Much like the previous year, 2023 presented ongoing challenges for M&A activity. However, despite a sluggish start, the market exhibited signs of recovery in the second half of the year, with deal making concentrated in the mid-market segment. Large-cap deals, on the other hand, remained subdued. Thanks to the strong recovery in M&A activity during the latter half of 2023, particularly in the fourth quarter, the overall level of M&A activity in 2023 was surprisingly normal. While strategic deals slightly decreased, the fourth quarter of 2023 saw the highest quarterly private equity-involved deal count over the past two years.

There are reasons to be cautiously optimistic that the M&A markets will gain momentum during 2024. There are tentative signs of economic recovery and stabilisation. The continuing decline in inflation and stabilising interest rates, and the considerable dry powder at private equity firms, are expected to contribute to a more favourable M&A landscape. However, due to lingering macroeconomic and geopolitical challenges, the strength and speed of the M&A recovery remains unpredictable.

Despite overall challenges in 2023’s M&A landscape, the Netherlands saw a significant resurgence, particularly in the fourth quarter. Deal-making activity, concentrated in the mid-market, was down for large-cap acquisitions. Public M&A displayed some small-cap activity, but middle and large caps remained subdued.

A constant theme throughout the year was the availability and pricing of debt. Higher interest rates lowered valuations, often causing impasses between sellers’ expectations and buyers’ offers. With banks tightening their belts, direct lenders have gained market share, particularly in acquisition financing. These direct lenders have a preference for buy-and-build initiatives, giving the lenders the opportunity to deploy more capital.

We have seen a continued growth of investments by private capital players in certain asset classes like infrastructure. The common denominator of these classes is that they offer stable returns and have minimal exposure to economic downturns.

The energy transition continues to be a strong M&A driver. Both private equity and strategic buyers, across all industries, increasingly consider deals in the sustainability sphere as a way to achieve growth and improve their business operations, while on the other hand raising their ESG profile.

After a difficult period for tech, we see investments in this sector increasing, although specifically in certain subsectors. This is primarily driven by the demand for commercial maturity and broader application of AI-based solutions.

There are a number of typical transaction structures that can be used to acquire a Dutch company.

Acquisitions of Private Companies

An acquisition of a privately owned company is mostly structured as a share purchase, and sometimes as an asset purchase.

Share Purchases

In a share purchase transaction, the buyer purchases the shares in the capital of the target company from its shareholders. The sale and purchase of the title to the shares is often documented in a share purchase agreement made between the buyer(s) and the selling shareholder(s). The transfer of shares in a Dutch company is typically arranged separately, in a notarial deed of transfer (as this requires the interference of a Dutch notary public).

Asset Purchases

In an asset purchase, the buyer purchases certain assets from the seller (and often, but not necessarily, also assumes the liabilities related to these assets) pursuant to the terms and conditions of an asset purchase agreement. The asset purchase agreement typically caters for the transfer provisions regarding the various types of assets (and liabilities) that are transferred as part of the transaction. Typically, the seller awards the buyer a limited power of attorney to make the appropriate registrations (if applicable) regarding the transfer of the assets after the closing of the transaction on behalf of the seller.

Acquisition of Public Companies

A bidder typically obtains control of a Dutch public company listed in the Netherlands by making a public offer. A public offer is subject to specific statutory procedural and other rules. Alternatively, (the assets of) a listed company can be acquired by means of an asset purchase or statutory merger.

Private M&A transactions generally do not require the involvement of a regulator, except when they are subject to antitrust clearances (see 2.4 Antitrust Regulations). Also, certain transactions can be subject to FDI or national security review (see 2.3 Restrictions on Foreign Investments and 2.6 National Security Review Public). In addition, public M&A transactions are subject to the supervision of the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten or AFM). The AFM is the competent authority for supervising the operation of the financial markets and oversees public offers in the Netherlands.

Some M&A transactions are subject to the supervision of sector-specific regulators, such as the European Central Bank (for banks), the Dutch Central Bank (for other financial institutions, such as insurance companies) or the Dutch Healthcare Authority (for healthcare providers).

The Netherlands has an open economy and welcomes foreign investments and investors.

For some industries there may be restrictions in terms of acquisitions, or a notification to, or the authorisation of, a regulator may be required.

For more information on national security review, see 2.6 National Security Review.

If a business combination is not subject to EU merger control review, a proposed merger, acquisition, or full-function joint venture may have to be notified to the ACM. Changes of control – as defined in the Dutch Competition Act – are subject to the Dutch merger control regime. This implies that the acquisition of a minority interest is not notifiable as long as it does not confer control (eg, through veto rights).

