Despite the general slowdown in global M&A activity observed in 2023, the Romanian M&A market has continued to show remarkable resilience and performance, with an estimated total value ranging from EUR6.5 billion to EUR7.7 billion. This figure slightly surpasses the 2022 total of EUR6.5 billion to EUR7.5 billion, which accounts for both disclosed and estimated undisclosed deal values. While the overall number of transactions appears to have decreased, the market nonetheless presents a wealth of advisory opportunities.

Despite the relatively low number of capital markets transactions, 2023 was an exceptionally strong year for the Romanian capital markets due to the record-breaking EUR1.9 billion Hidrolectrica IPO (the largest in the EU, and one of the largest worldwide in 2023). With the record increase in the Bucharest Stock Exchange’s capitalisation (at RON300 billion, the highest in its history), there is hope for growth in this area. However, this optimism must be tempered with the appropriate level of caution, given the ongoing general economic uncertainty and lingering geopolitical risks that continue to shape the global landscape.

The prevailing trend in the Romanian market continues to revolve around consolidation across numerous sectors. This consolidation trend is evident in most sectors, including IT, energy, real estate, healthcare and logistics. The entry of an increasing number of private equity firms into the Romanian market has led to a significant number of transactions involving these funds. However, market volatility has primarily favoured strategic investors. Sectors that align with European policies, particularly regarding ESG matters, as well as the current geopolitical climate, are naturally attracting the most significant interest.

While the COVID-19 pandemic and the geopolitical turmoil have presented several challenges for the global community, opportunities for innovation and adaptation in the M&A market were also created, particularly within the technology and renewable energy sectors. The ability to respond to rapidly changing market conditions and navigate complex environments has become increasingly important for companies seeking to develop or remain competitive. The sectors with the most deals included energy, IT, real estate, retail, logistics, and the banking sector while sectors such as the automotive and agriculture sectors have also seen notable M&A activity.

Typically, companies are acquired through the acquisition of shares. However, depending on due diligence findings or the financial situation of the target company (eg, insolvency), transfers of assets are also common and some involve large businesses.

There are no regulators for private M&A activity per se in Romania, but depending on the industry concerned, there may be certain closing conditions (eg, prior approvals of a regulator like the National Bank of Romania or the National Agency for Mineral Resources may constitute closing conditions for a transaction).

However, irrespective of the industry, the involvement of the competition authority might be legally required. The same goes for the Commission for Examination for Foreign Direct Investments (CEISD); see 2.6 National Security Review.

There are a few restrictions on foreign investment. For example, foreign nationals outside the EU and EEA cannot acquire land, other than in a limited number of exceptions. Also, a number of investments are subject to scrutiny by the CEISD; see 3.1 Significant Court Decisions or Legal Developments.

As an EU member state, Romania is subject to both EU regulations and relevant national legislation, the latter harmonising with the former. Among the details worth considering are the rather low thresholds triggering a merger control requirement.

More specifically, business combinations resulting in a change of control (be it sole or joint) of an undertaking on a lasting basis, are subject to compulsory clearance by the Romanian competition authority (ie, the Competition Council) if the combined turnover of the undertakings concerned are in excess of EUR10 million worldwide, and each of at least two of the undertakings concerned had a turnover in Romania exceeding EUR4 million in the year preceding the transaction.

Prior to a transaction, acquirers should carefully review individual templates and collective bargaining agreements, and any other arrangements (eg, protocols) between the employer and the trade union/employees’ representatives and/or employees, and HR-related policies and procedures applicable within the target company so as to assess potential non-compliance with the law, certain cost trends that could entail a target company’s liabilities at post-deal closing. These costs may include potential sale bonuses, benefits, severance payments, etc. Acquirers should also consider any other potential implications the transaction might have on the target company’s employees, such as mandatory prior information and consultation requirements.

Depending on the type of transaction, acquirers may also have specific obligations to fulfil. Asset deals are also typically subject to TUPE rules.

The most relevant employment laws and regulations include:

• the Romanian Labour Code (Law 53/2003);
• the Law on social dialogue (Law 367/2022);
• the Law on teleworking (Law 81/2018);
• the Law on the general framework for informing and consulting employees (Law  467/2006);
• the Law on the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts thereof (Law 67/2006);
• the Government Decision providing the minimum gross salary guaranteed for payment at national level (GD 900/2023);
• the Law on health and safety at work (Law 319/2006); and
• Government Decision No 1425/2006 on the methodological norms for the enforcement of the Law on health and safety at work.

