Corporate M&A 2019 Comparisons

Last Updated June 10, 2019

Contributed By Gorrissen Federspiel

Law and Practice

Authors



Gorrissen Federspiel is a major Danish full-service law firm that offers advice within all areas of corporate law, including financing, tax, competition law, employment law and litigation. The Corporate/M&A and Capital Markets practice group consists of 18 partners and 51 associates and assistant associates, and is split between the firm’s two locations in Copenhagen and Aarhus. The team works across all legal practice areas within corporate and M&A, including private and public M&A, capital markets and general corporate law, structuring and shareholder incentives. Industry focus areas include financial services, real estate, telecommunications, healthcare, shipping and transportation and IT and IT services, as well as industrial products, including oil and gas.

The M&A market continued to perform well in 2018 and early 2019, after the very high activity levels of 2017. The M&A market benefits from a large number of international investments and acquisitions into the Danish market. This is largely a result of the highly developed Danish business environment, including a flexible job market and high levels of education. Denmark is ranked third for ease of doing business by the World Bank in its report 'Doing Business 2018'.

Major M&A transactions in 2018 included the acquisition of Peak Performance Production AB, a provider of active and casual wear clothing, by Amer Sports Oyj from IC Company A/S and the sale of Scandlines, a ferry transportation services company, to First State Investments. Transactions also included the takeover of TDC A/S, the Danish telecommunications services provider, by a consortium including Danish pension funds and Macquarie Infrastructure & Real Assets, and the acquisition of the Unifeeder Group, a shipping logistics company, by DP World from Nordic Capital Fund VIII. So far, 2019 has seen limited activity, but one notable transaction is the sale of the IT company Conscia from Axcel to Nordic Capital.

The already very active M&A market developed further in 2017 and 2018, which also included a high number of public M&A and capital markets transactions. 2018 involved an increased focus on quality of assets, including a greater focus on due diligence of quality of earnings. This trend appears to be continuing into 2019.

The increased focus on due diligence has also been driven by the rise in number of M&A transactions involving warranty and indemnity (W&I) insurance. W&I insurance is taken out or at least considered in most major private M&A transactions, including the significant structured M&A processes and in transactions involving private equity sellers or bidders. The W&I insurance market has developed rapidly in Denmark over the last couple of years and is now at a settled level with a number of market participants having achieved understanding of the product.

Activity levels remain high across all industries, but with a particular focus on financial services, real estate, telecommunications, healthcare, IT and IT services, as well as industrial products, including oil and gas.

The Danish market is primarily driven by private M&A transactions structured as equity-based share transactions. In addition, a number of private M&A transactions are structured as asset deals; however, to a lesser extent than share deals due to perceived increased complexity relating to asset deals. Merger of businesses, together with the establishment of joint venture entities, primarily occurs in the event of competitors combining their activities or following add-on acquisitions by industrials and private equity-owned entities. 

Public M&A transactions are less frequent, but there appears to be an escalation in public M&A activity, particularly in 2017 and 2018.

Generally, the private M&A market is unregulated; however, filings will need to be made with the Danish Business Authority in connection with corporate actions such as capital increases and mergers as well as any amendments to the articles of association of the Danish entities involved.

In addition, antitrust filings will need to be made with Danish Competition and Consumer Agency or the European Commission for transactions above the applicable thresholds.

Public M&A transactions are regulated by the Danish Financial Supervisory Authority, which among other things is authorised to approve the required takeover document.

There are no general restrictions on foreign investment in Denmark. This is because there is no requirement for local ownership of legal entities or local representation in the executive management or Board of Directors. Regulated businesses may require specific approvals, eg, from the Danish Financial Supervisory Authority in respect of financial services.

Investments in Denmark may be subject to antitrust filings with the Danish Competition and Consumer Agency or the European Commission for transactions above the applicable thresholds.

The Danish Competition Act requires that mergers are notifiable to the Danish Competition and Consumer Authority if:

  • the aggregated annual turnover in Denmark of all undertakings concerned is at least DKK900 million, and the aggregated annual turnover in Denmark of each of at least two of the undertakings concerned is at least DKK100 million; or
  • the aggregated annual turnover in Denmark of at least one of the undertakings concerned is at least DKK3.8 billion, and the aggregated annual worldwide turnover of at least one of the other undertakings concerned is at least DKK3.8 billion.

