Corporate M&A 2024 Comparisons

Despite continued geopolitical instability, challenges in global supply chains and continued high inflation and interest rates, the Danish M&A market remained relatively robust during 2023, although it reflected a slow-down across most sectors in comparison to recent years. Nevertheless, the deal volume and levels in 2023 surpassed initial projections and demonstrated a fairly strong deal volume. However, when analysing the deals, it is evident that smaller-size deals constituted a larger share of the market than in previous years, and that financial investors accounted for relatively fewer compared to recent years. In the first months of 2024, the Danish M&A market has shown indicators of an increased level of activity, especially in sectors such as energy and technology, but it is too early to predict how the year will turn out. 

In 2023, transaction types included traditional private M&A transactions, minority/partnership deals, growth capital transactions and even a few public M&A transactions. Strategic buyers seemed very active during 2023, and foreign direct equity investments in Denmark were relatively modest compared to recent years.

Some of the most notable transactions in the Danish market in 2023 included DSV’s logistics joint venture with NEOM, and Deutsche Börse’s public takeover of SimCorp. The latter accounted for the largest inward direct investment in 2023. The merger between the two Danish C25-index companies Chr. Hansen and Novozymes was announced in December 2022, and was completed on 29 January 2024.

The Danish M&A market being dominated by private M&A deals remained a key trend, as did the rarity of significant public M&A transactions. Due to the slowdown in the M&A market across most sectors in 2023, deal terms are becoming more buyer-friendly. There is a trend towards sell-side financed warranty and indemnity (W&I) insurance, more thorough due diligence procedures, vendor financing, earn-outs and exclusive processes. 2023 was also a year where many deal processes had increased lead time.

As a consequence of the green energy transition targets and the war in Ukraine, activity in the renewable energy sector is continuously high, as businesses and Nordic countries in general have an increased focus on energy self-sufficiency.

Further, an examination of companies’ ESG (environmental, social and governance) profiles is increasingly being prioritised as part of due diligence in M&A transactions. Investors and stakeholders are recognising the significance of assessing a company’s sustainability practices and ethical standards alongside traditional financial metrics. This shift underlines the growing awareness of the impact ESG factors potentially have on a company’s performance, risk management and reputation. Thus, buyers seem to increasingly recognise that a greater focus on integrating ESG analysis into due diligence processes can enable the buyers to identify potential risks that may affect the contemplated investment case and the outcome of the transaction.

Throughout 2023, there was significant interest in Danish assets within industries where Denmark has a strong reputation. Such industries include:

• IT/tech;
• renewable energy;
• financial services;
• healthcare; and
• pharmaceuticals/life sciences.

Sectors such as fast-moving consumer goods and real estate were less active during 2023, primarily due to constraints in obtaining acquisition financing. Accordingly, the industrial and services sectors, together with pharma/healthcare and renewable energy, seemed to account for the majority of transactions in 2023.

An acquisition of a private company is typically completed as an acquisition of the target’s shares, as this is generally considered simpler and more tax-efficient than an asset transfer. Both types of acquisitions are documented by a purchase agreement, the format of which depends on the parties involved and the size and complexity of the transaction. Corporate mergers may also be used for business combinations, but this is rarely seen.

An acquisition of a public company will usually take place as a public takeover (voluntary or mandatory), which is documented by an offer document. Provided that the bidder obtains more than 90% of the shares and votes in the company, the bidder is, according to Danish law, entitled to complete a squeeze-out of the minority shareholders.

In Denmark, private M&A activities are mostly unregulated.

The Danish Financial Supervisory Authority (FSA) is the supervisory authority in respect of public takeovers, issuance of prospectuses and compliance with the market abuse regulation.

The Danish Business Authority is the relevant authority with respect to the various corporate actions that are usually necessary in connection with an acquisition – eg:

• registrations related to direct and indirect ownership;
• amendments to the target’s articles of association;
• registration of changes to the management;
• capital increases; and
• mergers.

In relation to antitrust regulation, filings need to be made with the Danish Competition and Consumer Agency or with the European Commission, as applicable. Individual filings in other jurisdictions may be required.

Certain targets will hold licences to conduct particular types of businesses – eg, debt collection, telecoms, insurance and banking. Regulatory approvals may be required when obtaining control of such businesses.

