The technology deal market has been very strong during the last 12 months. There seems to be a great deal of capital in the marketplace, which in the first half of the year was invested in IPOs, especially in the secondary marketplace, Euronext Growth.
See 3.1 IPO v Sale and 3.2 Choice of Listing for current trends.
Norwegian start-ups typically incorporate their business within their domestic jurisdiction, regardless of the type of business.
The minimum share capital requirement is NOK30,000 (about EUR3,000).
Shelf companies may be acquired on the day, whereas incorporation may take anywhere between ten to 20 business days.
A regular limited liability company (LLC) is by default the preferred type of entity. Other types of entities are hardly seen in the start-up community.
In addition to "friends and families", there are numerous angel communities and venture capital funds in Norway specialising in early-stage financing like pre-seeds, seeds and series-A. The government is also an active and important contributor with reasonably accessible equity and loan arrangements.
In addition to the sources mentioned in 2.3 Early-Stage Financing, there is evidence that more and more foreign venture capital firms are looking to, and investing in, Norway. Especially firms from the US, UK, Germany, France and Sweden.
There is good market practice in Norway with regard to typical transaction documents, eg, NDAs, term sheets, investment agreements, SAFEe (and the Norwegian equivalent SLIP), convertibles, shareholders' agreements, and side letters.
Start-ups in Norway generally continue to stay in the same jurisdiction as they advance in their development, with some rare exceptions.
They also generally continue to stay in the same corporate form, unless they go for a large IPO, as they may apply to become a public liability company (PLC) as opposed to a regular LLC. The transformation from LLC to PLC is a straightforward process.
When investors in a start-up are looking for a liquidity event, both listing on a securities exchange and a sale process are highly relevant options. Which option is most attractive depends on how each of these markets is performing at the time of the liquidity event. During the last 16 months, the equity capital market has been particularly strong in Norway, which has led to a strong wave of listings on the multilateral trading facility (MTF) Euronext Growth Oslo. However, lately the equity capital market has become more selective, prioritising value companies to growth companies, and also larger companies to start-ups. Simultaneously, the M&A market has picked up, which means that the trend has moved more in favour of trade sales. Particularly in 2021, there have been and still are a significant number of dual-track processes, both at Euronext Growth Oslo and the more developed regulated market, Oslo Stock Exchange (OSE).
To a large degree, there are listings on the OSE, Norway's home country exchange, and on the MTF Euronext Growth Oslo. Choosing where to list involves an overall assessment of which investors the company has, where the investors are used to investing, where the company believes they will achieve good pricing and liquidity and good understanding for their project, as well as tax conditions for both the company and the shareholders. The answers to these questions often lead Norwegian companies to pursue a listing in Norway, but this is not always the case.
There is an applicable squeeze-out rule as part of the Norwegian LLC Act, which applies to all unlisted LLCs in Norway. The threshold is strict, as one single shareholder (on a consolidated basis, if relevant) needs to hold at least 90% of the shares. Consequently, the matter should be addressed in the shareholders' agreement.
The sale process varies from case to case. If a process is initiated by the company or by its shareholders, a structured process, such as an auction, is the typical transaction process. If the sale is initiated by the buyer, however, a bilateral process is more common.
Tailor-made transaction structures are often seen in Norway, making it difficult to describe any structure as "typical". However, a deal structure where the venture capital fund may choose to stay on board, after a number of secondary sales, is quite common.
The buyer would normally like the key shareholders and management to be included in the business going forward and therefore, a pure cash-out is not all that common. A combination of shares with a cash element is more typical.
In sale processes, founders, venture capital investors and main shareholders are expected to commit to customary representations and warranties insurance in the transaction documents.
Escrow is not that common any more and is seen in less than 5% of transactions.
Warranty and indemnity (W&I) insurance is very common, especially in structured sales processes. Venture capital seed and series-A and B investments are less common.
Spin-offs are considered customary within the technology industry and are often triggered by attracting the right investors, which fit with certain parts of a company's business but not all of it. A tax-free spin-off is a good way of arranging this as it allows an industry segment with adjacent IP to be spun off, while the remaining business continues, based on other parts of the IP or the same part but for another business area.