Special regulations may apply. A notifiable merger must not be implemented before the Danish Competition and Consumer Authority has approved it (a 'standstill obligation').

The Danish Competition Act also applies during the negotiation and due diligence processes as well as in the period between signing and closing; thus, the merging parties must be aware not to enter into any agreement or engage in any conduct that restricts competition, eg, anti-competitive exchange of competitively sensitive information, anti-competitive non-compete clauses, etc. 

The Danish labour market is generally characterised by collective bargaining agreements being entered into between the trade unions and the employers’ associations or between a trade union and an employer. Collective bargaining agreements in Denmark are generally balanced to a level where they rarely affect the process or structure of M&A transactions. The customary use of defined pension schemes ensures that pension liabilities rest with the pension providers, and as such pension liability will rarely be a concern. Defined benefit pension plans financed by the employer are seen in Denmark, but are rare.

Employee liabilities and obligations will remain unchanged in the instance of a transfer of shares, and, accordingly, the employee-related structural effects on the employees and thus on the M&A transaction will be limited. If the terms and conditions of employment remain materially unchanged, consultation or information to employees in connection with M&A transactions is not required by operation of law.

In an asset deal qualifying as a transfer of a business or a part thereof, the employment relationships, including terms of contracts and collective bargaining agreements, of employees engaged in whole or mainly with that business will, by law, automatically transfer to the purchaser with the business. It will, subject to certain conditions, be possible to opt out of the seller’s collective bargaining agreements. Information and consultation requirements apply in asset deals, but will generally not be of a nature where they affect the timing of an M&A transaction.

Mandatory legislation applies in respect of employee incentive programmes and restrictive covenants, eg, non-competition and non-solicitation provisions. For instance, salaried employees in termination scenarios are entitled to a pro rata share of cash bonuses, irrespective of the conditions of their termination. This generally also applies to other bonus schemes, eg, stay-on and exit bonuses. Furthermore, special rules apply to option and warrant-based incentives, eg, under which conditions the employees are entitled to exercise their share options and warrants as good and bad leavers.

In Denmark, it is no longer possible to enter into non-poaching clauses, neither between an employee and an employer, or between two companies. However, in relation to business transfers, companies may still agree not to employ the employees of the other company for a period of up to six months after closing. Non-competition and non-solicitation of customers clauses are generally allowed. However, they are subject to certain compensation requirements if entered into with employees.

The Danish Competition and Consumer Authority and other national authorities do not conduct national security reviews nor are they authorised to oppose a merger due to national security concerns. There is no mechanism in Denmark that corresponds to, eg, the mechanism in the United States whereby mergers can be blocked due to national security concerns.

Litigation in connection with M&A deals are limited, and as most private M&A deals are subject to arbitration clauses, the results of disputes will generally not be made public.

During and following the 2008 financial crisis, a number of Danish banks were taken over by the Danish state as a result of financial issues. A number of cases have been filed against former management members of such banks and decided by the courts. Though a number of the cases are yet to be decided in the appeal courts, court practice has generally confirmed the application of the business judgement rule in cases of management liability under Danish law.

In 2014, the Danish bunkers trading company OW Bunker was listed on Nasdaq Copenhagen and went into bankruptcy approximately seven months thereafter. The ensuing civil law cases in respect of prospectus liability are yet to be decided, and it remains to be seen how they will affect the Danish prospectus liability regime.

As of 3 January 2018, the Danish Capital Markets Act entered into force, replacing the existing Securities Trading Act. The Danish Capital Markets Act restructured the existing regime, partly due to the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast) (MiFID II). The rules on takeovers were generally continued with only limited changes. From a practical perspective, the requirement for a takeover advertisement was abolished with the updated Takeover Order, issued pursuant to the Danish Capital Markets Act. Furthermore, the rules on delisting of listed entities that were previously governed by the Danish Securities Trading Act were deleted from the Danish Capital Markets Act. The requirements for delisting will now follow from the rules of the individual stock exchange. Nasdaq Copenhagen is assessing the future wording of the rules and will apply rules corresponding to those in the Danish Securities Act until a decision has been made. Generally, if an issuer whose financial instruments are admitted to trading submits a request for removal from trading, Nasdaq Copenhagen will comply with such a request. However, removal will not take place if it is likely that this will be to the detriment of the interests of the investors or the proper functioning of the market.

