This article first appeared in The Edge Malaysia Weekly on May 4, 2026 - May 10, 2026

INDEPENDENT advisers (IAs) are meant to be neutral gatekeepers in the country’s deal-making machinery, but their role is increasingly under scrutiny.

Their mandate is straightforward: guide minority shareholders through complex takeover offers and privatisations. In practice, however, their opinions, often buried in dense circulars, are drawing criticism for offering more form than substance.

At the centre of the debate is a familiar, and controversial, phrase: “not fair, but reasonable”.

A string of recent privatisation deals underscores the pattern. In transactions involving Timberwell Bhd (KL:TIMWELL), FGV Holdings Bhd, Magna Prima Bhd ­(KL:MAGNA), Ajiya Bhd (KL:AJIYA) and Yee Lee Corp Bhd, IAs concluded that the offers fell short of fair value, yet still recommended that shareholders accept them.

“While the existing regulatory framework permits conclusions of ‘not fair, but reasonable’, it is important to understand the distinction between these terms. An offer may be considered ‘not fair’ if it falls below intrinsic value, yet still be deemed ‘reasonable’ when assessed against broader factors such as the absence of alternative offers, limited market liquidity, historical share price performance since listing, or the offeror’s intention to delist the company,” Minority Shareholders Watch Group (MSWG) CEO Dr Ismet Yuso tells The Edge.

In such cases, he adds, accepting the offer may represent the most pragmatic option available to minority investors.

However, the repeated pairing of “not fair, but reasonable” conclusions with recommendations to accept, could erode confidence in the very idea of independent advice. Over time, what is meant to serve as a safeguard for minority shareholders begins to look like a procedural checkbox rather than a meaningful standard.

MSWG  believes that minority shareholder interests are best served when fair value remains the central benchmark, and when enhanced disclosures meaningfully support informed decisions made by minority shareholders.

The retail investor watchdog calls for exit offers, particularly those tied to delistings, to be both fair and reasonable, mirroring rules in Singapore. There, companies must offer prices that meet or exceed assessed fair value, closing the door on deeply discounted exits.

Ismet also points out that minority shareholders are often caught in a situation to accept an unfair offer price and have no alternative offers.

“In many instances, the offeror and the persons acting in concert (PAC) hold majority stakes, like 70% or more, [so] any alternative proposal will not be successful without their support. Furthermore, in certain cases where the offeror does not intend to maintain the listing status of the company, minority shareholders who do not accept the offer will end up holding unlisted shares that are difficult to trade and harder to value,” he says.

Faced with that prospect, accepting a discounted offer can feel less like a choice than a concession.

Ismet says Malaysian regulators should look into amending the rules of takeovers and mergers and compulsory acquisitions to stipulate that if a takeover offer is deemed “not fair but reasonable”, IAs should refrain from recommending acceptance of the offer to non-interested shareholders.

“This would enhance shareholder protection by ensuring that IAs do not endorse exit offers that do not adequately reflect the value of shares. By requiring IAs to communicate their views and concerns, the process fosters greater transparency and builds trust among shareholders,” he says.

The proposal, however, highlights a dilemma facing regulators. Stronger rules could bolster investor protection and restore confidence, but they may also constrain deal-making.

The Securities Commission Malaysia (SC) says, in considering any regulatory intervention, it is important to maintain an appropriate balance between investor protection and market efficiency, noting that a more stringent regulatory approach may result in certain trade-offs.

“For illustration, requiring exit offers to be both fair and reasonable could reduce flexibility in situations where an offer may provide a practical exit for shareholders but does not meet valuation thresholds. This potentially prolongs illiquidity for shareholders who may otherwise prefer a clean exit at reasonable premiums to market prices,” it says in an email response to questions from The Edge.

The SC is of the view that imposing a minimum valuation threshold might deter controlling shareholders from pursuing legitimate corporate restructuring or rationalisation exercises that may result in voluntary delisting, particularly if such a threshold exceeds what the controlling shareholders consider commercially acceptable.

“As such, the SC’s current framework is balanced and proportionate as it facilitates legitimate corporate exercises. The framework also empowers shareholders to decide for themselves whether to remain invested or to realise their investments in a company pursuant to such exercise,” it says.

