Technology M&A 2024 Comparisons

The Danish technology sector continues to experience a relatively high level of M&A activity compared to other sectors with a decent volume of transactions and with a wide spread of transaction values. Towards the end of 2022, the authors saw a general slowdown in the Danish M&A retail market as well as in the real estate market, primarily driven by rising interest levels, general market uncertainty and difficulties in obtaining acquisition financing. However, there is a significant continued interest in Danish assets within industries where Denmark has a strong reputation, including technology. Accordingly, technology transactions – along with pharma/healthcare and renewable energy transactions – seem to account for the majority of Danish transactions in the second half of 2022 and in 2023, and the authors see increasing activity within the fintech space. Due to the inflation and the increasing funding costs, the authors see a stronger focus on and demand for IT companies being able to provide final IT products or services and focus on reducing time to market.

Due to a general slowdown in the M&A market across most sectors in the second half of 2022 and in 2023, it is becoming a slightly more buyer-friendly market. The authors see a trend towards sell-side financed warranty and indemnity (W&I) insurance, vendor financing, earn-outs, escrow arrangements, deferred payments and exclusive processes.

Funding markets have become even more difficult both with respect to traditional bank financing and venture capital. Debt funds have been more active and are expected to play an increasing role while traditional bank financing remains difficult. Start-ups and growth companies have experienced difficulties in raising equity capital, and accordingly, the authors have seen an increase in the use of SAFEs (Simple Agreement for Future Equity), however, the authors note that there is some tax uncertainty related to the issuance of SAFEs.

A number of investment companies controlled by Danish commercial foundations and/or families (eg, Novo Holdings, AP Møller Holding, Augustinus and Kirk Kapital) are still more visible in the Danish market together with major Danish pensions funds, such as ATP, PFA and Pension Denmark. They provide long-term capital, make principal investments in majority and minority stakes and take part in consortium deals as minority investors.

Further, we are experiencing an increased focus on ESG-related topics as well as the impacts from the EU’s digital and data strategies which have entailed new/future regulations on, eg, AI and cybersecurity.

Jurisdiction for Incorporation of Danish Start-ups

Danish founders wanting to incorporate their business most often choose to incorporate themselves through a Danish company with limited liability. The process of incorporating a new Danish company with limited liability can be a swift electronic process and is often completed within 24 hours after beginning the preparation of the company formation documents.

Initial Capital Requirements

The requirement for initial capital depends on the choice of company type. Danish start-ups generally choose to register either as an ApS (private limited liability company) or an A/S (public limited liability company).

• The ApS has a minimum initial capital requirement of DKK40,000 (approximately EUR5,370).
• The A/S has a minimum initial capital requirement of DKK400,000 (approximately EUR53,690).

For both ApS and A/S, a formation fee of DKK670 (approximately EUR90) must be remitted to the Danish Business Authority at the time of incorporation.

Entrepreneurs are typically advised to form an ApS (private limited liability company) as it is the entity form with the lowest initial capital requirement and most flexibility in corporate governance, enjoying a comparatively lighter regulatory burden than other Danish limited liability entity forms.

Early-Stage Finance Providers

Denmark has a broad and active landscape of early-stage finance providers. These include family offices, angel investors, venture funds and the government-sponsored financial institution, Export and Investment Fund of Denmark (EIFO), which is the single point of access for Danish companies who need risk-tolerant government capital.

Documentation Requirements for Financing

Danish law provides a wide range of opportunities for investments either by equity or debt contribution and convertible instruments. In general, there is no mandatory form for documentation. However, an investor will be included in the company’s register of shareholders and will in addition be registered as shareholder in the Danish Central Business Register if the investor holds more than 5% of the share capital in the start-up. Most convertible instruments also need to be adopted in the company’s articles of association.

Venture capital is generally easily available to start-ups in the technology industry. A wide range of sources consisting of both Danish and foreign venture capital funds invest in Danish start-ups. In addition, venture capital can be available through EIFO.

