UGENT
EU Mergers & Acquisitions
2023-2024
Anna Sonnenschein
, M&A : introduction
Eu mergers and acquisitions| Anna Sonnenschein
Importance of market practices
M&A = selling and buying firms or part of films
→ When you want to buy a firm, you can either buy assets (building, factories including sometimes
employees) OR shares
→ There are various acquisition techniques
In this course, statutory has very little relevance: it revolves around contracts
→ But there is some important vocabulary
EXAM: written (example on Ufora)
→ Essay questions, hypotheticals, sometimes even simple definitions
→ Use of “legislation” (EU directives mainly) allowed, no other materials (BUT not much is relevant in M&A)
1. Types of deals
1.1. Acquisition
We will see the main acquisition techniques
An acquisition typically has one company, the buyer/bidder, that purchases the assets or shares of another, the
seller/target,
The payment can be done through:
→ Cash
→ the securities of the buyer, or
o ex: shares
▪ very often, if you want to take over a firm, you will simply buy shre (this is the common
currency)
o more rarely it can also be bounds
→ other assets that are of value to the seller
a) Friendly acquisition
Friendly acquisitions occur when the target firm agrees to be acquired; its board of directors (B of D, or board)
approves of the acquisition.
→ they often work toward the mutual benefit of the acquiring and target companies.
o Both companies develop strategies to ensure that the acquiring company purchases the
appropriate assets, and they review the financial statements and other valuations for any
obligations that may come with the assets.
Once both parties agree to the terms and meet any legal stipulations, the purchase proceeds.
b) Inhospitable – hostile acquisition
Unfriendly acquisitions, commonly known as "hostile takeovers”, occur when the target company does not
consent to the acquisition.
→ they don't have the same agreement from the target firm, and so the acquiring firm must actively
purchase large stakes of the target company to gain a controlling interest, which forces the acquisition.
2
, Eu mergers and acquisitions| Anna Sonnenschein
1.2. Types of deals
What are the main acquisition types?
→ Negotiated private acquisition: sale
o Leveraged buy-out; financial assistance issue
o Share deal: SPA –share purchase agreement
→ Public takeover bid (friendly or hostile)
o Squeeze-outs
→ Legal mergers and divisions
o Spin-offs, carve-outs
→ Joint ventures
a) Sale
The most common is the negotiated private acquisition, mainly called sale
→ The bidder wants to acquire several factories of the target and enter into negotiation with the target
firm or the controlling SH and after a while strikes a deal that leads to a written contract
→ Most simple way to do it
Those deals can often be leveraged buy-out
→ Very often the bidder will enter into credit facilities agreement with bank or issues bonds (=you extent
a loan to the issuer of the bond and the company will have to buy you back in a while) to receive money
so that it gets the money to pay
Very often, when company A buys company T (or the shares of T), T will offer some kind of financial assistance
to A
→ The acquirer get financial help from the target company: so T will help A to acquire those shares
o // helping someone to buy your own house by giving the person a loan
→ Actually, it is only that the acquirer uses the money of the target company to fund the acquisition
o Ex: I get a loan BUT I know that I will be able to pay it back directly with the money of T (that I
acquired with this loan)
→ BUT sometimes regulator in Europe do not really like that… that’s why in some countries since the 30s
(BUT in all EU since 70s), we have harmonized EU rules on financial assistance (see more about this
later)
Share deal: SPA –share purchase agreement
b) Public takeover bid (friendly or hostile)
This only happens to listed firm!