The Danish Investment Screening Act applies to foreign direct investments made on or after 1 September 2021. The Danish foreign direct investment regime is based on EU Regulation (2019/452) on screening of foreign direct investment, and implements a two-tiered screening mechanism:

• a sector-specific mandatory filing obligation; and
• a general (cross-sector) voluntary filing option.

The mandatory filing obligation is triggered by foreign direct investments (covering all typical M&A deals, including greenfield investments, asset deals and long-term loans) where a non-Danish investor acquires a “qualifying holding” in a Danish undertaking active within a “particularly sensitive sector”. A qualified holding is the direct or indirect possession or control of at least 10% of either the shares or voting rights (as well as increases of holdings that result in exceeding the thresholds of 20%, one third, 50%, two thirds or 100%), or equivalent control by other means. Equivalent control by other means covers, inter alia:

• rights granting the power to make or approve decisions on significant managerial, financial, developmental or operational matters; and
• rights to appoint or remove members of management bodies.

The mandatory filing obligation is further triggered by “special financial agreements” entered between a non-EU investor and a Danish undertaking within a “particularly sensitive sector”. Special economic agreements are joint ventures or operating, supplier or service agreements, whereby the investor gains control or significant influence over the Danish target.

The five particularly sensitive sectors covered by the mandatory screening mechanism are:

• the defence sector;
• the sector for IT-security functions or processing of classified information;
• production of dual-purpose products;
• other critical technology (consisting of 11 listed technologies, one of which the target must develop or manufacture in order to be a company within other critical technology); or
• critical infrastructure (consisting of 11 listed subsectors, such as energy and healthcare, which are further divided into a number of socially important functions, for one of which the target must be necessary to maintain or restore in order to be a company within critical infrastructure).

It is the responsibility of the foreign investor to file with the Danish Business Authority and provide comprehensive information and documentation regarding the investment, the target and the foreign investor. If the mandatory filing obligation is triggered, a standstill obligation applies until the Danish Business Authority has approved the investment. There are no filing fees or execution formalities (provided a qualified lawyer in Denmark makes the filing on the foreign investor’s behalf). In unproblematic cases, the foreign investor can expect a decision within five to six weeks.

The Danish merger control regime is laid out in the Danish Competition Act and is based on the principles of the EU Merger Regulation – hence why the Danish merger regulation is to a large extent similar to the EU merger rules. The Danish merger rules are generally interpreted in accordance with EU law and practice from the European Commission and the European courts. The concept of a concentration (ie, definition of a merger) as well as the substantive test (the assessment of a merger) is equivalent to the concept and test under EU law.

As under EU merger control, the Danish merger rules apply to mergers and full-function joint ventures that meet the thresholds for notification. If the thresholds are met, a standstill obligation applies, and the concentration must not be implemented before the merger has been notified and approved by the Danish competition authorities.

Concentrations must be notified to the Danish Competition and Consumer Authority where:

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

Besides the Danish merger control rules, the restrictions in Danish competition law against anti-competitive agreements apply to transaction processes.

Accordingly, during negotiations, under a due diligence process and in the period between signing and closing, the parties to the transaction must not engage in anti-competitive practices such as the exchange of competitively sensitive information. In practice, this is handled by establishing “clean team” procedures when a merger involves competitors.

Share Sale

A share sale generally has limited effect on employment relationships as they are not directly affected by the sale. Danish rules on consultation and information will generally not apply if no material changes affecting employees arise in connection with a share sale.

Asset Sale

An asset sale makes an assessment of the applicability of the Act on Transfer of Undertakings (TUPE) relevant – in particular, whether the transferred assets qualify as an economic entity that retains its identity after the transfer, which is a requirement for TUPE to apply.

TUPE

Under TUPE, employment relationships automatically transfer with the business, and the acquirer assumes the rights and obligations towards the transferring employees. In connection with transfer of a part of a business (carve-out), attention should be paid to employees who are partially working with the transferred activities or are indirectly affected by such transfer. Such employees may be eligible to transfer with a part of their working hours or tasks.

Reductions in force and changed employment terms, including changes constituting constructive dismissals in relation to a transfer, are permitted under TUPE on economic, technical or organisational grounds.

Information and consultation requirements must be observed in connection with the transfer of employees. Reductions or constructive dismissals affecting at least ten employees may trigger special information and consultation procedures.

