Corporate M&A 2024 Comparisons

The Norwegian M&A market continued its downturn from 2022, mostly due to continued uncertain macroeconomic and geopolitical instability and further increases in interest rates and inflation. The trend of very few new listings continued from 2022 into 2023.

Private equity players are active in the Norwegian market and are involved in well over 50% of all M&A transactions, on either the sell side or buy side, or both.

Also of note is an increasing trend of “continuation vehicle” transactions among private equity, although also some of these transactions have been dragged out due to valuation issues.

In the Norwegian market, a deal size exceeding EUR200 million is considered a rather large transaction. Although the majority of reportable transactions have a deal size of between EUR35 million and EUR100 million, we are seeing more and more transactions in the region of EUR100 million to EUR400 million.

As in 2022, there were quite a few mid-market transactions in 2023, predominantly driven by add-on acquisitions by private equity-backed portfolio companies. Larger transactions picked up slightly compared to 2022 and we also saw a higher number of public-to-private transactions, some of which were major. Most notably, a tender offer for Oslo Stock Exchange-listed Adevinta ASA, the online classifieds company, at a deal value of USD13.3 billion (still subject to regulatory approval), was launched in December 2023 by a consortium led by Blackstone and Permira. A large private infrastructure transaction was the sale of the ferry company Fjord1 to a consortium of international private equity funds. All four major ferry companies in Norway are now owned by international funds.

The number of IPOs remained low and consistent with 2022. On the junior exchange (Euronext Growth, a multilateral trading facility) there were significantly fewer listings in 2023 than in 2022. Many of the companies that were listed on Euronext Growth during 2020-2021 have seen significant declines in their valuations.

As always in the Norwegian market, there is active interest in Norwegian targets from abroad across most sectors.

As for capital raises, there were a handful on the Oslo Stock Exchange in 2023. The large majority of these were conducted as private placements towards selected major shareholders and institutional investors, typically followed by a so-called repair issue allowing retail investors to participate. The main formal rule under Norwegian law is that capital raises should be conducted as rights issues with listed subscription rights. The rationale for deviating from the main formal rule is that the issuer can secure its capital raise in a short time period. The practice of private placements does receive some criticism from various investors and shareholders who say they are “missing out” on opportunities as it violates the obligation for issuers to treat shareholders equally. The Norwegian Financial Supervisory Authority (NFSA) has last year been looking into the practice, and has during local supervision of managers running the equity processes further considered the issues. The NFSA has in 2024 written a letter to the Ministry of Finance proposing to appoint a Governmental Committee to consider the need for regulatory reform on the topic.

It is noteworthy that in 2023, we saw several public legal disputes in the Norwegian public takeover market. This may be a trend. The most significant one is the dispute concerning the failed takeover offer for Instabank, which is described in 3.1 Significant Court Decisions or Legal Developments. Further, there are disputes concerning private placements versus rights issues. The listed Solstad Offshore ASA (a leading provider of specialised offshore tonnage to the global energy markets) conducted a complex restructuring in 2023 resulting in Aker becoming majority owner of the assets of the issuer. Certain significant minority shareholders in Solstad Offshore argue that the restructuring should have taken place by a rights issue or by otherwise providing minority shareholders with a higher stake in the restructured group and that the Board of Solstad thus favoured one shareholder. Those minority shareholders have now stated that they will commence a class action against the Board. Such lawsuits have been highly uncommon in the Norwegian market.

In 2023, the most active sectors were technology, oil and gas and related services, fish farming, shipping and renewable energy (hydro and wind).

Almost all transactions are structured as acquisitions of public or private limited liability companies, ie, sales of shares. There are occasional asset transactions, but such transactions are typically motivated by there being material risks in taking over the legacy in a target company or in distressed situations. On the buy side, the buyer typically sets up a Norwegian BidCo structure, although there is a tendency for international funds to invest directly from abroad. This may be partly due to the Norwegian rules on interest deduction for tax purposes that were introduced some years ago.

Only a few transactions are completed by way of statutory mergers and the like. Such structures are, however, sometimes used in industrial public company settings between domestic entities.

M&A activity is in general not supervised by regulatory bodies in Norway. The Norwegian Competition Authority (NCA) is the only “general” regulator concerned with private M&A (see 2.4 Antitrust Regulations).

Takeover transactions of companies listed on regulated markets (Oslo Stock Exchange and Euronext Expand) are subject to the review of the Oslo Stock Exchange (Oslo Børs), which since 2019 has been a part of Euronext. The NFSA was set to take over this role from 1 July 2023, but this has been delayed.

There are a number of sector-specific regulators such as the NFSA within the banking, insurance and asset management industries, and the Norwegian Water Resources and Energy Directorate in relation to energy and natural resources. There is also significant sector regulation within agriculture and the oil and gas industry as well as national security issues within several sectors (see 2.6 National Security Review).

