Following the declaration of the end of the pandemic, the effects of COVID-19 on the market in 2023 were minor in comparison to the preceding years. The M&A market in Slovenia remains very active and investor sentiment continues to be deal-oriented. With that said, both regionally (in Central and Eastern Europe) and in Slovenia itself, M&A activity seemed to decelerate slightly in 2023 in terms of the number of transactions and the total value of transactions. The reasons likely lie in high interest rates, inflation and various geopolitical tensions, which created deal uncertainty.

Regionally, the telecoms sector in general was at the centre of M&A activity last year. One of the largest deals was the spin-off and sale of the mobile infrastructure of United Group and the Saudi company Tawal, which involves the sale of 100% of United’s mobile tower infrastructure in Slovenia, Bulgaria and Croatia. In 2023, the largest number of transactions took place in the technology, industrial, energy, healthcare and pharmaceutical sectors.

Exits by domestic entrepreneurs from their companies established at around the time of Slovenia’s independence (the late 1990s and early 2000s) remained one of the significant trends in 2023, along with cross-border joint ventures in various industries. Similarly, larger companies in Slovenia are more likely than in the past to either buy companies or divest. This trend is expected to continue in 2024. Trends may be influenced by geopolitical risks, inflation and interest rates. In general, the technology sector is expected to remain prevalent in the market, followed by the industrial sector, and then by the retail and consumer goods and energy sectors.

Business Today in Slovenia

In 2023, the largest number of transactions took place in the technology, industrial, energy, healthcare and pharmaceutical sectors. Looking forward, the technology sector is expected to remain prevalent in the market, followed by the industrial sector, and then by the retail and consumer goods and energy sectors.

Slovenia seems to be a very successful exporter of knowledge in the IT sector, and relevant M&A activity is expected to strengthen in 2024.

The lingering effects of the COVID19 pandemic were relatively minor in 2023 and all industries have largely recovered following the ending of the pandemic.

The method of acquiring a company depends mainly on the size and envisaged structure of the transaction, the target’s industry and related tax implications. Most of the acquisitions of (prominent) companies in Slovenia are share deals (including by way of takeovers and mergers), while asset deals occur less frequently due to the complexity of the requirements under Slovenian law and possible joint and several liability issues not usually connected to asset deals.

In recent years, joint ventures have also become increasingly relevant in the Slovenian market, especially in the development of projects and investments in renewable energy sources.

Slovenia does not have a general regulatory body tasked with supervision of all M&A activities.

However, certain transactions within specific sectors may be subject to the approval/authorisation of the relevant regulators. For instance, the approval of the Bank of Slovenia (Banka Slovenije) or the Insurance Supervision Agency (Agencija za zavarovalni nadzor) is required for the acquisition of voting rights or rights in own funds of a credit or insurance institution in Slovenia that reaches or exceeds the thresholds laid down by law.

The Securities Market Agency (Agencija za trg vrednostnih papirjev) monitors compliance with the Slovenian Takeovers Act (Zakon o prevzemih, ZPre-1) and sanctions the breaches thereof. In takeover bid procedures under the Takeovers Act, the acquirer must obtain the approval of the Securities Market Agency’s before publishing the takeover bid.

M&A transactions exceeding certain thresholds are also subject to clearance by the Competition Protection Agency (Agencija za varstvo konkurence); see 2.4 Antitrust Regulations. Since 2020, M&A transactions are also subject to a foreign direct investment (FDI) screening procedure by the Ministry of Economic Development and Technology (Ministrstvo za gospodarski razvoj in tehnologijo); see 2.3 Restrictions on Foreign Investments.

Prior to 2020, no systemic legislation that would specifically regulate restrictions on foreign investments existed in Slovenia.

On 31 May 2020, rules regarding the screening of foreign direct investment (FDI) were temporarily adopted as part of COVID-19-related legislation. On 1 July 2023, the FDI screening mechanism (with certain revisions) was permanently included into the Investment Promotion Act. An FDI notification obligation arises in cases of (direct or indirect) acquisitions of 10% of the share capital or voting rights of the target in Slovenia for foreign investments in certain strategic and critical sectors that could affect security or public order. Following the revision of the FDI rules in 2023, EU-based companies and EU nationals are no longer considered as “foreign investors” and their acquisitions are no longer screened under the FDI mechanism.

A new, preliminary examination procedure was introduced in 2023, based on which the ministry establishes whether the transaction is notifiable and shall be subject to further examination. When assessing the potential effect of the transaction on public order and security, the Ministry considers several factors (eg, foreign government control, market share and shareholding acquired by the transaction).

The FDI rules are interpreted broadly by the competent authorities, and it has become customary for foreign investors to file notifications out of prudence in most cross-border transactions, regardless of the industry and structure of the deal, even if they do not necessarily consider their transaction to fall under the screening regime. However, no major issues have been encountered in this respect when advising on M&A transactions and no foreign investment has been refused yet. For most of the reported transactions, the authors’ clients have received an opinion from the FDI commission that there are no grounds for initiating a formal review procedure at the time the notification was considered.

Antitrust rules, which apply also to business combinations in Slovenia, are set out in the Prevention of Restriction of Competition Act (Zakon o preprečevanju omejevanja konkurence, ZPOmK-2).