A mandatory pre-closing merger filing in the Netherlands is required if in the last calendar year prior to the transaction: (i) the combined worldwide turnover of the companies concerned is EUR150 million or more, and (ii) the turnover in the Netherlands of each of at least two companies is EUR30 million or more. Special turnover thresholds apply to certain sectors. The regime in the Netherlands comes with a standstill obligation, which means that a proposed transaction cannot be consummated until after approval has been obtained.

The ACM will assess whether, as a result of a proposed transaction, effective competition on the Dutch market or part of it would be significantly impeded, in particular as a result of the creation or strengthening of a position of economic power.

If a transaction is structured as a share deal, the acquirer obtains the target “as is”, including all employees and connected contracts and collective regulations. If the transaction is structured as an asset deal and, as a result, a “business” is being transferred on a going concern basis, all employees predominantly working for such business will automatically transfer together with all their applicable employment terms and conditions to the acquirer (ie, so-called TUPE or ARD). In such scenario, the acquirer should be able to replicate all employment terms and conditions as of the employee transfer date. Specific exemptions apply in relation to pensions dependent on facts and circumstances.

In case of a change of control of an entity in which a works council is established or in case the business transfer relates to such entity, the works council has a prior right of advice.

For transactions primarily concerning the Dutch market, where the entity or group entity employs 50 or more individuals in the Netherlands (either on the seller’s or acquirer’s side), there is a requirement to notify, in a timely manner, the Dutch Social Economic Council (Sociaal-Economische Raad or SER) and relevant trade unions (if any) ahead of the deal’s closure. The trade unions reserve the right to request consultation regarding the social and economic implications of the transaction.

On 1 June 2023, a broad Dutch National Security Investment Act (Wet veiligheidstoets investeringen, fusies en overnames or NSI Act) entered into force, covering acquisition activities involving any target company in the Netherlands that is a (i) vital provider, (ii) manager of a corporate campus, or (iii) sensitive technology company.

Under the NSI Act, a company that operates, manages or makes available a service whose continuity is vital to Dutch society is considered a vital provider, such as key financial markets infrastructure providers like significant banks, payment services providers, and trading platforms, main transport hubs (Schiphol Airport and the Port of Rotterdam), heat network or gas storage operators, or extractable energy or nuclear power companies.

If the envisaged transaction falls within the scope of the NSI Act, a notification will have to be made by either the acquirer or the target company. The notification requirement in the NSI Act applies irrespective of the nationality of the acquirer. The acquirer is exempted from the obligation to report if the investor is unaware of the investment’s notification requirement due to a confidentiality obligation of the target company.

In addition to the NSI Act, the main laws currently in force in the Netherlands containing foreign investment review-related provisions are:

• the Dutch Electricity Act 1998;
• the Dutch Gas Act;
• the Dutch Financial Supervisory Act;
• the Dutch Gambling Act;
• the Dutch Healthcare Market Regulation Act;
• the Dutch Mining Act; and
• the Dutch Telecommunications Act, as amended by the Dutch Act on undesired control telecommunications.

In its Catalpa decision of 17 May 2023, the Dutch Enterprise Chamber of the Amsterdam Court of Appeal (the Enterprise Chamber) ruled on a matter of mismanagement. The Estro Group (then named Catalpa) was acquired by private equity investor Providence in 2010. Providence took out several loans, which were pushed down to the level of the target company. In 2014, Estro Group was declared bankrupt. The bankruptcy trustee of Estro Group initiated proceedings before the Enterprise Chamber to determine mismanagement in connection with the acquisition by Providence.

In short, the Enterprise Chamber found that the mandatory works council consultation process was not adhered to, and the works council was not properly informed. This led the Enterprise Chamber to the conclusion that there had been mismanagement at Estro Group, for which the management and supervisory directors were responsible. This in itself does not make the directors liable for damages, but it does open the door for liability proceedings. The ruling emphasises that directors must serve the interests of the company, should strictly adhere to applicable rules when involved in an acquisition process, and should seek legal and financial advice from outside advisers.

On 1 June 2023, the NDI Act entered into force. For more information, see 2.6 National Security Review.

It is not uncommon for a bidder to acquire shares in the target prior to launching a public offer or during the offer period. Stakebuilding strategies are tailored to specific circumstances and the phase of (preparations for) an offer.

Stakebuilding in on-market transactions is only allowed if a bidder does not possess inside information. Even if a bidder possesses inside information, they could still acquire a large stake from one or more target shareholders in a block trade (off-market), assuming that the bidder and the selling shareholder(s) have the same inside information and therefore the bidder does not use the information for the block trade. In the phase prior to announcement, taking a stake above the disclosure threshold of 3% could trigger market rumours and therefore complicate a takeover process.

Because of these complexities, on-market stakebuilding generally is only done after the announcement of an offer. Stakebuilding is subject to disclosure requirements (see 4.2 Material Shareholding Disclosure Threshold) and other rules and obligations (see 4.3 Hurdles to Stakebuilding).

