Acquisition Finance 2024 Comparisons

The current global political climate continues to influence the financing landscape. Norway, along with other European nations, is experiencing elevated inflation rates and rising interest rates, leading to considerable strain in certain industries, notably real estate. At the same time, however, the combination of the current market and a weakening Norwegian krone is creating new prospects for new players. Consequently, there is a surge in interest for mergers and acquisitions from international investors and companies, particularly targeting sectors like aquaculture and technology, as well as other deals that might be secured at a favourable rate due to the current exchange rate.

In Norway, lending remains strictly regulated, and therefore financing generally has traditionally been predominantly offered by domestic banks, and to a lesser degree by international financial institutions. For that reason, private credit being offered by large debt funds has historically had a limited presence in the Norwegian market. However, direct lending continues to rise in significance as a financing option for acquisition financings, and there is an increasing trend for large funds to serve as lenders to foreign acquirers, including Norwegian, with whom they have pre-existing relationships and where the financing arrangement has been initiated abroad under an exemption for “reverse solicitation”, which is generally permitted. Market observations indicate a clear upward trajectory in this area, which is evident in both bond issuance and formats, and through direct, bilateral agreements.

Traditional lenders, such as banks, also appear to have better appetite for leveraged acquisition financings following changes in legislation introduced in 2020 which make it easier for a Norwegian target entity to grant security and guarantees for acquisition financings where the acquiring company is incorporated in an EEA jurisdiction and will control the Norwegian target entities following the acquisition.

In addition to traditional bank lending and direct lending/private credit, borrowers continue to seek to cover shortfalls through Norway’s very active high-yield bond market. As further described in 3.3 Bridge Loans and 3.4 Bonds/High-Yield Bonds, the lack of certainty of funds will typically be a reasonable cause for concern when it comes to bond issuances, making bonds less suitable for acquisition financings. That said, this concern is often solved by way of a bridge-to-bond solution, whereby a short-term financing is provided, either through private credit or bank lending, in anticipation of a fully committed bond issue to refinance such bridge loan.

Acquisition financing in Norway is primarily driven by leveraged lending, as opposed to capital injections or alternative non-debt instruments. Private equity entities specialising in leveraged buyouts have played a significant role in the market. Post-acquisition, it is common for both active stakeholders and existing management of the target company to be provided with the opportunity to reinvest or partake in management incentive programs through investment plans.

Direct lending has grown to become an important source of funding for leveraged buyouts, often being an avenue to higher leverage on a fixed interest rate basis, and a longer maturity.

The governing law of the financial instruments may vary depending on a variety of factors, including the jurisdiction of the parties involved, the location of the assets, the structure and size of the transactions, as well as preferences of the lenders and borrowers.

Lenders’ appetite will often determine governing law of acquisition financings (often Norwegian law, or English law as an alternative “mutual ground”), with local law for security documents as needed. Norwegian law will typically govern the loan documents for acquisitions between Norwegian parties, especially if arranged by Norwegian banks. If the transaction is syndicated through a different market, it may be a condition for that market’s law to govern the documentation as well. 

Corporate loans will typically be governed by the laws of the jurisdiction where the company operates or where the lenders are located.

As a general rule, a Norwegian entity may enter into contracts governed by foreign law and subject itself to the jurisdictions of non-Norwegian courts. Nonetheless, it is important to note that by selecting foreign law to govern a contract, the Norwegian entity will usually not be able to circumvent statutory provisions under Norwegian law.

Most transactions are documented on LMA-based, or certainly LMA-inspired, leveraged loan agreements in English, adjusted slightly to reflect Norwegian law features such as agency concept rather than a trust holding security and Norwegian requirements on financial agreements. The leading law firms in Norway will often have their own in-house standards, developed to reflect LMA format and optionality to reflect requirements of key clients.

In bilateral and/or direct lending transactions, the documentation is generally of a more bespoke nature and may be highly tailored to the relevant direct lender, or even the sponsor for sponsors that are active in the acquisition finance market and often supported by the same credit fund.

In the Nordic bond market, Nordic Trustee is the leading provider of bond services and administrator of standardised templates and documents. Over the years, the bond documentation has become more and more standardised, adjusted only to reflect necessary deviations, particular structures, and preferences of the respective arranger to the extent acceptable to Nordic Trustee.