Pursuant to the Prevention of Restriction of Competition Act, M&A transactions require an approval by the Competition Agency if (cumulatively) the combined Slovenian turnover of the parties to the transaction (including the affiliates) exceeds EUR35 million and the annual turnover of the acquired company (including the affiliates, excluding the seller and its affiliates) on the Slovenian market exceeded EUR1 million in the previous financial year.

Additionally, even if the aforementioned thresholds are not reached, the Competition Agency may still request the transaction to be notified, if the parties to the transaction (including the affiliates) hold a combined market share of over 60% in Slovenia. Parties acquiring such targets with large market shares are regularly advised to make a preliminary notification to the Slovenian Competition Protection Agency (Agencija za varstvo konkurence) for the purposes of legal certainty.

There are certain provisions in Slovenian labour legislation which can have a significant impact on transactions but which are frequently overlooked. Namely, in accordance with the Worker Participation in Management Act (Zakon o sodelovanju delavcev pri upravljanju, ZSDU), certain transactions (such as business transfers via asset deals or demergers) may trigger the parties’ obligation to notify the target workers’ representatives of the anticipated transaction and to enter into consultations with them. In such cases, the workers’ representatives have to be informed of the anticipated transaction and provided with the relevant documentation ahead of the transaction (ie, at least 30 days before the decision for the transaction is to be adopted); namely, not before an agreement is closed, but before the decision is made to enter into the transaction.

This statute is often at odds with modern conceptions of corporate decision-making and deal progress. Due to a lack of clarity over the precise time the decision to go forward with a transaction was adopted in some cases, it is advisable for the parties to proceed with due caution and make a timely notification. Violation of the above-mentioned obligations results in the workers’ representative’s right to delay/frustrate the target’s decision until the final decision is reached in a special dispute resolution procedure before the competent arbitration body provided for under the Worker Participation in Management Act.

Pursuant to the Slovenian Employment Relationships Act (Zakon o delovnih razmerjih, ZDR-1), in the event of transfer of business (for example, by way of an asset deal or due to a merger) the employees are automatically transferred to the acquirer as well. As a consequence, all the rights and obligations from the employment relationships that the employees have on the day of the transfer at the target pass to the acquirer.

Pursuant to the Takeovers Act, in the case of a public takeover the target’s management and the bidder are obliged to immediately inform the target’s employees (or their representatives) of the takeover intention and provide them with the target management’s opinion on the takeover bid upon its publication. The employees may submit to the management a separate opinion on the effects of the takeover bid on employment in the target company, which the management shall attach to their opinion.

As a general note, acquirers are often surprised at the high levels of employee protection in Slovenia.

Please see 2.3 Restrictions on Foreign Investments.

M&A disputes are not common in Slovenia as it is customary practice that the parties to the transaction enter into arbitration agreements, according to which any disputes are resolved before private arbitration, which ensures a greater degree of confidentiality than public proceedings before the courts (and a lesser degree of uniformity in case law).

Most of the court decisions related to M&A activities in Slovenia arise from decisions by regulators such as the Competition Protection Agency, the Securities Market Agency, or the Bank of Slovenia, whereby the parties to the transition appeal against an adverse decision of the regulatory body.

There have been no significant changes to the Takeovers Act in the past 12 months and, according to publicly available information, no significant changes of takeover legislation are anticipated in the next 12 months.

As regards takeover law more broadly, the Companies Act was amended in July 2023 in order to align the rules on cross-border mergers with the Mobility Directive (Directive (EU) 2017/1132). The amended rules dictate a structured multi-stage procedure for all types of cross-border mergers and introduce certain common rules. The rules outline permissible forms of these operations in a company while emphasising the rights of shareholders, creditors and employees. They introduce a simplified procedure for mergers and divisions, and mandate that both the cross-border merger plan and management report include more extensive information than before.

The amended rules also redefine the content and scope of the required public disclosure of a cross-border merger plan and other documents, as well as disclosure of an offer of a cash severance payment. For example, the cross-border merger plan must include full details of any special benefits enjoyed by the management or members of the management or supervisory bodies of the companies being cross-border merged. In addition to explaining the legal and economic consequences of the cross-border merger (in particular the implications for the future business of the company being cross-border merged), the management report should also contain an additional list of explanatory notes, the content of which varies depending on whether the addressees of the report are the shareholders or the employees.

While potential bidders may build a stake in the target prior to launching an offer (and often do so), they need to observe important restrictions prescribed in the Takeovers Act. The Takeovers Act applies when the target is either a public joint-stock company or a private joint-stock company that has either over 250 shareholders or over EUR4 million of total equity. In these cases (and noting the relatively low total equity threshold), the bidder shall be particularly conscious of (i) applicable disclosure obligations (see 4.2 Material Shareholding Disclosure Threshold) and (ii) mandatory takeover rules.

Pursuant to the Takeovers Act, an individual shareholder or shareholders acting in concert that hold one third of voting rights in the target shall make a mandatory takeover offer for all outstanding shares in that company that are not owned by the bidder(s) (see 6.2 Mandatory Offer Threshold). Stakebuilding in most of the joint-stock companies is therefore de facto limited to a stake of one-third of voting rights in the target.

Bidders shall also observe competition law restrictions, pursuant to which certain transactions (to the extent they constitute a concentration between undertakings and meet the prescribed thresholds) shall be cleared by the Competition Protection Agency.

