Corporate M&A 2020

Last Updated April 20, 2020

Denmark

Law and Practice

Authors



Gorrissen Federspiel is one of Denmark’s leading law firms, with a strong national and international practice that offers advice within all areas of corporate and commercial law, including financing, tax, competition law, employment law and litigation. The firm has more than 280 lawyers and associates operating from Copenhagen and Aarhus. The firm’s practice group for corporate/M&A and capital markets consists of 16 partners and 49 associates and assistant associates. The team works across all legal practice areas within corporate and M&A, including private and public M&A, capital markets and general corporate law, structuring and shareholder incentives. The practice group advises more than 50% of Danish large cap companies and has a strong focus on complex, cross-border M&A and private equity transactions. Industry focus areas include financial services, real estate, telecommunications, healthcare, shipping and transportation, and IT and IT services, as well as industrial products, including oil and gas.

The Danish M&A market slowed down slightly in 2019 when measured on number of transactions. Compared to 2018, approximately 15% fewer transaction were completed in 2019. The ratio between domestic and cross border transactions remain a steady at about 40/60.

While 2018 saw a significant increase in IPOs compared to previous years (nine compared to three in 2017 and three in 2017), only four listings were completed in 2019, including the listing of Mærsk Drilling though a corporate spin-off.

Despite the decrease in number of transactions, 2019 was marked by a number of large M&A transactions, including:

  • the listing of Mærsk Drilling, a Danish provider of drilling services to oil and gas companies, with a transaction value of EUR3,172 million;
  • the divestment of the Danish energy company Ørsted’s power, city light and residential customer businesses to SEAS-NVE amba, with a transaction value of EUR2,852 million;
  • the acquisition of the majority of the Danish payment services company Nets’ corporate services business by MasterCard Incorporated, with a transaction value of EUR2,852 million;
  • Asahi Kasei’s acquisition of 81.22% of the shares in the Danish pharmaceutical company Veloxis Pharmaceuticals, with a transaction value of EUR960 million; and
  • 19 other transactions with a transaction value above EUR200 million.

The year 2020 started well with expectations for a very active first half of the year both within the M&A and IPO market. The COVID-19 pandemic has however significantly affected activity since the middle of March 2020, where the Danish government adopted protective measures, including in the form of closures of businesses and schools. First to be affected was transactions within entertainment and food services, but other industries followed soon after and at the time of writing the COVID-19 pandemic is expected to significantly impair 2020 market activity. 

The M&A market in 2019 continued the trends of 2017-18, where a large proportion of the transactions involved a private equity target or acquiror. A number of significant transactions between strategics were also completed in the course of 2019.

Approximately half of the buyer’s of Danish targets were foreign companies, most of them from the NordicS or other EU member states, which mirrors the picture seen in recent years.

Use of W&I insurance in M&A is getting even more prevalent as the awareness of the product increases and the product further develops. Strategics are only now starting to adopt the product, which could potentially lead to smoother transactions in this segment.

M&A activity was spread out over multiple sectors, including TMT, financial services, real estate, healthcare, IT and IT services, as well as industrial products, including oil and gas.

The Danish M&A market is primarily driven by private M&A transactions, which are typically structured as share transactions subject to ordinary contract law.

Public M&A transactions are less frequent and are typically structured as tender offers within the framework of the Danish Capital Markets Act.

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

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

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

Regulatory approvals may be required for acquisitions within heavily regulated sectors such as telecom and financial services.

There are no general restrictions on foreign investment in Denmark and there are, generally, no requirement on local ownership of legal entities or local representation in the executive management or Board of Directors.

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

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

A notifiable merger must not be implemented before the Danish Competition and Consumer Authority has approved it (a "standstill obligation").

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

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

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

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

Mandatory legislation applies in respect of employee incentive programmes and restrictive covenants, eg, non-competition and non-solicitation provisions. For instance, salaried employees in termination scenarios are entitled to a pro rata share of cash bonuses, irrespective of the conditions of their termination. This generally also applies to other bonus schemes, eg, stay-on and exit bonuses.

Furthermore, special rules apply to option and warrant-based incentives, eg, under which conditions the employees are entitled to exercise their share options and warrants as good and bad leavers. Moreover, since 6 December 2018 it is no longer possible to purchase employee’s shares subscribed for/purchased under a subscription/purchase right at a price lower than market value, irrespective of good/bad leaver status, provided that the subscription/purchase took place at a later stage than the granting of the subscription/purchase right.

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

At present, there is no general requirement for a national security review of foreign investments under Danish law. However, new legislation has been proposed and may be enacted in the course of 2020.

