Call Option Issues in Cross-border M&A Transactions

Call option arrangements are frequently seen in M&A deals, and particularly in many regulated industries, such as banking, securities and fund management, because of those industries' schedule of gradually opening to foreign investment. A call option is granted to a foreign buyer by agreement so that the foreign buyer is able to enjoy the permitted maximum equity interests of the target company once the law permits. As a part of the acquisition, the certainty of the call option is essential to the foreign buyer. When structuring the option, the foreign buyer needs to take into consideration those regulatory factors that may impact the exercising of the option.