Most transaction documents are written in English. There is no legal requirement in Norway to translate documents from English to Norwegian (or vice versa) for the purpose of acquisition financing. However, certain official forms for security, such as asset-specific floating charges, are only available for submission to the relevant registry in Norwegian. Also, certain constitutional documents filed with the company registry, such as the articles of association, and hence also corporate authorisations changing those, must be in Norwegian.

Legal opinions issued under Norwegian law will be in a format generally seen in the international finance market. Market practice is for lenders’ counsel to render an opinion covering both obligor capacity as well as legality/enforceability – it’s less common for borrowers’ counsel to issue a separate capacity opinion.

Senior loans granted by banks or a combination of banks and investors, continues to be the main source of acquisition financing in the Norwegian market. Bank lending will generally be on a syndicated or club basis, and heavily influenced or based on the LMA leveraged template (adapted for Norwegian law as mentioned above).

Senior loans will typically be structured with one or more tranches utilised for different purposes with varying features. For the purpose of acquisition financing, there will typically be a designated term loan tranche, which may be coupled with a term or revolving facility for the purpose of refinancing or general corporate purposes or working capital facilities. Senior loans may also include separate ancillary or increase facilities, to accommodate for potential future needs to upsize, etc.

The tranches may have different features, such as differing interest rates and repayment schedules, and the loans may be amortising or non-amortising. Overall, the structure depends on the transactions, the size, the type of lender, etc. Acquisition financing will typically be secured and rank in priority to other debts, either contractually through an intercreditor agreement or structurally by way of junior debt held at different levels.

As mentioned above, direct lending structures are starting to make their way into the Norwegian market as well. Direct lending providers are typically able to offer different (longer maturity, fixed interest) and occasionally more flexible terms than banks and increasingly able to take larger credits, for instance by forming a club of lenders on the largest transactions.

While mezzanine loans may form part of a broader acquisition financing also in Norway, it is less common due to the very strict licensing requirements for providing financial services to the typical “mezzaniners”. When included, however, it will typically be granted as junior debt sharing in the security package of the senior loans, but ranking behind them.

On the other hand, payment-in-kind (PIK) loans are more common, although they are typically seen in the form of vendor notes or various forms of seller credit instruments.

In the Norwegian market, it is very common for bridge loans to be used as a short-term financing solution for the purpose of covering immediate capital requirements, either through bank or private credit, until a more permanent financing arrangement can be secured.

In other words, the bridge loan will typically be a short-term back-up pending the stable and committed funding source, which is later refinanced into a new instrument, which may be in the form of a larger syndicated bank loan, private credit or bonds. With the increased risk, the term is typically short, and the interest rates are on the higher end compared to long-term financing options.

Leveraged financings in Norway will typically be small enough for bank lenders to be able to participate and take the whole initial amounts without a further syndication process, thus reducing the need for bridge loans for that purpose alone.

However, there is an increasing trend to utilise bridge loans in combination with high-yield bonds as the source for acquisition financing. For bond financing, the lack of certainty of funds is a key issue, and so-called bridge-to-bond solutions with such short-term financing in anticipation of a fully committed bond issue, is very common.

While bank lending remains the main source of debt capital for Norwegian acquisition financing, any shortfall thereof may be covered by tapping into Norway’s high-yield bond marked. The Nordic bond market is very active, and there is an increasing trend to utilise Norwegian high-yield bonds as a source for acquisition financing, both domestically and abroad. However, as described in 3.3 Bridge Loans, the lack of certainty of funds is a reasonable cause for concern, making bonds less suitable for acquisition financings, which concern may be mitigated through the bridge-to-bond solution described above.

In addition, certain market participants are considering, and some have even begun offering, an underwriting of the bond commitments. This solution, if continued, will make the Norwegian high-yield bond market more competitive compared to traditional bank financing, in particular in acquisition financing. 

Private placements and loan notes are usually not a typical feature in the Norwegian market, except for smaller placements having been carried out for financing of real estate companies.

Asset-based financing, in terms of which funds available to be drawn by the borrower is based on and limited to an agreed percentage of the value of the borrower’s secured assets (the borrowing base), is not a very common feature of acquisition financing in Norway. It may be included as part of a revolving facility under a combined financing package, however.