Norwegian tax rules regarding participation exemption generally entail that a sale of shares in a Norwegian LLC is tax-free for Norwegian company shareholders. Norway also has favourable rules regarding tax-free mergers and demergers which generally facilitate restructuring (such as a spin-off) ahead of a planned transaction in order to structure a transaction as a sale of shares.
Provided the enterprise complies with tax and company law requirements, mergers and demergers can be conducted tax-free based on tax continuity on both company and shareholder level. On the shareholder level, shareholders retain their total fiscal input values in connection with the merger/demerger, and the value is redistributed to the consideration shares in the acquiring company. On the company level, all tax positions relating to the merged/demerged assets or business are continued and transferred with the assets/business.
A demerger immediately followed by a sale of shares is generally seen as possible. There has historically been a question of whether Norwegian anti-avoidance rules may be applicable if the link between the restructuring and sale is too strong, however, following Norwegian Supreme Court practice and several advance tax rulings and statements in preparatory works, the general understanding in the market is that a change in Norwegian legislation would be required for such steps to be captured by Norwegian anti-avoidance rules.
In total, a demerger process typically takes around eight to ten weeks, depending on the complexity. Included in this timeline is a creditor notice period of six weeks and a typical processing time with the company registry of one to two weeks.
There is no requirement for a tax ruling. However, if the link between the transaction and the demerger (restructuring) is very strong (eg, the transaction is to be signed ahead of the demerger), a ruling may be prudent in order to ensure there is no risk of Norwegian tax authorities later pursing the transaction on the basis of Norwegian anti-avoidance rules.
In Norwegian market practice, it is most common not to acquire a stake before making an offer, although stake-building is sometimes seen. The lowest reporting threshold for an acquisition of interests in a company listed at the OSE or Euronext Expand (regulated market) is 5%, with the next reporting levels at 10%, 15%, 20%, 25%, one third, 50%, two thirds and 90%. The disclosure must be made immediately, when the agreement to the acquisition has been made. In relation to such disclosures, there is no requirement for the buyer to state the purpose of the acquisition. Outside of the mandatory offer situations (see 6.2 Mandatory Offer), there is no requirement to make any proposal or explain the buyer's plans, etc, and there is no obligation such as a "put up or shut up" requirement.
In companies listed at Euronext Growth Oslo, there are no reporting requirements for investors connected to stake-building, but the company must disclose when informed that an investor has acquired 50% or 90%.
The mandatory offer threshold is one third of the voting rights in a company listed on a regulated market. When having reached the one-third threshold, the investor has a reporting obligation to the OSE and the target company, detailing if the investor wants to sell the proportion of shares which exceed the threshold within four weeks of the date on which the mandatory bid was made, or if the investor plans to go ahead with a mandatory offer to the shareholders. If the investor states that a mandatory offer will be made, such statement is legally binding.
Companies listed on the OSE but domiciled in an EEA state other than Norway are subject to specific rules on shared jurisdiction and supervision.
The Norwegian rules on takeover bids implement Directive 2004/25/EF on takeover bids (the "Takeover Directive").
There are no mandatory offer rules applicable for companies listed on Euronext Growth Oslo.
The typical transaction structure for an acquisition of a public company in Norway is through a voluntary tender offer made to all shareholders, where the basic principle is that the offeror must treat all shareholders equally. A voluntary offer is defined as an offer for shares in a company listed on a regulated market where the offeror – provided the offer is accepted by all shareholders who can accept the offer according to its terms – will control more than one third of the voting rights and thus, trigger the mandatory offer obligation. The voluntary offer may be made with consideration in cash and/or shares.
Somewhat less often, public companies are acquired through a mandatory offer where the consideration must include a cash alternative.
The takeover regulations in Norway for (in particular) voluntary offers and mandatory offers are flexible and the market seems to be satisfied with the efficiency and success rate for these transaction structures. Probably mostly due to this, other transaction structures, such as mergers, are less often used.
Public company acquisitions in the tech sector in Norway are, like Norwegian public acquisitions generally, typically structured as cash transactions, but stock-for-stock or a combination of cash and stock-for-stock is sometimes used. A mandatory offer must, pursuant to Norwegian takeover rules, include a cash alternative.
There are no price requirements for voluntary offers. However, the offeror will often make the offer conditional upon the target board of directors recommending the offer to the shareholders. The target board of directors will, as a condition to providing such recommendation, negotiate the price as high as possible.
