Technology M&A 2024 Comparisons

Given its size, Gibraltar does not have a stand-alone tech sector but rather tech actors are typically involved across a number of different areas where Gibraltar enjoys prominence wholly out of proportion to the country’s size (notably in gaming [where many leading players in this industry are Gibraltar-headquartered or have substantial operations in Gibraltar], in insurance [with close to one in every four cars in the UK presently covered by Gibraltar insurers] and in fintech [where alternative models operate allowing for full licensing of companies using distributed ledger technology (DLT) involving the transmission or storage of value belonging to others, or a less onerous virtual asset service provider (VASP) registration for certain more peripheral activities that fall outside the scope of full licensing]). Gibraltar holding companies also often feature (typically as indirect targets) in M&A deals (including with a tech slant). Over the past 12 months, the tech M&A market (in line with general market trends across most sectors) has seen a number of consolidations, which has prompted a relatively high deal activity.

One specific trend is in relation to M&A activity involving companies that are “passporting” their services into the UK. In particular, banks and investment firms have been of interest for crypto projects looking to enter, or to continue offering their products in, the UK market. Under the new financial promotion rules in the UK, generally only “authorised persons” or firms that are registered with the UK FCA as a cryptoasset businesses can promote cryptoassets to customers in the UK. A Gibraltar financial services firm that has passported its services to the UK becomes an “authorised person” for the purposes of the financial promotion rules. It is this key point that is driving M&A attention to Gibraltar firms particularly as only Gibraltar has retained passporting rights into the UK after Brexit.

There has been an influx of new tech-related operators in Gibraltar over the past 12 months, primarily in the following areas:

• gaming (in anticipation of a broadening of the scope of regulated activity under Gilbraltar’s new Gambling Act [anticipated to come into force during 2024], to cover software, marketing and a number of other supplementary services);
• payment rails using crypto/blockchain;
• “market-making” type activity (usually affording liquidity to exchanges);
• registrations/establishment of “over-the-counter” (OTC) exchange services (crypto for fiat and vice versa);
• new DLT full licensing applications/VASP registrations; and
• acquisitions of Gibraltar-licensed entities (including to the avail of access to the UK market given the “passportability” of certain activities between Gibraltar and the UK).

In the start-up market we see a variety of Gibraltar incorporations (taking advantage of the relative ease and speed [subject to AML/KYC requirements] to incorporate and organise a Gibraltar company, which can even be as quick as within 48 hours), as well as others that may have already been set up outside Gibraltar (and can be readily re-domiciled to Gibraltar using the country’s broad and easy-to-navigate re-domiciliation regulations). Whilst in principle there are no minimum capital requirements, there may be circumstances (typically for licensed entities providing some level of custodianship for third parties) where these may come into play.

This is typically fact-specific, but the most common type of entity used is a Gibraltar private company limited by shares (but with the whole spectrum of vehicles, including “foundations” [that can be set up for any purposes which are “capable of fulfilment” as long as they are not unlawful, immoral or contrary to public policy in Gibraltar, and which would include charitable or philanthropic purposes as well for any multitude of private, commercial arrangements], and most recently, as a result of updates to our law on Limited Partnerships, for the ability for Gibraltar Limited Partnerships to elect on whether or not to have separate legal personality, as well as the addition of protected cell limited partnerships, where the assets and liabilities as between limited partners can be segregated within different cells in the limited partnership).

This is often driven by circumstances, with all of the above typically featuring as sources of early-stage financing. A recent development, however, was the use by one of the firm’s Gibraltar-licensed clients (following careful negotiation throughout with the firm’s regulators) of crowdfunding using a UK crowdfunding platform.

To the authors’ knowledge there are no Gibraltar-based venture capital firms servicing the market, but many of the firm’s clients (including in the tech sector) have access and regularly use venture capital (from the UK and further afield) to fund their activities (not only in relation to start-ups, but also in buyout scenarios of more established enterprises).

There are no developed set standards for venture capital documentation given the absence of Gibraltar-based venture capital firms.

This can vary depending on the ultimate “end-goal” of the start-up concerned, but the authors have seen a number of non-Gibraltar companies redomicile to Gibraltar (often in order to bring themselves within scope of the jurisdiction’s relevant regulatory regimes). Conversely, the authors have also seen some start-ups initially incorporate as Gibraltar companies and then re-domicile to another jurisdiction to allow for their listing on a relevant exchange as part of an IPO exit (and further noting that Gibraltar has a fledgling exchange of its own in the form of the Gibraltar Stock Exchange, which is currently under intended purchase, and which hopes to in due course bridge its use by both traditional fiat and crypto currencies).

