Corporate Finance/M&A, United Kingdom updates

Regulatory scrutiny of M&A transactions: United Kingdom extends power to intervene in foreign takeovers
Davis Polk & Wardwell LLP
  • United Kingdom
  • 01 July 2020

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.

Regulatory scrutiny of M&A transactions: Enterprise Act regime for government control over investment
Davis Polk & Wardwell LLP
  • United Kingdom
  • 06 May 2020

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 of M&A transactions: Enterprise Act merger control regime
Davis Polk & Wardwell LLP
  • United Kingdom
  • 29 April 2020

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 of M&A transactions: FSMA change in control regime
Davis Polk & Wardwell LLP
  • United Kingdom
  • 22 April 2020

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.

Public M&A on trial: contested takeover schemes
Davis Polk & Wardwell LLP
  • United Kingdom
  • 29 January 2020

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.

Takeover Panel imposes 'cold-shouldering'
Davis Polk & Wardwell LLP
  • United Kingdom
  • 04 December 2019

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.

Private M&A on trial: interpreting private M&A sale and purchase provisions
Davis Polk & Wardwell LLP
  • United Kingdom
  • 11 September 2019

Two recent High Court of Justice decisions provide guidance on the interpretation of provisions customarily included in sale and purchase agreements for the acquisition of private companies or businesses. In the first decision, the court considered whether the provisions of a purchase price procedure were conditions precedent. In the second decision, the court considered the scope of a restrictive covenant in an employment agreement and its impact on sale and purchase agreements.

Private M&A on trial: damages for breach of private M&A accounting warranty
Davis Polk & Wardwell LLP
  • United Kingdom
  • 04 September 2019

The High Court of Justice recently considered two disputes regarding breaches of warranties arising from the acquisitions of private companies. The decisions affirm the orthodoxy that the measure of damages for breach of warranty included in a sale and purchase agreement for the sale of shares is the diminution in the value of the shares purchased but also sound a warning to sellers that have struck a poor economic bargain.

KCOM takeover – Takeover Code default auction process
Davis Polk & Wardwell LLP
  • United Kingdom
  • 14 August 2019

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.

Takeover Panel: roundup of recent panel statements
Davis Polk & Wardwell LLP
  • United Kingdom
  • 24 April 2019

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.

Sky takeover – post-offer undertakings
Davis Polk & Wardwell LLP
  • United Kingdom
  • 06 February 2019

One of the highest profile public M&A transactions of 2018 was the competitive takeover battle between Comcast and Fox for control of Sky, against the backdrop of Disney's proposed merger with Fox. This article looks at the post-offer commitments given by each of the bidders in connection with their competing offers.

Sky takeover – regulating an auction process
Davis Polk & Wardwell LLP
  • United Kingdom
  • 30 January 2019

One of the highest profile public M&A transactions of 2018 was the competitive takeover battle between Comcast and Fox for control of Sky, against the backdrop of Disney's proposed merger with Fox. As the first competitive process to proceed to an auction since the introduction of the default auction rules into Appendix 8 of the Takeover Code in 2015, the auction for Sky has been watched closely by public M&A practitioners.

Sky takeover – applying the chain principle
Davis Polk & Wardwell LLP
  • United Kingdom
  • 23 January 2019

One of the highest profile public M&A transactions of 2018 was the competitive takeover battle between Comcast and Fox for the control of Sky, against the backdrop of Disney's proposed merger with Fox. As Disney was proposing to merge with Fox and one of Fox's assets was a 39% stake in Sky (which is subject to the Takeover Code), the Takeover Panel Executive had to consider whether to apply the chain principle to Disney if it successfully acquired Fox.

Takeover Panel seeks to clarify rules on asset valuations
Davis Polk & Wardwell LLP
  • United Kingdom
  • 14 November 2018

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.

Private M&A trends: earn-outs
Davis Polk & Wardwell LLP
  • United Kingdom
  • 26 September 2018

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.

Private M&A trends: the use of a 'locked box' pricing mechanism
Davis Polk & Wardwell LLP
  • United Kingdom
  • 12 September 2018

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.

Private M&A trends: use of warranty and indemnity insurance
Davis Polk & Wardwell LLP
  • United Kingdom
  • 05 September 2018

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.

Cross-border mergers: recent case law upholding freedom of establishment
Davis Polk & Wardwell LLP
  • United Kingdom
  • 07 March 2018

The Court of Appeal recently confirmed that a company was entitled to use and benefit from the EU cross-border merger regime for its corporate reorganisation, even though the only cross-border element was the inclusion of a single, dormant foreign entity solely to allow the otherwise domestic reorganisation to benefit from the cross-border rules. The court's purposive approach to the interpretation of the rules may be relevant in a broader context when determining the effectiveness of corporate actions.

Takeover Panel updates rules governing bidder's intentions for target and its business
Davis Polk & Wardwell LLP
  • United Kingdom
  • 21 February 2018

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.

Takeover Panel introduces new rules on asset sales
Davis Polk & Wardwell LLP
  • United Kingdom
  • 14 February 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.

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