Anyone who acquires or disposes of shares or voting rights in a listed company as a result of which the percentage of capital or votes held reaches, exceeds or falls below certain thresholds, must report this to the AFM without delay. The same applies to the acquisition or disposal of financial instruments that represent a short position with respect to shares. The following thresholds trigger a notification obligation: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. The notifications are published in a public register on the AFM website.

The notification should set out whether the interest held is a direct or an indirect holding of shares or voting rights and whether it concerns an actual or potential interest. If two or more shareholders enter into an agreement to pursue a sustained joint voting policy (ie, for more than one general meeting), they will be deemed to be “acting in concert”. In that event, they will each have to notify the AFM of their combined shareholding, except if that combined shareholding is below the 3% threshold.

The main disclosure thresholds are explained in 4.2 Material Shareholding Disclosure Threshold. Compliance with these thresholds is based on mandatory law and a listed company cannot include higher or lower disclosure thresholds in its articles of association.

Other relevant hurdles for stakebuilding in the context of a (potential) public offer are:

• Mandatory offer threshold: See 6.2 Mandatory Offer Threshold.
• Stakebuilding disclosures: After announcement, a bidder is required to disclose any transactions in target shares, including the terms of such transactions and the total share interest of the bidder. In the offer memorandum, the bidder must disclose all its transactions in target shares that were executed during the year prior to publication.
• Antitrust, FDI and regulatory clearances: Some acquisitions may be subject to specific clearances or notification obligations. For example, the acquisition of an interest of 10% or more in a financial institution requires a declaration of no objection from the Dutch Central Bank or, in case the target is a bank, the European Central Bank.
• Best price rule: If a bidder declares its offer unconditional, it must pay all tendering shareholders a price equal to the higher of (i) the price offered in the offer memorandum, including any increases (if any) and (ii) the highest price paid in transactions after announcement of the offer. This is referred to as the “best price rule”. Importantly, this rule does not apply to transactions conducted in ordinary trading on a regulated stock exchange, which means that a bidder can pay a higher price than the offer price in on-market transactions without having to increase its offer price.
• Foreign jurisdictional rules: If there is substantial ownership by shareholders from other jurisdictions, the rules of those jurisdictions may be relevant to consider in addition to the Dutch rules. In practice, mainly US rules are relevant for public offers. A target will typically have US shareholders, in which case a public offer will be subject to certain US tender offer rules. The scope and extent of US regulation will depend on the level of US ownership in the target.

Dealings in derivatives are allowed in the Netherlands.

The disclosure obligations set out in 4.2 Material Shareholding Disclosure Threshold apply to derivatives in case their value is (co-)dependent on the value of shares, they entail a right or an obligation to acquire shares or the instrument gives the holder a position that is economically similar to a shareholder.

There is no general obligation for shareholders to disclose the purpose of their acquisition or their intention regarding control of the company. The Dutch Corporate Governance Code includes rules that require institutional investors to disclose their engagement policy and the implementation thereof on their website.

If someone creates the impression that it is preparing a public offer, the target can request the AFM to force the alleged bidder to publicly state its intentions. This is the so-called “put up or shut up rule”. In that case, the alleged bidder must issue a press release in which it announces a public offer or announces that it has no intention of making a public offer. If the press release states that the party in question has no intention of making an offer, they (and the persons with whom they are acting in concert) are prohibited from announcing or making a public offer for a period of six months after that press release.

In case a bidder launches a public offer, the offer memorandum should include information on the intentions of the bidder regarding the activities, locations, employees, management and governance of the target after declaring the offer unconditional.

The disclosure obligations regarding M&A are governed by the Market Abuse Regulation (MAR) and the Dutch Public Offer Decree (Besluit openbare biedingen Wft or Bob).

During the first phases of an approach, when there are confidential negotiations, inside information will be developed quickly. However, the target is often not yet required to disclose a deal because the option to delay the disclosure of inside information can be used. The disclosure of inside information may be delayed under the MAR if the following cumulative conditions are met:

• there is a legitimate interest of the company;
• the delay will not mislead the public; and
• the confidentiality of the information can be guaranteed.

An example of a legitimate interest for a company is ongoing negotiations, when publication may affect the normal conduct of those negotiations. In order to guarantee confidentiality, all parties sign an NDA. Immediate disclosure is required at the earlier of:

• the signing of a merger protocol; or
• the leakage of inside information.

The rules on disclosure obligations and delay of publication under the MAR will be subject to change if the proposed EU Listing Act will enter into force.

In general, the market practice on the timing of disclosure of public offers does not differ from the legal requirements. In a friendly transaction, the offer rules require that a public announcement of the intention to make an offer is ultimately made when the bidder and the target have reached (conditional) agreement on the public offer (ie, have entered into a merger protocol).