This can often depend on the sector and whether there are realistic pathways to “exit” (including prospective purchasers) identified at the outset. In practice the firm often see start-ups focusing all of their efforts on delivering growth without a clear consideration of exit strategy(ies). Invariably, it is preferable to at least give some level of consideration to this prior to structuring the business/entity, as in the alternative the firm has seen several clients “hamstrung” at this stage in light of earlier structuring decisions.

Crowdfunding has also become an interesting option for Gibraltar companies following the successful raise by a Gibraltar regulated company on a UK crowdfunding platform. This was the first raise of this type which has now paved the way for other companies to raise capital in this manner.

Given that Gibraltar only presently has a crypto exchange (which in itself is a recent addition), Gibraltar companies typically list either directly onto a foreign exchange or re-domicile to another jurisdiction prior to listing if there may be advantage in doing so.

Since Gibraltar companies typically list on foreign exchanges, this is generally not applicable (in particular noting that our own domestic laws afford minority protection rights from “squeeze-out” by application of the test of the doctrine of unfair prejudice – notably, the typical way to seek to mitigate against such potential future restrictions is by building in suitable “tag-along” rights into a Gibraltar entity’s constitutional documents).

Historically, Gibraltar companies have often not been the direct targets in these types of scenarios and as a result there is a scarcity of data from which to draw conclusions, but in principle both an auction and a bilateral negotiation are possible and which is more likely may well be driven by particular facts and circumstances on a case-by-case basis.

The majority of instances the authors have come across have involved complete sales, but there have not been enough examples of this to date of which the authors are aware to be able to draw any definitive conclusions, although both options are in principle possible.

Most of the transactions the authors have seen have typically been outright sales for cash.

Although it may depend on the nature of the deal and the parties involved, continuing application of representations and warranties post sale are often a typical feature and indemnification together with escrow/suspense payments as well as deferred consideration payments (sometimes contingent on earn-out requirements) are mechanisms employed in connection with this. More recently the authors have also seen insurance being used more widely in these situations (including to offer balancing protection to the sellers for consideration they may have already received).

Spin offs are possible, but the reality is that the majority of tech M&A in Gibraltar has thus far been in fields that are subject to regulation, and therefore spin-offs leading to two or more enterprises with respective regulated activity may mean that the spun-off entity would essentially require a fresh licensing application, which may explain why this has not often materialised.

Provided there is no trading, intercompany interest (above a GBP100,000 per annum threshold) or royalty income attributable at a corporate level and that any gain is considered capital in nature (noting that there is no capital gains tax levied in Gibraltar) there should be no Gibraltar tax due or levied at the corporate level. Gibraltar taxation on the shareholders will generally depend on whether or not they are Gibraltar ordinarily resident individuals.

There are generally no restrictions on a spin-off being followed by a business combination, noting that such a combination would typically be pursued by a Gibraltar Court-sanctioned merger (including in principle cross-border merger) or scheme of arrangement.

There is generally no mandatory requirement for a tax ruling to precede and allow for a spin-off, although there may be circumstances in which that may be advisable and/or required (eg, in circumstances where the spin-off involves another jurisdiction which desires tax clearance prior to allowing for the commencement of operations in the new jurisdiction).

The comparatively fledgling nature of Gibraltar’s M&A market generally (including in technology-related matters) means that pre-offer strategies (such as initial stake building) are not generally a feature of the Gibraltar space.

There are no material shareholding disclosure thresholds and filing obligations in Gibraltar in relation to private or public (non-listed) entities. For listed entities, however, and pursuant to the Disclosure of Interests in Shares Act 1998, all persons who acquire a notifiable interest in a listed company’s share capital (with reporting obligations at 10, 25, 50 and 75% thresholds of aggregate nominal value) owe an obligation of disclosure to notify the relevant listed company. Furthermore, for regulated entities, a decision by any person to make a takeover bid (no matter the proposed ownership level) must be made public without delay and the person must inform the Gibraltar Financial Services Commission of the bid at the first reasonable opportunity.

Save in relation to Gibraltar regulated entities (where the regulator would typically require that information as part of their regulatory oversight), Gibraltar law does not otherwise generally require shareholders to disclose or make known the purpose of their acquisition and their intention regarding control of the target company.