Collective bargaining

If work in an asset sale is subject to collective bargaining, the acquirer has the option of opting out of the applicable collective agreements, provided certain procedural requirements and deadlines are observed. The entitlements awarded to employees under the collective agreements remain in effect until the expiry of the term of the collective agreement as individual employment terms. With effect as of the expiry date, the individual employment terms may be modified under the general rules for changing employment terms.

Restrictive Covenants

Restrictive covenants (non-competition and non-solicitation of business restrictions) are permitted within a comprehensive employee protective framework, including capped duration and compensation requirements.

Non-poaching of employees’ restrictions is only enforceable in connection with share and asset sales during negotiations and for a period of six months following closing.

Incentives

Salaried employees are generally entitled to a pro-rated cash bonus in a termination scenario without consideration of bad leaver conditions.

In connection with certain types of retention bonus, bad leaver conditions on the forfeiture of a bonus may be enforceable.

Several categories of share-based incentives permit full or partial forfeiture for leavers. In certain circumstances, an obligation on the employee to sell back shares of the incentive scheme at a price below fair market value will be void. This is not an issue in respect of publicly traded shares.

Gender Equality in Company Management Bodies

Specific rules on gender equality apply for companies of a certain size and type (State-owned joint-stock companies and public limited companies falling under accounting classes C and D). Rules forcing such companies to introduce requirements for gender balance objectives in company management bodies effectively ensure that target figures for the share of members elected by a general assembly of the under-represented gender are set in place, to be observed within company management bodies. Further, policies to increase the share of the under-represented gender must be devised by the companies.

According to the guidelines of the Danish Business Authority, equal gender distribution will exist if both genders are represented by at least 40%.

See also 2.3 Restrictions on Foreign Investments. The Investment Screening Act requires that certain transactions be filed with and approved by the Danish Business Authority. If the Danish Business Authority decides that the completion of the transaction should be denied, it must refer the case to the Minister for Industry, Business and Financial Affairs, who is authorised to deny the completion of the transaction if the transaction threatens national security or public order.

Court Decisions

Litigation in connection with public M&A deals is fairly uncommon in Denmark.

Litigation in respect of private M&A deals is also uncommon, although the number of claims against W&I insurers seems to be increasing. As most private M&A deals are subject to arbitration clauses, due (inter alia) to the confidential nature of such disputes, very little public information on such disputes is available.

Notwithstanding the foregoing, in November 2023 the Danish Maritime and Commercial High Court ruled in respect of the “Gram Equipment case”. In 2018, Kg BidCo ApS purchased the entire share capital in Gram Equipment from Green Magnum (an SPV owned by Procuritas Capital Investors IV GP Limited). Later in 2018, Kg BidCo ApS filed an arbitration case against Green Magnum with a claim of warranty breach due to irregularities in the accounts in Gram Equipment, which, according to Kg Bidco ApS’ claim, had been largely edited. The tribunal held Green Magnum liable for the breach of the warranty. However, Green Magnum subsequently went bankrupt due to not having sufficient funds to honour the arbitration award.

Subsequently, Kg BidCo ApS filed a claim at the Danish Maritime and Commercial High Court against the former CEO and CFO of Gram Equipment, Procuritas Capital Investors IV GP Limited, and the managing partners of its advisers, Procuritas Partners AB. Procuritas Capital Investors IV GP Limited and the managing partners of Procuritas Partners AB were acquitted, as the Court found that they had not known of the manipulation and irregularities. In relation to the former CEO and CFO, the Court ruled that fraudulent accounting had occurred, and that the day-to-day management had been aware of the manipulation of the financial figures. However, the court found, inter alia, that Kg BidCo ApS had not been able to document any loss, since an accessor had valued the company higher in connection with the trial than what Kg Bidco ApS had claimed; and further that Kg BidCo ApS had received a EUR50 million payout from a W&I insurance. The ruling was given with dissent, and has been appealed.

Legal Developments

Among the recent developments in regulation concerning ESG are strengthened requirements for policies and target figures for the under-represented gender in State-owned public limited companies, listed companies and certain large limited liability companies (see 2.5 Labour Law Regulations). Further developments in this area are expected in the coming years.

