The Danish M&A market in 2022 started out on par with the record-breaking 2021 but was (except for some sectors) in the second half of the year affected by the geopolitical instability, continued challenges in global supply chains as well as rising inflation and interest rates. Despite an affected market, large (and even historical) transactions still took place in Denmark, eg, the merger between the listed entities Novozymes and Chr. Hansen (December 2022).

Although it is too early to tell, there are indications that the M&A market is clearing up toward Q2 of 2023. In 2022, transaction types ranged from traditional private M&A transactions to minority/partnership deals to growth capital transactions and even a limited number of public M&A transactions with significant cross border elements.

Some of the most notable transactions in the Danish market in 2022 include:

• the merger between Novozymes and Chr. Hansen;
• the acquisition by Shell of the Danish entity Nature Energy Biogas (subject to competition clearance);
• the acquisition of Handelsbankens Danish activities by Jyske Bank;
• the acquisition of a minority stake by PGGM and EDF Invest of Norlys Tele Service;
• Forma Therapeutics Holdings sold by RA Capital Management to Novo Nordisk;
• the acquisition of Kongens Sløjd by 3i Investments;
• Ostwinds sold by Danish family to Ørsted;
• Ferrosan Medical Devices sold by Impilo to a consortium comprising Kirk Kapital, ATP and Lundbeckfonden;
• Nordic Capital’s acquisition of Riskpoint; and
• BASE life science sold to Infosys.

It remained a key trend that the Danish M&A market was dominated by private M&A deals and that significant public M&A transactions were rare.

Funding markets became even more difficult during 2022 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. A number of investment companies controlled by Danish commercial foundations and/or families (eg, Novo Holdings, A.P. Møller Holding and Kirk Kapital) are still more visible in the Danish market along with major Danish pensions funds, such as ATP, PFA and Pension Denmark. They provide long term capital and do principal investments in majority stakes and take part in consortium deals as minority investor. They are active in Denmark and abroad.

As a consequence of the conflict in Ukraine, the activity in the renewable energy sector is trending, as businesses and Nordic countries in general have an increased focus on energy self-sufficiency.

Due to a slow down in the M&A market across most sectors in the second half of 2022 and Q1 of 2023, it is becoming a slightly more buyer-friendly market. We see a trend towards sell-side financed warranty and indemnity (W&I) insurance, vendor financing, earn outs and exclusive processes.

Throughout 2022, there was significant interest in Danish assets within industries where Denmark has a strong reputation. Such industries include:

• IT/tech;
• renewable energy (mainly solar and wind);
• financial services;
• healthcare; and
• pharmaceuticals.

Towards the end of 2022, we saw a general slow down in the M&A retail market as well as the real estate market, primarily due to difficulties in obtaining acquisition financing. Pharma/healthcare, technology and renewable energy transactions seem to have taken up the majority of transactions in 2022 and Q1 of 2023.

A number of Swedish banks withdrew or reduced their activities in the Danish market during 2022. This gave rise to a number of transactions within the banking sector. Moreover, Handelsbanken sold its Danish activities to Jyske Bank, SEB sold its private banking activities to Ringkøbing Landbobank and Swedbank sold a significant loan portfolio to Arbejdernes Landsbank.

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

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

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

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

The Danish Business Authority is the relevant authority with respect to the various corporate actions that are usually necessary in connection with an acquisition, eg, registrations related to direct and indirect ownership, amendments to the target’s articles of association, registration of changes to the management, capital increases, and mergers.

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

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

The Danish 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.

The Danish merger control regime is laid out in the Danish Competition Act and is based on the principles of the EU Merger Regulation, 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 class 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%.

The FDI Act requires that certain transactions must be filed to 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 case to the Minister for Industry, Business and Financial Affairs, who is authorised to deny the completion of the transaction if the transaction threatens national security or public order.

Court Decisions

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

Litigation in respect to private M&A deals is also uncommon, although the number of claims against W&I insurers seems to be increasing.

As most private M&A deals are subject to arbitration clauses, inter alia due to the confidential nature of such disputes, very little public information on such disputes is available.

Legal Developments

In July 2020 a new Danish Takeover Order (the new Takeover Order) entered into force. It introduced, inter alia, the following.

• Joint statement for competing offers – the new Takeover Order allows the board of directors to prepare a joint statement for all takeover offers when several competing takeover offers have been submitted before the expiry of the deadline for publishing the statement of the first takeover offer. The deadline for such joint statement is calculated based on the offer period on the most recently disclosed takeover document.
• Offer period – the new Takeover Order prescribes that the offer period for a competing offer must not be shorter than the offer period in an already disclosed takeover document. If this entails that the offer period for an already disclosed offer document must be amended, a supplement, which must be approved by the Danish FSA, must be disclosed.
• Option to withdraw takeover offer – the new Takeover Order allows a bidder to, within narrow time limits, withdraw an already submitted voluntary takeover offer when a competing offer is made.
• Extended option to withdraw acceptance – the new Takeover Order extends the right for shareholders who have accepted a takeover offer to withdraw their acceptance up to three business days after the disclosure of a takeover document to also apply in the event of disclosure of supplements to already disclosed takeover documents.

