break fees or other provisions may be intended to operate even if the acquisition itself remains subject to further negotiation.

The buyer should therefore be clear about what it is committing to now and what remains subject to information, due diligence, internal approval and definitive documentation.

Phase 2: Information Memorandum — what are we actually being invited to acquire?

Once the opportunity is sufficiently credible, the buyer needs information.

In many transactions, that comes through an Information Memorandum or a similar seller-side information pack. It may explain the target's business model, operations, historical financial performance, management, customers, assets, market position and the seller's investment proposition.

It is useful.

It is not due diligence.

The buyer's question at this stage should not merely be, "Do we like this business?" It should also ask: what assumptions would have to be true for this acquisition to make sense?

If the valuation assumes one major customer will stay after a change of control, that assumption should eventually be tested. If the acquisition thesis assumes licences will continue, that should be verified. If management believes valuable intellectual property belongs to the target, ownership needs evidence.

The IM should therefore generate questions, not end them. See our separate guide to the Confidential Information Memorandum in a business acquisition.

Phase 3: Initial Board review — and the authority check that should happen early

This is where the acquisition begins to become a governance exercise.

Section 211 of the Companies Act 2016 provides that the business and affairs of a company are managed by, or under the direction of, the Board. The Board's powers are subject to modifications, exceptions or limitations contained in the Act or the company's constitution.

That does not mean every transaction step automatically requires a fresh Board resolution.

It means the buyer should establish its authority matrix before the transaction gets too far.

Start with the company's constitution, if it has one. A Malaysian company other than a company limited by guarantee may choose whether to adopt a constitution. Where one exists, it can affect governance, powers, procedures and approval requirements.

But the constitution is only part of the analysis.

Depending on the buyer, authority may also be affected by a delegation-of-authority framework, Board charter, shareholders' agreement, reserved matters, parent-company requirements, investment-committee mandate, financing terms or sector-specific regulatory requirements. A listed company may also have separate Bursa Malaysia transaction requirements depending on the transaction.

The buyer should identify who may:

• authorise management to investigate the acquisition;

• incur advisory and due diligence costs;

• approve and issue an offer;

• negotiate the SPA;

• approve the final acquisition;

• approve a material change to the approved commercial terms; and

• execute the transaction documents.

The first Board gate is therefore generally not the final decision to buy. The question is narrower:

Is this opportunity sufficiently credible for management to spend time and money investigating it?

Phase 4: Establish the Due Diligence Working Group

Once the buyer is authorised to investigate, someone has to run the investigation.

For a significant acquisition, that usually requires more than the legal team.

A Due Diligence Working Group, or DDWG, may bring together management, legal, finance, tax, operations, commercial personnel and external specialists appropriate to the target.

The DDWG is an internal transaction-management structure. It is not a substitute for the Board.

Someone should own the data room. Someone should track unanswered questions. Workstreams need materiality thresholds. Advisers need to understand the commercial assumptions they are testing. Material findings need an escalation path.

The Companies Act permits directors, subject to the statutory conditions, to rely on information and advice from officers, advisers, experts, other directors and committees, and it recognises Board delegation. But the governance point remains simple:

The working group investigates. The Board decides.

Phase 5: Draft the Letter of Offer

With preliminary information understood and the internal process established, the buyer can develop a more serious commercial offer.

The Letter of Offer may address price, whether the transaction is a share or asset acquisition, payment structure, key assumptions, exclusivity, access for due diligence, proposed timing, financing assumptions and the pathway toward definitive documentation.

It should also identify what remains conditional.

If the buyer still requires satisfactory due diligence, final Board approval, shareholder approval, regulatory consent, financing or execution of a definitive SPA, that should be dealt with deliberately.

The phrase "subject to contract" should not become a substitute for thinking through which provisions are intended to bind and which are not.

For the commercial terms that normally need attention at this stage, see our guide to an Acquisition Term Sheet and Heads of Agreement in Malaysia.

Phase 6: Return to the Board — and obtain any approval required before the offer is made

The Board now has something more concrete than an acquisition concept. It has proposed commercial terms.

The second governance gate therefore asks a different question:

Are we prepared to put this particular offer to the seller?