There are no general restrictions on foreign investments in Norway. There are, however, various sector-specific regulations which prohibit non-Norwegians from owning certain assets. A significant asset class in this respect is Norwegian hydropower assets, of which foreigners are prohibited from owning in excess of one-third.

There are also restrictions within the defence industry and on certain important infrastructure assets; however, the restrictions do not apply per se to all foreigners but are considered on a case-by-case basis.

Norway, as part of the EEA, is subject to the EU Merger Regulation, which applies provided the transaction meets the turnover thresholds specified in that Regulation.

There are also specific Norwegian merger control rules that apply and there is a mandatory filing requirement if the following thresholds are met:

• the combined annual turnover in Norway of the undertakings concerned exceeds NOK1 billion; and
• at least two of the undertakings concerned have an annual turnover in Norway exceeding NOK100 million.

There is no specific deadline for filing, except that filing must be completed prior to implementation of the transaction. Transactions cannot be completed prior to clearance, although the NCA may, upon application, grant a partial or full exemption from this obligation.

The NCA also has the authority to order notification below these thresholds, including minority acquisitions (where no controlling influence is achieved), which is a frequently used tool in the NCA’s merger control. As of 1 January 2024, the NCA will continue the duty of disclosure for a number of players in the markets for power, fuel, waste, newspaper, laundry and garden centres, concrete, alarms, electric car charging, sports equipment, accounting services and online marketplaces. In addition, certain listed grocery retailers have a duty of disclosure until 31 March 2026.

Voluntary Notifications

Parties may voluntarily file a notification (in situations where the above turnover thresholds are not met) and are encouraged to do so if the combined entity will become a dominant entity in the market. In addition, the NCA may order the submission of a notification for a period of up to three months after the transaction was signed or control was achieved (whichever is first) – even where the thresholds set out above are not met.

Noteworthy Recent Merger Control Matters

In 2020, the NCA required a filing of the Norwegian media group Schibsted’s purchase of Nettbil AS, which was an internet-based marketplace for used cars, although the transaction was under the mandatory reporting thresholds. Schibsted owns the largest internet-based general marketplace – Finn – which also advertises used cars. The decision, which was upheld by the Competition Complaints Board, was appealed to the Court of Appeals and subsequently the Supreme Court, which allowed the transaction to go forward as Nettbil and Finn did not operate in the same market. This decision of February 2023 therefore seems to limit the scope of the merger control/right for the NCA to reject transactions.

In May 2023, the NCA blocked a transaction between major local players ØB Group AS and AS Betongvarer, within the market for ready-mixed concrete in Folgefonnhalvøya in Norway. The costs of shipping ready-mixed concrete are high, and ØB Group and Betongvarer are the only suppliers of ready-mixed concrete with concrete plants in the local market. Other players were based further away and due to the high transportation costs had a competitive disadvantage. The NCA feared that ready-mixed concrete customers on the Folgefonn Peninsula would have limited alternative suppliers to choose from after the acquisition and that reduced competition could lead to increased concrete prices in this area.

In December 2023, the NCA cleared the airline Norwegian’s purchase of another Norwegian airline company, Widerøe. This decision came after a thorough investigation which went to phase two, before the NCA decided that there were insufficient grounds to conclude that the transaction would significantly impede competition in the Norwegian aviation market.

The NCA also during 2023 approved a number of other M&A transactions, some of which were subject to various conditions.

Labour law regulations are quite relaxed in Norway with respect to acquisitions of Norwegian companies. Norwegian labour law has a number of provisions that provide employees with the right to be involved in the business, for instance, the right to appoint directors to the board of a company. Such employee representatives are “true directors” who get involved when a target board gets involved in an M&A transaction. Unions are also commonplace in Norwegian companies, in particular in traditional industries. The unions do not have the right to veto or delay transactions.

Share Transactions and Bargaining Agreements

In share transactions where the target company regularly employs at least 50 employees, the target company must both inform its employees about issues of importance for the employees’ working conditions and consult with elected representatives of the employees. Collective bargaining agreements may also include information and consultation obligations.

Consultation should take place prior to any firm decision being taken and should therefore occur as early in the process as is required in order for a meaningful consultation to take place – ideally before signing. In practice it is very often done immediately after signing.

An asset deal will constitute a TUPE transfer. In an asset deal, the previous employer and new employer are obliged, as early as possible, to inform and consult with elected representatives of the employees, with a view to reaching agreement. Both the former employer and the new employer are also obliged to inform the affected employees as early as possible. The aim is to provide the employees with an opportunity to influence the decision.