The scope of the due diligence investigation usually covers the following matters:

• corporate (target and subsidiaries, if applicable);
• material agreements;
• financing;
• employment (and pensions);
• intellectual property;
• information technology;
• data protection;
• real estate;
• environmental (and zoning);
• insurance; and
• litigation.

A standstill agreement is typically entered into between a bidder and a target company, preventing the bidder from increasing its stake in the target. Generally, the standstill provision terminates upon the signing of the merger protocol and announcement of the proposed offer.

A bidder and a listed target company can agree on (temporary) exclusivity prior to concluding a merger protocol. In a private M&A context, exclusivity is often agreed upon in a letter of intent which governs the pre-contractual relationship between a purchaser and seller.

In general, the terms and conditions of the tender offer are laid down in a merger protocol, which inter alia, includes provisions relating to conditions for initiating and completing the offer, break fees and so-called “no-shop” provisions, and non-financial covenants. While the parties are not required to disclose the merger protocol, the main terms and conditions of the agreement are included in an offer memorandum as well as in the initial public announcement regarding the tender offer.

Private M&A Transactions

For private M&A transactions, the length of the process will vary on a case-by-case basis depending on, inter alia, the structure of the transaction (bilateral negotiations or an auction process), the complexity of the negotiations, the due diligence process, mandatory regulatory clearances and other closing conditions.

Public M&A Transactions

In a public M&A transaction, the offer rules require that a public announcement will be made on the intention to make an offer if the bidder and the target have reached (conditional) agreement on the public offer. Following the initial announcement of the offer, it typically takes at least two to three months to have the offer memorandum approved by the AFM and to formally launch the offer. The offer period must be eight to ten weeks and is subject to an optional extension period of two to ten weeks. Any further extensions, which may be required for regulatory purposes, are subject to AFM approval. After closing of the offer period, the bidder typically announces a post-offer tender period of up to two weeks.

If the bidder, following settlement of the offer, holds at least 95% of the target’s issued share capital, it may institute a statutory squeeze-out procedure at the Enterprise Chamber. A statutory squeeze-out typically takes anywhere between three months and one year, depending on shareholder opposition. If a bidder has acquired less than 95% of the target’s issued share capital, various alternative squeeze-out measures may be available to the bidder, if so agreed in the merger protocol (see 6.10 Squeeze-Out Mechanisms). Timing of such alternative squeeze-out measures differs on a case-by-case basis, but they can typically be executed within a couple of days to a couple of weeks following closing of the public offer.

A bidder will be obliged to make a mandatory offer if they are able to exercise, directly or indirectly, at least 30% of the voting rights in the general meeting of a Dutch company listed on a regulated market (alone or together with others with whom the bidder is acting in concert). “Acting in concert” is defined as persons co-operating under an (oral or written) agreement with the aim of acquiring control in the target company.

Unfortunately, guidance on when persons are acting in concert is limited. Contrary to other EU jurisdictions where similar mandatory offer rules apply, there is no possibility to obtain guidance from any regulatory authority, since in the Netherlands a Dutch court will ensure compliance with the mandatory offer rules and not the AFM.

A mandatory offer should be made at a fair price which will, in principle, be equal to the highest price paid by the bidder for shares in the target in the one-year period preceding the announcement of the mandatory offer.

In the vast majority of Dutch public offers, cash is solely used as consideration. However, it is also possible to offer securities or a combination of cash and securities.

In the context of private M&A transactions, the most common tool used to bridge value gaps is an earn-out mechanism. We do not see these types of structures in the context of public M&A.

A public offer is usually subject to “commencement conditions”, being conditions that must be satisfied (or waived) for the bidder to launch the offer, and “offer conditions”, being conditions that must be satisfied (or waived) in order to declare the offer unconditional.

Common commencement conditions include:

• no breach of the (material provisions of the) merger protocol;
• absence of a material adverse change;
• no change in the board’s recommendation;
• compliance with employee consultation procedures;
• no legal prohibition of the public offer; and/or
• no suspension of trading of the target company’s shares.

Similar conditions typically apply as offer conditions. In addition, the following conditions generally apply:

• a condition that all regulatory approvals have been obtained; and
• a condition that a certain minimum acceptance threshold has been met (see 6.5 Minimum Acceptance Conditions).

Finally, the adoption of certain general meeting resolutions (eg, dismissal or appointment of directors) that will become effective upon settlement of the offer is generally included as an offer condition.

In contrast to a voluntary public offer, the completion of a mandatory offer may not be made subject to any conditions.

A common condition for a takeover offer is that at least 95% of the shares are tendered under the offer. This threshold of at least 95% of the shares is used because a bidder can subsequently initiate statutory squeeze-out proceedings to acquire the remaining minority shares (see 6.10 Squeeze-Out Mechanisms).