The Board should understand the proposed consideration, transaction structure, assumptions, material conditions and any provisions that could operate immediately.

The authority analysis performed earlier should now be put into action.

If the constitution, shareholders' arrangements, parent-company governance, investment mandate or another applicable framework requires an additional corporate approval for the proposed commitment, that approval should be obtained at the appropriate point before the relevant commitment is made.

It is more accurate to say that the company obtains an approval required by its constitution or governance framework. The constitution itself does not "approve" the transaction.

The Board should also establish who is authorised to finalise and execute the offer and the limits of that authority.

Phase 7: Letter of Offer signed or issued

Once the appropriate authority is in place, the Letter of Offer can be signed or issued.

At this point both sides should know what happens next: typically expanded data-room access, full due diligence, adviser workstreams and progression toward definitive transaction documents.

The signed offer still needs to be read according to its actual terms. An acquisition may remain conditional while confidentiality, exclusivity, costs or another provision operates immediately.

The document is therefore a legal instrument between commercial parties, not merely an administrative milestone.

Phase 8: Due diligence — what are we really buying?

Now the acquisition thesis gets tested against evidence.

The buyer is no longer simply asking whether the target looks attractive. It is asking:

What exactly are we acquiring, what liabilities come with it, and what could make the assumptions behind our offer wrong?

Legal due diligence may examine corporate ownership and authority, material contracts, financing and security, employment, litigation, intellectual property, licences, regulatory compliance, real estate, change-of-control provisions and other issues relevant to the business. Financial, tax, commercial, operational and technical workstreams may run alongside it.

The best due diligence is not a competition to produce the longest request list.

Every material finding should connect to a transaction consequence.

A key customer contract that can terminate on change of control may affect value, require consent as a condition precedent or undermine the acquisition thesis. Intellectual property that is assumed to belong to the target but is actually held by a founder may require remediation before completion.

See our step-by-step guide to the due diligence process for the investigation itself.

Phase 9: Due Diligence Report — turn findings into decisions

A due diligence report should not be a data-room inventory.

The Board does not need hundreds of pages proving that advisers opened thousands of documents. It needs to understand what the documents mean for the proposed acquisition.

A useful report should distinguish material risks from ordinary operational matters. It should identify information that remains unavailable and explain which findings affect value, structure or timing.

Most importantly, it should answer three questions:

What did we find?

Why does it matter?

What should we do about it?

An undisclosed dispute may require an indemnity. A missing regulatory consent may need to become a condition precedent. A customer concentration issue may require the commercial team to revisit valuation. A fundamental defect in ownership of a critical asset may justify stopping the transaction.

That is what turns due diligence into acquisition advice.

Phase 10: The Board reviews what due diligence actually found

The transaction now returns to the Board.

This is one of the most important points in the process because the information available now may be very different from the information available when the initial offer was approved.

Directors are required to exercise their powers for a proper purpose and in good faith in the best interest of the company, with reasonable care, skill and diligence. The Companies Act's business judgment framework also places importance on directors being appropriately informed about the subject matter of the decision.

The DD report should therefore not be presented merely "for noting".

The Board should understand what has changed.

• Did the buyer discover liabilities not reflected in price?

• Has a material contract become vulnerable because of the acquisition?

• Are regulatory approvals more difficult than first assumed?

• Can the risk be priced or contractually protected?

• Does the proposed transaction structure still make sense?

• Has the information undermined the reason the buyer wanted the business in the first place?

A strong acquisition process makes this a real decision point.

Phase 11: Final Board approval — should we still buy?

The earlier Board decisions allowed the opportunity to be investigated and the offer to progress.

This decision is different.

The company now knows substantially more about what it proposes to acquire.

The Board can approve the acquisition on the proposed basis. Or it can require a price adjustment, a different transaction structure, remediation before completion, stronger warranties and indemnities, additional conditions precedent or further negotiation.

And sometimes the correct decision is to stop.

A failed acquisition is not necessarily one that does not complete. Sometimes due diligence succeeds precisely because the buyer discovers that the transaction should not proceed on the terms originally contemplated.