The Slovenian Market in Financial Instruments Act (Zakon o trgu finančnih instrumentov, ZTFI-1) stipulates the obligation to notify the Securities Market Agency and the target on reaching a relevant threshold of voting rights in the target; namely, for shareholders of either a public joint-stock company or a private joint-stock company that has either over 250 shareholders or over EUR4 million of total equity. Such obligation arises when the shareholder reaches each of the thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50% or 75% of voting rights in the target.

The obligation to notify applies also when the shareholder disposes of its shareholding to the extent it does not reach the above-mentioned thresholds anymore. The notification obligation arises both when these thresholds are reached by an individual shareholder, a group of shareholders acting in concert, or holders of certain rights arising from the shares (eg, voting proxies).

Additionally, financial instruments related to shares (eg, call options) also count towards the thresholds that trigger the notification obligation. Special ad hoc reporting requirements apply in respect of call options or forwards/futures in relation to companies subject to the Takeovers Act.

Compliance with such obligations is strictly monitored by the Securities Market Agency.

More generally, the Companies Act (Zakon o gospodarskih družbah, ZGD-1) stipulates that a company that acquires more than one-quarter of the interests or shares in another company with share capital having its seat registered in the Republic of Slovenia shall immediately notify the company in writing. The same obligation applies to the company that acquires a majority interest in another company. In addition, if the company falls below the threshold that requires mandatory notification, the company must also report on such change. Until it has complied with its obligation to notify, the company, its subsidiary or anyone else on their behalf may not exercise the rights deriving from the shares in the company it is obliged to notify. Those provisions of the Companies Act apply to all corporations, except in cases where the company is already subject to the provisions of the Slovenian Market in Financial Instruments Act, as discussed above.

Foreign investors (ie, those from outside the EU) shall also observe the applicable FDI filing obligation (see 2.3 Restrictions on Foreign Investments).

The mandatory takeover or disclosure obligations are compulsory and companies may not depart from them. The minimum penalty for medium and large companies under the Markets in Financial Instruments Act is EUR80,000 and is enforced by the Slovenian Securities Market Agency.

The Introduction of Different Rules

In principle, companies may introduce additional disclosure obligations or other hurdles to stakebuilding in their articles of incorporation or by-laws, such as requiring consent from the company or its bodies for any share transfer.

Additionally, the shares of many Slovenian joint-stock companies have been admitted to trading on SI ENTER, a multilateral trading facility (MTF), which was established by Ljubljana Stock Exchange; namely, on the BASIC segment. Ljubljana Stock Exchange admits shares to its SI ENTER BASIC segment without the application or even consent of the company or its shareholders. This means that the disclosure of the inside information regime under the Market Abuse Regulation (Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse) does not apply. Nevertheless, investors should tread carefully when acquiring shares in such companies, as trading on the basis of inside information may still be prohibited under the Market Abuse Regulation.

Dealings in derivatives are allowed in Slovenia and are regulated in the Market in Financial Instruments Act.

A general disclosure obligation, described in 4.2 Material Shareholding Disclosure Threshold, applies to most derivatives (eg, transferable securities, options, futures, swaps and forwards). In addition, pursuant to the Takeovers Act, holders of stock call options and buyers of futures contract shall notify the Securities Market Agency of any transaction on the basis of which they acquired a stock call option or receivable for delivery of securities from a futures contract, as well as of any change in the transaction (in four days).

Disclosures of Intent

Potential bidders do not have to make known the purpose of their acquisition and their intention regarding control of the company before making a takeover bid. More generally, a registry of ultimate beneficial ownership of companies is established in Slovenia where ultimate beneficial owners must be registered for all companies in general.

On the other hand, takeover bids are very formalised and strictly regulated in the Takeovers Act (which applies in cases set out under 4.1. Principal Stakebuilding Strategies). The offer document (prospectus) in a takeover bid shall, among other things, include information on:

• the acquirer’s intention regarding the future operations of the target company and the acquirer’s company, if affected by the takeover bid;
• the possible future pledge of the target company’s assets (which is prohibited); 
• the protection of employees’ and management’s jobs, including any change in employment conditions; and
• its strategic plan for both companies with possible consequences for employment and the company’s registered office.

Shareholders are therefore required to ensure full transparency at the latest when making the takeover bid.

Stages of Procedure

In Slovenia, the vast majority of the M&A deals are private M&A transactions, particularly with respect to limited liability companies (družbe z omejeno odgovornostjo). Large public transactions have been scarce in the post-privatisation era, as the focus has shifted to the consolidation and reorganisation of the previously acquired businesses.

In private M&A transactions, there are generally no requirements to disclose a deal. If the target, to the extent included in the deal, is a limited liability company, its shareholders may require information from the company on an ad hoc basis in accordance with the general rules on the provision of information included in Article 512 of the Companies Act. The management is obliged to provide such information to the shareholders in a limited liability company upon request and without undue delay, unless they reasonably consider that disclosing such information would be harmful to the company. The same does not apply in stock companies, where access to information for shareholders is very limited.