Venture capital documentation is left for the parties to decide on as no specific and centralised standards have been developed. However, between experienced parties in the industry, certain standards have been developed in terms of documentation and process. Further, the standards from, eg, the British Venture Capital Association and the US National Venture Capital Association also impact the standards. In general, there is a tendency to align to international standards when international investors are accepted as material shareholders.

Start-ups are most often incorporated as ApS (private limited liability companies) and usually remain registered under Danish jurisdiction and in the same corporation form until the commencement of an IPO or crowdfunding process is commenced or the occurrence of other specifically motivated events that require conversion to another entity form or jurisdiction. This is due to the flexibility in corporate governance by the comparatively lighter regulatory burden on an ApS than on other Danish limited liability entity forms.

Common Exit Strategies for Danish Start-ups

Sale processes have been the common exit strategy for start-ups in Denmark, where companies are usually sold to strategic buyers or private equity funds. Since the private venture capital market in Denmark is fairly active, and since sale processes require less preparation than IPOs, companies are often sold multiple times privately before an IPO is considered. Accordingly, we do not see a vast amount of IPOs in the Danish market, and the Danish main IPO market is generally not perceived as suitable for growth companies. First North provides a less regulated alternative in Denmark.

Dual-Track Processes Under Danish Jurisdiction

In successful growth companies with substantial valuations, dual-track processes do occur – but in recent years, most dual-tack processes have been completed via trade sale.

When a Danish company decides to do a listing, they often prefer listing on the Danish stock exchange. This is due to the regulatory compliance synergies in being listed on the stock exchange in the same jurisdiction as the incorporation was made. However, we do see some companies exploring the possibility of dual listing in Stockholm, London or New York.

For growth companies, First North provides a less regulated alternative in Denmark, but we have also seen growth companies listing in Stockholm only due to a more suitable investor market.

Despite being listed on a foreign stock exchange, a Danish company will remain subject to Danish law. Therefore, the company will have to comply with both Danish law and the regulation of the relevant stock exchange, resulting in increased complexity. Danish corporate law automatically provides for squeeze-out regulation of minority shareholders following a successful tender offer.

Sales processes under Danish jurisdiction vary between auction processes and bilateral negotiations with a chosen buyer. In recent years, the general trend (given the more buyer-friendly market) has moved more towards bilateral negotiations or an auction that turns into a bilateral process fairly early. However, the sale of technology companies with a substantial valuation or potential is still run as auctions processes.

The parties to a sale of a privately held technology company with a number of VC investors would customarily pursue a sale of the entire company with only active founders and management reinvesting or staying on board as shareholders, however, given the difficulties in obtaining acquisition funding in certain sectors, the authors see several VC investors staying on board or reinvesting.

The majority of the transactions carried out involving Danish technology companies is done by a sale of the company for cash, but there is an increase in stock-for-stock transactions or combinations of stock and cash.

Providers of Representations and Warranties

In a connection with a liquidity event through a sale, the selling shareholders are expected to provide representations and warranties to buyers which would be backed by W&I insurance with no or very little recourse against the sellers (save for fraud and wilful misconduct and breach of fundamental warranties).

The authors do, however, see a few transactions where the management of the target company provides the business representations and warranties (backed by a W&I insurance) and the sellers only provide fundamental warranties. The authors expect the trends toward W&I insurance-backed management warranties to continue.

Holdback

Holdback and escrow arrangements are not customary, but given the more buyer-friendly market such arrangements are seen more often especially in terms of purchase price adjustments.

W&I

W&I insurance obtained by the buyers is customary in the Danish market in both in relation to large cap and mid-market transaction.

Although seen every now and then, spin-offs in the Danish technology industry are not a widely used instrument.

Generally, spin-offs are considered a taxable event resulting in taxation. However, spin-offs may be executed as a tax-free event, eg, a tax-exempt demerger, provided certain requirements are met.