Where the Board does approve the acquisition, the approval should be sufficiently clear about the material commercial parameters and the authority delegated for final negotiation and execution.

Management also needs to know what type of change would require the transaction to return to the Board.

Phase 12: Draft and negotiate the SPA

The Share Purchase Agreement should now translate the commercial decision and due diligence findings into the definitive legal architecture of the deal.

This is why SPA drafting should not operate in isolation from due diligence.

The investigation may identify matters that need to affect consideration, price adjustments, warranties, indemnities, disclosure, conditions precedent, pre-completion covenants, termination rights or completion deliverables.

In fast-moving transactions, SPA drafting often begins while due diligence is still running. That can be efficient.

The mistake is allowing the final agreement to outrun the investigation.

If due diligence identifies a material problem, the final agreement should deal with the consequence of that problem rather than proceed as though it was never discovered.

For the definitive agreement itself, see our guide to the Share Purchase Agreement in Malaysia.

Phase 13: SPA execution — check authority again before commitment

When the SPA is substantially agreed, the buyer should return once more to the authority question.

Does the final agreement remain within the transaction parameters that were approved?

Have material terms changed during negotiation?

Have all corporate or other approvals required by the buyer's governance framework been obtained?

Who is authorised to execute?

These are not ceremonial questions. An acquisition team can spend months negotiating a transaction only to create avoidable uncertainty at signing because the authority trail was not maintained as the commercial terms evolved.

Signing also does not necessarily mean ownership changes immediately. Many acquisitions have a period between signing and completion because specified matters still need to happen.

Phase 14: Conditions precedent and the long-stop date

Conditions precedent, or CPs, identify matters that must be satisfied, fulfilled or otherwise dealt with before completion can occur in accordance with the SPA.

The exact CPs depend on the transaction. They may include regulatory approvals, financing, third-party consents, corporate approvals, restructuring, release of security, remediation of identified issues or delivery of particular documents.

The DD report and the SPA should therefore speak to each other.

If due diligence identifies a problem that genuinely must be fixed before the buyer acquires the company, it may need to become a CP rather than merely another warranty.

The long-stop date creates a contractual deadline around this process. It should not automatically be treated as the completion date.

Its significance depends on the SPA: what happens if the conditions have not been satisfied or waived by then? Can the parties extend? Can a party terminate? Which conditions can be waived, by whom, and on what terms? What happens to any deposit or interim obligations?

A disciplined transaction team should maintain a CP checklist identifying the responsible person, required evidence and status of each condition.

Phase 15: Completion and transfer — when the acquisition actually changes ownership

Completion is the point at which the agreed acquisition is implemented.

The mechanics depend heavily on transaction structure.

For a share acquisition, the Companies Act 2016 provides for transfer through a duly executed and stamped instrument of transfer lodged with the company, with the company then dealing with registration of the transferee in the register of members in accordance with section 106 and the applicable constitution.

A typical share completion may involve payment of consideration, transfer documents, updated corporate registers, Board changes, delivery of company records and the other completion deliverables specified in the SPA.

For an asset or business acquisition, completion can be materially different. The parties may need assignments or novations of contracts, transfer of specified assets, intellectual-property documents, property-transfer instruments, third-party consents, employee arrangements and separate treatment of licences and permits.

That distinction matters.

Buying shares usually changes ownership of the company while the company's assets and contracts remain with that company. Buying a business or selected assets requires the parties to identify what is actually transferring and how each asset, right, obligation or relationship moves.

After legal completion, operational integration begins. See our guide to completion and post-completion integration in Malaysian M&A.

The real acquisition process is a series of decision gates

Viewed this way, the acquisition process is not simply:

LOI → DD → SPA → Completion.

It is closer to:

Opportunity → Information → Authority to Investigate → Offer → Authority to Offer → Investigation → DD Report → Informed Investment Decision → Definitive Agreement → Conditions → Transfer.

The Board appears repeatedly because the question being asked changes.

At the first Board stage: should management investigate this opportunity?

At the offer stage: are we prepared to put these commercial terms forward, and do we have authority to do so?

After due diligence: knowing what we now know, should the company actually make this acquisition?

Those decisions should not be collapsed into one generic "Board approval". They involve different information, different risk and potentially different levels of commitment.