There is currently no general national security review process in relation to acquisitions of targets in Norway. However, the Security Act which entered into force in 2019 gives, among other things, the authorities the right to request notifications for approval of acquisitions when targets (i) handle classified information, (ii) have control of information, information systems, objects or infrastructure which are of vital importance for fundamental national functions, or (iii) engage in activities that are of vital importance for fundamental national functions. Typically, this may apply to undertakings that play a particularly important role in maintaining key societal functions and interests, such as infrastructure for key utilities such as water and power, electronic communications, defence, health, etc.

The purpose of the Security Act is, among other things, to protect Norway’s sovereignty, territorial integrity and democratic system of government and other national security interests, as well as to prevent, detect and counter activities which present a threat to security. A key element in ensuring this is ownership control enshrined in the Security Act, where the intention is to prevent unwanted parties from gaining insight, influence and/or control over information, values and functions that are of importance/relate to national security. Ownership control pursuant to the Security Act entails that there is a duty to notify when acquiring a qualified ownership interest (currently one-third) in undertakings which are made subject to the Act. Which undertakings are subject to the Security Act is currently determined by decisions from the respective ministries. This entails that these undertakings are then obliged to establish a proper level of safety.

However, Norwegian authorities may intervene against a transaction, irrespective of thresholds or whether a company has been made subject to the Security Act’s filing obligations. The purpose of the right to stop acquisitions is to give the authorities an opportunity to control ownership “[a]ctivities that are of vital importance for fundamental national functions” and typically encompass critical infrastructure comprising targets that provide systems, assets, processes, technologies and/or services which are necessary to uphold certain socially important functions in, inter alia, energy and health.

This happened in the Bergen Engines case relating to Rolls-Royce’s decision in February 2021 to sell the engine manufacturer Bergen Engines AS to the Russian company Transmashholding Group (TMH). Bergen Engines manufactures, among other things, engines for Norwegian and US military vessels, which led to discussions on the potential consequences such a sale could have for national security interests. The government decided to stop the sale pursuant to the Security Act, partly because information and technology could help strengthen Russian military capabilities and exports without Norwegian export control authorities being able to uncover it. In addition, such a sale would include a large property with significant buildings strategically located in Bergen and defence installations of security importance. In the proposal for the amendments, the government pointed out that the Bergen Engines case illustrated how challenging it is to get an overview of potential risks in a complex value chain with businesses, suppliers and subcontractors across sectors and national borders.

If an acquisition causes a “not insignificant” risk to national security interests, the Norwegian government may block the transaction, or decide that the investment may only be implemented subject to conditions.

Recent Developments

Given some recent geopolitical developments, national security issues, ultimate beneficial ownership issues and sanction rules are in focus in a large percentage of all M&A activities.

During 2024 it is expected that the adopted but not yet implemented amendments to Chapter 10 of the Security Act will enter into force. The changes entail, inter alia, that the scope of application of the Security Act will be expanded so that undertakings that are significant for fundamental national functions or security interests may be subject to the provisions of the Act on ownership control, and that the threshold for the obligation to notify acquisitions will be lowered (10%).

The government is in parallel considering amendments to the Security Act that would tighten governmental control. There is an ongoing consultative process concerning a new Investment Control Act to replace Chapter 10 of the current Security Act and the establishment of a separate Investment Control Authority. The view is that a new Investment Control Act should be somewhat more aligned with the EU Foreign Direct Investment Screening Regulation (EU) 2019/452. The Ministry of Justice has indicated that a new legislative proposal will be sent to parliament before summer 2024. The core of the proposal is that the new Investment Control Act should apply to all investments in security-sensitive sectors, ie, companies that are suppliers to important societal functions, companies that produce or possess critical technology and companies that produce or possess certain critical raw materials.

There have not been any significant court decisions in the last three years relating to M&A. Most M&A disputes are subject to arbitration and decisions are, as a rule, kept confidential.

In February 2024, Oslo City Court rendered a decision concerning the extent of a condition precedent in a transaction agreement entered into in February 2022 between shareholders/sellers of  Instabank ASA, a bank listed on Euronext Growth (a multilateral trading facility), and the purchaser, the Danish bank Lunar Bank A/S. Lunar Bank had provided a takeover offer on the basis of an offer document, which had been accepted by shareholders of Instabank. The offer and transaction agreement included customary conditions precedent, including approval by the NFSA with a drop-dead date of 30 September 2022. Lunar Bank had no financing condition and had stated that it had sufficient funds to close the transaction. Lunar Bank applied for approval on 7 February 2022. Both Danish and Norwegian regulators had provided guidance to Lunar Bank that the bank would have to increase its capital to comply with capital requirements of around DKK650 million in order to obtain approval. At the time the NFSA considered the application, such capital had not been raised and the NFSA thus decided to withhold approval on 12 May 2022. Lunar Bank thereafter continued its efforts to obtain further capital, but this proved impossible. Lunar Bank therefore on the drop-dead date informed that the transaction could not be completed referring to the lack of approval from the NFSA. The shareholders then terminated the transaction agreement and, following that, initiated legal proceedings concerning material breach by Lunar Bank claiming compensation for their losses (which constituted the delta between the offer price and the actual share price following cancellation of the transaction).