In a mandatory offer, the price cannot be lower than the highest consideration the offeror has paid or agreed to pay in the period six months prior to the mandatory offer obligation occurring. If the market price is higher than the price that follows from the said rule for mandatory offers, the price must be at least as high as the market price. There is no practice of using contingent value rights in Norwegian public takeovers, but the target company will often obtain a fairness opinion from an independent adviser before issuing its formal recommendation.
Completion of a voluntary offer is usually conditional on fulfilment (or waiver by the offeror) of the following conditions:
The regulator reviews the conditions and provides input in order to ensure that the conditions are clear and easy to understand for the shareholders.
In mandatory offers, no completion conditions may be included, pursuant to the Norwegian Securities Trading Act (STA).
In relation to voluntary offers in Norway, it is customary for the offeror to enter into a transaction agreement with the target company. In such agreement, the target company usually undertakes a number of obligations, including to provide (and not withdraw) a unanimous recommendation of the offer from the target board of directors, regular conduct of business restrictions, non-solicitation and no-shop undertakings, including only to permit unsolicited superior offers and sometimes break-up fees, which under Norwegian law are limited to cost cover. It is not customary or even legal for a public company to provide representations and warranties connected to a takeover process.
The typical minimum acceptance condition is 90%, which is also the threshold for the offeror to make a compulsory acquisition (squeeze-out) of any remaining shares. The offeror normally reserves the right to waive or reduce the minimum acceptance condition in its sole discretion at any time before completion of the offer.
As mentioned previously, the threshold for making a compulsory acquisition (squeeze-out) is ownership of 90% of the share capital and control of a corresponding level of votes. When such threshold is reached, the board of directors of the offeror may resolve to acquire any remaining shares, which are acquired immediately when the resolution is made. If such resolution is made within three months from expiry of the offer period, the price per share must equal the offer price in the voluntary/mandatory offer. The OSE is the takeover authority for the compulsory acquisition. A bank guarantee from a bank licensed to do business in Norway must be provided for the total consideration; such guarantee must be approved by the OSE. Any shareholders being squeezed out may object to the price within two months (such objections are rarely made). The compulsory acquisition in itself may not normally be challenged.
For a voluntary offer, there is no requirement to prove "certain funds". In a voluntary offer, the offeror is legally free to include a financing condition. However, in market practice, this is seldom seen (although it has happened). From experience it appears that for a voluntary offer to succeed among the shareholders, the funding must be in place or the offeror must at least be able to present the shareholders with a trustworthy arrangement for the funding.
In a mandatory offer, the offeror must provide a bank guarantee for the full consideration, which must be approved by the OSE as takeover authority.
The offer is always made by the buyer itself.
The following deal protection measures are mostly seen in the Norwegian public M&A market:
Provided that the bidder obtains approval from 90% of the shares in a voluntary or mandatory offer, the bidder can, after having completed the offer and becoming owner of at least 90% of the shares, invoke compulsory acquisition and buy all the remaining shares at the same price per share as in the preceding offer, see 6.8 Squeeze-Out Mechanisms.
Even in a situation where the offeror obtains less than 90% acceptance based on a voluntary or mandatory offer but decides to waive the 90% condition and complete the offer, the offeror will regularly request the board of directors to convene an extraordinary shareholders' meeting in order to appoint a new board controlled by the offeror. If the offeror controls more than 50% of the shares, the new board will be controlled by the offeror. Through the new board, the offeror will be able to control the target company, although obviously within the limitations of the board of directors' competence.
It is quite common to obtain irrevocable commitments from principal shareholders just prior to making the offer public. In market practice, these are – in the clear majority of cases – "soft" in the sense that the shareholder is free to accept a superior offer made by a third party.
A voluntary offer document or a mandatory offer document must be approved by the OSE in its capacity as takeover authority, prior to the launch and start of the acceptance period. The review normally takes approximately three weeks. Under a voluntary offer, no approval of offer price is needed, but the OSE will go through the conditions to complete the offer in order to ensure they are clear and understandable for the shareholders. Pursuant to the STA, the acceptance period for a voluntary offer is two to ten weeks. In market practice, the initial acceptance period is four weeks, although sometimes three (if less than 10% of the shareholders are US shareholders) or even five weeks.