Unless stipulated in the articles of association (eg, by way of application of “tag along” or “drag along” rights), there are generally no Gibraltar law requirements to make a mandatory or compulsory offer, albeit noting that listed entities will need to comply with any relevant stock exchange requirements (and noting that these may not be Gibraltar law driven given the country’s nascent, limited stock exchange, only presently dealing with crypto, and that most Gibraltar public listed entities are listed outside Gibraltar).

Additionally, in respect of regulated entities (which can include a Gibraltar public listed entity), the Gibraltar Financial Services Commission must direct a buyer to make a mandatory offer if the buyer:

• acquires securities which when taken together with securities in which persons acting in concert with the buyer are interested, carry 30% or more of the voting rights of a company; or
• together with any person acting in concert with the buyer:
1. is interested in securities to which the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of those voting rights; and
2. acquires an interest in any other securities which increases the percentage of securities carrying voting rights in which the buyer is interested.

Whilst we have seen some of these framed as sales pursuant to a Gibraltar Act of Parliament (including to facilitate novation of clients of the enterprise being purchased), this is more typically pursued by way of share purchase, transfer and related documentation.

Noting the paucity of information in this relatively nascent field for Gibraltar, in our experience transactions are often outright sales for cash. Usually mergers involving retiring (or to otherwise differentiate between) shareholders may include a cash element, but will involve judicial oversight given that Gibraltar law mergers require Court sanction. If the activities of the business are regulated, then regulators will also have input/requirements of their own. In both cases, it is possible for a “fair price” to feature by way of protection of minority shareholders. Contingent value rights, insurance and other creative mechanisms may be possible, although latitude for these may be impacted where Court/regulatory oversight involved.

Given Gibraltar not typically featuring as the primary “target” jurisdiction, there is little prescriptive Gibraltar law or express regulation in this field, but in exercising its broad powers, regulators would ordinarily impose/restrict the use of conditions similarly as would be expected in other jurisdictions (such as the UK) where such transactions are more prevalent (eg, including allowing for acceptance below 100%, prohibitions on offer-related arrangements, and post-offer restrictions).

The primary technique/legal means for acquiring a company (including a public listed one) in Gibraltar is through the acquisition of its issued share capital and which will ordinarily include entry into a form of share purchase or business combination agreement (with tailored representations, warranties and undertakings), together with a related instrument of transfer. The transfer of shares shall also require to be approved by board resolution of the target entity and the making of corresponding private and public updates to its register of members (which are types of undertakings that, subject to navigation of our unlawful financial assistance provisions, the target entity can provide). The transfer may also require advance regulatory approval of the Gibraltar Financial Services Commission where a Gibraltar entity subject to its regulation is directly or indirectly involved or affected by the transfer. Whilst representations and warranties in public listed company scenarios may be less common, the authors have seen these feature, and sometimes with insurance cover in place.

Control thresholds in Gibraltar could arise in circumstances where certain turnover or share of supply tests are met or exceeded, but whilst acknowledging a scarcity of examples from which to seek to draw conclusions given such transactions not usually being Gibraltar target centric, typical tender offers in Gibraltar would expect to be at least 90% (given the ability to squeeze out minority shareholders described in 6.8 Squeeze-Out Mechanisms, and unless there are reasonable, explainable circumstances that may justify otherwise to the satisfaction of any court, regulator or other relevant body exercising oversight).

Gibraltar statute provides that if a buyer has acquired not less than 90% of the shares to which the offer relates and not less than 90% of the voting rights carried by such shares, the buyer can squeeze out the minority shareholders and acquire their shares at a fair price, provided that it does so within three months of the end of the time allowed for acceptance of the bid. Alternatively, if the buyer holds not less than 90% of all shares in the company, which carry not less than 90% of the total voting rights in the company, minority shareholders can require the buyer to acquire their shares in the company at a fair price within three months of the end of the time allowed for acceptance of the bid.

Further, after making a petition to the Gibraltar Court (by either a member of the target company and/or the relevant governmental minister in charge of such affairs) against unfair prejudice, the Court may order for the purchase of the shares of any members of the company by other members or by the company itself.

More generally, certain provisions may be included in the articles of association of the target company prescribing the manner in which to compulsorily acquire minority stakes.

There is no express Gibraltar statutory prescription (in terms of requirements) and therefore no general limitation on the ability to imbue offers with conditionality (including regarding obtaining financing), subject to (where applicable) demands/expectations of a Gibraltar Court or Regulator (and which can be case specific).