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

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

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

In recent years, there has been a number of private arbitrations and lawsuits in relation to private M&A transactions. Reportedly, Norwegian private equity firm, FSN Capital, received insurance payments under the W&I insurance policy taken out in connection with the acquisition of the Danish company Gram Equipment in 2018. Further arbitration and litigation proceedings are now pending against the seller and other parties involved in the transaction on sell-side.

There has been no material changes in the Danish take-over regime in the past couple of years. Only material amendment relates to Nasdaq Copenhagen’s introduction of a 90% (relative) majority requirement for delistings. The requirement does not apply to delistings resulting from statutory liquidations, mergers or sequeeze-outs.

Stakebuilding prior to a public offer can be used to deter other bidders and/or to form basis for a request for a nomination for a board position.

In some cases, stakebuilding has been used to effect a “creeping-takeover”, ie, a purchase of shares at market price to reach the one third threshold triggering a mandatory offer. Following publication and completion of the mandatory offer (which can be made without a premium), the bidder can further consolidate its ownership without triggering further mandatory offers.

A more common approach to creating a transaction certain prior to a takeover offer is to seek "irrevocable undertakings" from existing major shareholders. Pursuant to such irrevocable undertakings, the relevant shareholders will agree to tender their shares to the bidder in the takeover offer. Irrevocable undertakings are binding in the inter partes relationship; however, a shareholder having accepted to tender his or her shares will formally have a statutory right to withdraw his or her acceptance in the event of a competing offer.

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

There are no general statutory restrictions on stakebuilding and listed companies cannot have restrictions in the articles of association that limit transferability of shares.

A stakebuilding shareholder will have to consider general statutory requirements for regulatory consents, such as merger control requirements (typically, only relevant to consider if above 25%) and special regulatory consents within certain sectors, such as the financial sector.

The acquiring shareholder will also need to consider any voting limitations (including share classes with differentiated voting rights) that may apply to the target apply.

Dealings in derivatives are allowed. However, certain disclosure requirements apply as set out below. Shorting transactions are also subject to special reporting requirements.

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

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

At the stage where a bidder approaches a public target company, the approach will in itself (depending on offer price and seriousness of the bidder’s approach) often be considered inside information in relation to the target company. Disclosure may, however, be postponed as the final bid will be subject to further negotiations and confidentiality can be maintained through contractual undertakings. In the event of a leak, prompt disclosure will be required, but only as to the specific information disclosed.

When negotiations are finalised, ie, in a voluntary recommended offer, and an announcement agreement between the target board and the bidder is entered into, it will no longer be possible to delay publication, and the takeover offer must be published both by the listed company and the bidder.

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

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

In a large takeover offer on the Danish market, a bidder will generally carry out "outside in" due diligence of the target entity as part of early preparations. Further due diligence of non-public information will often be required by a bidder as a condition to committing to place a formal offer. This due diligence will be limited in scope compared to a private M&A transaction, but will often cover the following areas:

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

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

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

The bidder will often request exclusivity/no-shop undertaking, but this will often only be granted when a final announcement agreement has been entered into. When granting exclusivity or undertaking any other limitations regarding their ability to operate freely in the interest of the company and the shareholders, the board of directors should carefully consider requirements for compliance with their fiduciary duties. 

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

In private M&A transactions, the length of the process will depend on the specific circumstances, including whether the transaction is conducted as an one-on-one process or a structured process with multiple bidders. Generally speaking, a structured process will, typically, be carried through in a period of three to six months, plus any additional time required to prepare the target for sale.

For public M&A transactions, the process is governed by mandatory requirements in Danish takeover regulations, including the Danish Capital Markets Act. A takeover document is required to be made public no later than four weeks after the bidder has published its intention to make a voluntary offer or the requirement to put forward a mandatory offer. The offer period for the takeover offer must be a minimum of four weeks and a maximum of ten weeks. An offer period may be extended for a minimum of two weeks at a time, but cannot be extended beyond the ten-week maximum period, unless the extension is due to requirements for approvals from public authorities.

In situations where public authority approvals are required, eg, to fulfil merger control requirements, the offer period can be extended beyond the ten-week period to a maximum of nine months. If a competing offer is announced, the offer period of the existing offer is automatically extended to the time of expiry of the competing offer, unless the existing offer is withdrawn.

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

In a private M&A context, a minority may require redemption in case a single shareholder holds more than 90% of shares and voting rights.

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

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

If a voluntary offer does not result in the bidder obtaining more than 50% of the voting rights, the bidder will be required to offer a mandatory offer to the other shareholders if control is required. In practice, the typical minimum acceptance condition is set to 90%, which reflects the threshold for effecting a cash squeeze-out of minority shareholders under Danish corporate law.