In addition, it is market practice to agree that the 95% threshold will be lowered (eg, to 80%) if the general meeting of the target has passed resolutions to initiate alternative squeeze-out measures (see 6.10 Squeeze-Out Mechanisms). This allows the bidder to acquire full control of the business of the target company after settlement of the offer, even if they acquired less than 95% of the target’s shares.

A public offer cannot be conditional on obtaining the required financing. Ultimately on the date that approval of the offer memorandum by the AFM is requested, the bidder must ensure that it can dispose of the funds required for the offer or has taken all necessary action to provide any non-cash consideration. In addition, the bidder must make a public announcement as soon as it has secured certainty of funds. 

In private M&A transactions, it is permitted to include obtaining financing as a condition precedent. 

A bidder may implement deal protection measures, including arrangements for a break fee, matching rights, no-shop provisions, exclusivity, and information rights. However, the target’s management and supervisory directors are required to act in the best interests of the company. Any deal protection measures should therefore be proportional and reasonable. The target company typically requires a “fiduciary out” in addition to such measures, and the measures may not entirely exclude the possibility for a target company to engage with a third-party bidder if that third party has a superior offer. All circumstances should be considered to determine if the total package of deal protection measures is permissible. A break fee of around 1% of the target’s equity value in a Dutch public offer is generally accepted, however, in certain cases higher break fees may be agreed upon.

If a bidder does not intend to acquire 100% ownership of a target, it may strengthen its governance rights by, for example, entering into a shareholders’ or voting agreement with another major shareholder or concluding a relationship agreement with the target company. Such agreements typically include provisions regarding governance rights, and may include a nomination right for one or more members of the supervisory board. They may also include share transfer restrictions or orderly market arrangements.

An agreement between shareholders may trigger a mandatory offer if the shareholders are deemed to act in concert and can jointly exercise at least 30% of the voting rights at the general meeting of a Dutch-listed company (see 6.2 Mandatory Offer Threshold).

In the Netherlands, it is possible for shareholders to vote by proxy during a general meeting.

Under Dutch law, a shareholder (eg, the bidder following a successful tender offer) holding 95% of the target’s issued share capital may request the Enterprise Chamber to force the remaining minority shareholders to sell their shares to the majority shareholder (a statutory squeeze-out). Similarly, the remaining minority shareholders (assuming such majority shareholder holds 95% or more) have the right to require the majority shareholder to purchase their shares (a sell-out).

It is market practice for the bidder and the target to agree that if the bidder fails to reach the acceptance level of 95% but exceeds a certain lower acceptance level (typically 80%), the target’s board will co-operate with so-called alternative squeeze-out measures (subject to shareholder approval). These alternative possibilities allow for a squeeze-out of minority shareholders if a bidder, following a successful tender offer, holds less than 95% of the target’s issued share capital. Transaction structures that are regularly seen include:

• the triangular merger of the target into a subsidiary of the bidder with the subsequent liquidation of the entity in which the non-tendering shareholders have received securities;
• a sale and transfer of all assets and liabilities of the target to a subsidiary of the bidder with the subsequent liquidation of the target; and
• a combination of an asset sale and a (triangular) merger.

In order to mitigate any concerns over the efficacy of alternative squeeze-out measures and to enhance deal certainty, there is a consistent trend in public takeovers in the Netherlands to “prewire” any alternative squeeze-out measures. Pre-wired means that the decision to implement an alternative squeeze-out measure is put to a vote at the general meeting of the target prior to closing of the offer (subject to the bidder having acquired less than 95%, but at least the alternative percentage, of the target company’s issued share capital, following completion of the public offer).

It is common for a bidder to approach, and subsequently enter into irrevocable commitments with, one or more principal shareholders that hold a substantial interest in the target. Irrevocable undertakings generally require the shareholder to offer its shares in the offer and to vote in favour of certain resolutions that will be put on the agenda during the general meeting of the target company prior to the end of the tender period. Irrevocable undertakings provide deal certainty. However, a shareholder will typically only agree to commit to an irrevocable undertaking if it may terminate the irrevocable commitment in the event of a superior competing offer.

There are no statutory rules on the timing of the signing of irrevocable commitments. However, such commitments are generally negotiated concurrently with the (final) negotiations on the merger protocol and signed (just) prior to the initial public announcement.

To prevent the qualification of entering an irrevocable commitment as acting in concert, which would trigger the obligation to launch a mandatory offer, the Dutch offer rules provide for a safe harbour provision (subject to certain conditions).

Finally, the MAR provides for rules on market sounding, which includes approaching shareholders in the context of a public offer.

In case of a public offer, the offer memorandum must be filed for approval with the AFM ultimately within 12 weeks following the initial announcement. The review and approval process generally takes three to four weeks. Within six business days after obtaining the AFM’s approval of the offer memorandum, the bidder must either launch the offer or publicly renounce its decision to launch an offer.