Mergers and acquisitions that qualify as foreign direct investments (FDI) or EU investments (following recent amendments) and meet the relevant criteria under the FDI Romanian legislation are subject to a national security review conducted by the CEISD. The definitions of foreign direct investment and EU investment are broad.

If an FDI or EU investment meets the relevant merger control thresholds, the relevant parties should notify both the CEISD and the Romanian Competition Council. Transactions below the relevant merger control thresholds might still be subject to the CEISD’s scrutiny, depending on their characteristics.

M&A-related litigation is not common in Romania as many investors prefer arbitration and discretion when resolving disputes.

Rules on Security Review and Foreign Direct Investments

The legal regime of both foreign investments and national security review was amended by means of Government Emergency Ordinance No 46/2022 for the implementation of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, as well as for the amendment and supplementation of Competition Law No 21/1996 (GEO 46/2022), which came into force on 18 April 2022.

According to the amendments introduced by GEO 46/2022, the CEISD, a regulatory body which effectively started its activities at the end of 2022, conducts the security review of transactions that may pose a national security risk, replacing the former regulatory body, the Supreme Council of State Defence (CSAT).

The CEISD will perform its reviews of transactions subject to the merger control of the Competition Council with potential national security implications, as well as other types of foreign direct investments, as defined under GEO 46/2022.

According to recent amendments to FDI legislation, from the end of 2023, investments made by both foreign and EU investors are subject to examination and approval by the CEISD, if they meet the relevant criteria.

Trade Registry Law/Amendments to the Companies Law

The enactment of the Trade Registry Law (Law 265/2022) at the end of 2022 introduced new rules, though not significantly different, for registering corporate operations in Romania. However, the legal framework for the corporate governance of private companies has not seen significant changes.

The Companies Law was also amended through the enactment of Law 265/2022, which mainly introduced provisions primarily aimed at providing clarifications, as well as provisions on opposition for mergers and spin-offs, and new provisions concerning firms in difficulty (but not insolvent).

Furthermore, new amendments to the Companies Law, Law 265/2022, and other legislation affecting registration in the Trade Registry were enacted by Law 222/2023, thereby aligning with Directive (EU) 2019/2121 as regards cross-border conversions, mergers and spin-offs. The new law was published in the Romanian Official Gazette No 667 of 20 July 2023 and entered into force on 23 July 2023. Key revisions pertaining to cross-border operations include:

• streamlining the process by allowing the Trade Registry to directly acquire necessary information from certain other public authorities and allowing for the publication of merger projects on participating companies’ websites;
• eliminating the requirement for an audit and an independent expert’s report for limited liability companies owned by a sole shareholder or in cases where the participating shareholders waive such report; and
• implementing certain safeguards for employees.

Public M&A

On the public M&A side, the relevant core capital markets legislation, namely Law 24/2017 on issuers of financial instruments and market operations (Law 24/2017 or the “Issuers’ Law”) was not recently affected by major amendments and is generally in line with the relevant EU directives, including for example the Shareholders Rights Directive II  (SRD II). 

However, a bill of law is currently under public consultation aiming to amend the Issuers’ Law on a broad range of topics, covering, inter alia, (i) implementation of certain provisions of the Women on Boards Directive 2022/2381 and of the Corporate Sustainability Reporting Directive 2022/2464, as well as (ii) implementation of certain matters covered by the National Strategy for the Development of the Capital Markets. Some of the key proposed amendments aim to simplify capital raising via share capital increase by shortening certain legal terms, including the one related to the exercise of the preference right and to strengthen minority shareholder rights in electing board members via the cumulative voting procedure.

The capital markets legislation was subject to several important changes both in 2017 and 2018. Essentially, the Issuers Law was adopted aiming among other things to better implement the relevant EU directives, including Directive 25/2004 on takeover bids (the “Takeover Directive”). For example, the Issuers Law introduced the breakthrough rule in takeover bids laid down in the Takeover Directive. The more recent changes to the Issuers Law introduced in 2022 do not have material relevance to takeover bids.

As mentioned in 3.1 Significant Court Decisions or Legal Developments, the Issuers’ Law was amended in recent years essentially to implement the SRD II, but also to introduce certain amendments to ensure the correlation of the national legislation with the EU Prospectus Regulation.