In 2023, the “fit and proper” rules were changed, codifying the practice of the Danish FSA as authorised to approve or reject a proposed member of the board of directors or executive board based on the suitability and honesty requirements. Furthermore, the change enables the possibility for the FSA to make conditional approval of a management member.

The Mobilisation Directive was implemented in the Danish Companies Act. The objective of the Directive is to harmonise the rules for cross-border demergers and re-organisations. The implementation’s key changes include:

• better protection for shareholders, as the plan must contain information on their right to demand that their shares be redeemed;
• better protection for creditors, as the deadline for bringing the case before the probate court is changed to three months after publication of the plan; and
• better protection of employees, as the plan must contain information on implications for employment, and the employees must be consulted prior to the implementation of the demerger or re-organisation.

There have been no significant changes to the Danish takeover regime in the past 12 months. The latest changes in Danish takeover law were seen on 1 July 2020.

In respect of public takeovers, it is not uncommon for the bidder to have built up a stake in the target company prior to launching the offer. As long as the bidder is not in possession of inside information – which may be the case if the bidder has already been granted permission to carry out due diligence of the target – the bidder is free to buy shares and thereby increase its stake in the target.

The bidder should be aware that in both a voluntary and mandatory offer, the bidder will be required to raise its offer price, if – during the offer period and up to six months after the expiry of this period – the bidder acquires shares in the target company at a higher price.

In addition, the price offered in a mandatory offer must, at a minimum, correspond to the highest price paid by the bidder for shares in the target company during the six preceding months. This rule is sometimes exploited by bidders, who deliberately use stakebuilding (at market price) to trigger a mandatory offer, which can then be carried out without a premium. Following the completion of the offer, the bidder will not be required to complete another mandatory offer irrespective of the outcome of the takeover. If the bidder had completed a voluntary offer and acquired between one third and 50% of the target, the bidder would be required to complete a mandatory offer following the voluntary offer.

Any natural or legal person directly or indirectly holding shares in a listed company must notify the company and the FSA when their holding of shares reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, one third, 50%, two thirds or 90% of the voting rights or share capital of the company.

However, this does not apply to an issuer directly or indirectly holding own shares, who instead must publish a notice to this effect when its holding of own shares reaches, exceeds or falls below 5% or 10% of the voting rights or share capital of the company.

When building a stake in a target company, the bidder should consider the following aspects.

•       Approval from authorities – a stakebuilding shareholder will have to consider general and special statutory requirements for approvals by regulatory authorities, including merger control requirements when acquiring direct or indirect control with (parts of) the target company and requirements for approval by the Danish FSA of acquisition of a substantial ownership in a financial business. Control may be obtained by acquisition of a qualified minority position, where it is possible for the acquirer to exercise (de facto) control due to the spread of the shares.

• Mandatory offer – if the bidder obtains, through stakebuilding, a controlling interest in the target company, an obligation to launch a mandatory offer is triggered (see 6.2 Mandatory Offer Threshold). Contrary to what applies to a voluntary offer, the main consequence of an obligation to launch a mandatory offer is that the price offered as a minimum must correspond to the highest price paid by the bidder for shares acquired in the target company during the six months preceding the approval of the takeover document.
• Reporting obligation – in its memorandum of association or in the articles of association, it is not possible for a company to introduce higher or lower reporting thresholds than those set out in 4.5 Filing/Reporting Obligations. A stakebuilding shareholder reaching, exceeding or falling below these thresholds must thus notify the company and the Danish FSA thereof.
• Voting limitations – a stakebuilding shareholder must consider any voting limitations that may apply to the target company, including voting ceilings and share classes with differentiated voting rights.

Under Danish law, dealings in derivatives are allowed, subject to reporting and disclosure obligations.

Any person directly or indirectly holding 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 FSA when the holding of such instruments reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, one third, 50%, two thirds or 90% of the voting rights or share capital of the company. Only long positions are taken into account when calculating voting rights. Long positions cannot be netted with short positions that have the same underlying issuer.

There is no general obligation to make known the purpose of an acquisition or any intention regarding control of the company.

A bidder must publish its intention to launch a voluntary offer as soon as possible following its decision to submit such offer.

In addition, the bidder is required, as soon as possible and no later than four weeks after the publication of a voluntary offer or the acquisition of a controlling interest, to publish a takeover document in which information on the bidder’s intentions with the target company and strategy with respect thereto must be included.