If the rules on disclosure of inside information in accordance with the Regulation (EU) No 596/2014 (the “Market Abuse Regulation”) apply to the transaction, disclosure of inside information should be made whenever mandated by the provisions of Article 17 of the Market Abuse Regulation. In accordance with the Market Abuse Regulation, inside information (which generally should be disclosed) is considered information, relating to the issuer of financial instruments or financial instruments themselves, which:

• is sufficiently precise (ie, reasonably expected to occur);
• is not yet disclosed; and
• could have a significant impact on the price on the relevant financial instruments.

In accordance with the above criteria, a first approach or the beginning of negotiations may not yet be sufficient for the information to be considered inside information, which requires disclosure in accordance with the Market Abuse Regulation.

If the transaction is comprised of several steps, an intermediate step-in in a longer transaction process shall be deemed to be inside information if the intermediary step, by itself, satisfies the criteria of inside information as referred to above. 

The Market Abuse Regulation requires immediate disclosure of inside information (unless certain limited exceptions apply) and issuers are required to comply with the legal requirements. As stated in 5.1 Requirement to Disclose a Deal, the vast majority of the M&A deals in Slovenia are private, so public disclosures in M&A deals are rare.

Due diligence is usually conducted in Slovenia and comprises financial, legal and tax due diligence. If the target company is involved in an industry, which may have a larger impact on the environment, special environmental due diligence is also becoming more and more common. Due diligence which results in red flag due diligence reports is the norm in Slovenia.

The scope of due diligence largely depends on how many potential bidders are included in the transaction. If there is only one, the documents are sometimes prepared on the basis of the bidder’s request for documents; otherwise, the company and the sellers prepare the data room with the help of their advisers.

In certain cases, the due diligence process is split into two phases, whereby the target company initially discloses less detailed information to several bidders and the additional detailed/confirmatory due diligence is only available to the preferred bidder(s). In recent years, documents disclosed for the purposes of due diligence are almost exclusively available in virtual data rooms.

Exclusivity is often requested and granted for a limited amount of time in a single bidder M&A process, generally in smaller M&A transactions.

In private M&A, it is customary for the parties to the transaction to negotiate the terms and conditions agreement (eg, share purchase agreement, asset purchase agreement or merger agreement) and agree on a definitive agreement shortly before signing.

On the other hand, when bidders make a public tender offer (takeover bid), they must follow strict requirements as prescribed by the Takeovers Act and publish an offer document (prospectus) setting forth all terms and conditions of the offer. The shareholders of the target cannot negotiate or influence these terms, but may either accept the offer or reject it (in full). There are no representations and warranties that can be attached to the acceptance of a takeover bid.

Legally, a takeover bid is considered a publicly announced proposal for the conclusion of a contract addressed to all holders of securities. By the acceptance of a takeover bid, a definitive agreement for the sale of these securities is concluded between the acquirer as a buyer and the acceptor as a seller.

The length of the acquisition/sale process depends on several factors: the target’s size, number of bidders included (a multi-step competitive tender process or a simple process including one buyer with an exclusivity for a limited period of time), financing sources, the experience of the parties involved as well as the structure of the deal, scope of due diligence before the acquisition process, etc. The industry in which the target operates and regulatory restraints may play additional roles in this as well.

Definitive agreements in private transactions, which are the norm in Slovenia, may typically be signed in six months or less, whereas larger competitive tender processes take up to a year to sign. The public process of a takeover offer generally takes approximately three months from announcing the takeover bid.

The length of period between signing and closing further depends on whether regulatory approvals are required, such as obtaining a merger clearance from the national, EU or other competent authorities or obtaining regulatory approvals for qualified holdings in banks or insurance companies. These can postpone the closing for an additional six to nine months. The new FDI screening regime requires filing shortly after signing (in 15 days) and is now regularly included in a list of conditions precedent to closing. The FDI approval or opinion by the competent ministry is usually obtained in two to five weeks.

The governmental measures taken to address the pandemic have not impacted the M&A processes to a large extent.

Takeovers of public and certain private joint-stock companies are regulated in the Takeovers Act, which prescribes rules for both mandatory and non-mandatory (voluntary) takeovers.

The applicable threshold triggering a mandatory takeover bid of the shares of the target company by an individual shareholder or shareholders acting in concert is one third of voting rights in that company. Furthermore, if the initial takeover bid is successful and the shareholder acquires at least 10% of additional voting rights in the company, an additional takeover bid must be published (ie, additional acquisition threshold – dodatni prevzemni prag).

The shareholders under the obligation to submit a mandatory takeover who fail to do so will have their voting rights suspended (arising from any shares held, not just the shares in excess of the mandatory takeover threshold) and may not vote at the general meeting of the company until they submit a successful bid. Compliance with the Takeovers Act is monitored and breaches thereof are sanctioned by the Securities Market Agency.

In Slovenia, cash is by far most common form of consideration, whereas offering securities as consideration is rare. When securities are offered as a part of the consideration, this generally constitutes a smaller part, up to 20% of the total consideration offered.

In accordance with the Takeovers Act, a mandatory takeover offer can only consist of cash consideration, whereas any offeror who had obtained 5% or more of voting rights in the past 12 months prior to the offer can only offer cash consideration or alternative consideration (cash or securities, at the choice of the offerees). Voluntary takeover offers may be in cash, securities, combined or alternative offers.