The taxpayer can normally decide whether the tax-exempt demergers may be executed with permission from the Danish tax Agency (DTA) or without permission from the DTA.

General requirements for a tax-exempt demerger with or without permission:

• The remuneration must be in shares which can be supplemented with a cash payment.
• The spin-off date must be the first day in the receiving company’s financial year (retrospective effect).
• If the company subject to spin-off should continue to exist for tax and legal purposes, it is required that the assets and liabilities transferred to the new company constitutes a separate business unit.
• Registration of the spin-off must be done in the Danish Tax Agency’s Efiling system (DIAS) no later than one month after the decision to execute the spin-off has been made.

Specific requirements for tax-exempt demerger without permission:

• A holding requirement of three years must be met, according to which shares in the receiving company cannot be sold for three years post the tax-exempt demerger. This applies to companies owning 10% or more of the share capital in one of the participating companies and not shares owned by physical persons.
• The demerger must be executed at fair value.
• The proportions between debt and assets in the receiving company must be identical to the proportions between the debt and assets in the transferring company (balance adjustment rule). This often requires a binding ruling regarding the valuation.

It should be noted that in the following cases it may not be possible to perform a tax-exempt demerger without permission regardless (four exceptions exist):

• Exception 1:
1. If the transferring company has more than one shareholder.
2. One or several of these shareholders have been participants for more than three years without having the majority of the shareholder votes.
3. These shareholders jointly have the majority of the shareholder votes after the transaction.
• Exception 2:
1. Capital gains on shares are converted to dividend. If only a part of the company is transferred (a branch), the share capital cannot be used to concert an otherwise taxable capital gain on shares to a tax-exempt dividend.
• Exception 3:

1. If a shareholder, which has decisive influence in the receiving company is neither based in the EU or a state which has a double tax treaty with Denmark.
• Exception 4:

1. If a shareholder in the transferring company is remunerated in cash as a part of the spin-off, a permission from the DTA is required. This applies only if the shareholder can receive tax-exempt dividend from these shares.

Specific requirements for tax-exempt demerger with permission:

• The spin-off cannot have tax evasion as a main purpose, as it is required to be based on valid business considerations. The DTA performs an overall specific assessment of each individual transaction.
• The shareholders must be remunerated in the same proportions in the receiving company as in the transferring company.

While it is technically possible that a spin-off is immediately followed by a business combination, it is not very common.

From a tax perspective, there is no set minimum or maximum time. Thus, if a tax-exempt demerger without permission is pursued, only the time for legal registrations and audit valuations, etc, is of relevance.

However, if binding ruling or a permission from the Danish Tax Agency is needed, the demerger might take some time to plan and execute, as the processing time from the Danish Tax Agency differs from case to case and nothing general can be said on this matter.

Stakebuilding Structure

Public takeover cases sometimes include the party making the bid to accumulate a stake in the target company before initiating the offer. In general, the bidder is free to increase its stake in the company conditional upon the bidder not possessing any inside information obtained through a due diligence or in other ways.

Reporting Threshold

Any natural or legal persons directly or indirectly holding shares in a listed company must notify the company and the Danish Financial Supervisory Authority when their holding of shares reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 50% or 90% or ⅓ or ⅔ of the voting rights or share capital of the company.

However, this does not apply to an issuer directly or indirectly holding their own shares, as the issuer must instead publish a notice to that 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.

Revised Offer Duty

Potential bidders should, however, note that in both voluntary and mandatory offers, they have to revise their offer price if they acquire shares in the target company at a higher price during the offer period and up to six months after the offer has been completed.

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 ⅓ 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 ⅓ 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.

Public takeovers are usually carried out based on an offer directed at all shares in the listed company. While the acquisition of public companies can also be structured as mergers, mergers are not commonly used under Danish law. The main reason for not opting for merger structures lies in their specific formal requirements and shareholder involvement given the requirement for supporting votes at the general meetings amounting to at least ⅔ of the share capital.