The offer is launched by making the offer memorandum publicly available, typically by publishing the offer memorandum on the website of the offeror and/or the target. The tender period may not commence earlier than on the first business day following the day that the offer is launched and no later than the ninth business day after the date on which the AFM has given its approval of the offer memorandum.

If a bidder offers securities as consideration they will generally be required to make an approved prospectus available. This obligation also applies to the admission of such securities to trading on a regulated market, such as Euronext Amsterdam.

The Prospectus Regulation provides for certain exemptions with respect to the prospectus obligation. For example, the obligation to publish a prospectus does not apply to securities offered in connection with a takeover by means of an exchange offer or offered or allotted in connection with a merger nor for the admission to trading of such shares on a regulated market, provided that a document is made publicly available containing information describing the transaction and its impact on the issuer. Any such document will include information which is similar to the information included in an approved prospectus, but it would not have to be approved by the AFM as a prospectus.

In case of a public offer, the bidder will have to include in the offer memorandum a comparative overview of the target’s consolidated balance sheet, income statement and cash flow statement covering the last three financial years as well as the target’s latest published annual accounts, including the explanatory notes thereto. The auditor will need to issue a report on these comparative financials. If the target publishes semi-annual accounts after the latest annual accounts, these will also have to be included in the offer memorandum, including a review statement.

In case of an exchange offer, the offer memorandum will also have to contain information describing the transaction and its impact on the issuer (ie, the bidder). Consequently, in line with the prospectus rules, pro-forma financial information about the bidder and the target will in principle have to be included. 

There is no statutory requirement to disclose full transaction agreements and it is not market practice to do so.

The offer memorandum will contain relevant information for shareholders regarding the public offer, including a summary of the transaction agreements. The target company will also publish a position statement, which includes information about the views of the target company on the consideration offered by the bidder, considerations and projections used to determine the offer price (or exchange ratio), including the quantitative basis of which the target has based its position vis-à-vis the consideration offered and the consequences of the public offer on employees, employment conditions and the target company’s place(s) of business. It is common practice for the target company’s boards to obtain one or more fairness opinions. If these are obtained, they are required to be disclosed as an attachment to the position statement.

The management board is responsible for the management of the company and its business, under the supervision of the supervisory board. The management board’s responsibilities include, inter alia, the day-to-day management of the company’s operations. The management board may perform all acts necessary or useful for achieving the company’s objectives, with the exception of those acts that are prohibited or expressly attributed to the general meeting or supervisory board by law or by the company’s articles of association.

In performing their duties, the management board and supervisory board are required to be guided by the interests of the company and its business. Based on case law, this is understood to mean that the boards must promote the sustainable success of the business of the company. While doing so, they should take into account the interests of the company’s stakeholders (which generally includes various parties, such as shareholders, creditors, employees and customers).

The fiduciary duties of the management board and supervisory board do not change if the company is involved in a contemplated business combination.

In Dutch takeover situations, it is common for the management board to work closely with the supervisory board. To this end, it is not uncommon for the target company to establish a special committee to intensively supervise the transaction process and the related decision-making. Such a committee can be composed of supervisory directors only, or a mix of supervisory and management directors. Establishing a special committee can ensure a proper balancing of interests and a proper decision-making process and, furthermore, prevent (the appearance of) conflicts of interest within the boards as much as possible. A special committee closely monitors the transaction process, provides the boards with solicited and unsolicited advice and prepares the decision-making.

In general, the management board has broad discretionary authority when determining the strategy of the company. The decision to support a takeover offer falls under the authority of the management board, under supervision of the supervisory board. The boards need to follow a due process, based on available information and with an open mind, but have no overriding obligation to discuss or negotiate with the bidder. The opinion of shareholders can be a consideration, but cannot be decisive: boards can rightfully choose a strategy that creates less shareholder value in the long term than the takeover offer would do in the short term.

That authority of the boards is limited by provisions in law and the company’s articles of association. Breach of such provisions can be the subject of litigation. Business policy decisions are reviewed with caution by courts. Courts are generally reluctant to get into a comprehensive review of the substantive correctness of a resolution taken by the boards, especially when there was a careful and considerate decision-making process underlying such decision.

In a business combination, directors generally obtain outside advice from lawyers, financial advisers (eg, investment bankers) and/or other consultants and advisers. In addition, in case of a public offer, the boards of the target company may also obtain one or more fairness opinions regarding the financial reasonableness of the proposed transaction.

According to Dutch law, any member of a company’s management board or supervisory board must refrain from taking part in the deliberation and decision-making process of the relevant board if that member has a personal direct or indirect conflict of interest towards the company. According to the Dutch Supreme Court, such conflict of interest exists if the director is deemed to be unable to serve the interests of the company and the business affiliated with it with the required level of integrity and objectivity.