In a mandatory offer, the OSE must approve the offer price and ensure that it meets the requirements presented in 6.4 Consideration; Minimum Price. Pursuant to the STA, the acceptance period for a mandatory offer is four to six weeks. In market practice, most mandatory offers apply an acceptance period of four weeks.
There are no particular rules regarding the acceptance period in the case of the announcement of a competing offer.
Under the STA, the offeror is entitled to extend the offer up to the maximum acceptance period. For a voluntary offer, extensions can be made one or more times up to the maximum ten weeks. If regulatory/antitrust approvals are not obtained prior to the expiration of the acceptance period (as extended) in a voluntary offer, the offeror will await completion of the offer until such approval(s) has been obtained. The process and likely timeframe for obtaining such approvals are usually described in the voluntary offer document.
For a mandatory offer, there are few extensions in market practice (although the offeror may extend up to the maximum of six weeks). As explained above, a mandatory offer cannot be conditional, meaning that the offeror must complete the offer no later than two weeks after expiry of the acceptance period, irrespective of any outstanding regulatory approvals.
Within the electronic communications sector, there is an obligation for an undertaking to register with the regulator, the National Communications Authority (Nkom), pursuant to the electronic communications act for:
This is not a qualification test; it is only a requirement that a provider must have registered by the time it commence its operations in Norway. Nkom will not give any confirmation or approval.
Outside the electronic communications sector, setting up and starting to operate a new company within the technology industry is not subject to any specific Norwegian law regulations. Financing activities, payment services, issuance of electronic money and other similar activities in Norway are, however, subject to a licence requirement, notwithstanding the industry or sector a company is operating in.
For public takeovers, the takeover supervisory authority is the OSE, the role of which is to ensure compliance with the takeover rules on voluntary offers and mandatory offers in the STA. Outside of public takeovers and the said role of the OSE, the primary securities market regulator in Norway is the Financial Supervisory Authority of Norway (Finanstilsynet).
Norway has no general restrictions on foreign investments other than what follows from the Security Act, as explained in 7.4 National Security Review/Export Control.
The Security Act
An undertaking will be subject to the Norwegian Security Actof 1 June 2018 No 24, if it fulfils any of the following criteria:
"Within its area of responsibility, a ministry shall decide that the act shall apply wholly or partly to undertakings which
Any person who wishes to acquire a qualified ownership interest in an undertaking which is subject to the Norwegian Security Act must notify the relevant ministry accordingly, pursuant to Section 10-1 of the act. In cases where the undertaking does not fall within the area of responsibility of any ministry, such notice shall be given to the National Security Authority.
Pursuant to Section 10-1 second paragraph, a qualified ownership interest exists if the acquisition will, overall, give the acquirer, either directly or indirectly:
Pursuant to Section 10-3 of the Security Act, if an acquisition pursuant to Section 10-1 presents a not-insignificant risk of a threat to national security interests, the King in Council may decide that the acquisition will not be implemented, or that the implementation will be subject to conditions. This applies even if an agreement has been entered into in relation to the acquisition.
The entities typically subject to the Security Act are the major electronic communications providers, health undertakings, utilities companies, and financial institutions.
Within the telecoms sector, there has been a trend to sell out all or more than one third of the shareholding in so-called "tower" companies (telecoms infrastructure companies that are spun off from a telecoms provider's other assets). A Security Act assessment should always be made in these cases, since the infrastructure may have objects that are classified as critical or the telecoms company may provide services to entities that are of vital importance to fundamental national functions.
As a rule of thumb, the Security Act would rarely apply to smaller technology providers.
The so-called "Bergen Engine" case is a recent example of an acquisition that was stopped pursuant to Section 2-5 of the Security Act, which applies generally in the market even if an undertaking has not been designated as subject to the act. Under this section, the King in Council can make necessary decisions to prevent activities which present a threat to security, or other planned or ongoing activities which may present a not-insignificant risk of a threat to national security interests. In this case, a Russian acquirer was prohibited from acquiring the shares of a company called Bergen Engine (owned by Rolls-Royce), which produces certain marine engines with high-end technology that would, according to the Norwegian government's view, give the Russians access to advanced technology that could harm national security interests and be a risk for Norwegian allies.