The obligation to launch a mandatory offer must be published as soon as possible after the bidder’s acquisition of a controlling interest.

Whether a transaction needs to be disclosed to the public under Danish law depends on whether a listed company is participating in the transaction.

Purely private M&A deals need not (as such) be disclosed to the public. However, legal requirements to register the change of ownership in the Danish Central Business Register and other filing requirements (eg, antitrust) will entail the transaction becoming public.

If a listed company participates in the transaction (either as the seller, the buyer or the target), information related to the transaction must be disclosed in accordance with the EU Market Abuse Regulation (MAR) if and when the information constitutes inside information. This will usually occur at some point during the negotiation phase, but the issuing company may be entitled to delay the disclosure until the deal has been signed, provided that the delay conditions set out in the MAR are fulfilled (eg, confidentiality must be ensured).

In the case of a takeover, the mere approach by a bidder to the listed company’s board may be regarded as inside information depending on the firmness of the approach (see 7.1 Making a Bid Public).

Market practice on the timing of disclosure is in line with the legal requirements set out in the MAR. It is often debated between practitioners as to when a transaction reaches a stage where information regarding the transaction becomes inside information, and whether disclosure of such information by the target can be delayed.

In larger private M&A deals, a full scope legal due diligence of the target will be customary. The legal due diligence may be in the form of vendor due diligence, which is topped up by the buyer, or by full buy-side due diligence.

As W&I insurance is usually taken out in connection with larger private M&A deals, the scope of the due diligence is likely to be affected by the underwriter’s requirements for the level and scope of due diligence.

In a public takeover situation, a (non-hostile) bidder will often be granted access to complete light legal due diligence, which focuses on material issues – eg, business-sensitive matters and/or litigation. A bidder may also have completed (outside-in) due diligence of all public matters relating to the target.

In connection with a public takeover, a standstill obligation will usually be demanded by the target’s board of directors. A bidder will generally accept a standstill obligation to facilitate discussions between the bidder and the target, and to mitigate the risk of insider trading.

A bidder is similarly interested in demanding exclusivity. If accepted by the target’s board of directors, it will usually – due to the board’s fiduciary duties to act in the company’s best interest – contain a carve-out for competing offers that present a better price.

In connection with a public takeover, it is permissible for the bidder and the target to document the agreed terms in a definitive agreement. This is usually seen in larger transactions, but it depends on the circumstances.

The length of the process relating to acquiring or selling a business in a private M&A transaction largely depends on the type of transaction and the size of the target.

Most structured processes in Denmark are completed within three to six months’ time, excluding preparatory work. However, as most structured processes require thorough preparation, including gathering information for a data room and completing legal and financial vendor due diligence processes, the full process may take as much as one year to complete.

A more simplified transaction may be completed in less than three months (which assumes a simultaneous signing/closing).

If the acquisition of a listed company is carried out as a takeover, the timing is affected by the Danish Takeover Order, which sets out that the offer period must be at least four weeks and no more than ten weeks. Any antitrust filings may extend the period for up to nine months from the publication of the offer document.

Regarding COVID-19, government lockdown measures in Denmark have generally been less severe than measures taken in many other countries. Most of society remained relatively unaffected, with the exception of certain sectors, and this combined with a quick adjustment to electronic communication has meant that M&A processes have been fairly stable throughout this period. Since 1 February 2022, no governmental restrictions concerning COVID-19 have been in effect in Denmark.

In public M&A transactions, a mandatory offer threshold under Danish law is reached when one or more persons acting in concert obtain controlling influence of the listed company.

Controlling influence is reached when the person or persons obtain ownership or control of one third of voting rights in a listed company, unless in extraordinary circumstances it can be established that this ownership or control of voting rights does not constitute controlling influence of the listed company.

Furthermore, controlling influence is obtained if the person or persons have the ability to control one third of the voting rights in the company via an agreement with other shareholders, or if they have the power to appoint the majority of the board of directors.

In a private company setting, the same mandatory offer threshold does not exist. However, in a situation where a single shareholder holds more than 90% of the shares and voting rights of a limited liability company, any minority shareholder will be entitled to demand a redemption of its shares by the majority shareholder.

