The government recently announced amendments to the merger control regime which extend its discretionary powers to intervene on national security or public interest grounds. These reforms aim to address concerns raised by the COVID-19 pandemic and related financial uncertainty which has heightened the "risk of hostile actors exploiting the situation" to acquire vulnerable UK businesses.
From the outset of a deal, the parties will be keen to understand whether regulatory approval is required or recommended to be obtained prior to closing, how long it will take to obtain approval and the ability of the relevant regulator to block the transaction or otherwise impose conditions to closing that may change the commercial terms of the deal (as well as the likelihood of the same). This article looks at the regime under the Enterprise Act 2002 for government control over investment in the United Kingdom.
Regulatory scrutiny is an increasingly important area of focus for buyers and sellers in M&A transactions. From the outset of a deal, the parties will be keen to understand whether regulatory approval is required or recommended to be obtained prior to closing, how long it will take to obtain approval and the ability of the relevant regulator to block the transaction or otherwise impose conditions to closing that may change the commercial terms of the deal. This article looks at the UK merger control regime under the Enterprise Act 2002.
Regulatory scrutiny is an increasingly important area of focus for buyers and sellers in M&A transactions. One area of scrutiny that frequently arises on the acquisition of UK businesses is the requirement to seek the consent of the Financial Conduct Authority or Prudential Regulation Authority to become a controller. This article looks at the Financial Services and Markets Act 2000 change in control regime.
UK public takeovers can be structured either as a court-approved scheme of arrangement under the Companies Act 2006 or a contractual offer. This article examines two cases which highlight the types of objection raised by shareholders and provide an understanding of the approach taken by the English courts in applying their judicial discretion to sanction a scheme.
The Takeover Panel recently published a panel statement which provides helpful guidance on the factors that it will take into consideration when determining whether a person should be cold-shouldered. Cold-shouldering is the most serious disciplinary power available to the panel and has rarely been used – until now.
Since June 2019, Universities Superannuation Scheme and Macquarie have been engaged in a competitive takeover battle for KCOM (a telecoms company). As was the case for the recent Sky takeover, it proceeded to an auction. However, instead of the parties agreeing to their own set of rules for the auction, the Takeover Panel's default auction rules were used, making it the first time that they have been used for a UK takeover.
The Takeover Panel recently published a revised version of the Takeover Code to reflect amendments relating to the response statement to its October 2018 consultation on asset valuations and the Financial Conduct Authority's announcement that it will phase out the United Kingdom Listing Authority name. In addition, the panel recently published a rule-making instrument concerning the response statement to its consultation on the United Kingdom's withdrawal from the European Union.
The UK Takeover Panel recently published Public Consultation Paper 2018/1, which sets out several proposed amendments to Rule 29 of the Takeover Code relating to asset valuations. Given that the consultation paper largely seeks to codify current market practice and the approach of the panel to asset valuations, if the code is amended in line with the proposals, such amendments are unlikely to have a material impact on transactions.
It is not always possible for a buyer to meet a seller's valuation, especially where the seller is seeking upfront value for expected rather than actual revenue or profit. In these circumstances, the buyer and seller may attempt to bridge the gap and agree the terms of an earn-out. Under a typical earn-out structure for a private M&A transaction, the buyer will make an initial payment of consideration at completion and one or more deferred contingent payments over a specified period following completion.
For the sale of a company using a European-style share purchase agreement governed by English law, the use of a 'locked box' as the seller's preferred pricing mechanism is now more commonplace than the traditionally popular closing accounts. The 'locked box' is an alternative pricing mechanism to closing accounts, under which the parties agree a price payable for the target based on a balance sheet that is drawn up and settled between the parties on an agreed date in advance of signing.
Driven by private equity sellers seeking a clean break and no post-closing liability for a breach of business warranties or under a tax covenant, and by buyers requiring a source of meaningful financial recourse, warranty and indemnity insurance is now a common feature of most private M&A transactions governed by English law. Cover is available for up to the full amount of consideration under a share purchase agreement if required.