In short, the Court found that Lunar Bank had breached the transaction agreement and was liable for the sellers’ loss. The Court argued that Lunar Bank could not rely on the NFSA approval condition precedent, because the Court found that it was a reasonable and anticipated requirement that Lunar Bank would have to meet the capital requirements in order to obtain the approval, and the Court also found that if Lunar Bank had met the additional capital requirement of DKK650 million, it would have received approval from the NFSA.

As regards the loss calculation, the Court found that the delta which best reflected the sellers’ loss was the delta between the offer price and the VWAP the first week after it became known to the market that the transaction would not be completed. Corporate shareholders, which are subject to tax exemptions on capital gains on financial instruments but not on revenue derived from damage claims, were also compensated for the tax effect (22% corporate income tax in Norway).

Lunar Bank has appealed the decision.

As to general legal development, there have been several disputes concerning how to calculate a loss due to breach of sellers’ warranties in share purchase agreements.

Norway’s takeover rules implement the Takeover Directive (2004/25/EF) through the Norwegian Securities Trading Act as of June 2007.

There have not been any significant changes to takeover laws or practices in the last 12 months. However, the full implementation of the Market Abuse Regulation (MAR) came into Norwegian law as of 1 March 2021, and resulted in some practical adjustments concerning “wall-crossing” procedures, the drawing up of insider lists, etc.

One thing to note is that companies listed on the Euronext Growth platform (which is a multilateral trading facility and not a regulated market) are not legally subject to the takeover rules. However, the “common practice” in the market seems to be to follow the main rules and procedures laid down in the takeover rules (except for the regulatory requirements such as notification of trades/flagging, mandatory bids, etc).

In the Norwegian market, stakebuilding is not common, but it is used as a strategy sometimes. A more customary approach is to approach large shareholders prior to a bid launch and seek irrevocable undertakings. In general, it is difficult to persuade shareholders to accept to enter into “hard” irrevocable undertakings, as “soft” irrevocable undertakings are the norm (see 6.11 Irrevocable Commitments).

The material shareholding disclosure thresholds (up or down) are regulated in Chapter 4 of the Norwegian Securities Trading Act and implement the Transparency Directive (2004/109/EC). The rules apply to shares which are tradable on a regulated market with Norway as home state.

The reporting thresholds are 5%, 10%, 15%, 20%, 25%, one-third, 50%, two-thirds and 90% of the share capital or a corresponding part of the votes due to acquisition, disposal, share lending, redelivery of borrowed shares or another event (for instance, a share issue diluting a shareholder, resulting in the crossing of a threshold). The rules also apply to rights to shares, including borrowed shares, convertible instruments, options, derivatives and subscription rights.

The reporting thresholds are regulated in the law and there is no practice of deviating from reporting thresholds in articles of association or by-laws. Although a “private” lower reporting threshold in theory could be regulated in the articles of association, it would be a different kind of reporting obligation, and any non-compliance by investors would not have the same kind of consequence.

Regarding hurdles to stakebuilding, there are no particular rules apart from possible restrictions due to access to “inside information” and the mandatory tender offer rules and as laid out in the MAR (see 6.2 Mandatory Offer Threshold).

Dealings in derivatives are allowed and are common in the Norwegian market.

Derivatives and other financial instruments (most commonly, convertible bonds) giving rights to underlying shares listed on a regulated market are subject to the same disclosure obligations as shares (see 4.2 Material Shareholding Disclosure Threshold).

Additionally, the European Market Infrastructure Regulation (EMIR) requires that all dealings in OTC and exchange-traded derivatives are cleared and reported to the European Securities and Market Authority’s register in accordance with the EMIR regulation.

The EU short selling regulation (Regulation EU 2012/236 SSR) is implemented in the Norwegian Securities Trading Act and applies in Norway. The NFSA is the Relevant Competent Authority.

When disclosing the crossing of a threshold, an investor acquiring shares does not have to make known the purpose of the acquisition or further intentions. However, if an investor/bidder launches a voluntary offer, the takeover rules lay down information requirements for the voluntary offer document. This includes commenting on the purpose of the acquisition and future plans for the target company as well as what effects the completion of the offer will have on the employees as well as the legal and tax consequences of the offer.