This means that a director’s personal interest that is compatible with the company’s interest does not necessarily lead to a conflict-of-interest situation. In any case, it would be advisable for a board member to notify any interest that potentially conflicts with the company’s interest to the management board and supervisory board. In addition, if there is indeed a conflict of interest, this should be disclosed in the public transaction documentation as well, so that the shareholders are aware of the existence and management of any conflicts.

If a conflicted board member takes part in the deliberation and decision-making process of the board, the resolution that is a result of that process can be subject to nullification. In addition, the relevant board member (and sometimes the entire board because of the collective liability principle) may be personally liable towards the company if the conflict-of-interest rules and regulations are not complied with.

As a starting point, shareholders are free to vote as they wish, since the statutory provisions regarding conflict of interest do not apply to shareholders. However, according to the case law of the Enterprise Chamber, the decision-making process within the company as a whole must take place in compliance with the principles of reasonableness and fairness. This can, for example, result in a duty of care for a majority shareholder towards minority shareholders.

Hostile tender offers are permitted in the Netherlands, but they are rarely pursued. This is because it is (at least) complicated and, in some cases, virtually impossible to successfully complete a public takeover without the support of the target company’s boards.

A hostile takeover is generally complicated because the bidder will not be able to conduct due diligence investigations based on information provided by the target, it will be more difficult to prepare and obtain antitrust and regulatory clearances, and securing acquisition financing can also be more complex. Moreover, most major Dutch-listed companies have defensive structures in place that can be enacted against hostile takeovers. Because of these reasons, many bidders drop out in the face of resistance in the preliminary phase.

In the Netherlands, it is generally allowed to use defensive measures to block or impede an unsolicited takeover offer or to protect the company against shareholder activism. According to Dutch case law, the use of defensive measures against a hostile threat is permitted so long as this (i) is necessary to protect the interests of the company, its business and the interests of its stakeholders and (ii) constitutes an adequate and proportionate response to the threat at hand. Generally, defensive measures are not exercised by the target company’s directors but by an independent foundation (see 9.3 Common Defensive Measures).

There are many different defensive measures that can be used in the Netherlands. The most common is a call option on preference shares, under which an independent foundation has the right to acquire newly issued preference shares with voting rights in the capital of the target, with the exclusion of any pre-emptive rights of ordinary shareholders. The foundation can trigger the option if the test in 9.2 Directors’ Use of Defensive Measures is met and, as a result of this, the voting rights of existing shareholders can become diluted by up to 50%. The foundation would typically acquire over 30% of voting rights, but would be excluded from the mandatory offer threshold for a period of two years.

An independent foundation can also hold all shares of the target as of the IPO and issue listed depositary receipts of shares (DRs) to investors as part of the IPO. As a result, investors hold non-voting DRs but would be authorised by the foundation to vote on general meetings and exercise all other shareholder rights. Their voting authorisation would only be withheld in case of a threat by a hostile bidder or activist shareholder. This is a less used but still quite uncontroversial measure.

Even if structural defences like the ones above are not available, target boards could opt to enact various ad hoc measures. For example, the target company could find a friendly bidder (a “white knight”), issue a minority stake to a friendly party (a “white squire”), or it could consider asset sales or acquisitions (eg, purchase of a company, sale of a “crown jewel” or placing a subsidiary in a joint venture).

Based on Dutch corporate law, the management board of a listed company can, with the approval of the supervisory board, invoke a cooling-off period of a maximum of 250 days in case of a hostile tender offer or an activist shareholder trying to dismiss or appoint target directors. During this cooling-off period, the power of the general meeting to appoint, suspend or dismiss directors, as well as to amend provisions of the articles of association that relate to the same, will be suspended. This cannot legally block a tender offer, but can make it practically impossible for shareholders to change the position of the boards. The Dutch Corporate Governance Code provides for a similar response time of 180 days. The response time can be invoked in the event of a request to place a matter on the agenda of a general meeting that may lead to a change in the company’s strategy. It is doubtful whether the response time would be binding on shareholders, which is why the 250-day cooling-off period was enacted in law. It is up to the courts to rule on any undesirable concurrence of the cooling-off period and other protective measures.

The management board, under the supervision of the supervisory board, decides whether to cooperate with and support a public offer. In doing so, it makes an independent assessment and shareholders have no right to prior consultation. The general fiduciary duties of directors (see 8.1 Principal Directors' Duties) do not change in an M&A context. Also, when assessing a takeover proposal, it remains the duty of the management board to focus on the interests of the company and its business and, while doing so, to ensure that the interests of stakeholders are not unreasonably or disproportionately harmed.

This also means that, depending on the circumstances, the boards will have the right and, in some cases may even have the obligation, to actively defend those interests. This will require compliance with the defence test (see 9.2 Directors’ Use of Defensive Measures).

The target company’s boards may reasonably come to the decision not to support an unsolicited takeover offer. In that case, directors can also “just say no” to a hostile takeover bid. Even though a bidder can still decide to pursue their bid anyway, it will definitely complicate the takeover process if they do not have the support of the target company’s boards.