Save for the rules and regulations of the (typically non-Gibraltar) stock exchange where the entity may be listed, or such requirements of the Gibraltar regulator in circumstances where the enterprise is subject to Gibraltar regulatory oversight, there are generally no specific Gibraltar law provisions preventing a target company from seeking to negotiate and implement deal security measures (but this must be contextualised against the potentially highly persuasive application of common law in Gibraltar, which could accordingly feature in the absence of express, Gibraltar contrary provision). Traditional mechanisms and arrangements have included forms of cross-indemnities, break fee arrangements (in certain circumstances, and with limitations similar to those featuring per UK law) force-majeure clauses, non-solicitation provisions, insuring of representations, and warranties and undertakings.

This is invariably fact specific, but in certain circumstances (and within the general confines of “reasonableness” and not unfairly prejudicing remaining minority shareholders) it may be possible for additional governance rights to be afforded by way of amendments to a Gibraltar entity’s articles of association.

In principle the relative lack of Gibraltar statutory prescription in these matters means that there is typically substantial flexibility in the types of mechanisms that can be employed in committing principal shareholders to tender or support a transaction, including but not limited to allowing for irrevocable commitments by shareholders (with or without opt-outs in given circumstances). The negotiation of these can take place at any stage and will be fact specific (and may depend on the relationships with and identities of shareholders), but typically would come at a stage where there is already substantive agreement between the primary deal-makers.

From a Gibraltar perspective this has not been substantively relevant to date as we only have the Gibraltar Stock Exchange presently only dealing in crypto, but Gibraltar companies would ordinarily be expected to comply with such external regulatory and/or stock exchange requirements to which they may be subject.

Gibraltar’s antitrust regime involves voluntary disclosure (although can also feature in circumstances where the regulator employs its substantially broad powers, save that we are not aware of this having yet happened in practice). Accordingly, there are generally little (if any) restrictions in practice by way of timing of takeover offer limitations, save that in relation to a Gibraltar regulated entity, the time allowed by an offeror for accepting a bid must be not less than two weeks nor more than ten weeks from the date of publication of the offer document. An offeror may extend the period during which a bid will remain open for acceptance but only if (i) the offeror gives at least two weeks’ notice of the offeror’s intention of closing the bid; and (ii) doing so will not be contrary to an offeree company and must not be hindered in the conduct of its affairs by a bid for its securities for longer than is reasonable. The Gibraltar Financial Services Commission may grant a derogation from the period to allow the offeree company to call a general meeting of shareholders to consider the bid.

This depends on what the nature of the technology is and whether it involves Gibraltar regulated activity. For technology falling within the requirements of the (soon to be expanded to cover additional, ancillary services) Gambling Act, the relevant Regulator is the licensing authority presided over by the Gambling Commissioner – there are a variety of nuanced licences available depending on precise activity. In fintech, e-banking, insurance and other licensable activities (and which may also include a tech aspect), the relevant regulator is the Gibraltar Financial Services Commission – what specific approvals may be required (and their period for obtention) can vary substantially depending on the particularities of each application, including the nature of the services to be afforded (eg, a VASP registration is in principle achievable in a matter of weeks, whereas fully-blown DLT licences for custodian or other services can ordinarily range between 6 and 12 months subject to particular facts and circumstances).

There is not a Gibraltar securities regulator as such, but the Gibraltar Regulatory Authority is the designated Gibraltar Competition and Markets Authority for matters falling within the scope of Gibraltar’s Competition Act. Additionally, if the matter involves Gibraltar-licensable activity, then the Gibraltar Financial Services Commission will have authority.

There are generally no Gibraltar law restrictions on foreign investments in Gibraltar, subject to compliance with any employment requirements of general application as well as any typical conditions of the Gibraltar Financial Services Commission for pursuing a prescribed regulated activity (which could require eg, physical presence or other requirements).

There is no specific national security review of acquisitions in Gibraltar, although Gibraltar’s Proceeds of Crime Act (together with other pertinent national security legislation, including but not limited to the Terrorism Act), bestows wide ranging powers on the relevant authorities to gather information and investigate potential criminal conduct (including but not limited to money laundering, terrorist financing and proliferation financing), transacted or attempted to be transacted through relevant financial business (with corporate mergers and acquisitions being potentially within scope).

