Using Europe’s M&A Regime for Tactical Advantage

By on December 1, 2015

Peter Cohen-Millstein and Nick Rumsby, Linklaters LLP

U.S. companies planning for public M&A in the EU face rules of engagement that are considerably different from those in the United States. Although each EU member state has its own merger and takeover regime, there are a number of common themes.

In the UK, target companies are generally prohibited from entering into agreements to provide deal certainty to bidders, regardless of how friendly the transaction. Break fee and other similar arrangements are prohibited. In EU jurisdictions where break fees are permitted, usually they are limited to lower values than a U.S. bidder would expect.

While U.S. companies can be placed under prolonged siege, EU merger regimes tend to impose limits on how long a company can be in play against its wishes. While the U.S. system offers acquirers broad latitude in crafting the terms of an offer, a number of EU regimes regulate the substance of offers in ways that can appear onerous to bidders.

Consistent with the idea that bids should be determined by target shareholders (rather than target boards), and as a counterbalance to some of the rules that can seem onerous to bidders, in most EU countries there are restrictions on targets taking action designed to frustrate a bid.

Unlike Delaware, where an acquirer only needs to acquire a majority of target shares to squeeze out all shareholders, in Europe a bidder will typically need to gain control of 90-95 percent of the shares.

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