MAR has from 1 March 2021 been fully implemented into Norwegian law by a reference in the Securities Trading Act, and all aspects of MAR are Norwegian law. An issuer (target) listed on a regulated market or a multilateral trading facility (ie, Euronext Growth) is required to make timely disclosure of “inside information” that directly concerns the issuer.

The issuer may, however, decide to postpone the disclosure of such inside information if immediate disclosure is likely to prejudice the legitimate interests of the issuer, the delay is not likely to mislead the public and the issuer is able to ensure the confidentiality of such information. In practice, in a friendly situation an issuer will, when entering into discussions with a bidder, use its right to delay public disclosure. An issuer is in such circumstance under the Oslo (Euronext/Stock Exchange) Rule Book obligated to report the situation to the Oslo Stock Exchange which, typically in such situations, will follow trading patterns closely.

In a takeover situation, the bidder and target issuer will co-ordinate public disclosure and it typically takes place immediately following signing of the transaction agreement between issuer and bidder.

In a hostile situation, the issuer may, on the basis of the above main disclosure rules, decide to make public the fact that a possible bidder has approached the issuer with an indication to bid.

Previously, there was a tendency in the Norwegian market for issuers to withhold inside information (imminent launch of bids) too long as this was required by the bidder. With the implementation of MAR in the Norwegian rules and now as direct law in Norway, this “issue” has to a large extent been resolved.

In public takeovers, it is often expected that the bidder will conduct a preliminary due diligence based on publicly available information before advanced negotiations are commenced with the issuer target. The obligation to launch the offer is normally subject to a confirmatory due diligence which must be completed before a transaction agreement is executed and/or the bidder launches the tender offer.

There are often discussions/negotiations concerning the scope and timeline for the due diligence. The due diligence often comprises legal, tax, financial and operational matters. The typical time span is two to three weeks. Issuers are, typically, very focused on not becoming involved in dragged-out processes which divert time from other strategic and operational matters.

Both standstills and exclusivity are typical matters for negotiation. If exclusivity is granted, it is typically for rather short periods of time as the issuer wants to retain flexibility. The standstill obligation is often required by the issuer in public transactions and is of particular importance when disclosure of quarterly reports/management accounts to the bidder is deemed to be inside information prior to public release.

It is quite common to detail tender offer terms in the definitive transaction agreement with the issuer. Further, it is also seen that well-advanced tender document drafts are attached to the transaction agreement. The issuer wants to protect itself against the bid turning out to be less attractive than anticipated. However, the bidder wishes to ensure that the issuer’s board recommends that its shareholders accept the offer.

The process for acquiring/selling a business in Norway typically takes two to four months from “launch” to possible buyers until the signing of the share purchase agreement. However, the process varies significantly, and many business sales take much longer. The last couple of years have seen an increase in time span for various reasons, such as requirements for more in-depth due diligence and increased tensions concerning agreement on commercial terms. Given the quick rise in interest rates globally as well as more general uncertainty in the marketplace, we see more discussions between parties on pricing than earlier years. This also results in prolonged transaction processes.

The mandatory offer threshold in Norway is ownership of one-third of shares or votes in an issuer listed on a regulated market with Norway as home state. The mandatory offer obligation is repeated if thresholds of 40% and 50% are passed later as a result of subsequent acquisition of shares.

In public-to-private transactions, cash consideration is preferred for several reasons both by the selling shareholders and, to some extent, by the bidder. Using shares as consideration creates a number of complexities concerning valuation of consideration shares as well as tactical considerations, mainly as the following mandatory tender offer must be an all-cash offer. It also involves significantly more burdensome documentation as there will typically be prospectus (or similar document) requirements also on the bidder’s consideration shares.

Pursuant to the Securities Trading Act, a mandatory tender offer may not include any conditions. A takeover process is therefore almost always structured by way of the bidder first issuing a voluntary tender offer, in which a bidder is free to set conditions. Common conditions are:

• that the bidder received acceptances bringing the bidder up to more than 90% ownership upon completion (sometimes seen as an ownership condition of more than 50% or more than two-thirds);
• that required regulatory approvals are obtained; and
• that there is no material adverse effect.

The most common minimum acceptance condition is more than 90%. There are several reasons for this. Firstly, it is the threshold for the bidder to be able to conduct a squeeze-out, and thereby become a 100% owner, which also results in a swift process to de-list the issuer from the stock exchange.

Secondly, owning more than 90% also allows for tax consolidation.

The main relevant control threshold in Norway is more than 50%, which entitles a shareholder to appoint the board of directors, decide on dividends, consolidate the accounts of the target company and in general instruct the board in relation to the operations of the company. In practice, however, such control in a listed company typically kicks in at lower ownership levels due to the fact that a significant number of shareholders do not attend or vote at general meetings.