In a public takeover of a technology company, the primary method of consideration in Denmark is cash. A bidder is entitled to offer both cash or shares and a combination thereof, except in 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 voting rights 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, eg, a minimum acceptance threshold of more than 90% (due to the squeeze-out option) and regulatory conditions.

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, some main terms of other transaction documents will as such be included in the takeover document.

If a bidder in a voluntary offer acquires between ⅓ 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 that the minimum acceptance condition is 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 ⅔ of the shares and voting rights or just above 50%. A total of ⅔ 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.

A shareholder holding 9/10 of the shares in a company has the right to squeeze out the remaining shareholders by way of acquiring their shares. If the shareholders cannot agree on a price for the shares, the share price is determined by an expert.

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 not commonly used in the Danish market and are often rejected by targets with reference to the board’s fiduciary duties.

Managing pandemic risks 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 risks in an interim period.

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

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

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

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. It is also seen that the bidder enters into irrevocable commitments following discussions with the board and in such case with the board’s blessing.

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

The offer documents need to be reviewed and approved by the Danish Financial Supervisory Authority.

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 up to nine months from the publication of the offer document.

In addition to the Danish Business Authority’s general supervision of all Danish companies and the general regulatory compliance with, eg, corporate law, certain regulated sectors are subject to specific permits and approvals required for technology companies. Such sectors include, eg, banking, in which fintech companies are affected (i) directly by being subject to supervision by the Danish Financial Supervisory Authority, and being financial companies, they are generally heavily regulated, and also (ii) indirectly as their customers often are subject to heavy regulation, and accordingly, the product offering must be suitable for such regulated customers.

Also, if the company is in the business of dual-use items/technologies, the Danish Business Authority grants permission for export of dual-use products included on the EU control list.

Lastly, due to the implementation of the NIS2 regulation and the DORA regulation, we expect further supervision from a cybersecurity perspective. It has not yet been specified which Danish public authority will be responsible for supervision and control of companies’ compliance with the NIS2 regulation.

The primary securities market regulator for M&A transactions in Denmark is the Danish Financial Supervisory Authority.

In addition, the Danish Business Authority is responsible for the areas of dual-use items/technologies.

The Danish Act on screening of foreign direct investments applies to foreign direct investments made on or after 1 September 2021. The Danish FDI regime is based on the EU (2019/452) regulation 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 asset deals and long-term loans) where a non-Danish investor acquires a “qualifying holding” in a Danish undertaking within a “particularly sensitive sector or activity”. A qualified holding is the direct or indirect possession or control of at least 10% of either the shares or voting rights or equivalent control by other means, and applies also to increases of holdings that result in exceeding the thresholds of 20%, ⅓, 50%, ⅔ or 100%.

The mandatory filing obligations 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.

There are five particularly sensitive sectors and activities in Denmark:

• 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 sub-sectors, such as energy and healthcare, which are further divided into a number of socially important functions, 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 stand-still 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.

National security reviews of acquisitions follow from the FDI regime. The FDI Act requires that certain transactions are filed with and approved by the Danish Business Authority. If the Danish Business Authority decides that the completion of the transaction should be denied, the Danish Business Authority must refer the matter 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.

The Danish merger control regime is laid out in the Danish Competition Act and is based on the principles of the EU Merger Regulation. This is why the Danish merger regulation to a large extent is 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 stand-still obligation applies, and the concentration must not be implemented (“gun-jumping”) 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 so-called “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 are made 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, which is a requirement for TUPE to apply.

The Act on Transfer of Undertakings (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 a transfer of a part of a business (carve out), attention should be paid to employees, who are partially working with the transferred activities or 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 comprised by 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. After 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 are enforceable in connection with share and asset sales for a period of six months following closing.