On 21 July 2019, the majority of the provisions in the new EU Prospectus Regulation will enter into force. While this is not expected to affect private or public M&A markets materially, it will, in the short term, result in an increased legal focus and legal work for business owners seeking to exit over the equity capital markets.

Stakebuilding through the public market cannot be considered a common strategy in the Danish market. It will generally be carried out through the public market by shareholders who already hold a significant portion of shares slowly increasing their position in the company.

A more common form of increasing bid certainty prior to a takeover offer is by the potential bidder entering into 'irrevocable undertakings' with existing significant shareholders in the company. Pursuant to such irrevocable undertakings, the relevant shareholders will agree to tender their shares to the bidder in the takeover offer. Irrevocable undertakings are binding in the inter partes relationship; however, a shareholder having accepted to tender his or her shares will formally have a statutory right to withdraw his or her acceptance in the event of a competing offer.

Pursuant to the Danish Capital Markets Act, a person directly or indirectly holding shares in a listed company must notify the company and the Danish Financial Supervisory Authority when his or her holding of shares reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 50% or 90% or one-third or two-thirds of the voting rights or shares capital of the company.

As the law governs reporting thresholds, higher or lower thresholds cannot be implemented. The Danish rules on registration of shares were amended in 2015, and, accordingly, it is now required that all shares are registered by name in the ownership register of the company. However, existing shares issued to the holder as opposed to being registered by name remain valid.

Dealings in derivatives are allowed. However, certain disclosure requirements apply as set out below.

Pursuant to the Danish Capital Markets Act, a person who directly or indirectly holds instruments giving unconditional rights to acquire shares and derivative financial instruments having an economic effect comparable to holding shares in a listed company must notify the company and the Danish Financial Supervisory Authority when the person’s holding of the instruments reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 50% or 90% or one-third or two-thirds of the voting rights or shares capital of the company. Only long positions are taken into account when calculating voting rights. Long positions cannot be netted with short positions.

There are no general requirements to disclose the purpose of an acquisition or any intention regarding control of the company. However, in the event of a takeover, the bidder will in the takeover document be required to include information on the bidder’s intention with the target and strategy with respect thereto, including information on work positions.

Pursuant to the European Market Abuse Regulation, the disclosure requirement for a listed target company generally arises when the information of the takeover offer constitutes inside information with respect to the target company. Inside information is information of a precise nature that has not been made public and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.

At the stage where a bidder approaches the target company, the information will (depending on the seriousness of the bidder’s approach) often be considered inside information by the target company, and the disclosure obligation will thus apply. However, the target company may, on its own responsibility, delay disclosure to the public of inside information provided that:

  • immediate disclosure is likely to prejudice the legitimate interests of the target;
  • delay of disclosure is not likely to mislead the public; and
  • the target company is able to ensure the confidentiality of that information.

These requirements will generally be fulfilled through confidentiality agreements entered into, and, as it is normally considered a legitimate interest if a listed company is conducting negotiations, where the outcome of such negotiations would likely be jeopardised by immediate public disclosure. This is assumed to be the case in the event of a takeover.

Depending on the circumstances, including any leaks, delay of publication is in takeovers not considered to mislead the public. When the negotiations are finalised, ie, in a voluntary recommended offer when an agreement between the target board and the bidder is entered into, it will no longer be possible to delay publication, and the takeover offer must be published both by the listed company and the bidder.

For non-listed companies, ie, most private M&A transactions, and for M&A transactions being carried out by listed companies, but not being considered inside information, there are no formal requirements to disclose a deal. Deals subject to filing requirements with the Danish Competition and Consumer Authority may be made public in connection with filing with the authority.

Market practice is considered to be in line with the legal requirements as interpreted in Denmark.

In a large takeover offer on the Danish market, a bidder will generally carry out 'outside in' due diligence of the target entity. Given the listing of the target, the disclosure level in the market will generally be high. Upon the initial approach to the target entity, the bidder will often provide a request list for due diligence of non-public information regarding the target. This due diligence will be limited compared to a private M&A transaction, but will often cover the following areas:

  • key strategic and commercial items;
  • operational matters, including risks and assets;
  • legal matters such as litigations, shareholder information, compliance/licences and agreements/change of control issues;
  • financing matters;
  • tax; and
  • matters related to employment, including details of incentive programmes.   