The next control threshold is two-thirds ownership, as an owner can then pass various material corporate resolutions, such as changes to the company’s capital, and mergers and changes to the articles of association.

A voluntary tender offer can contain a financing condition, but such a provision will clearly make the offer less attractive, and it will be more difficult to obtain irrevocable undertakings from the major shareholders prior to launch of the offer. In Norway, even if there is no financing condition, a bidder issuing a voluntary offer does not need to prove certain funds, although this often is a prerequisite for the issuer’s board to recommend the transaction. In the voluntary tender offer document it is customary to provide certain information concerning the contemplated financing of the offer.

A mandatory tender offer requires certain funds in the form of a bank guarantee. There are detailed legal regulations concerning the content and wording of such guarantees and the guarantee must be pre-approved by the takeover authority.

In a friendly transaction process, the parties typically enter into a transaction agreement prior to launch of the offer by the bidder. It is quite customary that such transaction agreement includes various deal security measures, but target board is always considering its fiduciary duties with respect to securing the best possible transaction terms from the current bidder or any alternative bidder which may surface during the tender offer period.

The legal framework for tender offers in Norway makes ‘force the vote’ provisions superfluous, as the target company as such does not have any power as to whether the offer is accepted or not. The decision lies fully with the shareholders. The transaction agreement, however, typically includes provisions in which the board commits to recommending the offer to its shareholders. The background for this is partly that under the takeover rules the board has a duty to provide a statement as to the offer. In not-so-friendly bid situations, it often occurs that the board in its statement to the shareholders recommends that the shareholders do not accept the offer.

Matching rights are quite common, while break fees are not often a part of such agreements. One significant reason for why break fees are not commonly used is that the Oslo Stock Exchange has issued guidelines in practice only allowing for break fees, which cover bidders’ reasonable costs and expenses in connection with the transaction process. Even though such amounts may be significant, it typically does not serve as a deterrent for competing bids. The target board is typically also concerned about complying with its fiduciary duties if agreeing to significant break fees.

In Norway it is very uncommon to have specific governance rights provided to certain shareholders in listed companies, as this typically also conflicts with the equal treatment of the shareholders doctrine. As stated in 6.5 Minimum Acceptance Conditions, a bidder having more than 50% can appoint the directors, and correspondingly a shareholder with less than 50% may not require a board seat.

In a friendly situation, however, it is rather common that a material minority shareholder is offered a board seat or board observer role via discussions with other significant shareholders or by being proposed by the nomination committee. All shareholder-elected directors are elected by the general meeting of shareholders. In some larger companies the shareholder-elected directors are appointed by a “corporate assembly” (bedriftsforsamling) and this body’s shareholder-elected members are in such cases elected by the general meeting.

Shareholders may vote by proxy and issuers have, in the last few years, made significant efforts to make this as easy as possible. A proxy can, under Norwegian company law, always be withdrawn up to the time of the actual general meeting.

A shareholder owning in excess of 90% of the shares may initiate a squeeze-out process and thus immediately become owner of all shares in the company. The process is initiated by a board resolution in the bidder and notice sent to all other shareholders concerning the squeeze-out. There is a requirement that the bidder has provided a bank guarantee for the total squeeze-out amount (share price times number of shares subject to the squeeze-out) by the time the notice is submitted.

The minority shareholders have a two-month period in which to dispute the squeeze-out price. It is, however, important to note that the bidder upon the resolution to carry out the squeeze-out – irrespective of a disputed share price and prior to the two-month period – becomes owner of the shares, and thus from such date has full control over the target company and may initiate the de-listing from the stock exchange.

A dispute with the minority shareholders subject to the squeeze-out will thus only concern the amount to be paid for the acquired shares. In events where there has been a customary takeover process with acceptances of most shareholders and the squeeze-out is initiated within three months from the end of the offer period, the main rule is that the squeeze-out price shall be the same as the tender offer price.

In more complex situations, in which the fact that a bidder obtains in excess of 90% does not itself indicate that the offer price was on an arm’s length basis, the courts may conclude on a higher price and the bidder will be bound to pay such amount to the minorities.

Other mechanisms to obtain ownership of additional shares can be mergers and combinations with other assets of the majority shareholder and/or directed share issues to dilute minorities to under the 10% threshold. Typically, such processes create issues concerning arm’s length terms and often the bidder instead waits a certain period and reverts with new offers and gradually obtains more than 90%.

As discussed in 4.1 Principal Stakebuilding Strategies, it is quite common to obtain irrevocable commitments to tender. The customary process is that negotiations are ongoing for a while with representatives of significant shareholders (who are often also directors of the target company) and discussions concerning the irrevocable commitments are part of the main discussions. Typically, both target and bidder want to secure additional irrevocable commitments also from “professional outsiders”. Such investors (often fund managers) will typically be approached a couple of days before planned launch after having agreed to become insiders.