The Takeovers Act prohibits the use of conditions in takeover offers, except for those explicitly stipulated in the statute itself, which mainly relate to the mandatory clearance requirements (excluding, under the interpretation of the Securities Market Agency, merger clearances) or thresholds for the bid to be successful (the bidder shall condition its bid on reaching a threshold of more than 50% of all voting shares where a takeover bid is mandatory).

The offeror may determine the minimum acceptance threshold in its voluntary takeover bid.

Notwithstanding the above, in a mandatory takeover bid the offeror shall be required to determine the successful bid threshold, which may not be lower than 50% of all of the voting shares in the target plus one share, unless the offeror’s shares already reach 50% of all of the voting shares of the target.

Offers for shares in limited liability companies and joint-stock companies, which are not subject to the Takeovers Act, may be made subject to any threshold of minimum acceptance, but are generally aimed at obtaining the 90% majority or all shares.

The relevant control thresholds under the Companies Act are the following:

• 50% of voting rights plus one vote (an ordinary majority) enables the shareholder to take simple majority decisions (ie, decisions on day-to-day matters of the company), including the appointment of supervisory board members (if established) or directors;
• 75% of voting rights (a qualified majority) generally enable the shareholder to amend the articles of association, implement corporate restructurings (mergers, demergers, spin-offs, transformations of company form), recall the supervisory board of the company, decide on the liquidation of the company, etc; and
• 90% of shares in the company enables the shareholder to squeeze out minority shareholders and certain other matters.

Certain control thresholds may be set lower or higher under the company’s articles of association.

While it is legally possible to structure a private M&A transaction in a way which would make completion of the deal conditional upon the bidder obtaining financing, it is normally expected that the bidder warrants in its binding offer as well as in the transaction documents that it has secured financing to complete the deal.

Takeover offers subject to the Takeovers Act cannot be conditional on obtaining financing. When providing a cash consideration offer, the offeror is required to deposit cash required for the payment of all securities in the target company or a bank guarantee for the same amount (provided that the bidder deposits its shares in the target for the duration of the bid with the central clearing corporation).

In private M&A, the bidder may seek any deal security measures without restrictions (to the extent permissible under the generally applicable contract law). Break fees are not customary in Slovenia since the sellers are usually not agreeable to such security measures. On the other hand, contractual penalties if one of the parties does not close the deal are often included in the parties’ agreements.

Bidders are significantly more limited when making a public tender offer (takeover bid), as takeover bids may only include the conditions stipulated in the Takeovers Act and do not grant much freedom to the bidders (see 6.4 Common Conditions for a Takeover Offer).

It has been common to include certain mechanisms for managing “pandemic risk” in M&A transactions. This has become less prevalent since the end of the pandemic. Some M&A transactions in Slovenia are also subject to an FDI screening procedure (see 2.3 Restrictions on Foreign Investments). In some cases, obtaining the FDI approval may also impact the length of interim periods.

If the bidder does not obtain all or at least 90% shares in the company at the outset, it is common for the bidder to insist on obtaining a specific governance structure, which is reflected in a shareholders’ agreement. These usually include establishing special advisory boards with consent or veto rights above the contractually determined thresholds.

Such structures are particularly common in start-up financing, where several rounds of financing are envisaged and the investors obtain larger shares based on the performance of the target.

Voting by proxy is acceptable and common in Slovenia.

If proxy collection in a joint-stock company is addressed to more than 50 shareholders (and therefore constitutes an “organised collection”), the Securities Market Agency shall be notified in advance of the intention, reasons and manner of such proxy collection. In the absence of such notice, a presumption applies that the organised collection is concealing an agreement aimed at gaining or consolidating control over the target company, which may trigger mandatory takeover bid obligations and result in monetary fines and loss of voting rights.

Pursuant to the Companies Act, the general assembly of a joint-stock company may, at the proposal of a shareholder holding shares representing at least 90% of the share capital of the company (main shareholder), adopt a resolution on the transfer of shares of the remaining (minority) shareholders to the main shareholder for the payment of appropriate compensation. This squeeze-out mechanism also applies in takeover and other M&A situations, with certain specifics.

As a general rule, shareholders with at least a 1% shareholding that were squeezed out from a company may request judicial review of the received consideration. In appraisal proceedings, the court may (and in some cases must) seek an opinion from a special settlement committee consisting of legal, accounting, financial and audit experts. If the court decides that consideration was insufficient, the majority shareholder has to pay the squeezed-out shareholders additional payments up to the amount of an appropriate consideration.

The exception to the general rule applies when the general assembly of the target adopts a resolution on the squeeze-out at the proposal of the acquirer as the main shareholder within three months of the publication of the outcome of a successful takeover bid. In such cases, the acquirer must offer compensation of the kind and in the amount specified in the takeover bid to the squeezed-out shareholders (notwithstanding the rules on appropriate consideration).

Irrevocable commitments to tender or vote by principal shareholders of the target company are rare. In Slovenia, most M&A activity occurs in companies where the shareholder structure is already concentrated and the potential acquirer approaches all or the majority of such core shareholders. It is not uncommon to request or agree exclusivity with such shareholders.

In cases of dispersed shareholder structure, particularly where there is a large number of shareholders who are natural persons, a shareholders’ agreement on joint sale may be concluded between the sellers. Such an agreement usually provides for the establishment of a sale commission, which leads the sale process and often agrees on the preferred bidder and the obligation of the shareholders to sell if the minimum price is offered.