Export control is regulated in the Norwegian Export Control Act of 18 December 1987 No 93 and the accompanying Export Control Regulations of 2013. The key regulation is set out in the act Section 1 first and second paragraph:
"The King may decide that goods and technology that may be of significance for other countries' development, production or utilisation of products for military use or that may directly serve to develop the military capability of a country, including goods and technology that can be used to carry out terrorist acts, cf. the Penal Code, section 147a, first paragraph, shall not be exported from the Norwegian customs area without special permission. A prohibition may also be laid down against rendering services such as are mentioned in the first sentence without special permission. Conditions may be laid down for such permission.
The King may also prohibit persons who are resident or staying in Norway and Norwegian companies, foundations and associations from trading in, negotiating or otherwise assisting in the sale of weapons or military material from one foreign country to another without special permission. The same applies to strategic goods and technology such as are further specified in regulations."
The act also includes, in particular, provisions requiring every person to provide assistance or information to ensure compliance with the act and provisions on ministry inspections and access, search and seizure, penalties and coercive fines. The Export Control Regulations include more detailed provisions on matters such as licensing requirements, government-issued authorisations, special requirements regarding military-related goods, registration of export goods, and reporting obligations.
While these provisions do not directly regulate change of ownership, change of ownership may de facto be restricted by export control licences or other regulations, eg, if the ownership in practice entails that goods will be transferred out of Norway.
The Norwegian Sanctions Act of 16 April 2021 No 18 and the regulations pursuant to the act regulate sanctions under Norwegian law. For example, sale or transfer of goods or technology, or assistance in relation to such sale or transfer, may be subject to sanctions or other restrictions. Currently, the regulations include sanctions in relation to, inter alia, Crimea, Belarus, Syria, Yemen, Libya, Somalia, Nicaragua, Mali and Venezuela.
Takeovers (acquisitions), business combinations (mergers), the creation of full-function joint ventures and even some pure asset deals ("concentrations") must be notified to the Norwegian Competition Authority (NCA) if the combined annual turnover of all the undertakings concerned exceeds NOK1 billion in Norway. However, there is no duty to notify the NCA if only one of the undertakings concerned has an annual turnover exceeding NOK100 million in Norway.
The concept of a "concentration" corresponds to the identical concept as set out in the European Commission's Consolidated Jurisdictional Notice under the EU Merger Regulation.
There is no exemption for the technology sector. The antitrust filing requirements in Norway also apply to foreign-to-foreign transactions in so far as the turnover thresholds are met.
A standstill obligation applies to all notifiable concentrations, meaning that implementation is illegal before the NCA has cleared the transaction. Infringements of the standstill obligation ("gun-jumping") are sanctioned with heavy fines.
The Working Environment Act (WEA) is the main act on employers' duties and employees' rights related to employment. The WEA covers both HES-issues (the working environment), the right to (temporary) contract, working conditions, including working hours/compensation, and the procedures in reorganisation/dismissal cases, including the duty to consult with the employees' elected representatives in given situations.
Other laws and regulations that may also be of interest are the Holidays Act; Internal Control Regulations; Construction Client Regulations; Regulations concerning Organisation, Management and Employee Participation; and Workplace Regulations.
General Application of Collective Bargaining Agreements
To prevent exploitation of foreign workers by giving them poorer pay and working conditions, Norway has introduced the general application of collective bargaining agreements in certain industries. These agreements apply to all employees in the industry, regardless of whether the employees or the employer are parties to the agreement. These industries have generally applicable collective agreements on pay and working conditions in construction, maritime construction, agriculture/horticulture, cleaning, fish processing, electrical work, freight transportation by road, passenger transportation by tour bus, and hotels/restaurants/catering (HORECA).
Information and Consultations
Requirements on information and consultations are stated in WEA Chapter 8. Undertakings that regularly employ 50 or more employees must provide information concerning issues of importance for employees' working conditions and discussions with employee representatives.
Termination of employment(s) is regulated in WEA Chapter 15. Consultations (both individual and with elected union representatives where applicable) prior to decisions on termination are a requirement set out in this chapter.
The employer is not bound by the consultations, but may strike an agreement with the union representatives. In that case, such an agreement will, as a general rule, bind both parties, including also the individual employees affected by this.