General

The rights and arrangements amongst different classes of creditors will typically be regulated by way of an intercreditor agreement. Typical elements include, amongst others, the ranking and priority of payment, subordination, sharing of security and the rights to accelerate and instruct enforcement thereof. 

Contractual Subordination

Both contractual and structural subordination are recognised concepts under Norwegian law. Contractual subordination of debt is common in Norway, both in relation to the amounts payable and the procedures to enforce security. Contractual subordination, thus creating a hierarchy, can be achieved by a declaration from the junior security lender that it will not collect its debt until the senior debt is paid in full, either through a separate declaration of subordination, but most commonly directly through the intercreditor agreement itself.

Structural Subordination

Structural subordination is also common in Norway, and is achieved by debt being issued at different levels within the same group of the corporate structure, that is, further away from the source of income, such as by a parent company or a subsidiary. For instance, while the senior debt might be held at the operating company level, junior debt could be issued by the holding company, and in the event of bankruptcy or liquidation, creditors of the operating company have a claim on its assets before the creditors of the holding company, meaning that the holding company’s debt is structurally subordinated to the operating company’s debt.

Payment of Principal

In both contractually and structurally subordinated structures, there is generally an intercreditor agreement between the lenders on the various levels of debt, regarding the priority for payment of principal, so that the subordinated loan will have limited or no payment of principal during the tenor of the senior ranking loan. Vendor notes will typically be a bullet loan maturing after the senior loan.

Interest

The intercreditor agreement will typically also outline how interest payments are prioritised across different layers of debt, ensuring that interest is paid on both higher-priority (senior) and lower-priority (junior) loans for the life of the loans. However, in the case of an event of default, the senior ranking loan will usually take priority. Further, parts of the subordinated debt may be on PIK interest terms, and standard conditions will typically be included for vendor notes.

Sharing Security

Sharing of security and contractual subordination of payment through a payment waterfall provision is a common structure in Norway.

Enforcement

The intercreditor agreement will typically set out the procedure and terms for accelerating the loans and the terms for enforcing any guarantee or security granted thereunder. The intercreditor agreement will typically state that the enforcement instructions of one of the creditor groups shall prevail in the case of the agent receiving conflicting instructions, subject to certain conditions and for a certain period of time, except in the case of an insolvency event. In the Nordic market, it is not uncommon that the senior creditor group is given the right to instruct enforcement, ahead of the super senior creditors, however, this may be subject to certain enforcement principles such that the proceeds shall be sufficient to ensure complete discharge of the super senior liabilities.

While there is a rise in issuance of junior bonds in combination with senior bank financing in the Nordic high-yield bond market compared to previously, bank/bond deals are more common in asset financing than in acquisition financing, where it is rarely seen. In this context – although not specifically related to acquisition financing – it is worth noting that combined bank- and bond-financings are being documented on a platform basis with a common terms structure, with the very first of its kind in Norway in 2023.

Most commonly, hedge counterparties will be secured, typically sharing in the security package, but ranking behind the senior creditors in the waterfall.

Shares

In acquisition financings, the security package will most commonly include a charge of the shares in the target and its material subsidiaries, which charges are perfected by way of notice to the company whose shares have been charged. The parties will typically have pre-agreed enforcement procedures to ensure swift enforcement of the shares either by way of appropriation or a pre-agreed sales process.

Floating Charges: Inventory, Operating Assets and Trade Receivables

Under Norwegian law, there is not a concept of floating charges covering all assets owned by a debtor from time to time. However, charges over certain specific asset classes with the same effect as typical floating charges, is allowed, including the debtor’s inventory, trade receivables, operating assets, motor vehicles and construction machinery, in each case outstanding from time to time. Floating charges are perfected by way of registering a standardised charge form with the Norwegian Register of Mortgaged Movable Property.

With respect to acquisition financing, such floating charge security covering inventory, trade receivables and/or operating assets will usually be provided by the target companies. As for inventory, the floating shall, at the outset, cover the chargor’s inventory in its entirety (or, alternatively a separate part thereof which is operationally separate from the rest and appears as an independent unit).