In private M&A transactions, cash is the primary method of consideration, although re-investment schemes are often seen as a way to bridge the financing. Earn-out provisions or indemnifications (in the case of a specific risk) may be used if the parties cannot agree on the value of a target. Although often discussed, earn-out provisions are rarely incorporated.

In a public takeover scenario, the primary method of consideration is cash. A bidder is entitled to offer either cash or shares, or a combination thereof, except in the case of a mandatory offer, which must include a cash alternative if shares offered are not liquid shares in a company listed on a regulated market, or if the bidder has acquired at least 5% against cash within six months prior to the offer.

A shareholder holding more than 90% of the shares and the votes in a company will be entitled to complete a squeeze-out of the remaining shareholders. Such squeeze-out must be completed by offering cash.

While a mandatory offer must be unconditional, voluntary offers may be conditional as long as the conditions are not within the control of the bidder. Common conditions are, for instance, a minimum acceptance threshold of more than 90% (due to the squeeze-out option) and regulatory conditions.

If a bidder in a voluntary offer acquires between one third and 50% of the target, the bidder is required to complete a mandatory offer following the voluntary offer. Consequently, an acceptance threshold above 50% will usually be included as a condition in a voluntary offer.

It is very common for the minimum acceptance condition to be set at more than 90% of the shares and voting rights, as this is the threshold for effecting a redemption of the remaining minority shareholders under the Danish Companies Act. In addition, the threshold for effecting a delisting is 90% of the vote cast at a general meeting.

Other relevant thresholds are two thirds of the shares and voting rights, or just above 50%. A total of two thirds of the shares and voting rights is sufficient to complete most amendments of the articles of association and to effect capital increases or mergers. A simple majority of shares and voting rights is sufficient to control most decisions at the general meeting, including the appointment of directors.

Neither a mandatory nor a voluntary offer may be conditional on the bidder obtaining financing. Prior to the announcement of a mandatory or a voluntary offer, it must be ensured that the bidder can fully meet any requirement regarding consideration in cash. Furthermore, the bidder must also have taken all reasonable measures to ensure that any other form of consideration (eg, share consideration) can be paid.

The most common deal security measure used by bidders in public M&A transactions is non-solicitation provisions and matching rights. Break-up fees are legally permissible (if reasonable), but are not commonly used in the Danish market and are often rejected by targets with reference to the board’s fiduciary duties.

Managing pandemic risk has not led to new contractual tools. Material adverse change (MAC) conditions are sometimes used, and gap covenants have been tailored to protect against pandemic risk in an interim period.

There have been no changes in the regulatory environment leading to changes in interim periods.

In private M&A transactions, it is common for the shareholders to enter into a shareholders’ agreement where additional terms can be arranged, including rights to appoint members of the board of directors and to veto rights concerning certain proposals put forward at the general meeting. It is, however, important to note that under Danish law a shareholders’ agreement is generally not binding on the company. A breach of contract must therefore be handled separately between the shareholders.

In a listed company, it is uncommon for certain shareholders to be provided with additional governance rights. It is possible to build special governance rights into the articles of association, but this is rarely seen outside the context of restructurings.

Shareholders have the opportunity to vote by proxy in Denmark, and such a right cannot be restricted in a limited liability company. If a shareholder wishes to vote by proxy, a dated power of attorney must be provided in writing. The power of attorney can be given to a specific person or to the holder of the power of attorney – it does not need to be limited in time, and can be withdrawn at any time.

See 6.9 Voting by Proxy.

In connection with a public takeover, bidders may obtain irrevocable commitments from larger shareholders as an alternative to stakebuilding.

Depending on the shareholder structure and the transaction, the bidder may enter into irrevocable commitments prior to contacting the target’s board of directors in order to put pressure on the board. Bidders sometimes also enter into irrevocable commitments following discussions with the board, and in such cases with the board’s blessing.

Irrevocable commitments will usually contain an “out”, in case of competing offers that present a better price.

Private M&A transactions are not required to be made public, but are often disclosed by the parties involved through a press release, either at signing or at closing. As previously mentioned, antitrust filing, registration of ownership in the public register and other corporate actions will preclude the option of keeping the transaction secret.

Inside Information

As mentioned in 5.1 Requirement to Disclose a Deal, a transaction may be regarded as inside information if a listed company participates in the transaction (either as the seller, the buyer or the target). To the extent that the transaction constitutes inside information, disclosure of the transaction must be made no later than at signing and cannot be postponed based on any required regulatory approvals.

