Facts:

You are advising a European private equity firm ("Buyer") on a proposed acquisition of a Hong Kong-based logistics and supply chain company ("Target"). The Target is privately owned and operates a regional network of warehousing and distribution hubs across Asia. The Buyer views this acquisition as a strategic opportunity to expand its presence in the logistics sector.

During the due diligence process, the Target disclosed details regarding its employees, share option scheme, real estate, and compliance practices. The Target has a large workforce, including long-serving employees entitled to statutory end-of-service payments under Hong Kong law. The company has also faced recent disputes with employees over unpaid overtime, with some cases currently being handled by the Labour Tribunal.

The Target operates a share option scheme for key employees, but the documentation provided is poorly structured, with ambiguous terms regarding the treatment of vested options in the event of a change of ownership. This raises questions about potential disputes with key employees post-acquisition.

The Target leases several warehouses and offices across Asia that are critical to its operations. However, some lease agreements are close to expiration, and no renewal negotiations have begun. Additionally, one of the Target’s key warehouses in China is operating without the proper government permits.

The Target has no formal anti-corruption policy in place. During interviews with management, it was revealed that “facilitation payments” are regularly made to local officials in certain jurisdictions to expedite customs clearances. This raises concerns about potential violations of laws such as the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA).

Question:

Based on your review of the materials provided, identify the issues or concerns that may arise in this transaction. Explain why these issues could be significant and what steps you would take to address them.