Irish M&A deals reached record levels in 2021 boosted by cross-border activity – up 27% year on year. There was an initial slowdown when the Covid-19 pandemic first began in 2020, but subsequent recovery was marked by acceleration in 2021. The key question now facing M&A activity in Ireland is the impact of the war in Ukraine and how that will impact international markets.

The top trend in Ireland in 2021 was the ongoing increase in cross-border deals. Over half of all M&A deals had a cross-border element. Inbound deals reached an all-time high and were up 44%, and outbound deals were up 46%. Any concerns in relation to the stability of the Irish corporate tax regime have dissipated due to the recent agreement with the OECD, where 15% will become the new baseline corporate tax rate for multinationals with revenues in excess of EUR750m, and 12.5% will remain as the applicable rate for businesses with revenues below EUR750m. The ever-increasing levels of private equity (primarily from the US but also from the UK, Europe and China) are driving both deal volumes and value. 

The largest deals completed in 2021 were primarily in the manufacturing, financial services, energy and tech sectors. As Ireland emerges from restrictions associated with the COVID-19 pandemic, state supports for industry will be withdrawn. It is predicted that certain sectors, in particular the hospitality sector, will see significant readjustment as many of these businesses are within the zone of insolvency, and it is anticipated that distressed activity will make its return to the market. The market is also closely looking at the commercial property sector and the impact of remote working on commercial property demands. 

The primary techniques for acquiring an Irish public company are:

• takeover offers;
• schemes of arrangements; and 
• mergers.

Scheme of Arrangement

The most common means for acquiring a public company in a “friendly” scenario continues to be a scheme of arrangement effected under Irish company law, the Takeover Rules and Irish court procedures, in which a scheme is put to the shareholders for approval. If it is a transfer scheme, the target company’s shares are transferred to the bidder in return for consideration, and if it is a cancellation scheme, the target’s shares are cancelled in return for consideration. To succeed, a scheme of arrangement requires the approval of a majority in number of the shareholders of each class of the target, representing not less than 75% of the shares of each class, voting in person or by proxy at a class or shareholder meeting of the target. The approval of the Irish High Court is also required.

Takeover Offer

In a conventional takeover offer under the Irish Takeover Rules, a bidder makes a general offer to the target shareholders to acquire their shares. This offer must be conditional on the bidder acquiring (or having agreed to acquire) shares holding more than 50% of the voting rights in the target. The bidder may compulsorily acquire the remaining shares on the terms of the offer if it has acquired pursuant to the offer not less than 90% of the target shares to which the offer relates for companies fully listed on EU or EEA regulated markets, and not less than 80% for private companies and companies listed on other markets (eg, NYSE).

Mergers

Mergers are less common for public company acquisitions. A cross-border merger can be undertaken pursuant to the European Communities (Cross-Border Mergers) Regulations 2008, which permit an Irish company to merge with another EU or EEA company. A cross-border merger requires the approval of 75% or more of the votes cast in person or by proxy at a general meeting of the target’s shareholders, and requires approval of the Irish High Court.

The primary means for acquisition of an Irish private company is by the acquisition of its shares, pursuant to a negotiated share purchase agreement between the shareholder(s) and the buyer. Less commonly, privately owned companies are acquired by way of a merger structure. The statutory merger procedure under the Irish Companies Act 2014 is most often undertaken in an intragroup restructuring. Typically for either tax or risk mitigation reasons, alternative types of structures are often deployed where the undertaking or assets of a company are acquired instead of its shares.

The primary regulator of M&A activity as regards public companies in Ireland is the Irish Takeover Panel (the “Takeover Panel”), established under the Irish Takeover Panel Act 1997 (as amended) (the “Takeover Act”). 

The Takeover Panel administers and enforces the Irish takeover regime, which comprises the Takeover Act, the Takeover Rules 2013 and Substantial Acquisition Rules 2007 made thereunder, and the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006, as amended. 

The takeover regime primarily applies to M&A transactions involving:

• an Irish incorporated public limited company that has voting shares admitted to trading (currently or in the past five years) on an Irish market regulated by the Irish Stock Exchange, the NYSE, Nasdaq or regulated markets in the EEA; or
• non-Irish incorporated targets having voting shares admitted to trading on Irish markets.

In cross-border deals, the Takeover Panel often liaises with overseas regulators such as the SEC and/or various stock exchanges, particularly where there are conflicts between the various regulatory frameworks, often relating to timing or disclosure issues.

The Central Bank of Ireland is the main financial regulator in Ireland and its approval (or notification to it) is required for the acquisition or disposal of qualifying holdings in certain types of undertakings regulated by it, including Irish regulated credit institutions, insurance undertakings and other investment undertakings.

Mergers of media businesses (eg, radio or print news) exceeding certain thresholds are subject to approval by the Irish Minister for Communications, which is in addition to antitrust clearance (referenced in 2.4 Antitrust Regulations). 

In general, foreign investment is welcomed in Ireland and few restrictions have historically been placed on such investment.

In light of security concerns highlighted by the Covid-19 pandemic, the EU recently introduced a foreign direct investment (FDI) screening regime. EU Regulation 2019 /452 (the “FDI Regulation”) took effect from 11 October 2020 and Irish implementing legislation may be enacted in 2022.