Gibraltar has various key pieces of antitrust legislation designed to, inter alia, protect both consumers, ensure the operation of fair and undistorted markets with regards to both goods and services, together with empowering statutory bodies to uphold and enforce each of the same. Notable pieces of legislation include:

• the Competition Act, which provides a general prohibition on agreements, transactions and decisions which may affect, prevent, restrict or distort trade and competition;
• the Financial Services Act (together with numerous applicable subsidiary legislation in the form of sector specific regulations), governing the provision of financial services in Gibraltar, and empowering the Gibraltar Financial Services Commission (as the financial services regulator) to uphold good business market practices and consumer protection; and
• the Fair Trading Act, which governs the operation of consumer markets and business trading practices and licensing requirements in Gibraltar, as regulated by the Office of Fair Trading as the business trading regulator in pursuance of the same.

Pursuant to the Employment Act (and per Gibraltar’s pre-Brexit transposition [and continued application of the provisions] of the EU’s Acquired Rights Directive 77/187/EC, which provides the European standard on labour and employment law matters), certain, extensive employee consultation and information provisions and other rights form part of the pertinent Gibraltar legislation. Notably, acquirers should be primarily mindful of provisions relating to the automatic transfer of any applicable employees by the seller which would form part of the applicable M&A transaction. Additionally, to the extent that a Gibraltar target company is regulated by the Gibraltar Financial Services Commission, additional requirements (including regarding regulated pension schemes) will also require attention/adherence.

There are no such requirements or provisions in this jurisdiction.

The most significant recent development in Gibraltar has been the coming into force of the Competition Act on 1 January 2021.

Whilst generally there is no express Gibraltar statutory prescription covering this, practically consideration should be given to general adherence with typical insider trading regimes (eg, the UK’s, given that Gibraltar often draws on UK practice in instances where the country does not have express contrary provision in Gibraltar), with the primary aim being to seek to avoid information asymmetry that may operate in favour of particular bidders and to the potential detriment of certain shareholders.

The general data protection provisions operative under Gibraltar law (which essentially largely transpose and incorporate the EU General Data Protection Regulation [Regulation (EU) 2016/679] into our domestic provisions) are also those applicable in relation to data privacy restrictions regarding due diligence of a Gibraltar technology company.

Whilst there is no general requirement to make a bid public, if the deal requires Court sanction (as, eg, a merger would) then the directors of each of the public merging companies must deliver, inter alia, a copy of the draft terms of merger to the Registrar of Companies in Gibraltar, who then publishes in the Gibraltar Gazette a notice at least one month before the date of any shareholder meeting of that company summoned for the purpose of approving the proposed arrangement. For regulated entities, a person must, without delay, make public, and at the first reasonable opportunity inform the Gibraltar Financial Services Commission, of any decision by that person to make a takeover bid. Where a bid has been made public, the boards of the offeree and offeror companies must inform the representatives of their respective employees or, where there are no such representatives, the employees themselves, of the fact.

Gibraltar prospectus requirements can feature in arrangements requiring Gibraltar Court sanction.

More broadly, the type of disclosure required for the issuance of shares in a business combination with a Gibraltar element may depend on whether the entity is private/public, listed and/or regulated.

In all cases there shall require to be adherence to the requirements of the Register of Ultimate Beneficial Owners Regulations (being continuing obligations on UBOs with 25% or more voting/economic interests). There shall also be requisite filings at Companies House, Gibraltar regarding the incumbent legal shareholder(s) and any changes to a Gibraltar entity’s share capital.

Public and listed entities may also see additional and ongoing disclosure obligations (eg, notification of changes to capital or board of directors’ composition).

With listed entities, there may be additional disclosure requirements driven by the rules and regulations relating to the market/exchange on which they are listed and, in the case of Gibraltar regulated entities, where the issuance is pursuant to a takeover bid there is also an obligation regarding a decision by any person to make a takeover bid requiring to be made public without delay, as well as to inform the Gibraltar Financial Services Commission of the bid at the first reasonable opportunity.

Finally, save for the aforementioned, and while noting that there is no other express statutory prescription regarding the form of disclosures relating to an issuance of shares in a Gibraltar company, Gibraltar is a common law jurisdiction and, as such, dishonestly concealing any material fact or making a statement that is false or misleading with the intention of inducing, or being reckless as to whether doing so may induce another party to enter into an agreement (including with respect to acquire/dispose of shares), amounts to a criminal offence.