Illustration: You have a Belgian company, A, that has no major SH (it has a lit of little SH, none of them is
controlling => dispersed share ownership)
→ A billionaire or an investment funds think then that A is an interesting company with a lot of potential
BUT with a very bad management strategy and that A is not living up to its potential and is under
performing and is stuck a very low stock price (in short; you think it could be turn into something far
more valuable)
o So he wants to acquire control of A
→ How can he do that? He cannot negotiate with all those various SH to ask them if they want to sell their
share to him (not feasible)
→ BUT since the company is listed, you can buy shares on the stock exchange
o BUT in that way, it will be very hard to acquire 90% or so of the share
o SO instead, once you acquire a serious state (like 30%), you will launch a public takeover bid
3
, Eu mergers and acquisitions| Anna Sonnenschein
This is public because you offer to buy the share of everybody who is an SH at B at this stage
→ For the next twee weeks, everybody who wants to sell her share to me, I will pay to them at a previous
fixed price (usually hirer than the current stock market price, to be attractive)
In every civilized nation in the world, you are not allowed as a potential bidder to launch a public takeover bid
unless you have first produce a certain prospectus (a brochure in which you explain to SH who you are, what
your motives are, eventually the conditions attached to your bid and what your vision and plan for this company
is) that needs to be approved by a supervisory authority (FSM in Belgium)
→ It is not a permission BUT it needs an approval of the prospectus
Friendly takeover bid: when the bidder enters into negotiations with the BoD or top management and if this
board is happy about that so they will recommend this bid to their SH
→ The bid takes place with the approval of the BoD of the target company
Hostile takeover bid: usually after acquire controlling share, the acquire will want to change the top management
SO sometimes the BoD will opposes the bid
→ BUT if the BoD are not controlling SH, then they do not have the last word BUT they can make life more
difficult to the bidder and not recommend this public take over bid and on the contrary, they will tell
that this is a bad bid and that the SH should absolutely not accept it with defensive measures
So friendly/hostile depends on the position of the BoD
Squeeze-outs: it is the rule that says that if you have acquired 95% (depending of the countries) of SH of the
target company, you can FORCE (legally) the remaining 5% of SH to sell their shares to you
→ Once a public bid is launched, often the bidder wants to acquire all the shares of the company in order
to delist the company BUT it never happens that every SH of the company wants to sell to the bidder
o That is why, over the past years, countries have introduced rules about squeeze-out
→ SO you are actually reopening your bid to those last SH for a new period of time
o And if those SH have not sold at the end of this period, the shares will be automatically
transferred to the bidder (by the force of law!)
→ They are various types of squeeze-out
c) Legal mergers and divisions
Legal mergers: Dissolution of at least one company (target)
Illustration: You have at least 2 companies A and B
→ B dissolves itself
→ We have negotiation between A and B about the fact that they want to get together by A eating up B
→ After negotiations, B holds a meeting of SH and they decide to approve through a vote which requires a
super majority (the number depends on the country) to approve a merger proposer in which B will be
merged in A
o It has to be approved by the board of SH in order to happen legally
→ If approved, B is going to be dissolved and seize to exist as a legal person
o BUT it is not followed a traditional liquidation
o After the GM, all the assets and liabilities (everything B owns and his depts) are transferred to
A, the acquiring company
▪ This transfer takes the form of a universal succession meaning that all their assets are
transferred to the other company in one go, in one procedure
4
EU Mergers & Acquisitions
2023-2024
Anna Sonnenschein
, M&A : introduction
Eu mergers and acquisitions| Anna Sonnenschein
Importance of market practices
M&A = selling and buying firms or part of films
→ When you want to buy a firm, you can either buy assets (building, factories including sometimes
employees) OR shares
→ There are various acquisition techniques
In this course, statutory has very little relevance: it revolves around contracts
→ But there is some important vocabulary
EXAM: written (example on Ufora)
→ Essay questions, hypotheticals, sometimes even simple definitions
→ Use of “legislation” (EU directives mainly) allowed, no other materials (BUT not much is relevant in M&A)
1. Types of deals
1.1. Acquisition
We will see the main acquisition techniques
An acquisition typically has one company, the buyer/bidder, that purchases the assets or shares of another, the
seller/target,
The payment can be done through:
→ Cash
→ the securities of the buyer, or
o ex: shares
▪ very often, if you want to take over a firm, you will simply buy shre (this is the common
currency)
o more rarely it can also be bounds
→ other assets that are of value to the seller
a) Friendly acquisition
Friendly acquisitions occur when the target firm agrees to be acquired; its board of directors (B of D, or board)
approves of the acquisition.
→ they often work toward the mutual benefit of the acquiring and target companies.
o Both companies develop strategies to ensure that the acquiring company purchases the
appropriate assets, and they review the financial statements and other valuations for any
obligations that may come with the assets.
Once both parties agree to the terms and meet any legal stipulations, the purchase proceeds.
b) Inhospitable – hostile acquisition
Unfriendly acquisitions, commonly known as "hostile takeovers”, occur when the target company does not
consent to the acquisition.
→ they don't have the same agreement from the target firm, and so the acquiring firm must actively
purchase large stakes of the target company to gain a controlling interest, which forces the acquisition.
2
, Eu mergers and acquisitions| Anna Sonnenschein
1.2. Types of deals
What are the main acquisition types?