The FDI Regulation applies to FDI that is likely to affect “security or public order” and will include critical infrastructure (eg, utilities), media freedom and critical technologies. The purpose of the FDI Regulation is to provide collective security to member states and facilitate information sharing between such states on proposed FDI.

Under the proposed legislation, the Minister for Enterprise, Trade and Employment will be able to assess, investigate, authorise, condition, prohibit or unwind certain foreign investments from outside of the EU, based on security and public order criteria. This is expected to result in additional conditionality to offers in affected transactions.

Sanctions legislation (normally promulgated by the EU or the UN as well as under domestic Irish law) may also feature.

The Competition Act 2002 (as amended) (the “Competition Act”) regulates business combinations in Ireland. Pursuant to the Competition Act, mergers and acquisitions are mandatorily notifiable to the Competition and Consumer Protection Commission (the “CCPC”) for review and approval where, in the most recent financial year:

• the aggregate turnover in Ireland of the undertakings involved in the proposed merger or acquisition was not less than EUR60 million; and
• the turnover in Ireland of each of two or more of the undertakings involved was not less than EUR10 million.

So-called “media mergers” form their own category of business combination that are mandatorily notifiable to the CCPC under the Competition Act, irrespective of the foregoing thresholds being met.

Failure to notify a mandatorily notifiable merger or acquisition is a criminal offence as a matter of Irish law.

It is expected that the Irish competition law landscape will be significantly overhauled in the short to medium term. The Competition (Amendment) Bill 2022 (the “Bill”) was published in January 2022 and is currently before the Irish parliament (Dail Eireann). Among other changes, the Bill gives effect to Directive (EU) 2019/1, which aims to empower the competition authorities of the member states to be more effective enforcers and to ensure the proper functioning of the internal market.

Pursuant to the Bill, the CCPC will be given additional powers including the ability to enforce administrative sanctions, with maximum fines of up to EUR10 million or 10% of total worldwide turnover, whichever is greater.

The Bill introduces some notable changes to the Irish merger control regime, including:

• powers for the CCPC to require certain completed mergers be unwound, if the CCPC believes the transaction may harm competition;
• increased powers for the CCPC to enforce gun-jumping (ie, the prohibition on putting mergers into effect before they are cleared); and
• the ability for the CCPC to require below-threshold mergers or acquisitions to be notified, if the CCPC believes it may have an effect on competition.

In the case of an asset purchase, the principal piece of legislation is the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“TUPE”). TUPE will apply to most asset purchases and obliges the purchaser to take on the vendor’s staff on their existing terms and conditions/with their continuity of service intact. TUPE will not apply to a share purchase – because the employer is not changing. However, the employees will continue to benefit from all aspects of Irish employment law. 

In both cases, the party acquiring the business will need to be mindful of the fact that all mandatory employment law protections will continue to apply post-acquisition. In the case of an asset purchase, the acquirer will be directly responsible for these (because it becomes the new employer via TUPE). The existing employer, in the case of a share acquisition, will continue to be responsible for ensuring compliance with law.

A wide range of mandatory employment law protections apply in Ireland - including such things as minimum wage, mandatory minimum notice, protection against unfair dismissal, equality rights and others. Many Irish mandatory employment law protections derive from EU law regulations and directives. The vendor’s compliance with these will need to be carefully checked during due diligence in advance of acquisition and any necessary indemnities/warranties sought.

There is no national security review generally of acquisitions in Ireland. See 2.3 Restrictions on Foreign Investments in relation to the forthcoming investment screening regime in relation to FDI.

Where the EU has passed sanctions regulations, these have direct effect in Ireland, in addition to any national implementing legislation in relation to sanctions. UN sanctions are adhered to also.

The following legal developments in the past three years are noteworthy.

• In March 2021, Irish securities settlement migrated from the UK CREST system to Euroclear Bank Belgium. The migration means that the settlement of trading activity on Euronext Dublin (operated by the Irish Stock Exchange plc), now takes place in Euroclear Bank Belgium Central Securities Depository (CSD). The changes did not affect investors who hold their shares in certificated form. Holders of Irish securities who wish to continue to hold and settle transactions in Irish securities in CREST (eg, trades executed on the LSE) are still able to do so via CREST Depository Interests. The UK decision to leave the EU precipitated the need to migrate the Irish system to an EU entity.
• The Companies (Miscellaneous Provisions) (COVID-19) Act 2020 commenced on 21 August 2020 to provide companies with flexibility in relation to governance and operational matters during the pandemic (such as the electronic holding of general meetings). This was enacted as an interim measure but has been extended to April 2022.
• From 1 July 2020, the Competition and Consumer Protection Commission (CCPC) introduced a simplified procedure for the notification of mergers that do not raise competition concerns in Ireland. This applies to cases where there is no overlap, or where there is limited horizontal or vertical overlap. The simplified procedure is intended to reduce the information burden on parties to qualifying mergers. 