In the case of a public takeover, the mere approach by a bidder to the listed company’s board may be regarded as inside information depending on the firmness of the approach. In a recent ruling relating to inside information in connection with a takeover, the FSA stated that even an indicative offer should be considered sufficiently serious to be deemed inside information. In the present case, the indicative offer was made by a consortium of a global financial service group and three large Danish pension funds, and was made after a thorough examination of the company and the Danish market. In addition, the indicative offer was already fully financed.

Public Takeover

For public takeovers, the Danish Takeover Order stipulates that a takeover offer must be made public. A bidder launching a voluntary offer must disclose its intention to do so as soon as possible following the bidder’s decision to submit such offer. In the case of a mandatory offer, the bidder must disclose the obligation to launch a mandatory offer as soon as possible after the bidder’s acquisition of a controlling interest (see 6.1 Length of Process for Acquisition/Sale for the definition of “controlling interest”).

As regards the manner in which the announcement must be made, the Danish Takeover Order prescribes that this must be by means of a notice which, via electronic media, reaches the public in the countries where the target company’s shares are listed on a regulated market.

In the event of an issuance of shares in an M&A transaction, the following types of disclosure are relevant, depending on the type of transaction.

• Mandatory offer – in a merger involving listed companies, the bidder must launch a mandatory offer if the issuance of shares results in an acquisition of a controlling interest in a listed company. In such event, the bidder must disclose the obligation to launch a mandatory offer.
• Prospectus – for public offers exceeding certain minimum thresholds, there is an obligation to publish a prospectus. However, this obligation does not apply to securities offered, allotted or to be allotted in connection with a takeover, merger or demerger, provided that a document containing information about the transaction and its consequences for the issuer is made available to the public.
• Corporate law merger documentation – in the event of a merger, the Danish Business Authority must receive a drawn-up merger plan and a declaration by valuation experts on the creditors’ position or, if such documents have been deselected, information surrounding this. Upon receiving such notification, the Danish Business Authority will publish this.

In private and public M&A transactions, the bidder is not required to disclose or produce financial statements for the bidder.

However, in public M&A transactions the bidder is required, as soon as possible and no later than four weeks after the publication of a voluntary offer or the acquisition of a controlling interest, to publish an offer document which must include information on the target company’s current activity and key figures from the most recently published financial statement of the target company, as well as the most recently published financial expectations for the target company in the current financial year.

Private M&A Transactions

In private M&A transactions, no transaction documents are required to be disclosed in full.

Public M&A Transactions

In public M&A transactions, the takeover document and a statement from the target company’s board of directors containing the board of directors’ reasoned position on the offer must be disclosed. No other transaction documents need to be disclosed in full. However, as the takeover document must contain information on the parties, the offer price, the consideration, any conditions (only in a voluntary offer) and applicable law, etc, certain main terms of other transaction documents will be included as such in the takeover document.

The duties of the directors are primarily owed to the shareholders of the company as a whole. This also entails that the management is not allowed to take any action that is likely to provide certain shareholders or others with undue advantages over other shareholders or the company.

In a public takeover, it is not common for the board of directors to establish special or ad hoc committees.

Corporate mergers between one or more listed companies are rarely seen, but in such cases it is common to establish a special committee to:

• negotiate the deal and plan for integration;
• assess separation issues and synergies; and/or
• handle conflicts of interest.

Case law in recent years has strongly indicated the application of the business judgement rule under Danish Law. In cases concerning management liability, the Danish Supreme Court has stated that the court should be cautious regarding holding management liable when a business judgement has been made. This caution presupposes that the management was acting solely in the interest of the company and that the business judgement was made on a well-informed basis.

Although there is no case law concerning the business judgement rule in takeover situations, it is presumed that the same caution would apply under those circumstances.

Any transaction – private or public – will generally require external legal involvement. Financial advisers will usually also be involved together with an accountant.

In public M&A transactions, it is common for the management of the target to retain independent financial advisers to issue fairness opinions and provide support concerning valuation issues.

The principles of conflict of interest among directors and managers are well established, and are regulated in the Danish Companies Act.