It is expected that the relevant Romanian securities legislation will be generally impacted by the adoption of new legislative changes at the EU level. Notable examples include the expected transposition of the Women on Boards Directive (Directive (EU) 2022/2381 and of the Corporate Sustainability Reporting Directive 2022/2464 (see 3.1 Significant Court Decisions or Legal Developments).

Additionally, the proposals of the European Commission for the new Listing Act Package which comprises significant amendments to the EU’s Prospectus Regulation (2017/1129/EU, the “Prospectus Regulation”), Market Abuse Regulation (596/2014/EU, the ”MAR”) and Markets in Financial Instruments Directive (2014/65/EU, the ”MiFID II”), as well as a proposed directive on multiple-vote shares, are expected to impact the Romanian legislation once such proposals are finalised and enacted.

Stakebuilding is not prohibited in Romania; however, in practice, its use seems to be rather limited for various reasons, including the low liquidity of the Romanian capital markets, the impact of stakebuilding on the price to be offered where the bidder is subject to a mandatory takeover bid requirement or where he or she wishes to make a voluntary takeover bid to acquire control over the company.

There are also implications for market abuse rules as certain safe harbours applicable to public takeovers and mergers do not apply to stakeholding (the EU Market Abuse Regulation being directly applicable in Romania).

The notification requirements regarding the acquisition or disposal of major holdings laid down in the Romanian legislation implement to a large extent the provisions of the Transparency Directive 2004/109 (as amended). As such, disclosure of material shareholding applies where a shareholder acquires or disposes of shares of an issuer listed on a regulated market and to which voting rights are attached, if the percentage of the voting rights held following the acquisition or the disposal concerned, reaches, exceeds or falls below one of the 5%, 10%, 15%, 20%, 25%, 33%, 50% and 75% thresholds.

The disclosure obligation also applies where the relevant thresholds are reached either directly or indirectly by holding financial instruments of similar economic effect to holdings of shares and entitlements to acquire shares, whether or not they give the right to a physical settlement.

The notification must be made to the issuer and to the FSA (if Romania is the home member state of this issuer) in Romanian or a widely recognised international financial language, within four trading days. The issuer must make the notification public within three working days of its receipt.

Where the 33% threshold is exceeded, either on an individual basis or together with other persons acting in concert, the obligation to launch a mandatory takeover bid may apply, unless the bidder can rely on an exemption (see 6.2 Mandatory Offer Threshold).

Issuers are prohibited from determining thresholds in their constitutive acts other than the ones laid down by law. See 4.1 Principal Stakebuilding Strategies in relation to general stakebuilding hurdles.

Dealings with derivatives are not prohibited under Romanian law. However, transactions with derivatives are taken into account to determine whether shareholding disclosure obligations apply if the relevant thresholds, indicated in 4.2 Material Shareholding Disclosure Threshold, are reached.

The filing/reporting obligations under the European Market Infrastructure Regulation (EMIR), a European regulation on over-the-counter (OTC) derivatives, apply, as EMIR is directly applicable in Romania.

In the case of a takeover bid, the bidder is required to disclose in the offer document the plans for continuing the business of the target company, for example, including any significant change in working conditions, in particular the bidder’s strategic plans for the two companies, if any, and possible repercussions for the jobs and business locations of the companies.

Explicit information will also be provided regarding the bidder’s plans on a potential winding-up, changing the object of activity and withdrawing from trading on a regulated market.

In public M&A deals, disclosure requirements dictate that the application of an inside information disclosure regime must be considered in line with the EU Market Abuse Regulation. Therefore, the target must make a case-by-case analysis and decide at what stage of the deal the relevant non-public, price-sensitive information is accurate enough to qualify as inside information subject to disclosure obligations.

As a rule, the issuer must disclose any inside information as soon as possible, but no later than 24 hours after the event or after the date when the information is brought to its attention.

If information is made public through the press or an online post not initiated by the issuer in the context of its reporting requirements, or in the case of a market rumour explicitly referencing privileged information at the issuer’s level, the issuer must immediately publish that information under the EU Market Abuse Regulation. This is required if the information is sufficiently detailed to indicate that its confidentiality is no longer assured. The publication must be carried out using the same conditions and mechanisms as those used for communicating inside information, ensuring an ad hoc announcement is published as soon as possible.