Transfer of Undertakings
If the acquisition is considered a transfer of (a part of) an undertaking, ie, in the case of a demerger, certain rights, liabilities and obligations of the outgoing employer (Transferor) will automatically be transferred to the incoming employer (Transferee). WEA Chapter 16 regulates this and is based on the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 ("TUPE").
The Transferee is obliged to take over all the existing employees from the Transferor, and their terms and conditions under their employment contracts will automatically be transferred. Furthermore, any collective bargaining agreement will still be in force throughout its period or until replaced. A transfer of employment also does not break continuity of service, so employees uphold their seniority in case of a later redundancy process.
The Transferee also takes on liability for any outstanding payments or claims for unfair dismissal against the Transferor.
There is also an obligation for both the Transferor and the Transferee to inform and consult the employees (and elected union representatives, where applicable) prior to the transfer. The reason for the transfer, the proposed date of the transfer and assessments of the legal, economic and social implications should be given and should be subject to consultation.
As mentioned above, informing and consulting the employee representatives is required prior to the transfer. However, the board is not bound by the opinions that follow from the consultations. Upon disclosure, all employees who are affected by the transfer will be informed as soon as possible about the transfer and all potential changes in the company due to the transfer. Information should be given as soon as possible after the transfer agreement has been signed.
Except for anti-money laundering regulations, sanctions and certain reporting requirements relating to international payments and financial transactions, there are no general currency control regulations or requirement for Central Bank approval relating to M&A transactions.
Due to the COVID-19 pandemic, all work streams in Norwegian M&A transactions have rapidly been converted from physical to digital processes. Meetings, negotiations, signing and closing are done almost exclusively on digital platforms. It remains to be seen if this is only a temporary effect of the pandemic or if M&A transactions in the Norwegian market will continue to be a digital affair in the long term.
Another effect of the COVID-19 pandemic has been an increase in the completion of deals without the buyers physically meeting the management. This is in contrast to before the pandemic, when buyers were hesitant to complete an acquisition without having a physical meeting with the management and key personnel.
The pricing in the Norwegian M&A market has been high and buyers have shifted their focus to acquiring companies lower down in the supply chain and later consolidating the acquired companies with other acquired targets, rather than acquiring additional companies where the buyer has deemed the price to be too high. This has been a trend for smaller private equity funds, but now an increasing number of larger private equity funds also apply this method.
Assessments of ESG-related factors during a transaction process have seen rapid growth in the last few years, and this includes an increased focus on compliance and employment issues.
A decision from the Norwegian Supreme Court ruled that some elements of a collective wage agreement continue to apply for the worker, even though the collective wage agreement as such has expired. This will most likely lead to an increased focus on reviewing collective wage agreements as part of due diligence processes.
There has been a vast increase in listings on the Norwegian stock market, in particular, on Euronext Growth Oslo. In parallel, IPO advisers have introduced new measures to protect their risk connected to indemnity declarations from the issuer. Due to strong creditor protection under Norwegian company law, there are serious concerns with respect to the legality of an indemnity statement obtained by an IPO adviser from a private LLC (such concern does not exist for public companies). Due to this uncertainty, IPO advisers have identified four alternatives for securing their claims against private limited companies under a traditional completeness and indemnity statement.
In principle, a public company is also bound by due diligence to the general restrictions related to disclosure of inside (price-sensitive) information and equal treatment of securities holders. However, in a voluntary or mandatory takeover process, the actual limitations under said limitations will be limited, which means that the public company is free to provide a wide scope of information to the offeror, subject of course to considerations based on sensitivity and competitive aspects. Due diligence with respect to technology aspects is particularly relevant. The company will, at least as a starting point, be required to treat the bidders equally, meaning that they must have access to the same information.
Norway has incorporated the EU General Data Protection Regulation (GDPR) through the Norwegian Data Protection Act 15 June 2018. Several of the general principles of the GDPR could potentially limit the due diligence of a technology company.
For a voluntary bid, both the offeror and the target company will be required to make the bid public immediately a transaction agreement has been agreed. If no transaction agreement is agreed, the offeror must, under the STA, notify the OSE and the market when it "has made a decision to make a voluntary bid".