Typically, the irrevocable commitments are “soft”, meaning that they lapse as not binding if a better offer is made and not matched by the initial bidder.

It follows from Chapter 6 of the Securities Trading Act that when a bidder has resolved to make a voluntary bid, the takeover authority and the target company shall immediately be notified and the takeover authority shall make information about the offer public. The target company is also obligated to immediately make the offer public. When transaction agreements are entered into, there is a co-ordinated public announcement.

Disclosure requirements in connection with issuance of shares in a business combination depend heavily on the situation. If shares are offered to more than 150 persons, and the value thresholds are met while the exceptions do not apply, the issuer will have to prepare a full EU prospectus in compliance with the Prospectus Directive.

However, if shares are only issued to one other party in a business combination, there are no specific disclosure requirements. The issuer does, however, have a general duty to provide the subscriber with key information regarding the issuer and its business. Otherwise, it is up to the receiver of shares to consider the extent of its due diligence.

If the business combination is done by way of formal statutory merger, the parties will have to enter into a merger plan and have this approved by the respective general meeting of the two (or more) merging entities. There are detailed rules concerning content of the merger plan and its exhibits, which includes inter alia the latest annual reports and accounts, valuation principles and consequences for the merging entities and their employees.

There is no requirement for the bidder to include financial statements concerning itself (except when it is required to draw up a prospectus). Typically, bidders include general information and key financial numbers in offer documents.

The transaction agreement and/or other transaction documents do not have to be disclosed in full, although the Oslo Stock Exchange prefers that the entire document is attached. If the transaction agreement is not attached, a rather comprehensive summary of the terms and conditions needs to be included in the offer document.

In general, the directors of a company have a fiduciary duty towards the company and all of its shareholders while also having a general obligation to take into consideration the interests of other stakeholders of the company, such as employees, contractual partners and society at large.

However, in a business combination the primary obligation of the directors will be to maximise share value for the shareholders. There is a general obligation for the board to treat shareholders equally, and in a business combination this principle is very important. A practical issue in this respect is that an acquiring party often requests that a major shareholder in the target company reinvests a part of its proceeds in the acquirer. This is in most cases acceptable, but will often require that the transaction is structured in a certain way.

In listed companies it is quite common to operate with various special subcommittees of the board, for example an audit committee and a remuneration committee. Under Norwegian law, however, the clear starting point is that it is the full board as a collegium which is responsible for all actions or omissions by the board (although the liability is on an individual basis). The concept of special or ad hoc committees is therefore less common than in some Anglo-Saxon jurisdictions. When special subcommittees of the board have been appointed, such subcommittees normally function as preparatory committees for the board.

In business combinations, it is the full board which makes final decisions (sometimes subject to approval by the general meeting), but from a practical perspective it is not uncommon that certain directors are appointed by the full board to participate with members of senior management (typically the CEO and CFO) in negotiations and that such a negotiation team thus forms an ad hoc committee.

As to conflict of interest, the normal procedure under Norwegian law is that the conflicted directors are excluded from the board’s handling of the matters. A special committee is thus not established.

In takeover situations, as mentioned, it is in most cases the shareholders who have the final decision, while the board’s role in practice often is to negotiate the best possible offer on behalf of the shareholders, and then advise the shareholders whether or not to accept the offer. There is no tradition in Norway for courts to be involved at all in relation to takeover situations.

A discontented shareholder may sue the directors personally for its losses, and this could include the delta between a fair price and a price which is too low. However, since it is up to the shareholders to accept the offer, it is very unlikely that such lawsuit will be successful in relation to a public takeover situation.

In relation to an asset sale or sale of a significant subsidiary which has not been subject to shareholder approval, the test is whether the board has conducted a prudent process and assessed the overall considerations in light of relevant circumstances when deciding to transact with a material asset. In such situations, the court is very hesitant to rule that the directors acted negligently and thus are liable to the shareholders.

From that perspective, it is fair to conclude that the “business judgement rule” is a very strong principle in takeover situations.

It is very common for companies to retain outside financial advisers which are mandated to assist the board in business combinations. A key part of such advice is to provide support on valuation issues and issue fairness opinions.

In public-to-private transactions it is mandatory for the board of a target company to retain an independent financial adviser to provide a fairness opinion on the offer, and this is used to support the board’s recommendation to its shareholders with respect to the offer. If the public offer is recommended by the board in a transaction agreement, the stock exchange will further require the target company to obtain an independent fairness opinion from an independent investment bank or auditor.

Legal advisers are also retained by the issuer. Sometimes separate legal counsel is retained by the board. This is, however, not very common.

The principle of conflicted directors having to withdraw from board considerations is a well-established principle and regulated in the Norwegian Companies Act.