In a private M&A transaction involving a merger, joint venture or acquisition of another entity, standard full M&A due diligence will be carried out, subject to any merger control and clean team requirements.

Standstills will often be demanded and accepted by bidders, depending on any specific needs for the bidder. Generally speaking, the standstill will cease to apply at either the announcement of the offer or the decision of the bidder not to pursue the transaction. During the standstill period, the bidder will undertake not to purchase or sell shares and derivatives or to assist or instruct any third party in doing so.

The bidder will often request exclusivity, but this will often only be granted when a final agreement has been entered into for the board of directors of the company to recommend the offer. Any such exclusivity may take the form of the board of directors agreeing not to actively seek out other bidders. When granting exclusivity or undertaking any other limitations regarding their ability to operate freely in the interest of the company and the shareholders, the board of directors should carefully consider requirements for compliance with their fiduciary duties. 

In larger public M&A transactions, the bidder and the target will often enter into an announcement agreement on the date of publication of the offer documenting the main tender offer terms and conditions.

In private M&A transactions, the timeline will depend on a specific situation, including whether the transaction is conducted as an one-on-one process or a structured process with multiple bidders. Generally speaking, a structured process will be carried through in a period of three to six months, with additional time being used for preparation of the process.

For public M&A transactions, the process is governed by mandatory requirements in Danish takeover regulations, including the Danish Capital Markets Act. A takeover document is required to be made public no later than four weeks after the bidder has published its intention to make a voluntary offer or the requirement to put forward a mandatory offer. The offer period for the takeover offer must be a minimum of four weeks and a maximum of ten weeks. An offer period may be extended for a minimum of two weeks at a time, but cannot be extended beyond the ten-week maximum period, unless the extension is due to requirements for approvals from public authorities. In situations where public authority approvals are required, eg, to fulfil merger control requirements, the offer period can be extended beyond the ten-week period to a maximum of nine months. If a competing offer is announced, the offer period of the existing offer is automatically extended to the time of expiry of the competing offer, unless the existing offer is withdrawn.

The mandatory offer threshold is one-third of voting rights, except in extraordinary cases where it can be established that this does not represent control.

Cash offers are by far the most common in Denmark. For mandatory offers, a cash option must always be offered if the financial instruments offered are not liquid shares in a listed company. It will be assessed on a case-by-case basis whether the shares can be considered liquid.

In voluntary offers, the most common conditions in addition to technical and company-specific conditions are regulatory approvals, minimum acceptance threshold, non-withdrawal of recommendation and no material adverse change. Conditions cannot be within the control of the offeror. Mandatory offers must be unconditional.

If a voluntary offer does not result in the bidder obtaining more than 50% of the voting rights, the bidder will be required to offer a mandatory offer to the other shareholders if control is required. Accordingly, most voluntary offers in Denmark will contain a condition of obtaining a minimum of 50% of the shares and voting rights.

The typical minimum acceptance condition is 90%, which reflects the threshold for effecting a squeeze-out of minority shareholders under Danish corporate law. There is no specific threshold for effecting a delisting; however, in practice 90% ensures that a delisting can also be achieved. Nasdaq Copenhagen has, however, accepted delisting based on a lower threshold, which explains why, in some recent take-over offers, a lower threshold for the minimum acceptance ratio condition (eg, 75%) has been applied. A threshold of two-thirds of the shares and voting rights is the necessary threshold for effecting changes to the articles of association pursuant to Danish corporate law, whereas a threshold of 50% of shares and voting rights will be sufficient for other decisions at the general meeting of shareholders, including appointing members of the Board of Directors.

A voluntary or mandatory offer cannot be conditional on the bidder obtaining financing. The Danish Financial Supervisory Authority even requires that for share consideration, the authorisation to issue the consideration shares must be in place prior to announcement of the intention to make on offer.

There is generally a possibility for the bidder and the seller to agree on deal security measures, as Danish law recognises the fundamental principle of freedom of contract. However, the management of the target company (typically the board of directors) may only agree upon deal security measures subject to their fiduciary duties, ie, it must generally be deemed to be in the best interest of the target and its shareholders.