Litigation in connection with private M&A deals is not uncommon in the Netherlands. The reasons for such litigation vary and can be initiated at different stages of the deal (see 10.2 Stage of a Deal).

In case of pre-signing situations, litigation can, for example, be initiated in relation to pre-contractual liability, which finds its legal basis in the Dutch principles of good faith and reasonableness and fairness. Parties who enter into negotiations have to act towards each other in accordance with the principles of reasonableness and fairness. In principle, parties who are negotiating a deal are free to break off such negotiations. This could, depending on the circumstances, be different if the other party had the justified expectation that a contract would be concluded from these negotiations. Dutch case law confirms that, even though parties are in principle free to break off negotiations, certain circumstances can lead to liability for the negative contractual value (eg, costs) or, in certain (more exceptional) circumstances, for the positive contractual value (eg, loss of profits). In practice however, the positive contractual value is almost never awarded, save for exceptional cases.

Post-contractual disputes mainly concern warranty breaches, earn-outs, liability limitations, price mechanisms and, in general, the interpretation of clauses.

Litigation in M&A disputes can arise at various stages throughout the deal process: from pre-contractual liability claims during negotiations to the post-closing earn-out, purchase price mechanism and warranty claims.

In public M&A deals, litigation is more often brought in the early stages of the bidding process, rather than post-transaction.

Since early 2020, there has been heightened attention in case law regarding “Material Adverse Change” clauses and pre-completion covenants in M&A contracts. This focus has shifted to earn-out clauses that are being included in M&A contracts to address certain and uncertain parameters of the transaction. The interpretation and calculation of such earn-out arrangements have become a frequent subject of post-M&A (interpretation) disputes in the past years. The same applies to interpretation disputes regarding warranties, the purchase price and limitation of liability clauses.

Activist shareholders have caused quite a stir in the Dutch corporate landscape in the past two decades, during which there have been many notable cases. Recently, there has been an increase in shareholder activism throughout Europe, and in the Netherlands we see a similar trend. Over the past few years, activists have acquired stakes in several companies.

Generally, we see two main types of activism. The first is activism that arises in the context of a major corporate event, such as a takeover proposal. This type is mainly driven by the desire to influence strategic decision-making in relation to the corporate event. The second type of activism is unrelated to any major event, but rather driven by the activist’s ideas about how the company should be running or changing its business. The latter can ultimately lead to a major corporate event (like a merger or spin-off), but the event is not the trigger.

The focus of activists in the Netherlands is typically to influence the company’s boards to change the company’s strategy. This can be done to achieve several objectives, including financial engineering tactics, such as increasing dividend payouts or share buybacks, forcing a company to sell businesses and distribute the proceeds to shareholders, improve corporate governance or ESG practices, or simply increase the company’s share price and sell the activists’ initial stake at a profit.

The typical activist shareholders are value-driven hedge funds that look to force a change in the company’s strategy. They use their nuisance value or shareholder rights to put pressure on the boards to implement measures that maximise shareholder value. These funds often try to influence the strategic decision-making of a company’s boards by encouraging them to enter into M&A transactions, such as a sale or spin-off of a business unit or to separate their entire operations into two or more companies. Generally, it is quite difficult for shareholder activists to achieve their goals because the boards of Dutch companies do not have an overriding fiduciary duty to maximise shareholder value (see 8.1 Principal Directors' Duties and 9.4 Directors’ Duties) and companies have defensive measures at their disposal (see 9.2 Directors’ Use of Defense Measures and 9.3 Common Defensive Measures).

In recent years, ESG and sustainability have become relevant themes for activist shareholders. This goes both ways; in some cases shareholders claim that the boards of a particular company should be more focused on ESG, while in other cases they claim that boards should be less focused on ESG. On the pro-ESG side, there is a subset of activists consisting of NGOs that are not value-driven but acquire shareholdings to exercise influence on the company to improve their efforts to battle climate change. It is expected that the increased focus on and polarisation of ESG issues will fuel a continuing increase in shareholder activism.

Although shareholders may threaten to interfere with the completion of announced transactions, they are mostly looking for an improvement in the offer terms. In public M&A transactions, it is not uncommon for existing shareholders or hedge funds that buy a stake after the announcement of the transaction to publicly express their discontent regarding the takeover plans and, in particular, the offer price. In recent years, vocal shareholders have expressed their discontent in the context of the takeover offers for several listed companies. This is partly because there is a high threshold to initiate squeeze-out proceedings and, consequently, shareholders that have a relatively small stake can have substantial leverage in price negotiations. This is partly mitigated by agreeing to pre-wired alternative squeeze-out measures. See 6.5 Minimum Acceptance Conditions and 6.10 Squeeze-Out Mechanisms.