For a mandatory bid, the offeror must make the bid public when the offeror has made an agreement on acquisition that will bring the offeror more than one third of the voting rights, this being the threshold for the mandatory offer obligation.
Publication is, in each instance, made through disclosure to the market via the OSE's information service at newsweb.no.
Norway has implemented the EU Prospectus Regulation (2017/1129), which means that an offer of shares will trigger a prospectus when so required thereunder, which will regularly be the case in a stock-for-stock offer for a public company. There is no legal requirement that the buyer's shares should be listed on any specified exchange or trading facility (but this will, of course, normally make the offer of shares more attractive for the target shareholders).
Provided that the stock-for-stock offer triggers a prospectus requirement under the EU Prospectus Regulation, the matter is governed thereunder. This means that the starting point is presentation of historical financial statements for the last three financial years.
To the extent that the offeror and the target company have established a transaction agreement and/or irrevocable undertakings have been obtained from shareholders, the OSE should request a copy of such agreements and statements connected to its review. The main elements of the contract between the offeror and the target company, and certain clauses from the transaction agreement, such as exclusivity, non-solicitation and no-shop provisions, must be included in the offer document. Apart from this, there is currently no requirement to make the agreements/undertakings public as such.
Directors in a company (as an employee) are only responsible to the company. Any party other than the company may only claim a director (as an employee) in the same way as any third party in general may claim anyone due to culpa.
With regard to the board of directors, they may be held liable due to a specific codification of the board of directors' duties in the Limited Liability Companies Acts. This codification is deemed as a specific codification of the general culpa principle in Norwegian Law. As a high-level remark, the specific codification does not apply additional liability compared to the same general culpa codification for persons in trusted positions. Over the past several years, the trend has been for more focus on the board of directors' liability and a higher degree of awareness of the matter in business.
It is not very common for the board of directors to establish special or ad hoc committees in business combinations, but an advisory board, or special technical or ethical committees, are used from time to time.
In the case of a separate committee or advisory board, a set of special committee rules is normally established in order to define the scope and procedures of the committee's operations, in the same way that board rules apply to the board of directors.
The board will normally play a very active role in a transaction. This is mainly due to the board members being appointed by the main shareholders, and thus having a direct interest in the matter, both as representatives of the shareholders and as representatives of the company in general.
Shareholder litigation challenging the board's decision is not that common. It does happen from time to time, but this is normally in larger, mature companies with a greater number of independent board members.
Outside advice is not commonly given to the board of directors in minor venture capital deals or scale-up business. However, in larger, more mature businesses, it is not unusual to seek financial fairness opinions.
Overview of the Norwegian M&A and IPO Markets
The Norwegian M&A and IPO markets have been on a roller-coaster ride since the beginning of 2020. From the complete stop in almost all transactions in March 2020 due to the COVID-19 pandemic, to a record-breaking year in 2020 for the IPO market. The resurgence of the IPO market has continued into this year, but the number of listings has decreased since the summer of 2021. Almost at the same time, the Norwegian M&A market bounced back strongly in 2021, and there are no indicators of it slowing down.
Gap between buyers' and sellers' valuation
In the first weeks of the COVID-19 pandemic, the transactions market slowed down, and many drew similarities to the M&A and IPO markets in the aftermath of the financial crisis in 2008. In March 2020, many deals were aborted or shelved as buyers' and sellers' price expectations did not meet. The uncertainty of the pandemic led to the traditional tools for bridging valuation gaps between parties being rendered useless. The market participants were cautious to move forward with transactions without clearer visibility of the short and long-term effects of the pandemic.
The pandemic and oil price reduction shifted the focus to operational concerns
Almost simultaneously with the COVID-19 pandemic, the Norwegian markets suffered another hit as oil prices dropped to record-low levels during the spring months of 2020. This led many business and market players to direct their attention to operational concerns and focus less on pursuing growth or strategic transactions.
The resurgence of the M&A and IPO markets
The impact of COVID-19 also led to a severe fall in prices at the Oslo Stock Exchange, as it did globally. However, the pandemic effect on the M&A and IPO markets only lasted for a short period, and from the summer of 2020, the markets bounced back with an increase in the number of deals and the value of the deals, with the IPO market leading the growth.