Break-up fees are not common in public and private M&A transactions, but are sometimes used in connection with financing conditions or where the buyer has undertaken the risk to obtain approvals for merger control. Break-up fees are not subject to statutory limitations, but to a general standard again related to the fiduciary duties.

Governance agreements between a company and a major shareholder are not common in Denmark. The Danish Companies Act generally provides that shareholders’ agreements are not binding on the company, and contractual governance rights are, accordingly, not always effective. In some cases, agreements governing information exchange are entered into to ensure confidentiality and compliance with disclosure restrictions. In practice, a Danish Board of Directors will typically invite major shareholders to propose board candidates, but these will ultimately have to be elected by the general meeting.

Proxy voting is possible in Denmark. The proxy must be in writing, but may be general and without time limits. As a matter of law, a proxy may be withdrawn at any time, and commitment to vote by correspondence (which cannot be withdrawn) may therefore be preferable in some cases.

Following a successful tender offer, it is customary to effect a statutory squeeze-out of the minority under the Danish Companies Act. The squeeze-out is subject to a threshold of 90% of share capital and voting rights. Bidders often contemplate more creative squeeze-out mechanisms, but they are not used in practice. Following a recent decision by Nasdaq Copenhagen not to require a 90% threshold for a delisting, a delisting may in practice be used to coerce minority shareholders into accepting an offer.

It is fairly common to obtain irrevocable undertakings from major shareholders. Assuming the shareholders are willing to accept insider status, the commitments are typically negotiated and obtained at an early stage of the negotiations in an effort to obtain transaction certainty. The commitments will be disclosed in connection with the announcement of the offer. It depends on the circumstance and is a matter for negotiation whether the undertakings will expressly provide for an 'out' in case of a superior offer. As a matter of law, shareholders are able to retract their acceptance if a superior offer is made; however, bidders will seek contractual protection through irrevocable undertakings.

In private M&A transactions, the transaction will generally be made public upon signing. However, as long as there are no listed companies involved or the transaction does not constitute inside information pursuant to the European Market Abuse Regulation, there is no requirement for publication at the time of signing. In such private transactions, disclosure is often made at signing or delayed to occur in the period between signing and closing or at closing. Any such delayed disclosure should, however, be considered commercially in relation to on-going contractual relationships and the entry into of new agreements for target. Disclosure will generally be made in a press release agreed between the parties.

In a private M&A transaction involving listed entities, a bid/potential transaction may be considered inside information depending on whether the bid can be considered information of a precise nature, which, if it were made public, would be likely to have a significant effect on the prices of the financial instruments of the relevant listed entity involved in the transaction. Danish practice on application of the European Market Abuse Regulation generally assumes that the disclosure of any inside information in M&A transactions can be delayed until a final agreement has been entered into. To the extent the transaction constitutes inside information, publication will for any listed companies be made through a company announcement.

For public M&A transactions governed by the Danish Takeover Order, the time of disclosure depends on whether the offer is a voluntary or a mandatory offer.

In a voluntary offer, it is a requirement that disclosure of the bid is made once the bidder has made a decision to put forward a takeover offer on the target. This will generally be at the time of the board’s decision to make the offer. In a takeover offer recommended by the target company’s board, this will generally coincide with the time of signing of any announcement agreement between the target entity and the bidder. There are no specific requirements to the disclosures made in connection with announcement of the offer, but the announcement will have to be made through an announcement by electronic media that reaches the public in the countries where the targets shares are listed on a regulated market.

In a mandatory offer, the disclosure must be made as soon as possible after the obligation to make a mandatory offer has occurred, ie, at the time the bidder makes a purchase of shares triggering the threshold for control (at least one-third of the voting rights). There are no specific requirements to the announcement of the offer, but the announcement will have to be made through an announcement by electronic media that reaches the public in the countries where the target’s shares are listed on a regulated market.

In a public M&A transaction, a takeover document is required to be made public no later than four weeks after the bidder having published its intention to make a voluntary offer or the requirement to put forward a mandatory offer.

A business combination, ie, a merger involving listed companies, may involve the requirement to put forward a takeover offer and publish a takeover document if the issue of shares results in a shareholder obtaining control (as defined in the relevant provisions of the Danish Capital Markets Act) of a listed entity issuing shares.