→ Negotiated private acquisition: sale
o Leveraged buy-out; financial assistance issue
o Share deal: SPA –share purchase agreement
→ Public takeover bid (friendly or hostile)
o Squeeze-outs
→ Legal mergers and divisions
o Spin-offs, carve-outs
→ Joint ventures
a) Sale
The most common is the negotiated private acquisition, mainly called sale
→ The bidder wants to acquire several factories of the target and enter into negotiation with the target
firm or the controlling SH and after a while strikes a deal that leads to a written contract
→ Most simple way to do it
Those deals can often be leveraged buy-out
→ Very often the bidder will enter into credit facilities agreement with bank or issues bonds (=you extent
a loan to the issuer of the bond and the company will have to buy you back in a while) to receive money
so that it gets the money to pay
Very often, when company A buys company T (or the shares of T), T will offer some kind of financial assistance
to A
→ The acquirer get financial help from the target company: so T will help A to acquire those shares
o // helping someone to buy your own house by giving the person a loan
→ Actually, it is only that the acquirer uses the money of the target company to fund the acquisition
o Ex: I get a loan BUT I know that I will be able to pay it back directly with the money of T (that I
acquired with this loan)
→ BUT sometimes regulator in Europe do not really like that… that’s why in some countries since the 30s
(BUT in all EU since 70s), we have harmonized EU rules on financial assistance (see more about this
later)
Share deal: SPA –share purchase agreement
b) Public takeover bid (friendly or hostile)
This only happens to listed firm!
Illustration: You have a Belgian company, A, that has no major SH (it has a lit of little SH, none of them is
controlling => dispersed share ownership)
→ A billionaire or an investment funds think then that A is an interesting company with a lot of potential
BUT with a very bad management strategy and that A is not living up to its potential and is under
performing and is stuck a very low stock price (in short; you think it could be turn into something far
more valuable)
o So he wants to acquire control of A
→ How can he do that? He cannot negotiate with all those various SH to ask them if they want to sell their
share to him (not feasible)
→ BUT since the company is listed, you can buy shares on the stock exchange
o BUT in that way, it will be very hard to acquire 90% or so of the share
o SO instead, once you acquire a serious state (like 30%), you will launch a public takeover bid
3
, Eu mergers and acquisitions| Anna Sonnenschein
This is public because you offer to buy the share of everybody who is an SH at B at this stage
→ For the next twee weeks, everybody who wants to sell her share to me, I will pay to them at a previous
fixed price (usually hirer than the current stock market price, to be attractive)
In every civilized nation in the world, you are not allowed as a potential bidder to launch a public takeover bid
unless you have first produce a certain prospectus (a brochure in which you explain to SH who you are, what
your motives are, eventually the conditions attached to your bid and what your vision and plan for this company
is) that needs to be approved by a supervisory authority (FSM in Belgium)
→ It is not a permission BUT it needs an approval of the prospectus
Friendly takeover bid: when the bidder enters into negotiations with the BoD or top management and if this
board is happy about that so they will recommend this bid to their SH
→ The bid takes place with the approval of the BoD of the target company
Hostile takeover bid: usually after acquire controlling share, the acquire will want to change the top management
SO sometimes the BoD will opposes the bid
→ BUT if the BoD are not controlling SH, then they do not have the last word BUT they can make life more
difficult to the bidder and not recommend this public take over bid and on the contrary, they will tell
that this is a bad bid and that the SH should absolutely not accept it with defensive measures
So friendly/hostile depends on the position of the BoD
Squeeze-outs: it is the rule that says that if you have acquired 95% (depending of the countries) of SH of the
target company, you can FORCE (legally) the remaining 5% of SH to sell their shares to you
→ Once a public bid is launched, often the bidder wants to acquire all the shares of the company in order
to delist the company BUT it never happens that every SH of the company wants to sell to the bidder
o That is why, over the past years, countries have introduced rules about squeeze-out
→ SO you are actually reopening your bid to those last SH for a new period of time
o And if those SH have not sold at the end of this period, the shares will be automatically
transferred to the bidder (by the force of law!)
→ They are various types of squeeze-out
c) Legal mergers and divisions
Legal mergers: Dissolution of at least one company (target)
Illustration: You have at least 2 companies A and B
→ B dissolves itself
→ We have negotiation between A and B about the fact that they want to get together by A eating up B
→ After negotiations, B holds a meeting of SH and they decide to approve through a vote which requires a
super majority (the number depends on the country) to approve a merger proposer in which B will be
merged in A
o It has to be approved by the board of SH in order to happen legally
→ If approved, B is going to be dissolved and seize to exist as a legal person
o BUT it is not followed a traditional liquidation
o After the GM, all the assets and liabilities (everything B owns and his depts) are transferred to
A, the acquiring company
▪ This transfer takes the form of a universal succession meaning that all their assets are
transferred to the other company in one go, in one procedure
4