Even though, according to the law, the threshold for conflict is rather high, it seems to be rather well established that directors who are related to a possible bidder or acquirer withdraw from the board’s dealing with the transaction.

As to shareholders, the general rule is that shareholders are not conflicted, and are allowed to vote on a subject matter irrespective of commercially being in conflict.

As to advisers, the general view is that advisers manage to keep Chinese walls, but that conflict considerations are made prior to them being retained.

Hostile tender offers are permitted and, although not common (as the success rate typically is much lower than for friendly tender offers), they do occur in the Norwegian market.

As the duty of the directors in general is to maximise value for shareholders and it is the shareholders and not the target company which decides to accept a tender offer or not, defensive measures are rather uncommon in the Norwegian market. Typically, the board will make efforts to invite other possible bidders to the table if approached.

There are also restrictions under Norwegian law when it comes to defensive measures. In the Securities Trading Act there are restrictions for the target company from the date on which it is notified about an offer to issue shares (also in subsidiaries), acquire or sell material assets, be a part of mergers and acquire target company shares. There are, however, exceptions to this rule if the general meeting in advance has approved defensive measures which may be used in case of a future tender offer.

As mentioned in 9.2 Directors’ Use of Defensive Measures, a common measure would typically be the issuing of shares to friendly shareholders or third parties (either for cash or as contribution in kind) who want to retain the company. Less common measures are to not accept the bidder to perform due diligence and/or invite other friendly possible bidders to make an offer to acquire the company’s shares.

The board’s duties when enacting defensive measures is typically to have a commercial rationale for why such measures would benefit the shareholders of the company, typically because the bidder’s offer price is below the true value of the company or that it has reasons to believe that more attractive offers would appear in the future. This should be seen in the context of the company’s overall strategy.

The board would also need to consider the alternative in case a bidder withdraws because of the defensive measures, and be able to defend its decision to implement defensive measures for its shareholders.

The board has the right to try to prevent a business combination occurring. In doing so, it has a fiduciary duty to provide reasonable grounds to support its decision.

The board cannot hinder an offeror making a public offer on the company’s shares. Also, in private companies an offeror can make an offer directly to the shareholders, circumventing the board of directors.

Litigation is fairly uncommon with respect to M&A deals in the Norwegian market.

When there is litigation (or arbitration) it typically relates to damages claims for breach of sellers’ warranties in share purchase agreements. In public-to-private transactions, this is seldom relevant, as it is not market practice for the sellers to give any representations or warranties. Reference is made to the recent court case summarised in 3.1 Significant Court Decisions or Legal Developments concerning the interpretation of a condition precedent in a public-to-private transaction.

In somewhat complex tender offers and squeeze-out situations, litigation may be required to determine the mandatory tender offer price and/or squeeze-out price.

Recently, there have also been some disputes (and some arbitration matters) concerning breach of exclusivity provisions. Typically, a buyer/investor is arguing that a seller/issuer has breached an exclusivity provision with the bidder/investor when the seller/issuer decides to sell to another bidder or let another investor subscribe for a material part of the target company. Although claimants have succeeded with such claims, the damages award typically is limited to cost cover for the process and not the loss of missed opportunity.

As covered in 10.1 Frequency of Litigation, litigation is typically brought post-completion.

In general, there has not been publicity around conflicts due to “broken deal” issues on the basis of COVID-19 or the war in Ukraine. It may be that there are ongoing disputes (typically confidential arbitration matters) concerning “walk-aways”, but our impression is that there are not many of those in the Norwegian market.

Reference is, however, made to the recent court case summarised in 3.1 Significant Court Decisions or Legal Developments concerning the interpretation of a condition precedent in a public-to-private transaction.

Shareholder activism is still not very common in the Norwegian market. However, for some years there has been a focus on senior management remuneration issues as well as supply chain issues and environmental issues. These issues are typically fronted by certain major asset/pension fund managers.

There are also various examples of investors acquiring meaningful minority stakes and thereafter providing strategic market assessments to the board and/or senior management, who then take these into consideration. Such investors sometimes receive an invitation to become directors, and as such participate in the further direction of the company.

Activist investors often have significant views on improvement and restructuring possibilities, and this includes M&A transactions, spin-offs or major divestitures. Occasionally they encourage and succeed in implementing reverse takeovers into listed companies.

In the Norwegian market, it is not typical to see activists trying to interfere with the completion of announced transactions, but sometimes minority shareholders and/or hedge funds position themselves after the announcement of an offer. Such positioning typically takes the form of share acquisitions and/or co-operation to have sufficient shares to prevent the bidder from obtaining a sufficient number of acceptances. The aim is then to await a competitive bid and/or force a revised and higher offer.