On 7 July 2017, the UK Takeover Panel published Practice Statement No 31, which describes the way in which the Panel Executive normally interprets and applies certain aspects of the Takeover Code when a company wishes to seek bidders for itself, typically via an announcement of a formal sale process or a strategic review that

M&A transaction documents often contain an exclusion or limitation of the seller’s liability for “consequential”, “indirect” or “special” losses suffered by the purchaser.   For instance, a purchase agreement will often provide that the liability of the seller under the warranties does not extend to these types of losses.

It appears that purchasers often agree to

On 12 September 2016, the rules of the UK Takeover Code governing the communication and distribution of information during a UK takeover bid will change. The rules and requirements affected are summarized in the attached memo and include the chaperoning requirement for meetings and calls with shareholders and analysts, new rules relating to the use of materials during meetings and calls, and new rules relating to the use of social media and videos during bids. 
Continue Reading UK Takeover Code Update: The Communication and Distribution of Information During a UK Takeover Bid

Directors of UK companies which are “for sale” are not (unlike directors of Delaware companies) subject to Revlon type duties to take active steps to obtain the best price reasonably available to shareholders.

However, directors of UK companies are subject to a duty to act for proper purposes, which has been interpreted by UK Courts as requiring strict board neutrality when battles for corporate control arise.  (This duty to act for proper purposes, which originated in common law principles, applies in addition to the restrictions on frustrating action applicable to listed companies under the UK Takeover Code.)  The UK proper purposes duty would for instance likely prohibit directors of UK companies from taking actions permitted under the Delaware Unocal principles, such as the establishment of a poison pill in response to an unsolicited offer which posed a threat to corporate policy.
Continue Reading Staying Neutral – UK Supreme Court Re-emphasizes Primacy of Board Neutrality When Battles for Corporate Control Arise

In a landmark decision in Cavendish Square Holding BV vs Talal El Makdessi, the UK Supreme Court recently overturned a Court of Appeal decision (discussed here), and substantially re-formulated the English law principles relating to contractual penalty clauses. Upholding the validity of provisions in a purchase agreement that forfeited deferred consideration upon breach of non-competition covenants by the seller, the Supreme Court held that the true test as to whether a clause was penal (and therefore unenforceable) was whether it imposed a secondary obligation on the contract breaker “out of all proportion to any legitimate interest of the innocent party” in enforcing the obligation breached.
Continue Reading UK Supreme Court Substantially Re-Formulates Contractual “Penalty” Principles

There has historically been very little reasoned consideration by the UK Courts of MAC conditions in English law SPAs.   In contrast, there have however been a number of cases in the US Courts (particularly in Delaware) which have considered MAC conditions.   The Delaware Courts have interpreted MAC conditions narrowly and in a seller friendly manner – the Delaware Court of Chancery in the important IBP v Tyson Foods decision for instance said that MAC conditions were “best read as a backstop protecting the acquirer from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally significant manner”.  The Delaware Courts have also been reluctant to allow a buyer to trigger a MAC condition on the basis that the target had underperformed vis a vis forecasts provided prior to execution. [1]
Continue Reading Can a Pre-Completion Downward Revision to the Target’s Forecasted Performance Constitute a MAC in an English Law SPA?

The UK Companies Act provides that a company can amend its constitutional documents by special resolution (being a shareholders’ resolution passed by 75%+ of votes cast by those shareholders voting on the resolution).  In private M&A transactions where the target has multiple shareholders and a drag right does not apply, a bidder wishing to acquire the entire issued share capital of the target may, given an amendment to the constitutional documents does not require unanimity, consider conditioning its proposal on the insertion of a drag right into the target’s constitutional documents.  Some practitioners have historically taken the view that amendments of this sort are unlikely to be enforceable.
Continue Reading Court of Appeal of England and Wales considers important questions for UK M&A transactions