Furthermore, if the issue of shares constitutes a public offer, it may be required to publish a prospectus. Where the business combination takes the form of a merger or a takeover, it is sufficient to issue a document containing information corresponding to that of a prospectus in relation to the issue of shares. However, such document will generally contain information and a level of disclosure similar to that of a prospectus.

Outside the scope of takeovers and the prospectus regime, a business combination through a merger will require the publication of general corporate law merger documentation.

There are no requirements in respect of disclosure of private M&A transactions. There are also no requirements to produce financial statements in connection with a public M&A transaction (takeover offer). However, the takeover document that must be published no later than four weeks after the publication of the offer shall, inter alia, contain information on main numbers from the latest financial announcement of the target company and the most recently published financial expectations for the current financial year.

In a private M&A transaction, there are no requirements to disclose transaction documents in full, eg, the entire share purchase agreement.

In a public M&A transaction, the takeover document and a statement from the target company’s Board of Directors with the Board’s assessment of the offer must be published. No other transaction documentation, eg, an announcement agreement entered into between the bidder and the target company, must be published in full, but main terms of material agreements will generally be included in the offer document.

In their management of the company, directors are generally limited by their obligations towards the company, its shareholders and other stakeholders. However, in a business merger, the primary duty of the directors will be to maximise share value for the shareholders. It is a general requirement under the Danish Companies Act that members of the management of a limited liability company do not take any action that is clearly likely to provide certain shareholders or others with an undue advantage over the other shareholders or the limited liability company. The duties of the directors extend to other stakeholders, including third parties in general, pursuant to the general rules on management liability in the Danish Companies Act.

It is not common for the Board of Directors to establish special or ad hoc committees in business combinations. In large listed companies or in large private M&A transactions, a committee could be established to facilitate and support the process of the business combination. A committee could also be established in case of a conflict of interest involving the management and would consist of the non-conflicted members. In public M&A transactions, the main point of contact for the discussions will generally be the chairman of the Board of Directors.

Case law has generally confirmed the application of the business judgement rule in cases of management liability under Danish law. Pursuant to the business judgement rule, management will, as a main rule, not be held liable when making a business judgement on an informed and qualified basis. There is no case law dealing with management liability in takeover situations, but it is assumed that the business judgement rule will be applicable.

In public and private M&A transactions, the board of directors will typically retain legal advice. Further, in public M&A transactions, the board of directors will typically also retain corporate finance advisers to assess the potential offer price. It is common to obtain a fairness opinion from the financial advisers; however, it is not a requirement.

Under Danish law, no member of the management may participate in a transaction of business involving any agreement between the limited liability company and the member. Further, a member may not participate if the business involves a third party and the member has a material interest in such business that may conflict with the interests of the limited liability company. Generally, the rules on conflict of interest do not apply to shareholders.

Members of the management may therefore be obliged to refrain from taking part of the process in a business combination if the member has a material interest in such business that may conflict with the interests of the limited liability company. There is no case law dealing with conflicts of interests in takeover situations.

Hostile tender offers are permitted in Denmark, but are less common than friendly offers. Listed companies that become subject to takeover interest tend to seek to organise auction processes of a more or less structured nature to ensure price competition and support a board recommendation.

Defensive measures such as 'poison pills', etc, are not common in the Danish market and would likely be difficult to implement and apply in a Danish context. The board of directors’ primary leverage against bidders relates to access to due diligence and to the content of the board of directors’ recommendation required in relation to takeover offers.

Danish corporate law is shareholder friendly in terms of shareholders’ ability to replace board members, and, in practice, the general meeting will always be able to replace all shareholder-elected board members at relatively short notice.

The most common defensive measures are to seek out or encourage other bidders for the target company. Furthermore, a number of Danish listed companies have passive defence mechanisms included in their Articles of Association, eg, separate share classes with increased voting rights or voting rights limitations so that no shareholder can vote on more than 10% of the shares of the company.

In their management of the company, directors are generally limited by their obligations towards the company, its shareholders and other stakeholders. It is a general requirement under the Danish Companies Act that the members of the management of a limited liability company do not take any action that is clearly likely to provide certain shareholders or others with an undue advantage over the other shareholders or the limited liability company.

Furthermore, directors who in the performance of their duties have intentionally or negligently caused damage to the limited liability company are liable to pay damages. The same applies where the damage has been caused to the shareholders or any third party.