Under the Danish Companies Act, no member of the board of directors or the executive board may take part in the process concerning an agreement between the limited liability company and the member themselves, or in discussions regarding lawsuits against the member themselves. Furthermore, a member is not allowed to participate in discussions regarding agreements between the limited liability company and any third party, or in discussions about lawsuits against a third party, if the member has a material interest which may conflict with the interest of the company.

While the rules of conflict of interest do not apply to shareholders, the members of the management appointed by a majority shareholder may be in a conflict of interest in situations where the interests of the limited liability company and the majority shareholder are in conflict. The consequences are that a member of the management may be obliged to withdraw from the board in consideration of certain transactions.

Advisers of the company will usually ensure that conflict considerations are made prior to their agreeing to be retained in the first place.

Hostile tender offers are permitted in Denmark, but they are not common since bids usually follow a formalised auction process and (friendly) negotiations with the board of directors of the target company.

Use of defensive measures by the directors is allowed under Danish law. Subject to the duties of the management, the directors must, however, be aware of potential risks of becoming liable when utilising aggressive measures, such as when issuing new shares to a friendly third party or using “poison pills”. Other and less aggressive ways of using defensive measures include denying a due diligence review and recommending that shareholders decline the tender offer.

As hostile tender offers are generally quite uncommon in Denmark, so too are these measures.

In terms of reactive measures, the most common response to a hostile tender offer is for the management to search the market for competing bidders and to create a formalised auction process in an effort to ensure price competition.

It is also not uncommon for companies to have precautionary measures incorporated into the articles of association (eg, an authorisation for the board of directors to make a directed share issue); and, especially in the financial sector, it is common for voting rights ceilings to be included. It is also fairly common in larger, formerly family-owned businesses to have separated classes of shares. This way, B shares are usually listed on a regulated market, while A shares with stronger voting rights attached remain in the hands of the original owners.

The COVID-19 pandemic has not changed the use of defensive measures.

When enacting defensive measures, directors must have due regard to the corporate benefit doctrine, according to which any action taken by the directors must be in the interest of the company (ie, generally the collective interest of the shareholders in the company). That being said, there are no specific rules governing directors’ duties in relation to defensive measures.

In practice, the board of directors will often consult strategically important shareholders to ensure that they support the initiatives taken by the board of directors. However, this must be done in accordance with the duty to not take any action that is clearly capable of providing certain shareholders or others with an undue advantage over other shareholders or the limited liability company. Certain defensive measures must be approved by the shareholders at a general meeting.

Naturally, the potential responsibility of the board of directors is greater if it actively seeks to prevent a takeover offer being made or implemented than if it refrains from actively supporting the takeover offer.

As long as the directors work loyally in the best interest of the shareholders and the company as a whole, directors are deemed to have a fairly broad ability to oppose business combinations.

In the context of public takeover offers, whether to deny or accept an offer is primarily left to the shareholders. In practice, however, directors are left this broad ability to assess whether an offer is in the best interest of the shareholders and the company, since a bidder, if they are met with resistance from the management, will have the option to approach the shareholders directly. The board of directors will usually hire financial advisers in order to assess the offer and, optionally, formalise an auction process to create price competition.

Litigation in connection with public M&A deals is very uncommon in Denmark, and Danish private M&A deals are generally subject to arbitration clauses, due to the confidential nature of such proceedings. Therefore, very little public information is available in respect of M&A litigation.

In 2014, a Danish company (OW Bunker) was listed on Nasdaq Copenhagen with a value of roughly DKK5 billion. Only seven months after the listing, the company went bankrupt. As a consequence of the bankruptcy, various civil cases primarily relating to prospectus liability are currently pending in the Danish courts.

Litigation related to private M&A will in general relate to breach of warranties or purchase price calculations in closing account deals – ie, post-closing.

There have been no public disputes between parties with pending transactions in early 2020.

Shareholder activism is seen more and more in the Danish market, particularly in respect of larger companies, and generally in sectors such as pharma, banking and energy.

Shareholder activism in the Danish market is primarily seen taking place at annual general meetings of the listed companies, where shareholders ask critical questions and challenge management decisions.

Danish pension funds and international and national shareholder organisations are the most active shareholders in the Danish market.

When shareholder activism is seen in Denmark, it is mostly related to the composition of the management, ESG and compliance matters, remuneration and observance of disclosure obligations.

Activists rarely try to interfere with the completion of announced transactions in Denmark.