Intellectual Property Rights (IP Rights)

Intellectual property rights are considered as the operating assets of the chargor and may thus form part of a floating charge. This is the most common, however, an intellectual property right in itself may also be granted as security, and fixed charges may be established over specific patents effective in Norway, as well as trade marks.

Movable Assets

While vehicles and construction machinery may be granted as security in the form of a floating charge registered with the Movable Property Register, other registrable movable assets, such as vessels/rigs and aircrafts may be provided as security by way of a mortgage registered with the applicable registry.

Bank Accounts

Charges over bank accounts, specifically over the amount which is from time to time deposited in the account of the bidding company, will most commonly be granted.

Monetary Claims

Security may be granted over the chargor’s monetary claims/contract receivables, provided that the claim exists or will arise against a named debtor in a specifically mentioned legal situation. In order to charge future monetary claims, an underlying contractual relationship, specifying the parties, needs to be in place. If the group uses cash-pooling arrangements, it should be noted that most of these prohibit assignments under the cash pool and as such these claims may not be assigned. For acquisition financings, assignment of the claims under the SPA is commonly granted.

Real Property

The most common form of security over real property is a mortgage, perfected by registration of a standardised charge form with the Norwegian Property Register (Statens Kartverk). If the target company is a real estate company (not holding assets other than real estate not under construction or development and without employees except a general manager), such security may also be granted for acquisition financing incurred by the bidding company.

Limitations With Respect to Security Granted by Target Companies

As further explained under 5.5 Financial Assistance, all financial assistance (as defined therein) granted by a target company will be subject to restrictions in relation to the acquisition portion of a financing. Financial assistance, including the granting of security, created by a target company, will therefore occasionally be limited to other facilities under the loan, for example the facility used to refinance debt in the target companies (which can be guaranteed and/or secured notwithstanding the rules on financial assistance).

Maximum Liability Requirement

The maximum amount to be secured or the amount of the secured obligations must be set out in most Norwegian law security agreements for the security right to be valid. This also applies to Norwegian guarantee documents, unless otherwise agreed amongst the parties. Standard market practice is to cap liabilities at 120–125% of the principal amount of the guaranteed or secured obligation, plus interest, default interest, costs and expenses – ie, the total commitments.

Release of Security

Under Norwegian law, there are no formal requirements when it comes to agreeing the release of security between the parties. The formal release procedure depends on the specific asset over which security interest is granted. For instance, with respect to security perfected through submission of originally signed mortgages or charge forms, the security interest is released/deleted by submitting the respective charge form in original and endorsed “for deletion”, signed by an authorised signatory of the existing creditor/beneficiary (alternatively under a power of attorney), to the respective registry, such as the Norwegian land register for real estate, the movable property register, etc.

The charge and mortgage forms referenced in 5.1 Types of Security Commonly Used, shall all be based exclusively on the standardised forms published by the applicable registry. There is limited room to deviate and/or to add additional information other than reference to the underlying agreement. These forms shall be in Norwegian and need to be signed in original, subject to also other signing requirements.

For the floating charges referenced above, a Norwegian organisation number is required, meaning that if the entity is foreign, it will be necessary to create a Norwegian-registered foreign company (NUF) in order to charge the asset.

Under Norwegian law, the act to perfect the applicable security, such as a notice of the charge to the relevant company, to the account bank or the security agent, or the registration of the standardised charge forms relating to that movable property, shall be made/delivered promptly or without undue delay.

While there are few-to-no formality requirements when it comes to perfection by way of notice, the signing and delivery of the various charge forms and mortgages to the applicable registries shall follow certain signing and formality requirements. To mitigate any risk when it comes to obtaining perfection, the forms may be pre-signed and pre-cleared with the registries in advance of closing.

A Norwegian company may provide loans, guarantees and security (“Financial Assistance”) for the benefit of an entity that has a decisive influence over the Norwegian obligor or a subsidiary of such legal entity, provided that such Financial Assistance serves the group’s financial interests. This is a very practical exception, and as a result, upstream security and guarantees are common features in all types of corporate and acquisition financings.

Restrictions apply in relation to acquisition financings and the granting of any Financial Assistance (as defined in 5.4 Restrictions on Upstream Security) by a Norwegian target company (and any subsidiary) in connection with an acquisition of shares, or right to acquire shares, in the Norwegian target or any parent company’ shares. In short, the financial exposure must not exceed the amounts that the target has available for distribution of dividends to its shareholders. The Financial Assistance must also be granted on commercial terms.