Incentives

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

In connection with certain types of retention bonus, bad leaver conditions on the forfeiture of 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 comprised by 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

For companies of a certain size and type (state-owned joint-stock companies and public limited companies falling under accounting classes C and D), specific rules on gender equality apply. New rules enforcing such companies to introduce new requirements for gender balance objectives in company management bodies have been enacted to ensure that target figures for the share of members elected by a general assembly of the under-represented sex are set in place to be observed within company management bodies. Further, policies to increase the share of the under-represented sex 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%.

M&A transactions in Denmark do not require approval from the Danish central bank.

Litigation in connection with public and private M&A deals is fairly uncommon in Denmark, although the number of claims against W&I insurers seems to be increasing in the private M&A deals. Further, as most private M&A deals are subject to arbitration clauses, inter alia, due to the confidential nature of such disputes, very little public information on such disputes is available.

Key developments in the Danish technology M&A market are largely driven by increased regulatory requirements, including:

• a strict FDI regime;
• strengthened ESG 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; and
• extensive GDPR and privacy regulations for data-driven business models.

Public companies are allowed to provide bidders with the information necessary to conduct their due diligence. However, if the bidders are competitors of the target, disclosures will be restricted with respect to competitively sensitive information, which is typically handled through clean team procedures.

Further, bidders are obliged to adhere to regulation regarding inside information. As a consequence, inside information disclosed during a due diligence process may limit the ability of the bidder to acquire shares outside the bidding process.

Often, personal data will be disclosed through a due diligence of a technology company. Accordingly, such disclosures must comply with the data protection requirements, including the GDPR in the EU, and with the applicable regulatory standards outside the EU. The disclosures may be justified as being necessary for the purposes of the transaction, and potentially in anonymised versions.

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

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 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 inside information depending on the firmness of the approach. In a recent ruling relating to inside information in connection with a takeover, the Danish Financial Supervisory Authority (Danish FSA) stated that even an indicate 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 the indicative offer 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 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.

As regards the manner in which the announcement must be made, the Danish Takeover Order prescribes that the announcement must be made 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.

Article 3 of the Prospectus Regulation (Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered) requires a publication of a prospectus in several share offering scenarios (including stock-for-stock offerings), unless an exemption applies. Article 1 (4) lit. f of the Prospectus Regulation provides a list of prospectus-exempt offerings, including for securities offered in connection with a takeover by means of an exchange offer, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2), containing information describing the transaction and its impact on the issuer.

To qualify as a consideration under a Danish-law governed takeover offer, shares need to be listed on an organised market within the European Union.

In general, the bidder is not required to disclose or produce financial statements in M&A transactions under Danish law.

Nevertheless, a bidder in a public M&A transaction subject to Danish law is required to publish an offer document containing information on the target’s activity and key figures from the target’s latest published financial statement, which must be included together with the most recent published financial expectation. Such offer document must be published no later than four weeks after the voluntary offer was published.

Further, in cases of securities offerings, pro forma financial statements are required pursuant to the EU regulations on prospectuses.

The disclosure requirements for transaction documents under Danish law depend on whether the traded company is a public or a private company.

Private M&A Transactions

In general, transaction documents regarding private companies do not have to be disclosed to or filed with the authorities. However, some information which may form part of the transaction documents, such as updated articles of association and minutes of general meetings implementing changes to the articles of association, must be filed with the Danish Central Business Register.

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 director’s 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, some main terms of other transaction documents will as such be included 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 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 will be common to establish a special committee to negotiate the deal and to plan for integration, assess separation issues and synergies and/or to handle conflicts of interest.

It is common to have provisions in articles of associations on a board of directors’ approval of a transfer of shares in Danish technology companies. However, such provisions do not usually raise concerns about the completion of a transaction because the board of directors is appointed by the shareholders and can be replaced by them. Therefore, a majority shareholder is usually entitled to immediately replace the majority of the board of directors with board members willing to approve the transaction.

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.