In addition to the above, in January 2020, Nasdaq issued more flexible rules for delisting companies, as Nasdaq will now meet a delisting request if a valid resolution has been adopted by the general meeting, passed by at least 90% of the votes cast as well as the share capital represented at the general meeting.

Previously, the rule contained considerable discretion for Nasdaq to decide on a delisting request based on an assessment of the impact on the investors’ interests and the proper functioning of the market. Thus, the new rules set out more objective criteria.

Further, in August 2022, Nasdaq issued a new set of rules concerning the MTF, First North Growth Market, with the intent to enhance the confidence, credibility and transparency of the MTF. Some of the new changes include the need for ongoing sufficient liquidity and working capital, the listing condition of at least one financial report and an extended deadline for financial reports. Issuers now have extended rights to delist their shares, and the exchange may suspend trading in order to ensure market stability.

Finally, an amendment to, inter alia, the Danish Companies Act, the Danish Capital Markets Act and the Danish Financial Statements Act has been adopted, which, inter alia, has simplified the voting rules for foreign shareholders in listed companies by clarifying that a nominee is not considered a proxy holder and that the nominee therefore can vote on behalf of one or more shareholders without having to show an unbroken chain of proxies from the nominee to the shareholder who ultimately owns the shares as is otherwise required. Further, a previous rule has been abolished, which stated that foreign limited liability companies and companies with a similar corporate form based outside of the EU or EAA would only be able to establish branches in Denmark if this right was reciprocated in that specific country. These amendments entered into force in July 2022 and are aiming at making it easier for foreign companies to establish an entity in Denmark.

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

There have been no significant changes to the Danish takeover regime in the past 12 months. The latest changes in Danish takeover law were seen on 1 July 2020 (see 3.1 Significant Court Decisions or Legal Developments).

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

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

In addition, the price offered in a mandatory offer must, at a minimum, correspond to the highest price paid by the bidder for shares in the target company during the six preceding months. This rule is sometimes exploited by bidders, who deliberately use stakebuilding (at market price) to trigger a mandatory offer, which can then be carried out without a premium. Following the completion of the offer, the bidder will not be required to complete another mandatory offer irrespective of the outcome of the takeover. If the bidder had completed a voluntary offer and acquired between ⅓ and 50% of target, the bidder would be required to complete a mandatory offer following the voluntary offer.

Any natural or legal person directly or indirectly holding shares in a listed company must notify the company and the 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 shares capital of the company.

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

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

• Approval from authorities – a stakebuilding shareholder will have to consider general and special statutory requirements for approvals by regulatory authorities, including merger control requirements when acquiring direct or indirect control with (parts of) target company and requirements for approval by the Danish FSA of acquisition of a substantial ownership in a financial business. Control may be obtained by acquisition of a qualified minority position, where it is possible for the acquirer to exercise (de facto) control due to the spread of the shares.
• Mandatory offer – if the bidder through stakebuilding obtains a controlling interest in the target company, an obligation to launch a mandatory offer is triggered (see 6.2 Mandatory Offer Threshold). Contrary to what applies to a voluntary offer, the main consequence of an obligation to launch a mandatory offer is that the price offered as a minimum must correspond to the highest price paid by the bidder for shares acquired in the target company during the six months preceding the approval of the takeover document.
• Reporting obligation – it is not possible for a company, in its memorandum of association or in the articles of association, to introduce higher or lower reporting thresholds than those set out in 4.5 Filing/Reporting Obligations. A stakebuilding shareholder reaching, exceeding or falling below these thresholds shall thus notify the company and the Danish FSA hereof.
• Voting limitations – a stakebuilding shareholder must consider any voting limitations that may apply to the target company, including voting ceilings and share classes with differentiated voting rights.

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

Any person directly or indirectly holding instruments giving unconditional rights to acquire shares and derivative financial instruments having an economic effect comparable to holding shares in a listed company must notify the company and the Danish Financial Supervisory Authority when the holding of such instruments reaches, exceeds, or falls below 5%, 10%, 15%, 20%, 25%, 50% or 90% or ⅓ or ⅔ 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 that have the same underlying issuer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Controlling influence is reached when the person or persons obtain ownership or control of 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.

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

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

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

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

If a bidder in a voluntary offer acquires between 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.

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

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

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

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

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

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

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.

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

Inside Information

As mentioned in 5.1 Requirement to Disclose a Deal, a transaction may be regarded as inside information if a listed company participates in the transaction (either as the seller, the buyer or the target). To the extent 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 (see 6.1 Length of Process for Acquisition/Sale for the definition of “controlling interest”).

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

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

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

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

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

Private M&A Transactions

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

Public M&A Transactions

In public M&A transactions, the takeover document and a statement from the target company’s Board of Directors containing the Board of 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.

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

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

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

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

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

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

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

As to the advisers of the company, these will usually ensure that conflict considerations are made prior to them accepting to be retained in the first place.

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

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

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

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

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

The pandemic has not changed the use of defensive measures.

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

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

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

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

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

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

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

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

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

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

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

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

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

It is rare that activists try to interfere with the completion of announced transactions in Denmark.