Per the EU Market Abuse Regulation, the issuer may delay, at its own responsibility, disclosure of inside information to the public, subject to the observance of certain conditions (eg, immediate disclosure is likely to prejudice the legitimate interest of the issuer; the delay of disclosure is not likely to mislead the public; and the issuer can ensure the confidentiality of that information).

Considering the severe sanctions applicable in connection with breaches related to disclosure and misuse of inside information, the normal market practice on timing of the disclosure should not differ from the legal requirements. Even so, there may be cases of legal uncertainty as regards the exact moment when the disclosure obligation arises.

In public M&A deals, due diligence is typically made on the basis of publicly available information only. In some cases (eg, takeover or merger deals), it may be possible to have access to some additional non-public and price-sensitive information, subject to compliance with the EU Market Abuse Regulation as well as the obligation to ensure that investors have equal access to relevant information about the issuer prior to the deal.

As such, disclosure of non-public and potentially price-sensitive information should be treated with great care, especially as, unlike other jurisdictions, there are no official guidelines from the Romanian authorities regarding the setting up of data rooms in relation to public M&A deals and disclosure of inside information in this context.

When scoping due diligence exercises for private M&A deals, some factors are of particular relevance, such as the deal structure (eg, share or asset deal), the sector experience of the party commissioning the due diligence (ie, the vendor or the buyer), any on-going investigation on the target entity, as well as the size of the deal.

The COVID-19 pandemic has had a notable influence on the scope of the process of deal-making, ranging from the initial stages of due diligence and documentation to closing and beyond. Regardless of whether one is a buyer, seller, or adviser, having a grasp of the challenges that have arisen due to the pandemic and the approaches employed to tackle them can enhance the smoothness of one’s deal and diminish the likelihood of disagreements.

As a rule, however, nowadays there are more due diligence exercises limited in scope (usually covering title-related matters, material contracts, regulatory, employment, litigation), than those covering all aspects of a company’s business. For example, where a vendor commissions a due diligence exercise to put its company up for sale (commonly known as a “vendor due diligence” or VDD), typically encountered in sizeable deals, while the buyer may still (legally) rely on the VDD findings, it often elects to conduct a supplementary review (top-up) departing from the VDD findings, aimed at identifying and filling potential “gaps”.

In public M&A deals, standstill agreements imposing obligations on the bidder are in some cases concluded, but they are uncommon. In the context of a mandatory takeover bid, the law prohibits the shareholder and persons acting in concert from acquiring shares in the issuer prior to carrying out the bid in question.

Typically, in private M&A deals, exclusivity is agreed upon for the buyer’s benefit through term sheets or similar documents. This restricts the vendor for a specific period, which is estimated to encompass all the main milestones of the transaction process, such as due diligence, negotiation, and up to the tentatively scheduled signing date of the definitive transaction documents. This arrangement effectively sets a time limit on the deal itself. As a result, the seller benefits, as they may walk away from the deal with that particular buyer simply due to the passage of time, unless an extension is mutually agreed upon. 

The terms and conditions offered within a bid are commonly documented in definitive agreements.

Further, in public M&A deals, the terms and conditions of any takeover must be included in the bidder’s offer document, which is made public to ensure that the offer is addressed to all the shareholders. The offer is irrevocable for the entire duration of the takeover bid.

In public M&A deals, the process is highly regulated (eg, the norms provide for a minimum of ten working days and a maximum of 50 working days for the takeover bid) and involves obtaining approvals from the competent authority (the FSA) and compliance with publicity requirements.

Timeframes

The timeframe for the acquisition/sale of a business in non-public M&A deals may depend on a series of factors; eg, whether a share deal or asset deal is envisaged or, in case of a share deal, whether the target company is a limited liability or a joint-stock company, the acquisition structure, whether it is subject to merger control (and if only phase I or phase II), and whether it is subject to the CEISD’s scrutiny. Any debt registered in the Romanian investor’s tax record (cazier fiscal) could further impact the timeframe of the transaction.

In addition, certain other prior clearances may be legally required with respect to a particular transaction that would naturally expand the process (eg, in the area of certain natural resources).

While the initial government response to the COVID-19 outbreak (ie, a strict lockdown) could have been problematic where physical presence of all parties would have been required to close a deal (eg before the notary public in case of real estate deals), this was not the case, as most of the M&A processes were already performed online. While in-person meetings saw a significant increase within M&A activities in 2023, online meetings still account for a substantial proportion of all interactions.