Subject to the fiduciary duties of the board of directors, access for the board of directors to oppose a business combination is generally considered to be fairly broad as long as this is deemed in the best interest of the company and its shareholders.

For potential takeover offers, the board of directors should generally not take steps that would prevent its shareholders from benefitting from a bona fide offer. the board of directors will typically retain corporate finance advisers to assess the potential offer price. Assuming the price represents a relevant premium to the listing price, the board of directors will typically allow due diligence and enter into an announcement agreement in which it commits to support the transaction and render a positive recommendation – subject to, inter alia, the terms of the announcement agreement.

Although the approach from shareholders and other stakeholders has been more aggressive in recent years, in particular in relation to listed companies, Denmark is generally not considered a particularly litigious nation. As such, litigation in connection with M&A deals cannot be considered common, but occurs from time to time. Typically, private M&A deals are subject to arbitration clauses, which ensure that processes can often be kept confidential. It remains to be seen whether the recent increase in the use of W&I insurance will give rise to a significant increase in disputes relating to warranty claims.

Litigation in connection with public M&A deals is not common, although majority requirements for squeeze-outs and delisting have historically given rise to disputes.

Litigation will rarely be brought in respect of claims relating to the negotiation process where a final transaction is not ultimately entered into, ie, claims for pre-contractual liability are not common. Litigation is generally brought following closing of the transaction in respect of the representations and warranties agreed in the transaction documentation.

The shareholder activism in the form of public critique by larger private fund investors as seen in the US and other jurisdictions is relatively rare in the Danish market. One example was Cevian Capital’s investment in Danske Bank in 2013, which was decidedly 'friendly' compared to better known examples of shareholder activism in the US.

Danish pension funds are perhaps the most visible shareholder activists, and increasingly more so after the adoption by the Danish Corporate Governance Committee of a stewardship code in 2016 – a code highly inspired by the UK counterpart.

In public, the Danish pension funds focus primarily on specific governance-related issues, including in particular remuneration, rather than more fundamental issues such as strategic or operational objectives, which are dealt with in direct conversations with, eg, the chairmanship.

International proxy advisory firms, such as ISS and Glass Lewis, play an important role in forming activist shareholder topics, in particular through their increasingly detailed guidelines on board composition and remuneration.

Public campaigns of this nature by individual activist investors are rare in the Danish market. Activist shareholders rather tend to pursue dialogue on strategic matters directly with boards.

There are examples, however: recently, the Danish telecoms group TDC’s planned merger with the Swedish media group MTG met fierce public opposition among investors, and the transaction was eventually aborted as a consortium of Danish pension funds together with Macquarie placed a takeover offer for the company.

In recent years, a number of Danish publicly-traded conglomerates have been criticised by investors for not seeking to 'unlock' proposed “conglomerate rebates” through spin-offs or divestments. Whether or not in response to this critique, A.P. Møller Maersk commenced a historic separation of its energy business in 2017, while NKT completed a spin-off and separate listing of its cleaning solutions business 'Nilfisk' through a demerger. A spin-off of the electricity distribution operations of the partly state-owned Ørsted was aborted in early 2019 following political activism and subsequent loss of backing from political parties to the sale.

Activist interference merely to block a M&A transaction is rarely seen in the Danish market. The primary examples of interference are seen within public M&A where international hedge funds sometimes take up larger positions in anticipation of potential increases in the offer price. Recent change in practice by Nasdaq Copenhagen lowering the majority requirement effectively required for obtaining a delisting has potentially made such attempts more expensive and risky.

Gorrissen Federspiel

Axeltorv 2
1609 Copenhagen V
Denmark

+45 33 41 41 41

contact@gorrissenfederspiel.com gorrissenfederspiel.com
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Law and Practice

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Gorrissen Federspiel is a major Danish full-service law firm that offers advice within all areas of corporate law, including financing, tax, competition law, employment law and litigation. The Corporate/M&A and Capital Markets practice group consists of 18 partners and 51 associates and assistant associates, and is split between the firm’s two locations in Copenhagen and Aarhus. The team works across all legal practice areas within corporate and M&A, including private and public M&A, capital markets and general corporate law, structuring and shareholder incentives. Industry focus areas include financial services, real estate, telecommunications, healthcare, shipping and transportation and IT and IT services, as well as industrial products, including oil and gas.

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