The decision in Ross Human Directions  ATP 8 is not a "game changer" when it comes to deal protection in M&A transactions, but it does provide some fairly clear guidance to advisers negotiating deal protection provisions in M&A transactions. While the Takeovers Panel has issued a revised Guidance Note 7 (Lock Up Devices), this guidance note is concise, and it is always helpful to see how the Panel applies its policies in practice.
Applicant complained about the deal protection provisions of a scheme implementation agreement. In the event, the parties amended the provisions in question so that the Panel did not make a declaration of unacceptable circumstances, but the Panel's reasons nevertheless provide some useful guidance to companies and their advisers negotiating deal protection.
The Panel observed that deal protection measures are not per seunacceptable and may indirectly facilitate competition by encouraging a bid to be made. Further, according to the Panel such provisions are now commonplace and do not prevent a "serious" competing bid emerging.
The Panel said there was no requirement for a public sale process (although Guidance Note 7 does suggest that this is a relevant factor).1 However, there are certain basic structural requirements that are even more important where there is no public sale process:
The Panel proceedings caused the implementation agreement to be brought more closely into line with these principles:
Advisers will do well to keep this decision in mind when negotiating deal protection mechanisms in M&A implementation agreements, as well as the preparedness of the Panel to intervene to cause deal protection provisions to be rewritten in appropriate cases.
Download the decision here.
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