Share Deal v Asset Deal

In terms of a share deal versus an asset deal, while an asset deal may prove beneficial for the buyer in terms of liability inheritance, which, generally, does not follow the transferred assets but remains with the seller (ie, the company owning the transferred assets), the transfer process may prove cumbersome and time-consuming. This is because certain licenses may need to be renewed or reissued to the new owner, and individual re-registrations may be required for registrable assets, as well as the assignment of contracts, among other things.

Mandatory takeover requirements apply when a person or persons acting in concert, acquire securities that entitle them, directly or indirectly, to more than 33% of the voting rights of the issuer. In such cases, these persons are required to launch a public offer addressed to all securities holders at a fair price and covering all their holdings, as soon as possible but no later than two months after they reach that holding threshold.

However, the requirement to conduct a mandatory takeover bid does not apply if the holding reaching the above-mentioned threshold is the outcome of an “exempt transaction”; ie:

• the acquisition of shares in the process of privatisation;
• the acquisition of shares from the Ministry of Public Finance or from other legally empowered entities, in the process of budgetary claims enforcement;
• transfers of shares between a parent company and its subsidiaries or between subsidiaries of the same parent company; or
• a public voluntary takeover bid addressed to all those securities holders and covering all their holdings.

If over 33% of the issuer’s voting rights are unintentionally acquired, the holder of such a position must, within three months:

• carry out a public offer, under the conditions stipulated under the Issuers’ Law; or
• transfer a number of shares, for the purpose of losing the position unintentionally acquired.

The acquisition is considered “unintentional” if it is the result of operations such as:

• the reduction of the capital through the buy-back by the company of its own shares, followed by their cancellation;
• the exercise of the preference right, subscription or conversion of the rights originally granted, as well as the conversion of preference shares into ordinary shares; or
• merger/de-merger or succession.

Generally, in public M&A deals, the preference is for cash consideration, although the norms regulating takeover bids allow for the bidder to offer cash, or a combination of cash and securities. In the latter case, the bidder of a public exchange offer must also propose a cash alternative for the securities offered in exchange, so that the investors can opt to receive either cash, securities or a combination of the two.

Likewise, in non-public business combinations, the consideration is typically cash or, sometimes, shares swap.

Valuing companies in the current global climate can present challenges, particularly in certain sectors, making it more difficult to bridge the valuation gap. Despite this added complexity and the challenges posed by higher inflation, deals have continued to regain a higher degree of predictability over the past year.

In public M&A deals, the relevant regulations may not explicitly address the use of conditional takeover offers. However, through interpretation, conditions such as achieving a minimum threshold in a voluntary takeover bid or securing clearance/approval from the appropriate competition authorities may be considered acceptable. Nevertheless, it is advisable to consult the competent authority for the most recent interpretations regarding the permissibility of submitting conditional offers in such deals.

The key control thresholds in Romanian public companies are as follows:

• the 33% threshold: this triggers the bidder’s obligation to launch a mandatory tender offer; the threshold is also relevant for a voluntary takeover bid where the bidder intends to acquire more than this percentage of the voting rights in the target (see 6.2 Mandatory Offer Threshold);
• the 75% threshold: if, following a takeover bid, the bidder holds 75% or more of the capital carrying voting rights, no restrictions on the transfer of securities or on voting rights, nor any extraordinary rights of shareholders concerning the appointment or removal of board members provided for in the articles of association of the target company shall apply; and
• the 90/95% threshold: this enables the bidder to initiate the squeeze-out procedure (see 6.10 Squeeze-Out Mechanisms).

In public M&A deals involving a takeover bid, the offer cannot be conditional upon obtaining financing, as the offer document to be submitted to the competent authority for approval must include either proof of a deposited guarantee representing at least 30% of the total offer value in a bank account of the bidder’s broker (the amount to be blocked for the entire period of the offer), or a guarantee letter issued by a credit institution in the European Union or by a non-banking financial institution registered in the special register kept by the National Bank of Romania covering the entire value of the offer, issued in favour of the bidder’s broker and valid until the settlement date of the transaction related to the offer.

A non-public business combination may be conditional on the bidder obtaining financing, although the condition usually consists of requiring the bidder to prove the financial capacity to ensure the payment of the consideration, whether or not with additional financing. Furthermore, for obvious reasons, sellers take a cautious approach to bidders who have not yet secured financing.