That is also why the constitution and wider approval framework should be checked near the beginning rather than immediately before the SPA is signed.

Governance should shape the transaction. It should not chase it.

A good acquisition file should tell one continuous story

When the transaction is managed properly, every phase feeds the next.

The Information Memorandum identifies assumptions.

The first Board paper explains why those assumptions justify investigation.

The DDWG tests them.

The Letter of Offer records the commercial basis on which the buyer is prepared to proceed.

Due diligence establishes what is actually supported by the evidence.

The DD report converts the findings into transaction consequences.

The Board decides whether those consequences remain acceptable.

The SPA allocates the risks the buyer has chosen to accept.

The CP process deals with matters that must be resolved before ownership changes.

Completion implements the transaction that was ultimately approved.

That continuity is what separates a collection of M&A documents from a properly governed acquisition process.

Conclusion

Buying a business is not one decision.

It is a sequence of increasingly informed decisions.

Early in the process, the buyer knows relatively little and should normally preserve flexibility. As information improves, the buyer can make progressively firmer commitments. Due diligence should then give the Board the information necessary to decide whether the acquisition remains commercially and legally acceptable.

Only after that decision should the definitive transaction documents fully allocate the risks the buyer has consciously decided to assume.

For a corporate buyer, the key discipline is therefore not simply having an LOI, a due diligence report and an SPA.

It is making sure that information, authority, investigation, approval and documentation remain connected throughout the transaction.

Frequently Asked Questions

Does every phase in this roadmap require a fresh Board resolution?

No. The number of formal Board approvals depends on the buyer's own constitution, delegation-of-authority framework and any shareholders' agreement or investment mandate. What should not change is the underlying discipline: management should know, at each stage, whether it is still acting within authority already given or needs to go back to the Board.

What is the difference between an LOI and a Letter of Offer?

Market practice varies, and this article uses LOI for the buyer's initial expression of interest and LO for a more developed offer made after preliminary information has been reviewed. The labels are a convenience. The legal effect of any document turns on its actual wording and context, not on what it is called, so confidentiality, exclusivity, cost or break-fee provisions can bind even while the acquisition itself remains conditional.

Does the Companies Act 2016 require shareholder approval before a company can make an acquisition?

Not automatically. Section 211 gives the Board authority to manage the company's business and affairs, subject to any modification, exception or limitation in the Act or the company's constitution. Whether shareholder or another additional approval is required depends on the buyer's own constitution, reserved matters and governance framework, not on a general rule that acquisitions need shareholder sign-off.

What happens if due diligence turns up a problem after the offer has already been signed?

That is exactly why the Board should review the due diligence report before giving final approval, rather than treating an earlier offer-stage approval as the final word. Depending on what is found, the response may be a price adjustment, a new condition precedent, a specific indemnity, restructuring, or a decision not to proceed at all.

Is the long-stop date the same as the expected completion date?

No. The long-stop date is the contractual deadline by which outstanding conditions precedent must be satisfied or waived before a party can walk away or the parties must decide whether to extend. It should be set with a realistic buffer, not treated as a completion date the transaction is assumed to hit.

Does buying shares automatically transfer the target company's contracts and assets?

Generally yes for a share acquisition, because the company itself does not change — only its ownership does, so its existing contracts and assets normally stay with it, subject to any change-of-control clauses in those contracts. An asset or business acquisition is different: the parties must identify and separately transfer, assign or novate each asset, contract, licence and employee arrangement that is meant to move.

This article is for general information only and does not constitute legal advice. Every transaction and every set of facts is different. Obtain specific advice from a qualified adviser before acting on any part of it.

How Legal That Works can assist

If your company is evaluating a corporate acquisition and has moved from preliminary interest into due diligence, Legal That Works' Legal Due Diligence for Corporate Acquisition service can examine the target's corporate structure, material contracts, employment matters, intellectual property, regulatory position and other relevant legal risks and translate those findings into a decision-focused due diligence report.

The objective is not simply to identify problems. It is to help the acquisition team and Board understand what each material finding means for the decision to proceed, the transaction structure and the protections that should be carried into the definitive agreement.