Pursuant to the Takeovers Act, the bidder may only withdraw the offer under certain conditions stipulated therein. On the other hand, shareholders who accepted the bidder’s offer are entitled to opt out from the accepted bid and potential related commitments, and accept a competing offer.

In private M&A, it is generally possible to keep the deal under the radar until completion (ie, registration of the deal with the business register).

Disclosure rules for takeover bids (tender offers) are detailed in the Takeovers Act. A bidder who intends to make a takeover bid shall first notify the management of the target, the Securities Market Agency and the Competition Agency of the intention to make a bid (ie, takeover intention) and publish the takeover intention on that same day. In cases of mandatory takeovers, the takeover intention shall be made within three days of reaching the mandatory offer threshold (one third of voting rights in the target).

Additionally, the Takeovers Act provides that if it appears on the basis of the situation on the capital market that a certain potential bidder intends to carry out the takeover (eg, if the price of the security on the regulated market has risen significantly and it could be inferred from this that a takeover bid will be made), the Securities Market Agency may request (i) the potential bidder to state within 24 hours whether it intends to make a takeover bid, and (ii) the target’s management to state within 24 hours whether it is aware of the takeover intention. The potential bidder and the target’s management must submit such statements to the Securities Market Agency and publish it.

The Prospectus

According to the Takeovers Act, the bidder must publish the takeover bid, including the offer document (“prospectus”) in ten to 30 days after the publication of the takeover intention.

In the prospectus, the bidder shall disclose various information pertaining to the takeover bid, including:

• the bidder’s identification information;
• the share amount and type of securities and the share of voting rights of the bidder in the target;
• the purchase price and/or information on the offered replacement securities and/or the exchange rate offered by the bidder;
• deadlines and the manner of fulfilment of the bidder’s obligation that will arise from the acceptance of the takeover bid;
• a description of the circumstances in which the acquirer may cancel the takeover bid;
• the date of the beginning and end of the deadline for acceptance of the takeover bid;
• the bidder’s intention regarding the future operations of the target company and the bidder’s company (if affected by the takeover bid), the possible future pledge of the target company’s assets, the protection of employees’ and management’s jobs (including any changes in employment conditions) and the implications of its strategy for both employment and the registered office of the company.

Note that if the target is a private (non-listed) joint-stock company that is subject to the Takeovers Act because it has either over 250 shareholders or over EUR4 million of total equity, the bidder’s prospectus shall also include an audited report on the appropriateness of the price in the takeover bid (also explaining any reasons for the price if it was not found to be appropriate in the auditors’ report).

Pursuant to the Prospectus Regulation (Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017), publication of a prospectus in accordance with the procedure prescribed therein is obligatory prior to issuance and offering of the shares to the public. The requirement to publish a prospectus under the Prospectus Regulation does not apply (among other situations) if securities are offered, allotted or to be allotted in connection with a merger or division (under additional conditions). The content of the prospectus must comply with the provisions of the Prospectus Regulation.

Securities Market Agency Approval

Additionally, in order for the bidder to obtain an approval by the Securities Market Agency for the takeover offer, it will have to prove that it has not in any way, either directly or indirectly, given or undertaken to pledge or to secure by collateral the shares in the target owned by other shareholders or assets of the target for the payment of the securities of the target. If the mandatory takeover bidder does not obtain the approval by the Securities Market Agency, it is not allowed to make the mandatory takeover offer.

Related Party Transactions

The recent amendment to the Companies Act introduced a requirement that public companies shall obtain a supervisory board’s approval for related party transactions if the value of the transaction, or the value of the transaction together with the value of all transactions performed with the same party in the last 12 months, exceeds 2.5% of the value of assets shown in the balance sheet from the last approved annual report. Conflicted members of the supervisory board may not vote, and a proposal by independent members of the company’s audit committee (or a fairness opinion) are required. 

Such related party transactions shall be published (on the company’s website or other information system) and the publication must provide all relevant information necessary to assess whether the transaction is appropriate from the point of view of the company and shareholders who are not related parties (eg, information on the type of the company’s relationship with the related party, the identity of the related party and the date and value of the transaction). This disclosure obligation also applies to takeover bids.

There is no obligation for the bidders to produce financial statements in their disclosure documents, but they may do so if they wish (in the prospectus).

In both private and public M&A, the deal documentation (eg, asset and share purchase agreements, merger agreements, articles of association) is in principle publicly available and either published online or easily accessible at the court register or the Land Registry after completion.

As the parties are generally hesitant to publicly disclose all the information on the deal, they ordinarily opt to enter into separate short-form documents for delivery to the court register that only contain a limited set of relevant information.

In addition, due to the bidder’s obligation (under the Takeovers Act) to prove to the Securities Market Agency that it has not offered (or undertaken to offer) the shares or assets of the target as security for financing the bid, partial disclosure of the transaction documents can be required within such takeover offer authorisation procedure. Recent practice by the Securities Market Agency also leans towards requesting deal documentation with every notification of shareholdings under the Market in Financial Instruments Act. Disclosure of deal documentation is usually required for the purposes of merger clearance and FDI screening; however, in the latter case, the notifying party may initially try to redact the most sensitive commercial information.