During the bidding phase, buyers typically do not have the opportunity to utilise deal security measures. However, there are frequent attempts to negotiate break-up fees and matching rights.

With respect to managing the “pandemic risk” during the interim period, parties generally exclude pandemic-related causes from activating hardship, force majeure, and material adverse change/event clauses. This is because the pandemic is no longer considered the unforeseeable “wild card” that it was initially; instead, the responsibility for such risk is generally borne by the buyer.

Beyond its shareholdings, a party may seek additional safeguards within the company’s decision-making process by ensuring representation for its appointee(s) on the managing bodies. This allows them to actively participate in decisions that could negatively impact the appointer’s interests. Pre-agreeing on the selection of company auditor(s), among other things, can further enhance this protection.

In companies listed on the regulated market, the members of the board of directors can be selected by applying the cumulative voting method, at the request of a significant shareholder. The cumulative voting is a means to strengthen the possibility of minority shareholders elect a director. As mentioned in 3.1 Significant Court Decisions or Legal Developments, the bill of law for the amendment of the Issuers’ Law which is under current public debate includes provisions meant to increase minority shareholders’ rights to elect a director in listed companies via the cumulative voting procedure.

For companies listed on regulated markets, shareholders can grant a valid proxy – general or specific – to their representatives. General proxy may be granted for a maximum of three years (unless a longer period is expressly agreed upon) to vote on matters pertaining to the general meeting of shareholders (GMS) of a specific issuer or a category of issuers. General proxies can only be granted to an authorised intermediary or a lawyer.

In non-public companies, voting by proxy is permitted, subject to certain limitations prescribed by law or the by-laws of the company in question (eg, power of attorney is granted for a single and specific shareholders meeting; the proxy may not be a member of the company’s managing bodies; and publicity rules must be observed).

Squeeze-out procedures are regulated in Romania and to date have been applied quite often in respect of publicly traded companies.

Following a tender offer addressed to all shareholders and for all their shares, the bidder can compel those shareholders who have not subscribed to the offer to sell all their shares at a fair price, if one of the following conditions is met:

• the bidder holds at least 95% of the total number of shares with voting rights and at least 95% of the exercisable voting rights; or
• the bidder has acquired, within the takeover offer, shares representing 90% of the total number of shares with voting rights and at least 90% of the voting rights targeted in the offer.

Current regulations stipulate a maximum three-month period from the completion of the tender offer for the “supermajority” shareholder to exercise their squeeze-out right.

Sell-out procedures are also governed by regulations and apply when the bidder meets one of the conditions described above. Under a sell-out procedure, the minority shareholder who did not subscribe to the takeover bid is entitled to ask the bidder to buy its shares at a fair price.

Practices such as obtaining irrevocable commitments to tender or to vote by the target company’s principal shareholders are rare in Romania.

In the case of a voluntary takeover bid, the bidder must submit a preliminary announcement to the competent authority (the FSA). Following approval by the FSA, the announcement must be sent to:

• the target company; and
• the regulated market in which the securities are traded; it must be published in at least one central and one local newspaper within the issuer’s local area.

Following the publication of the preliminary announcement, the bidder must submit an offer document and related materials to the FSA within 30 days. The FSA will make a decision on whether to approve the offer document within ten working days.

Where the bidder issues shares as consideration for the offer, the offer document must be accompanied either by the offer prospectus relating to the relevant securities or by a document providing information about these securities. These documents are subject to the FSA’s approval/review including as regards compliance with the provisions of the Prospectus Regulation. Additionally, the offer document must include the exchange report by the independent valuer, as well as the cash value of the securities offered in exchange.

In the case of voluntary or mandatory takeovers, the offer document and preliminary announcement must contain economic and financial data pertaining to the bidder in line with the latest approved financial statements (eg, total assets, total equity, turnover and result of the financial exercise).

If part of the offer is to be settled in securities, a prospectus (in line with the Prospectus Regulation and the Commission Delegated Regulation (EU) 2019/980) or an offer document, as the case may be, must be included.

In public M&A, the terms and conditions of the transactions are included in the offer document. This is made public and there are no requirements to disclose other transaction documents. However, full disclosure of some transaction documents to the competent authority may be required (eg, the underwriting agreement).