Key summary points
Largest Deals and Trends in the Market
Selective M&A and IPO markets
The M&A market became very selective in the wake of the COVID-19 pandemic. Industries that were severely affected by the pandemic, such as travel, tourism and retail, really suffered, while other sectors, such as technology, media and business services, accounted for a large number of the deals made in 2020 and 2021. The technology sector continued to attract high valuations as the digitalisation trend was driven by global and local lockdowns.
Increase in dual-track processes
The second half of 2021 has seen a slowdown in the Norwegian capital markets. The markets have prioritised value companies to growth companies, and larger companies to start-ups. At the same time, the M&A market has picked up. There was an increase in dual-track processes in the first half of 2021 on Euronext Growth Oslo, and in the second half of 2021 and going into 2022, on the Oslo Stock Exchange.
The presence of private equity funds in the market
Private equity funds have had a stable presence in the Norwegian market over several years, but the first half of 2021 was historically strong. Some of the biggest M&A deals by value involved private equity funds on the buy or sell side. An example is the NOK20 billion public takeover of Bank Norwegian by Nordax Bank, the largest cash transaction ever on the Oslo Stock Exchange, which is backed by Nordic Capital.
Digitalisation of the transaction process
One of the key trends in the markets globally, mirrored by the Norwegian market, has been the digitalisation of the transaction process. Meetings and negotiations are now completed through video conference. Signing and closing are done almost exclusively on digital platforms without any physical meetings. This has made it possible for the market players to continue their businesses throughout the pandemic. It was the IPO market that led the implementation of the digitalisation process, as it was possible to complete IPOs, including roadshows and the listing process with the Oslo Stock Exchange, without any physical meetings. Soon the M&A market followed, even though private equity funds were hesitant to complete transactions without a prior physical meeting with management. Digital meetings between management and private equity funds are now accepted as standard market practice. Even though local travel restrictions have been rolled back, the majority of transactions are still being completed digitally.
Active technology sector
The pandemic led to global lockdowns and travel restrictions, and this led in turn to the workforce needing new solutions to be able to work remotely. As a consequence of this, the digitalisation of the workforce has led to the technology sector becoming one of the busiest sectors with the most deals in 2020 and 2021 in the Norwegian M&A and IPO markets. A clear display of shifted focus towards technology on the part of market players, was the listing of video technology company Pexip Holding ASA on the Oslo Stock Exchange, which yielded tremendous interest and represented the largest-ever listing of a tech company in the Nordics.
Introduction of SPACS and their position in the Norwegian M&A and IPO markets
One of the vital trends the last few years in the global capital markets has been the introduction of SPACs (special purpose acquisition companies), where an SPV raises capital and lists its shares for public trading on the stock exchange with the purpose of carrying out an acquisition or merger taking a private company public. To date, no SPACs have been introduced in Norway, and the Norwegian FSA has argued against establishing and listing SPACs in Norway due to alleged lack of investor protection. This is somewhat surprising, taking into consideration that Norway has implemented applicable EU rules in this field, and Sweden, the UK, France, the Netherlands and Ireland have all allowed SPACs.
Outlook for 2022
Basis for a strong M&A market going forward
While there is still uncertainty as to how the COVID-19 pandemic will continue to affect the markets, and how effective the vaccination roll-out has been or if there will be new lockdowns due to increasing COVID-19 cases, the basis for an active M&A market appears to be intact. There is a surplus of dry powder in the market waiting to be deployed, and cash is still inexpensive. There are good indicators that the current positive M&A environment will continue to grow in 2022.
Slowdown in the IPO market
All signs indicate that even though the IPO number slowed down in the second half of 2021, the possibility of a listing process is still something that is being considered as a valuable option to the M&A market. The market valuation is still high. This is exemplified by the listing of Autostore, the second largest IPO on the Oslo Stock Exchange in history. There are currently clear indications that a number of significant companies are heading for an IPO on the Oslo Stock Exchange in H1, 2022.
Technology will continue to be an active sector
For sectors that have not been affected by the COVID-19 pandemic, the markets will continue to be strong with low interest rates, easily accessible financing and capital, and high-quality targets. With the continued focus on remote work and flexible solutions for the workforce, even after the pandemic, a strong technology sector is expected to continue its high deal frequency.