Welcome to our UK Public M&A round-up. Our round-up will feature select topics that highlight notable themes, trends and developments in the UK public M&A space.

Our first edition includes:

We hope you find the topics in this issue to be of interest and invite you to contact the articles’ authors or your normal Cleary contact if you have any questions or want to discuss.

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On 20 July 2021, the UK Government announced that the National Security and Investment Act 2021, which was passed on 29 April 2021, will come into force on 4 January 2022. This new regime for review of investments on national security grounds will be among the most wide-ranging in the world. It represents the most significant change in the UK regulatory environment since the Government ceded the power to approve or prohibit mergers on competition grounds to an independent agency in 2002.

Please click here to read the full alert memorandum.

On July 13, 2021, the Securities and Exchange Commission (“SEC”) announced a major enforcement action related to a proposed merger between a special purpose acquisition company (“SPAC”) and a privately held target company (“Target”).  This followed numerous warnings by the SEC staff over several months of enhanced scrutiny of such transactions under the federal securities laws.[1]  The respondents, except for the Target’s CEO, settled the action by collectively agreeing to civil penalties of approximately $8 million and to certain equitable relief described below. [2] Continue Reading SEC Brings SPAC Enforcement Action and Signals More to Come

As we have covered previously, one of the most noticeable trends that has emerged in the current boom in UK public M&A activity[1] is the heightened level of target shareholder opposition to bids. This is manifesting itself in a number of ways, including through increased and novel “bumpitrage”[2] campaigns as well as through institutional investors becoming more vocal in expressing their discontent at proposed bids. There appears to be a general feeling among a number of the largest UK institutional investors that private equity are acquiring UK public companies “too cheaply”. Continue Reading UK Bids: Take-Private Boom Sees Negotiating Power Shift from Target Boards to Shareholders

On June 18, 2021, the German Works Council Modernization Act (Betriebsrätemodernisierungsgesetz) entered into force.  This legislation aims at supporting and facilitating the establishment of new works councils in Germany.  In order to achieve this purpose, the new law improves, inter alia, protection against dismissal of employees who are initiating the establishment of a works council, and simplifies works council elections by expanding the possibilities for a simplified election procedure. Continue Reading Germany Changes the Legal Framework to Increase the Number of Works Councils

Bumpitrage in UK bids being implemented by scheme of arrangement. So-called “bumpitrage” refers to the intervention of a shareholder activist in a public bid to attempt to force the bidder into improving the terms of the bid. Most public bids in the UK market are implemented by scheme of arrangement. When it becomes effective, a scheme of arrangement results in the transfer of all of the shares of the target to the bidder including the shares of target shareholders who decided not to vote on the scheme or to vote against the scheme.

Please click here to read the full alert memorandum.

In the past week, two further potential bids were announced in relation to FTSE 250 companies – KKR’s potential bid for John Laing and Blackstone’s potential bid for St Modwen. This follows a number of recent bids for UK listed companies, many of which were launched following the announcement in November 2020 by Pfizer and BioNTech which triggered the so-called ‘vaccine rally’.

Please click here to read the full alert memorandum.

In Snow Phipps v. KCAKE Acquisition, the Delaware Court of Chancery ordered the buyer (Kohlberg) to close on its $550 million agreement to purchase DecoPac, a cake decorations supplier.  In doing so, the court easily rejected the buyer’s claims that the COVID-19 pandemic resulted in a material adverse effect (“MAE”) and that the steps taken by the company to respond to the pandemic breached the ordinary course covenant.  More novel was the way in which the court sidestepped the near-universal construct in leveraged buyouts that the seller will be entitled to a specific performance remedy requiring the buyer to close only if the buyer’s debt financing is also available.  The court—pointing to the “prevention doctrine”—concluded that the buyer’s failure to use reasonable best efforts to obtain the debt financing was a breach of the agreement and, therefore, the buyer could not rely on the unavailability of debt financing to avoid being required to specifically perform its obligations under the contract.  While alternative financing for the DecoPac transaction proved to be available and Snow Phipps and Kohlberg have agreed to close later this week, financial sponsor buyers will need to continue to be vigilant in ensuring that the prevention doctrine does not erode the remedies architecture that has become ubiquitous in leveraged buyouts.

Please click here to read the full alert memorandum.

On April 29, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against eight public companies that filed notifications of late filings on Form 12b-25 (more commonly known as “Form NT”) without disclosing in those filings a pending restatement or correction of financial statements.

These settlements are a reminder that filing a Form NT is not only a necessary procedural step when an issuer will be delayed in filing a 10-K, 10-Q, 20-F or other specified report; it is also a decision point for making potentially sensitive disclosure to the market, and should reflect input from both a company’s IR and legal departments.

Please click here to read the full alert memorandum.