The existing framework for the regulation of statements governing a bidder's intentions for a target and its business was introduced to the City Code on Takeovers and Mergers in January 2015. The panel recently published Response Statement 2017/2 to its September 2017 consultation on statements of intention and post-offer undertakings. The resulting amendments to the code set out in this response statement took effect on January 8 2018.
The Takeover Panel recently published Response Statement 2017/1 to its July 2017 consultation on the sale of a target's assets in competition with a takeover offer and related matters. The amendments to the Takeover Code set out in the response statement took effect on January 8 2018 and include measures to prevent a bidder from circumventing the application of the Takeover Code by purchasing a target's significant assets and a target's board from taking any action which may result in an offer being frustrated.
The Department for Business, Energy and Industrial Strategy recently published a green paper setting out the government's proposals to reform and strengthen its powers to scrutinise investments in critical businesses and infrastructure which could provide opportunities for foreign investors to "undertake espionage, sabotage or exert inappropriate leverage". The proposals aim to ensure that any national security issues can be considered in a clear, consistent and proportionate way.
The UK Takeover Panel recently published Panel Statement 2017/1, in which it declared the 'cold shouldering' of two defendants to be a breach of the Takeover Code. The statement is helpful in understanding the panel's approach to 'cold shouldering', as the penalty has been imposed on only two previous occasions. Further, the statement is a helpful reminder of the need for thorough and robust 'concert party' analysis in relation to the Takeover Code.
The UK Takeover Panel recently published Panel Statement 2016/9 prescribing new checklists and supplementary forms to be completed and submitted to the panel by the financial adviser to the bidder or the target (as appropriate), together with the documents required to be sent to the panel under Rule 30.5 of the Takeover Code.
The Takeover Panel recently published the 12th edition of the Takeover Code, replacing in its entirety the previous edition published in the wake of Kraft's takeover of Cadbury. The new edition includes the final text of the amendments that took effect in September 2016 relating to the communication and distribution of information during an offer, including in regards to the equality of information, advertisements and the use of videos and social media and the chaperoning of meetings and communications.
The UK Takeover Panel has published a number of proposed amendments to the Takeover Code relating to the communication and distribution of information during an offer by a bidder or target. The purpose of these proposals is to provide greater clarity on the rules governing equality of information to shareholders, and to update the code to reflect developments in the use of social media and other forms of electronic communication.
Two recent decisions are helpful in understanding the English courts' approach to the interpretation of provisions in share purchase agreements. In one, the Supreme Court considered whether certain clauses in a share purchase agreement were unenforceable penalty clauses. In the other, the Court of Appeal ruled on two different interpretations of an indemnity in a share purchase agreement.
The Takeover Panel has confirmed a number of amendments to the Takeover Code in three response statements to 2015 public consultations. The amendments – which relate to the treatment of dividends, the definition of 'acting in concert' and the use of restrictions and suspensions of voting rights to avoid the normal application of Rule 9 – came into effect on November 23 2015.
The Takeover Panel has published new guidance explaining its approach to offer-related arrangements, and when a target may provide sensitive information to a bidder's advisers on an 'outside counsel only' basis to assist the bidder in determining whether regulatory consents are required without having to provide such information to a competing bidder in accordance with the principle of equality of treatment of competing bidders.
The English courts have considered a number of recent cases concerning the interpretation of share purchase agreements, shareholders' agreements and articles of association in the context of private M&A transactions. These cases serve as a useful reminder that the courts will adopt a strict interpretation of contractual provisions on the basis that they have been commercially negotiated between sophisticated parties.
New regulations recently came into force which prohibit the use of cancellation schemes to effect public takeovers. A cancellation scheme involves the cancellation of the target's shares by way of a reduction of capital, the application of the reserve arising from such cancellation in paying up a number of new shares in the target and the issue and allotment of such new shares to the bidder.