As the principal duty of directors is to manage the company, their attention is all the more required where the company is involved in an M&A process; eg, to assess the findings of due diligence procedures; to consider and decide on the transaction structure; and to ensure that all the necessary formalities are followed.

The directors’ duties are mainly to the company and its shareholders. Under certain circumstances, the directors may be liable to other stakeholders. Yet, even in this instance, a third party having suffered damage as a result of an action or omission of the director, should normally sue the company, not the director, to the extent that the director acted within the apparent limits of his or her powers as a director. If the director acted outside his or her powers as a director, a third party could directly file a claim against the director based on his or her personal tort liability.

The new rules regarding firms in difficulty will also need to be considered.

The establishment of ad hoc committees is not common in business combinations in Romania.

In Romania, courts of law rule on the legality of matters and not on opportunity or business-related aspects.

In more complex business combinations, particularly those involving the retention of the target company’s management team post deal closure, it is customary for legal, financial and tax advice to be sought on behalf of the managers.

The legislation contains specific provisions in respect of shareholders and directors and potential conflicts of interest, and there have been disputes on such matters; eg, involvement in the decision-making process despite existing conflicts of interest.

Romanian law does not distinguish between hostile and friendly offers. Consequently, the rules with respect to the conduct of takeover bids will apply accordingly.

Romanian legislation has implemented the board neutrality rule and consequently, from the takeover announcement until the closing of the offer, the board of directors cannot take actions that would affect the possible takeover; ie, they are prohibited from taking any measures that may affect the property or the objectives of the takeover bid, except for ordinary administration measures.

The board neutrality rule prevents the board of directors from taking any adverse action without the specific post-bid approval of an extraordinary general meeting (EGM) of shareholders, except in the course of ordinary business.

However, directors may seek out another more favourable bidder (or “white knight”) and attempt to build a defence by expressing a negative opinion of the strategy to be implemented by a bidder, or the potential consequences of this strategy, thereby attempting to convince the shareholders to resist the hostile takeover bid. The opinion of the board of directors must be sent to the competent authority, the bidder and the regulated market.

The most common defensive measure when facing a hostile takeover bid is probably for the EGM of shareholders to empower the board to search for an alternative bid. The outbreak of the COVID-19 pandemic did not seem to change the prevalence of this measure, although the holding of physical gatherings for the general meeting of shareholders was generally affected by the applicable restrictions. However, the FSA adopted new regulations aiming to ensure that shareholder meetings could still be held. These regulations prioritise voting by correspondence or holding meetings remotely through the use of suitable electronic means.

Since directors must comply with the board neutrality rule, their primary duties are to comply with applicable legal requirements in cases of takeover bids seeking to obtain control of the target company. For example, expressing the board’s opinion within five working days of the receipt of the preliminary offer announcement and deciding whether to convene the EGM of shareholders to inform the shareholders of the board’s opinion and to seek approval for the implementation of defensive measures.

In taking these measures, the general duties of the directors apply, including observance of the legal prohibition against abuse of their position as directors by using disloyal or fraudulent measures, which may prejudice the shareholders.

Directors may not take measures aiming to affect a hostile bid without a decision of the EGM of shareholders. However, they can present a well-founded opinion to the shareholders and potentially prevent a business combination by persuading them of the adverse effects of the proposed transaction.

In Romania, litigation is not common in connection with M&A.

M&A-related litigation is not common in Romania.

Parties generally try to avoid actual disputes regarding broken deal scenarios. The degree to which this is achievable depends on the clarity of the conditions precedent and any pre-agreements that may be in place. It is crucial for companies involved in negotiations or deal signings to be cautious of the possibility of unforeseen and atypical situations that may impede the closure of the deal.

In this regard, it may be more effective to focus less on listing additional force majeure events and similar provisions and more on being meticulous when defining material adverse change events. An approach that takes into account the potential impact on the deal, rather than a specific cause of change, may be more appropriate.

While shareholder activism is not a universal phenomenon, it has become increasingly prevalent in recent times. Activist shareholders still face significant hurdles, including the challenge of accessing adequate resources and sufficient information. In this context, activist shareholders tend to concentrate on examining intra-group and related party arrangements, directors’ responsibilities towards the company, and potential conflicts of interest at the level of the main shareholder.

Activists seek to encourage companies to enter M&A transactions as they look for opportunities to exit or consolidate their position.

Activists do occasionally seek to interfere with the completion of announced transactions, but this is uncommon in Romania.