The threshold for effecting a delisting is 90% of votes cast at a general meeting. Depending on the turn-out a delisting can thus be obtained even without obtaining 90% of total shares and voting rights.

A threshold of two thirds of the shares and voting rights is required to effect a merger or to make changes to the articles of association. A threshold of 50% of shares and voting rights will be sufficient for other decisions at the general meeting of shareholders, including appointing members of the Board of Directors.

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

In principle, the bidder and the seller is free to agree on deal security measures (no-shop, break fees, etc). However, the management of the target company (typically the board of directors) may only agree upon deal security measures subject to their fiduciary duties, ie, it must generally be deemed to be in the best interest of the target and its shareholders. In public M&A deals, the target’s board of directors will typically seek some form of "fiduciary out" in the announcement agreement.

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

Governance agreements between a company and a major shareholder are not common in Denmark. The Danish Companies Act generally provides that shareholders’ agreements are not binding on the company, and contractual governance rights are, therefore, not always effective.

In some cases, agreements governing information exchange are entered into to ensure confidentiality and compliance with disclosure restrictions. In practice, a Danish Board of Directors will typically invite major shareholders to propose board candidates, but these will ultimately have to be elected by the general meeting.

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

Following a successful tender offer, it is customary to effect a statutory squeeze-out of the minority under the Danish Companies Act. The squeeze-out is subject to a threshold of 90% of share capital and voting rights. Bidders often contemplate more creative squeeze-out mechanisms (mergers, etc), but they are seldom used in practice.

It is fairly common to obtain irrevocable undertakings from major shareholders. Assuming the shareholders are willing to accept insider status, the commitments are typically negotiated and obtained at an early stage of the negotiations in an effort to obtain transaction certainty.

The commitments will be disclosed in connection with the announcement of the offer. It depends on the circumstance and is a matter for negotiation whether the undertakings will expressly provide for an "out" in case of a superior offer. As a matter of law, shareholders are able to retract their acceptance if a superior offer is made; however, bidders may seek contractual protection through irrevocable undertakings.

Private M&A Transactions

In private M&A transactions, disclosure is often made at signing or delayed to occur in the period between signing and closing or at closing. In case of merger filings, the receipt of the filing will typically be announced by the competition authority and preclude the option of keeping the transaction secret until closing.

In a private M&A transaction involving listed entities, a bid/potential transaction may be considered inside information depending on whether the transaction would be likely to have a significant effect on the share price of the listed entity involved. Danish practice on application of the European Market Abuse Regulation generally assumes that the disclosure of inside information concerning an M&A transactions can be delayed for as long as negotiations are ongoing and until a final agreement has been entered into.

To the extent the transaction constitutes inside information, publication will for any listed companies be made through a company announcement. In general, the announcement of the transaction must be made at signing and cannot be postponed based on any required regulatory approvals.

Public M&A Transactions

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

Voluntary offer

In a voluntary offer, it is a requirement that disclosure of the bid is made by the bidder once it has made a decision to put forward a takeover offer on the target. In a takeover offer recommended by the target company’s board, this will generally coincide with the time of signing of any announcement agreement between the target entity and the bidder.

There are no specific requirements as to the disclosures to be made in connection with announcement of the decision to make an offer, but the announcement will have to be made through an announcement by electronic media that reaches the public in the countries where the targets shares are listed on a regulated market.

Mandatory offer

In a mandatory offer, the disclosure must be made as soon as possible after the obligation to make a mandatory offer has occurred, ie, at the time the bidder makes a purchase of shares triggering the threshold for control (at least one third of the voting rights).

There are no specific requirements to the announcement of the offer, but the announcement will have to be made through an announcement by electronic media that reaches the public in the countries where the target’s shares are listed on a regulated market.

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

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

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

In a strictly private M&A transaction, a business combination through a merger will require the publication of general corporate law merger documentation.

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

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

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

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

The Board of Directors will typically delegate authority to the chairmanship or a special committee to deal with potential business combinations. A committee could also be established in case of a conflict of interest involving the executive management or individual board members.

In public M&A transactions, the main point of contact for the discussions will generally be the chairman of the Board of Directors, who will be supported by an ad hoc committee comprising members of the board and potentially members of the executive management.

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

In public M&A transactions, the board of directors may sometimes retain separate legal advice from that of the Company itself. The board of directors will typically also retain corporate finance advisers to assess the potential offer price and thus support the board statement in respect of a take-over offer. It is common to obtain a fairness opinion from the financial advisers; however, it is not a requirement.

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

The conflict rules entail that members of the management may be obliged to refrain from taking part of the process in a business combination if the member has a material interest in such business that may conflict with the interests of the limited liability company.