In relation to public mergers or private schemes of arrangement (which require Gibraltar Court sanction), a directors’ explanatory report shall be required which must set out the legal and economic grounds for the draft terms and specify any special valuation difficulties. In addition, a supplementary accounting statement may be required which must consist of a balance sheet dealing with the state of affairs of the company as at a date not more than three months before the draft terms were adopted by the directors and where the company would be required to prepare group accounts if that date were the last day of a financial year, a consolidated balance sheet dealing with the state of affairs of the company and the undertakings that would be included in such a consolidation. Both GAAP and IFRS are accepted in Gibraltar with IFRS being the most commonly used standard.

In relation to regulated entities, although, formal accounts are not technically required to be furnished within the offer documents, an offeror must prepare and make public in good time an offer document containing, inter alia, the consideration offered for each security or class of securities and, in the case of a mandatory bid, the method employed in determining it (with particulars of the way in which that consideration is to be paid), information concerning the financing for the bid and the future business of the offeree company and, in so far as it is affected by the bid, the offeror company. Accordingly, it is customary for accounts to be prepared in these circumstances in order to substantiate and address the offer document financial requirements set out above.

In relation to public mergers or private schemes of arrangement (which require Gibraltar Court sanction), a draft of the proposed terms of the merger/scheme must be drawn up and adopted by the directors of the merging companies together with a directors’ explanatory report, a supplementary accounting statement and an expert’s report (the latter three may not be required in certain statutory prescribed circumstances). There may be further requirements under the relevant stock exchange where the entity is listed.

With respect to regulated entities, an offeror must prepare and make public in good time an offer document containing the information necessary to enable the holders of the offeree company’s securities to reach a properly informed decision on the bid. An offer document must be communicated by the offeror to the Gibraltar Financial Services Commission before it is made public and when it is made public, must be communicated by the boards of the offeree and offeror companies to the representatives of their respective employees or, where there are no such representatives, to the employees themselves.

In both public and private M&A transactions, the company’s board of directors are the key decision-making body. The directors must have regard to their fiduciary duties, and act in the best interests of the company as a whole (essentially considering all interested persons, including the company in itself, its shareholders and third-party creditors).

More generally, directors’ duties are not generally codified in Gibraltar statute but by virtue of the common law’s application in Gibraltar, directors’ fiduciary duties could include:

• a duty to act in the best interests of the company as a whole;
• a duty to exercise a degree of skill and care that may be reasonably expected from them; and
• a duty to act for a proper purpose (typically as more particularly set out in the company’s articles of association, which ordinarily impose certain specific duties to secure proper use of the powers bestowed upon directors).

This is permissible per Gibraltar law and in certain circumstances may well be strongly advisable, although the authors are not aware of this having historically been regularly used.

The board of directors are the key decision making body and are tasked with drafting the terms of the merger/scheme together with the directors’ explanatory report and the supplementary accounting statement (for public mergers or private schemes of arrangement) and the offer documents (for regulated entities), all of which are the documents which govern the relevant takeover, and accordingly offers the opportunity for them to exercise their business judgement and substantiate the commercial reasons for the proposed transaction (which a Gibraltar Court may take into consideration in exercising its discretion).

Further, on the basis that the directors (in accordance with their fiduciary duties) must act in the best interest of the company as a whole (and so would typically be expected to take such steps as may be consonant with the same, and which shall be fact specific), in Gibraltar, directors are allowed to use defensive measures in a hostile takeover as long as they are not contrary to Gibraltar law and do not unduly frustrate an offer without justifiable grounds. As such, the “just say no” approach must be accompanied by a principled argument setting out a proper, defensible basis; eg, that the offer will be one that undervalues the target and its prospects and/or that the offer carries an insufficient premium for control, etc. In relation to regulated entities, there is an obligation on the board of directors to obtain prior authorisation of a general meeting of shareholders, in particular before taking any action, so their ability to “just say no” in these circumstances is further limited.

In any event, substantiating proper, reasonable grounds for decisions are typically the best form of defence/mitigation against shareholder challenge (litigious or otherwise).

In all M&A transactions, it is common for directors of the relevant entities to seek independent outside advice from corresponding professionals (typically lawyers, but can also include other professionals as circumstances may warrant) to advise on the relevant procedures, risks and assist with advice regarding potential forms of pursuance of the proposed combination and the drafting of the necessary documentation. For public mergers or private schemes of arrangement, there may be certain circumstances where an expert’s report is also required (typically in situations involving financial considerations, and in which case this is usually provided by an accountant or auditor – the authors would generally expect there to be a fairness opinion addressed in their report in some form).