As a result of ongoing uncertainty around the future of the United Kingdom's relationship with the European Union, a number of M&A transactions with a UK nexus may be affected pending Brexit negotiations. However, with significant fluctuations in exchange rates and share prices, the dislocation in the markets may encourage both opportunistic and defensive M&A transactions.
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.
A number of changes to the UK takeover regime recently became effective. The first set of changes comprises amendments to the Takeover Code intended to clarify areas of uncertainty and codify current market practice. More significant changes relate to statements made by the parties to an offer relating to a particular course of action which they commit or intend to take after the end of an offer period.
The Takeover Panel has published new guidance explaining when a bidder may be permitted to approach a target to reopen takeover talks where it would otherwise be prohibited from doing so. The panel also published a response to its consultation on changes to the Takeover Code, which confirms changes reflecting the development of market practice and tightening the operation of the rules.
Following the 2011 amendments to the Takeover Code, the Takeover Panel has kept further changes to a minimum in order to assess the effect of the reforms, which it believes are working satisfactorily. However, the panel recently published a public consultation paper setting out a number of new changes which largely reflect the development of market practice and tighten the operation of the rules in some cases.
The UK Takeover Panel's rules and enforcement powers have once again been in the spotlight recently, following the AbbVie/Shire and Pfizer/AstraZeneca takeover battles. In both cases, the Takeover Code rules concerning statements made by a bidder during the course of the offer – and the panel's ability to enforce the rules and hold a bidder to the statements that it makes – were the subject of extensive public scrutiny.
The Takeover Panel recently published a practice statement on irrevocable commitments and letters of intent. The practice statement reminds bidders that including any provisions in irrevocable commitments given by directors of the target that are not directed solely at securing that individual's commitment to accept an offer risks breaching the Takeover Code.
The UK Takeover Panel recently amended its requirements for profit forecasts and quantified financial benefits statements in the context of transactions governed by the Takeover Code, in some cases relaxing the rules where the forecast is less contentious, but in other respects broadening them. The changes will reduce the burden on parties to an offer where forecasts are less contentious.
The UK Takeover Panel recently expanded the scope of the UK Takeover Code with the effect of bringing certain companies that were not subject to the code within its jurisdiction. It is still too early to assess whether the code's application will encourage or hinder mergers and acquisitions, but ahead of any possible transaction companies should now consider these amendments.