Hostile tender offers are not common in the Danish market. Listed companies that become subject to takeover interest tend to seek to organise a formalised auction processes to ensure price competition and support in the form of a board recommendation. The board recommendation is often considered critical to ensure required acceptance rates in the tender offer.

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

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

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

Share classes are typically seen in formerly family owned business, where ownership has been transferred to foundations, which control the listed company through majority ownership of the share class with higher voting rights. Examples include well-known Danish companies such as, Novo Nordisk A/S, Carlsberg A/S, A.P. Møller – Mærsk A/S. Voting ceilings are most common in the financial sector, where many listed local credit institutions typically have voting restrictions that effectively block hostile take-overs.

There are no specific rules on directors’ and management’s obligations in relation defensive measures. Board and management thus act within their general obligation to act in the interest of the company, which in an M&A context first and foremost refers to the common interests of the shareholders.

Further, Danish corporate law specifically prohibits board and management from taking any action that is clearly likely to provide certain shareholders or others with an undue advantage over the other shareholders or the limited liability company. This obligation may preclude defensive measures that are effectively directed at individual shareholders.

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

In relation to public takeover offers, the board of directors should generally not take steps that would prevent its shareholders from benefitting from a bona fide offer. The board of directors will typically retain corporate finance advisers to assess the potential offer price and/or organise an auction process to create price competition. Assuming the price represents a relevant premium to the listing price and considered superior to other available transactions, the board of directors will, typically, allow due diligence and enter into an announcement agreement in which it commits to support the transaction and render a positive recommendation.

There appears to have been a slight uptick in disputes and litigation in recent years relating to private M&A transaction. There is speculation that this may be attributed to a more prevalent use of M&A insurance, but it is too early to draw conclusions on any relationship between the these two trends.

Private M&A deals in Denmark are typically subject to arbitration clauses, which are intended to ensure that the proceedings can be kept confidential.

Litigation in connection with public M&A deals is not common, although majority requirements for squeeze-outs and delisting have historically given rise to disputes. Most recently, private litigation ensued following the delisting of the ferry-operator Molslinien A/S and subsequent squeeze-out of minority shareholders by the Danish private equity fund Polaris, resulted in disputes.

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

The shareholder activism in the form of public critique by larger private fund investors as seen in the US and other jurisdictions is relatively rare in the Danish market. One example was Cevian Capital’s investment in Danske Bank in 2013, which was decidedly "friendly" compared to better known examples of shareholder activism in the US. In 2017, Primestone Capital urged a US-based cleaning company Tenant to merge with the Danish company Nilfisk, in which Primestone also held a minority stake.

Danish pension funds are perhaps the most visible shareholder activists. In public communication, the Danish pension funds focus primarily on specific governance-related issues, including in particular remuneration, board diversity and over-boarding. Fundamental operational issues such as strategic or operational objectives are typically dealt with in a private manner in direct conversations with, eg, the chairmanship.

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

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

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

In recent years, a number of Danish publicly-traded conglomerates have been criticized by investors for not seeking to "unlock" proposed “conglomerate rebates” through spin-offs or divestments. Whether or not in response to this critique, AP Møller Maersk commenced a historic separation of its energy business in 2017, while NKT completed a spin-off and separate listing of its cleaning solutions business "Nilfisk" through a demerger. In 2019, a spin-off of the electricity distribution operations of the partly state-owned Ørsted was completed following substantial political activism which initially brought the sales process to a standstill.

Activist interference to block a public M&A transaction is rarely seen in the Danish market. The primary examples of interference are involves international hedge funds taking up larger stakes in anticipation of potential increases in the offer price. Recent changes in Nasdaq Copenhagen rules increasing the majority requirement for obtaining a delisting (now 90% relative majority) may bring about increased risk of interference from hedge funds in future public-to-private transactions.

Gorrissen Federspiel

Axeltorv 2
1609 Copenhagen V
Denmark

+45 33 41 41 41

contact@gorrissenfederspiel.com gorrissenfederspiel.com
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Gorrissen Federspiel is one of Denmark’s leading law firms, with a strong national and international practice that offers advice within all areas of corporate and commercial law, including financing, tax, competition law, employment law and litigation. The firm has more than 280 lawyers and associates operating from Copenhagen and Aarhus. The firm’s practice group for corporate/M&A and capital markets consists of 16 partners and 49 associates and assistant associates. The team works across all legal practice areas within corporate and M&A, including private and public M&A, capital markets and general corporate law, structuring and shareholder incentives. The practice group advises more than 50% of Danish large cap companies and has a strong focus on complex, cross-border M&A and private equity transactions. Industry focus areas include financial services, real estate, telecommunications, healthcare, shipping and transportation, and IT and IT services, as well as industrial products, including oil and gas.

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