However, it may be allowed to obtain Financial Assistance from a Norwegian target company in certain instances and subject to carrying out a so-called “whitewash” procedure.

Specifically, the amount limitation does not apply if:

• the acquiring company is incorporated in an EEA jurisdiction;
• the acquiring company will form part of the same group of companies as the target following the acquisition; and
• a detailed procedure is complied with (often called a “whitewash procedure” in international financing transactions).

The procedure involves, among other things, (i) an evaluation by the target’s board of directors of the creditworthiness of the recipient of the Financial Assistance, (ii) approval by the board, and (iii) a declaration by the board that it will be in the interest of the company to grant the Financial Assistance, and the background and terms of such Financial Assistance. The Financial Assistance must then be approved by the target’s shareholders’ meeting and information regarding the Financial Assistance must be registered with the Norwegian Business Registry before the Financial Assistance can be granted.

Notwithstanding the exceptions available as described in 5.4 Restrictions on Upstream Security and 5.5 Financial Assistance and across its business, a Norwegian entity (and its board of directors) must always act in the best interest of the relevant company and ensure that there is sufficient corporate benefit.

Legal advice should be sought in each case involving Financial Assistance.

Generally, a distinction must be made between enforcement through the procedure set out in the Norwegian Enforcement Act of 1992 (the “Enforcement Act”) and enforcement in accordance with the Norwegian Financial Collateral Act of 2004 (the “Financial Collateral Act”), implementing the Financial Collateral Arrangements Directive. At the outset, individual enforcement of security interest granted over an asset located in Norway shall take place within the framework of the Enforcement Act, stipulating enforcement procedures for different asset classes. The central authority responsible for this process is the enforcement officer (Namsmannen), or in the case of a vessel it will be the District Court (jointly, the “Enforcement Authority”).

However, certain security interests (as set out below) may be enforced in accordance with the more flexible and quick procedures provided for by the Financial Collateral Act.

Pursuant to the Financial Collateral Act, assets which are not subject to enforcement through the Enforcement Authority – eg, financial collateral and monetary claims, may be enforced by self-appropriation through the security agent subject to the enforcement procedures and conditions agreed between the parties in the security agreement, without involvement of the Enforcement Officer. Such financial collateral includes, but is not limited to, bank deposits and financial instruments such as transferable securities (including shares and bonds).

Enforcement will typically be exercised by way of the security agent notifying the security provider of its intention to enforce, followed by which the security agent will be able to, inter alia, take possession of and exercise any and all ownership and creditor rights in connection with the assets as if it was the creditor thereof, or immediately sell or assign the claim or the assets (by public or private sale for consideration as is then agreed, or require a sale by the Enforcement Authority). To the extent self-appropriation is not explicitly agreed between the parties, the provisions of the Enforcement Act will apply.

Acquisition financing transactions will typically be structured without guarantees above bidco, except for a charge over the shares in bidco.

One development to note, is that a new Financial Agreements Act went into effect on 1 January 2023, under which it is for instance no longer mandatory to include the maximum liability applicable to Norwegian guarantors. Although the general view in Norway has been that this was not mandatory when it came to foreign law documents, it was still preferred by many (including leading banks) to include this together with customary limitation language applicable to Norwegian guarantors even in foreign law loan agreements. With this change in law, the market practice has changed so that it is not included in foreign law documents, while still being preferred in Norwegian law documents.

Please see 5.5 Financial Assistance.

Pursuant to the Norwegian Companies Act, transaction and financial assistance made within the group shall also be on ordinary business terms, thus implying that guarantee fees shall be charged as if the parties were third parties.

Under Norwegian law, there is no concept of equitable subordination, nor does it embrace a related legal doctrine that would allow a bankruptcy court to rearrange precedence of claims during a court-led restructuring of a company.

Nonetheless, under Norwegian bankruptcy law, transactions made by the company and which are deemed “extraordinary” in the circumstances before bankruptcy, or which give rise to a fraudulent preference of certain creditors, can subsequently be set aside by the courts following a request from the bankruptcy estate manager, and such extraordinary payments can include: payments made by other means than money (transfer of assets); payment made prior to the original maturity date; and payments that have substantially weakened the debtor’s financial position (at the expense of other creditors).

