Due diligence on takeovers

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Due diligence on takeovers
  • Purpose
  • Equality of information to competing offerors
  • Information on offeree shareholders
  • Scope
  • Due diligence team
  • Confidentiality agreements

Due diligence on takeovers

This Practice Note discusses the conduct of due diligence by an offeror on a public takeover. It considers the purpose of due diligence, its potential scope, the approach taken on hostile takeovers, shareholder information that a bidder is entitled to request, issues under the Takeover Code (Code) such as the requirement to provide equal information to competing bidders and how the offeree can protect its position through the use of confidentiality agreements.

Purpose

Due diligence provides a buyer with the opportunity to investigate the affairs of the offeree business, to verify that it is trading in accordance with market expectations and that there are no significant commercial, financial, legal and regulatory issues that would impact on price or the buyer's willingness to proceed with the transaction. The due diligence exercise may also influence how the transaction is structured and may identify issues that need to be resolved before the offer can proceed (eg competition notifications or clearances).

It is a fundamental concept of the Code that an offeror should announce a firm intention to make an offer only after the most careful and responsible consideration and when it has every reason to believe that it can and will continue to be able to implement the offer, including ensuring that it can fulfil in full any cash consideration.

In addition, although it is common for extensive

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