The Companies Act stipulates that the members of both management and supervisory bodies shall, in performing their duties, act for the benefit of the company with the diligence of a conscientious and honest business person and protect the company’s business secrets.

These duties apply equally to members of boards of directors (upravni odbor) in single-tier joint-stock companies, management board (uprava) and supervisory boards (nadzorni svet) in two-tier joint-stock companies, as well as to management in limited liability companies and other companies.

It follows from the case law of the Slovenian courts that management shall act for the benefit of the company rather than (only) for the benefit of the shareholders. While there is no notion of a constituency statute in the Slovenian legislation, companies are not prohibited from considering the interests of stakeholders other than shareholders in determining the purpose of the company in their articles of association or by-laws.

Business Combinations

The management’s duties do not change in the context of a business combination. The Takeovers Act stipulates that the management of a target company shall, within ten days of the publication of the takeover bid, publish a reasoned opinion on the bid. The management’s opinion shall include, inter alia:

• an assessment of the effects that the possible implementation of the takeover bid will have on the realisation of all interests of the target company, in particular employment;
• an assessment of the acquirer’s strategic plans for the target company and their possible consequences for employment and place of business; and
• disclosure of the content of any agreement between the acquirer and the management of the target company regarding the takeover bid or a statement that there is no such agreement.

The management shall also observe their duties to inform the employees (their representatives) related to the takeover intention (see 2.5 Labour Law Regulations).

It is not common for the management to establish special or ad hoc takeover committees in business combinations (but the companies may decide to do so).

The proposal for the approval of the supervisory board or a board of directors in single-tier companies (see 7.2 Type of Disclosure Required) when entering into so-called related party transactions shall be formed by the audit committee and shall include an assessment that the transaction is fair and reasonable from the point of view of the company and non-related shareholders, including minority shareholders. A member of the audit committee who is involved in the transaction or in whom there is a risk of a conflict of interest due to their relationship with a related party may not participate in the formulation of the proposal. In such cases, the transaction may only be approved if an independent third party issues a report assessing that the transaction is fair and reasonable.

The business judgement rule is not formally enshrined in Slovenian legislation. Nevertheless, courts ordinarily defer to the business judgement rule when deciding on cases of management’s liability and discharge of their duties.

There is no developed case law on this topic applicable to takeover situations (see 10.1 Frequency of Litigation), but it is reasonable to assume that Slovenian courts would also defer to the business judgement rule in that context.

It is customary for the management of a Slovenian target to seek independent outside advice in a business combination, especially economic (financial) and legal advice on different aspects of a transaction.

In assessing a takeover bid and issuing a reasoned opinion, the management of the target would generally engage various advisers to ensure that they fulfil their duties pursuant to the Takeovers Act. Note that a takeover offer may only be submitted by a licensed broker in Slovenia. If the management issued their opinion based on incomplete or inaccurate information, that could be considered by the courts a breach of their duties and could expose the management to liability.

Members of both management and supervisory bodies are under a general obligation to avoid any conflict between their interests or duties and the interests or duties of the company they lead or control. If a conflict of interest arises, such members shall inform the bodies of which they are member and the supervisory body of that conflict.

In addition, the Companies Act prescribes rules on certain specific situations of conflict of interest (eg, transactions with members of management or their family members) which need to be approved by the supervisory body or general assembly of the company. Special regime applies in transactions with related parties where members of an audit committee and/or supervisory body are conflicted and therefore cannot vote on the approval of the transactions (see 8.2 Special or Ad Hoc Committees).

Case law on the conflicts of interest under the Companies Act is somewhat underdeveloped in Slovenia, which is partly due to the fact that several provisions on this topic were only recently introduced to the law.

While hostile tender offers are permitted (subject to the mandatory takeover rules, see 6.2 Mandatory Offer Threshold), they are not common in Slovenia. This is predominantly a consequence of the underdeveloped public M&A market, where private M&A deals are the norm and takeovers are scarce, and the ownership structure of companies which tends to be concentrated and include dominant shareholders. Another reason for this is that very often there will be takeover protections built into the articles of association of the company or into shareholder structures. As shareholders in hostile takeovers generally expect from the bidder to pay a premium to the market price and are less willing to sell, it is oftentimes wiser for the bidder to pursue a friendly takeover, negotiated with the management.

Generally, defensive measures by directors are prohibited in Slovenia.

The Takeovers Act stipulates that, after the target’s management has become familiarised with the takeover intention and until the decision on the outcome of the takeover bid is published, they may not use defensive measures (eg, increase share capital, conclude transactions outside the company’s regular operations, acquire own shares or securities, or perform other actions that could impede the bid) without a resolution of the general assembly. In addition, decisions of the target’s management or general assembly that were adopted before the announcement of the takeover intention and not yet fully implemented require approval of the general assembly before implementation if they were not taken in the course of regular business and their implementation could impede the bid. Any legal acts contrary to these provisions shall be null and void.

Articles of association of companies also often contain mechanisms limiting transfer of shares or exercise of voting rights (see 9.3 Common Defensive Measures), which can in certain situations serve as effective defensive measures. Pursuant to the Takeovers Act, these mechanisms may be waived by the general assembly of the target by way of amending the articles of association to that end. Such decision by the general assembly may be terminated at any time. It is not common for general assemblies to adopt such resolutions up front.