General

Under Norwegian insolvency law, there are certain overriding claw-back provisions which may, for certain transactions entered into shortly before opening of insolvency proceedings, being considered objectively unfair to other creditors of the insolvent party or also in other circumstances, be invoked by the administrator of the insolvency estate and reversed/avoided provided that the debtor was in a distressed financial situation at the time, or if deemed necessary to prevent the creditors from being deprived of assets.

In general, claw-back rules can be used by a bankruptcy estate to reverse transactions completed within a certain time period before the day that the debtor (or its creditors) files petition for bankruptcy (fristdagen/ the “Bankruptcy Date”), provided that the petition is affirmed by the court and bankruptcy proceedings are commenced. The time periods during which a transaction may be subject to claw-back vary (eg, if the parties are closely related, the period is extended). 

Further, a violation of the restrictions on financial assistance or acquisitions can result in guarantees and security being deemed void; see 5.5 Financial Assistance.

The “Objective” and “Subjective” Rules

In Norway, the rules pertaining to claw-back are divided into two primary categories. The first encompasses objective claw-back rules that are applied irrespective of the parties’ intentions with the transaction. This means that the establishment of for instance a “fraudulent element” is not required. Examples include transactions that unjustly give preferential treatment to certain creditors at the expense of others, prevent the debtor’s assets from being used to pay off the creditors, or increase the debtor’s liabilities in a manner detrimental to the creditors. Should the transaction be covered by the objective rules, the reversal of claims will apply for transactions carried out in a period of three months leading up to the Bankruptcy Date (or up to two years for closely related parties).

The second category is subjective claw-back rules, which come into play under circumstances including intentional wrongdoing, fraudulent activity or similar. In cases where the creditor should have been aware of the upcoming insolvency and the improper nature of the transaction, a statute of limitations of ten years applies.

While claw-back regulations can be invoked in a multitude of scenarios, detailing these instances is beyond the scope of this submission.

There are no stamp taxes applicable in Norway. 

Norway levies a withholding tax (15% rate) on certain outbound interest payments made from Norwegian debtors to related parties resident in low-tax jurisdictions (namely where the effective taxation is lower than two-thirds of what it would have been had the foreign entity (lender) been resident in Norway). There is a general exemption for lenders that are genuinely established and carry out genuine economic activity within the EEA. There is currently no proposal for withholding taxes being imposed on interest payments made to non-related (third party) lenders like banks.

In Norway, the standard tax regime does not include specific thin-capitalisation rules.

Nonetheless, interest payments on loans from or provided by related parties may not be deductible if they exceed the debtor’s arm’s length borrowing capacity, as per transfer pricing regulations and, in certain cases, general anti-avoidance rules.

However, there are limitations on the level of interest costs that are allowed for tax deduction in Norway, specifically, restricting deductions to 25% of the EBITDA (earnings before interest, taxes, depreciation and amortisation) of the Norwegian entities. For group companies, the limitation of tax deduction applies to debts owed to both related and non-related parties (ie, banks and bondholders).

The limitation does not apply if the Norwegian group’s equity-to-total assets ratio, as reported in the consolidated financial statements, is equal to or higher than the equity ratio of the corporate group as a whole. Moreover, this rule is only relevant if net interest for the Norwegian group exceeds NOK25 million.

For standalone companies, the same EBITDA-based rule applies, but only to a calculated net interest on loans from related parties (or loans guaranteed by related parties) exceeding NOK5 million.

Disallowed interest deductions can be carried forward for up to ten years. All interest must be based on arm’s length terms. General anti-avoidance rules also govern the use of tax positions. Norwegian tax advice should be obtained early when setting up a holding structured for acquiring a Norwegian company from abroad.

Specialised rules for interest deduction exist for companies within the oil tax and tonnage tax regimes, which differ from the standard tax rules.

Regulated Industries

Several industries in Norway are regulated to a varying degree, including banks, financial institutions and insurance companies, aquaculture and oil production. Concession requirements vary and must be considered on a case-by-case basis.