Critics argue that the problem runs deeper than methodology. This is where comparisons with other markets become relevant.

The Singapore Exchange is frequently cited as a benchmark: there, offerors and their concert parties are barred from voting on delisting resolutions, and approval must come from at least 75% of independent shareholders. The framework effectively shifts decision-making power towards minority investors.

That stands in contrast to Malaysia, where controlling shareholders are not always excluded from voting, even when they stand to benefit directly, Ismet says. “Currently in Malaysia, there is no restriction or exclusion of controlling shareholders from voting on the proposed voluntary delisting resolution at a general meeting, to withdraw a company’s listing status.”

He points to the 2024 privatisation of Grand Central Enterprises Bhd (KL:GCE), where controlling shareholders were permitted to vote on the delisting resolution because it was not classified as a related-party transaction and did not give rise to any conflict of interest situation under Bursa Malaysia rules.

“This is notwithstanding that the controlling shareholders would stand to benefit from the successful delisting of the hotel operator from Bursa, highlighting a potential conflict of interest, as the proposer, offeror and beneficiary were effectively the same party,” Ismet says.

At its core, the issue is not just technical, but perceptual.

IAs are appointed and paid by the very companies whose transactions they evaluate. While they are subject to licensing requirements and regulatory oversight, the arrangement carries an inherent tension that is difficult to ignore.

James Hay, founder and director of Singapore-based fund management company Pangolin Investment Management Pte Ltd, has been blunt in his assessment. Advisers, he argues, tend to produce conclusions aligned with the interests of those who commission them, rendering their role “pointless” in practice.

Hay cites the recent takeover offer for DKSH Holdings (M) Bhd (KL:DKSH) at RM6.15 per share, where Asia Equity Research Sdn Bhd deemed the offer “not fair, but reasonable” while still recommending acceptance, calling the exercise a “waste of money”.

Invoking Charlie Munger’s maxim “Show me the incentive and I will show you the outcome”, Hay says IAs are ultimately paid by parties with a vested interest in seeing the deal succeed.

Others frame the concern less starkly but acknowledge the perception problem. Ismet says MSWG recognises concerns that target companies may gravitate towards advisers more likely to deliver favourable opinions, raising questions about conflicts of interest.

“While IAs are expected to act independently, however, the target companies’ pay model can give rise to real or perceived incentives that undermine the credibility of such opinions,” Ismet says. 

To address this, he says MSWG supports stronger safeguards, including clearer disclosure around how advisers are appointed and greater accountability for boards, particularly independent directors, in justifying those choices. It has also proposed requiring second independent opinions in certain transactions, such as exit offers and related-party deals.

While such measures will not eliminate conflicts entirely, Ismet says they could strengthen accountability and help restore confidence in the advisory process.

The SC, however, maintains that safeguards already exist. IAs must meet licensing and independence requirements, conflicted directors are excluded from decision-making, and draft advisory circulars are reviewed before issuance. Misconduct is dealt with through enforcement, it says.

The regulator also notes that its current approach — assessing “fairness” and “reasonableness” by IAs as separate criteria — already aligns with practices in jurisdictions such as Australia and Singapore.

“Fairness is assessed based on market price and value of the securities; and reasonableness is assessed based on factors other than the value of the securities such as liquidity of the securities, existing level of control of the offeror and persons acting in concert and likelihood of alternative offers for shareholders,” it explains.

“The SC is of the view that this approach provides greater clarity, as valuation of the securities may not be the sole factor for consideration by shareholders.

“This dual-limb approach enhances shareholders’ understanding of the basis for the recommendation and mitigates the risk of oversimplifying complex transactions into a single, binary conclusion. It recognises that valuation is a critical, but not exclusive, consideration for minority shareholders — ‘fairness’ allows for an objective assessment of whether the offer price reflects the value of the securities, while ‘reasonableness’ enables consideration of broader commercial realities.”

The commission says it will continue to review regulatory standards in consultation with stakeholders to ensure they remain relevant.

For now, the regulatory framework remains unchanged, built on the premise that clear disclosure and shareholder choice provide sufficient protection. Ultimately, the decision rests with shareholders and in many cases, the presence or absence of an IA is unlikely to alter the outcome.

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