Considering the general prohibition of adopting (ad hoc) defensive measures, directors of the target may typically only rely on the general provisions enshrined in the articles of association that may also be used as defensive measures in the takeover context. Most notably, these provisions include limitations on (i) transfer of shares and (ii) exercise of voting rights.

Pursuant to the Companies Act, the articles of association may limit the transferability of shares by conditioning the transfer on obtaining the permission of the company (its management or general assembly). In cases of joint-stock companies, the articles of association shall stipulate the justified grounds on which the company may refuse permission for transfer. For private joint-stock companies, these grounds may only pertain to cases when the transfer would jeopardise the achievement of the company’s objectives or its economic independence; for public joint–stock companies, the only permissible ground is that as a result of the transfer in question a certain share of voting rights or share in the company’s capital of the acquirer would be exceeded. The regulation of limited liability companies is less restrictive and other grounds for refusal of transfer are permissible.

The articles of association of joint-stock companies may also restrict the shareholders’ right to vote by determining that the number of votes held by an individual shareholder in relation to the number of shares may not exceed a certain number or percentage. Additional restrictions on voting rights may be applied in limited liability companies.

As there are no special rules on directors’ duties when enacting defensive measures, general rules are applicable (see 8.1 Principal Directors’ Duties and 9.2 Directors’ Use of Defensive Measures).

In the takeover proceedings under the Takeovers Act, the management’s authority is limited since they are not allowed to execute certain acts (including, without limitation, increasing of share capital, conducting business outside of regular affairs, taking any action that may frustrate the takeover bid, etc) without prior approval or explicit authorisation of the shareholder’s assembly. By the following, shareholders can control the conduct of business during takeover proceedings and subsequently change the directors’ duties accordingly.

As the management is required to assess a takeover bid and issue a reasoned opinion (with the required diligence), they do not have the ability to “just say no” and prevent a business combination.

It should be noted that it is not required under Slovenian legislation for the management to consent to a (hostile) tender offer. Bidders may turn directly to the shareholders and/or publish a takeover intention without any action or approval by the management. Even if the management opposes the transaction, this will not prevent the business combination from occurring if the tender offer is accepted by a sufficient number of shareholders.

Litigation is very uncommon in connection with M&A deals in Slovenia (see 3.1 Significant Court Decisions or Legal Developments).

If litigation in connection with M&A deals is initiated, this will likely (though not exclusively) be either before submitting the takeover bid (claiming that the bidders have exceeded the threshold under the Takeovers Act and shall have their voting rights suspended until they submit a successful bid) or after the closing of the transaction (alleging insufficient disclosure or other obligations by the relevant parties). While the decision to execute a squeeze-out itself generally may not be challenged pursuant to the Companies Act, judicial challenge of the amount of the compensation offered to minority shareholders for squeeze-out is a frequently used litigation proceeding in relation to M&A deals.

“Broken-deal” disputes are not common in Slovenia and there is no significant case law on this matter.

Shareholder activism has been a factor in Slovenia but has declined in relevance. Institutional activist shareholders do not have a significant impact on the operations of Slovenian companies, but can in some cases increase the cost of M&A transactions through litigation.

Most notable activists are minority shareholder associations that represent minority (dispersed) shareholders in private and public companies and use the shareholders’ rights to raise corporate governance or other issues (see 11.2 Aims of Activists) with the management. These associations sometimes also obtain insignificant shareholdings of their own (in some cases even a single share) and pursue their goals directly as shareholders.

As minority shareholder associations are the main drivers of activism in Slovenia, activism is typically aimed at extracting value from majority shareholders. This is often done by information requests or other means of gaining access to the company’s documentation that the activists wish to use to pressure the management, either during the general course of business or at general assembly meetings, and through threatened or actual litigation aimed at slowing down or impeding M&A and other transactions.

In practice, minority shareholder associations are rarely successful in instating their own slate of directors to replace the incumbent management. As three-quarters of all votes cast is necessary for such replacement, such attempts are usually fruitless. In 2021 and 2022, Slovenian courts were increasingly active in curtailing frivolous litigation (aimed at stalling or reversing deals) lodged by associations of minority shareholders.

A further topic of interest for the minority shareholder associations is dividend distribution. Pursuant to the Companies Act, the resolution of the general assembly on the use of profit may be challenged if the general assembly has distributed less than 4% of share capital (barring certain exceptions). As the required shareholding threshold for this filing is rather low (ie, 5% of shares), this is quite a popular course of action for minority shareholders.

Minority shareholders also ordinarily exercise their appraisal rights in squeeze-outs by the majority shareholders (see 11.3 Interference With Completion).

Activists will at times seek to exercise appraisal rights in squeeze-out transactions – ie, where a majority shareholder holding at least 90% in a joint-stock company forces the minority shareholders to sell their shares for an appropriate cash consideration. Shareholders with at least a 1% shareholding that were squeezed out from a company may request judicial review of the received consideration.

In appraisal proceedings, the court may (and in some cases must) seek an opinion from a special settlement committee consisting of legal, accounting, financial and audit experts. If the court decides that consideration was insufficient, the majority shareholder has to pay the squeezed-out shareholders additional payments up to the amount of an appropriate consideration.