Effect on Transaction

Concession requirements can prevent the acquisition of a target until concession is achieved. For example, acquisition by a buyer (or several buyers acting in concert) of 10% or more of the share capital or voting rights, or a stake that otherwise gives the owner a “significant influence” over a Norwegian bank, financial institutions and insurance companies will be subject to a concession.

Additionally, according to the Norwegian Competition Act, transactions involving a merger or acquisition of control (a “concentration”) must be notified to the Norwegian Competition Authority (Konkurransetilsynet) if:

• the undertakings involved in the transaction have a combined annual turnover in Norway equal to NOK1 billion or more; and
• at least two of the undertakings concerned each has an annual turnover exceeding NOK100 million.

Additionally, the Norwegian Competition Authority has the competence to order a notification of non-controlling minority shareholdings and transactions falling below the turnover thresholds if it has reason to believe that a transaction may affect competition in Norway. This order must be issued within three months from signing or closing (whichever comes first).

An automatic standstill period applies until the Competition Authority has issued a final decision. If the turnover thresholds of the EU Merger Regulation (EUMR) are met, the NCA will not have jurisdiction to review the concentration and no notification is required in Norway. Note however that for some product markets not covered by the EEA Agreement – eg, fish and certain agricultural products, a notification in Norway may still be required, even if the thresholds in the EUMR are met, in addition to an EU filing.

Norwegian and foreign companies listed on a regular market in Norway are, with a few exemptions, subject to regulations pursuant to the Directive 2004/25/EC on takeover bids (Takeover Directive), Regulation (EU) No 596/2014 on market abuse (the Market Abuse Directive) and Directive 2004/109/EF (the Transparency Directive) which have been implemented into Norway law.

The regulations include:

• disclosure obligations for listed companies;
• restrictions on insider trading and handling of inside information;
• major shareholder disclosure requirements; and
• various requirements for voluntary and mandatory offers.

The major shareholder disclosure obligation is triggered when holdings of shares with voting rights or share capital reach, exceed or fall below the following thresholds: 5%, 10%, 15%, 20%, 25%, one-third, 50%, two-thirds and 90%. Holdings of rights to shares, derivatives and other financial instruments with similar economic effect as such instruments, as well as financial instruments referenced to indices or basket of shares comprised of the relevant shares, shall pursuant to certain terms and conditions also be aggregated when calculating whether the major shareholding disclosure obligation is triggered, in addition to any holdings held by related parties.

A requirement to make a mandatory offer for the shares in the target is triggered when the buyer acquires more than one third of the voting rights in the target, with repeat triggers at 40% and 50%.

An offer document must be prepared in connection with an offer and must be approved by the takeover authority of Norway in advance of making the offer. The offer document must be distributed to all shareholders of the target and made known to all its employees.

The takeover authority in Norway is currently the Oslo Stock Exchange, but a law proposal has been made to transfer the takeover authority to the Norwegian Financial Supervisory Authority (Finanstilsynet).

Methods of Acquisition

Where consideration offered in a takeover consists of securities (wholly or partly), this can lead to a requirement to prepare a prospectus in accordance with the Prospectus Regulation (EU) 2017/1129 for those securities.

A mandatory offer must include a cash-only alternative, but may also offer alternative forms of consideration. Further, a mandatory offer must be unconditional, whereas a voluntary offer can be made conditional, for example subject to receipt of a minimum 90% acceptance or approval from relevant authorities.

The bidder must treat all shareholders equally when making a takeover offer, although different classes of shares can be treated differently.

Funding

Settlement of a mandatory offer must be backed by a bank guarantee from a bank authorised to carry out business in Norway.

Squeeze-Out Procedures

If the purchaser holds 90% or more of the shares of the target and a corresponding proportion of the votes that can be cast at general meetings of the target, the buyer has the right to acquire minority shareholdings on a compulsory (squeeze-out) basis (and minority shareholders have a right to demand that the bidder make a compulsory acquisition). Funding of the squeeze-out must be backed by a bank guarantee from a bank authorised to carry out business in Norway.

Note that the Norwegian National Securities Act requires certain acquisitions to be notified and approved by the Ministry with the sectorial competence or the National Security Authority. In June 2023, the Security Act underwent substantial amendments, some of which entered into force 1 July 2023, whilst the rest is expected to enter into force during 2024. The amendments broaden the types of transactions that will be subject to notification.