Law stated as at 17 Jan 2011 • UK |
"two things should be borne in mind before trying to predict the impact of these reforms. First, we are still not certain about the precise scope of each proposal. The Panel will publish additional consultation papers containing the details of each reform during 2011, which is giving stakeholders the chance to comment on and potentially modify the most controversial proposals.
Secondly, when you make changes of this nature, the law of unintended consequences often kicks in. We can make an informed guess as to what may happen, but the practical effect of the proposals will not become apparent until after their implementation. All we can conclude with any degree of certainty at this point is that the reforms will alter the alignment of the playing field for targets, especially in hostile bid scenarios".
"Rule 2.4(a) announcements are tactically advantageous for very many bidders. Hostile bidders can issue them to exert pressure on a target (known as a "bear hug" announcement) and friendly bidders have begun using them to gauge the market's likely reaction to a proposed transaction".
"Although the Panel seems to believe that the proposal will not encourage offerees to leak information about unwelcome approaches, it is naive to assume that companies under siege may not resort to this measure".
"the use of deal protection measures has become absurd in recent years. While I understand the counter-arguments made by those opposing the ban, the Panel has made a sensible case for their abolition. It could even be argued that the current reliance on these measures runs counter to the General Principles (especially General Principle 3) and the spirit of the Code".
"Before the crisis, when it was common for five or six bidders to approach a listed company, it could have been argued that break fees undermined the ability of competing offerors to enter the fray. However, due to the downturn's effect on take-private activity and the corresponding reduction in the average number of bidders chasing a single target, one could question whether break fees are as detrimental (for the offeree) as they used to be".
"What private equity bidders primarily want is the privacy to undertake due diligence, arrange finance and negotiate a recommended deal. The changes to the PUSU regime are therefore more likely to deter private equity sponsors than the ban on deal protection measures".
"deal protection measures are relatively new in UK M&A deals. Transactions used to be negotiated without them until five or six years ago and will continue being successfully completed if they are banned. Moreover, although lawyers spend considerable time negotiating and drafting break fees and other deal protection clauses, these provisions do not ultimately affect the final offer price. Some principals and financial advisers may even be glad to see them banned".
"The Code used to require bidders to disclose the same amount of financial information regardless of whether the consideration for the offer was cash or securities. I always viewed the old requirement as somewhat unnecessary in cash offers, seeing as in those offers target shareholders generally want to just take the money and run. In fact, during my time as a member of the Panel, I argued in favour of the inclusion of what became Rule 24.2(b)".
"It is unclear how the proposed rule will operate in certain circumstances, such as in the event of a competing offer, or rumours of a competing offer".