In December 2021, the Takeover Panel published a consultation paper proposing extensive changes to the Takeover Rules, including the Substantial Acquisition Rules. The consultation period closed on 28 February 2022. As noted by the Panel, the majority of the proposed amendments reflect changes over the past ten years to the Takeover Code made by the Panel on Mergers and Takeovers in the UK (the “City Code”). Other changes seek to update and modernise the Rules, eg, the provision of electronic information, or codify the existing practice of the Takeover Panel.

Some of the material proposed changes are the following.

• PUSU: the Takeover Panel proposes to adopt a new 28-day PUSU (put-up or shut-up) regime for any identified offerer. Under the proposed new regime, an announcement by a target which commences an offer period must identify any potential bidder with which the target is in talks or from which an approach has been received. Any publicly named bidder then has 28 days to “put-up or shut-up” (ie, announce a firm intention to make an offer or announce it will not make an offer). PUSU regimes are designed to put a time limit on the uncertainty and disruption caused to business operations during a takeover offer period. Under the current regime, the Takeover Panel will impose a PUSU deadline only if requested by the target and the timeline is not prescribed.
• Disclosure of dealings: the disclosure regime will move from being principally dealings-based to positions-based. Rule 8.3 requiring disclosure of dealings is being amended to require an opening position disclosure by the bidder, target, and 1%+ shareholder in the bidder or target.
• Profit forecasts: Rule 28 is proposed to be revised to incorporate less onerous requirements for certain profit forecasts, notably for those published before the making of an approach for a possible offer. It is based on the principles underpinning Rule 28 of the City Code.

It is expected that the public consultation will result in changes to the Takeover Rules being implemented materially as proposed, which will align Irish takeover practice with that of the UK in many important areas.

It is not customary for a bidder to build a stake prior to launching an offer, due to various disclosure obligations, restrictions on the speed of stakebuilding and the implications for the price and consideration for the offer.

Up to the time of announcement of a firm intention to make an offer, the Takeover Rules and the Takeover Panel Act 1997, Substantial Acquisition Rules 2007 (the “SARs”) restrict the speed with which a bidder is permitted to increase a holding of shares in the target.

Substantial Acquisition Rules

Subject to limited exceptions, the SARs require that an acquirer discloses to the target and the Takeover Panel any acquisition of voting rights that would result in the acquirer holding in excess of 15% of the target’s voting rights. If the acquirer already holds between 15% and 30% of the target’s voting rights, any acquisition that increases its percentage holding must be disclosed. The timing of acquisition is also restricted such that a person may not, in any seven-day period, acquire shares (or rights over shares) in the target carrying 10% more of the voting rights, if the person would then be following the acquisition hold between 15% and 30% of the voting rights in the target.

The Takeover Rules require that an offer must not be made at a price per share that is less than the higher price per share paid by the bidder during the three-month period prior to the commencement of the offer period (subject to extension by consent of the Takeover Panel). If the bidder has acquired 10% or more of the target’s shares during the offer period, or in the 12 months preceding the offer period, the offer must be in cash or include a cash alternative, and the price per share cannot be less than the highest price per share paid by the bidder during the relevant period.

Mandatory Notification

The Transparency (Directive 2004/109/EC) Regulations 2007 and Central Bank (Investment Market Conduct) Rules 2019 require notification to the target company and the relevant exchange where there is a change in the percentage of shares held by a person in an Irish public limited company resulting in an increase from below to above 3%, a decrease from above to below 3%, or where the interest held is above 3% and changes through a percentage level. 

Beneficial Ownership

Irish companies are required to maintain and disclose information about individuals who are their underlying beneficial owners pursuant to the EU (Anti-Money-Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019. Companies are obliged to persons with a shareholder or ownership interest (direct or indirect) of 25% or more. Such an obligation does not apply to Irish companies already subject to equivalent international standards ensuring transparency of ownership information. 

Stakebuilding is completely prohibited if it constitutes insider dealing.

See 4.1 Principal Stakebuilding Strategies in relation to mandatory disclosure thresholds. 

During an offer period, the bidder and any person acting in concert with it must disclose any acquisition of company shares or derivatives. Any persons interested in 1% or more of the target entity’s securities are required to disclose their dealings during the offer period.

The proposed changes to the Takeover Rules, if implemented, will require an opening position disclosure by the target, the bidder, and any 1%+ shareholder in the bidder or target, detailing their interests (including short positions) in those securities shortly after the announcement of an offer or possible offer. 

The applicable reporting thresholds are set out in the Transparency Regulations 2007, the Central Bank (Investment Market Conduct) Rules 2019, and the Companies Act 2014.

These disclosure obligations and the restrictions on timing of acquisition of substantial holdings, as outlined above, act as practical hurdles to stakebuilding.

Dealings in derivatives are permitted (and restricted) similar to dealings in other securities, prior to and during an offer period.

The filing and reporting obligations for dealing in a target company’s derivatives are similar to those obligations applicable to dealings in securities. Where derivatives entitle the exercise of voting rights, they will generally be treated as securities for the purposes of competition law.

Under the current rules shareholders do not have to make known the purpose of their acquisition and their intention regarding control of the company - aside from particular circumstances, such as bespoke requirements under a target’s constitution or if the Takeover Panel has imposed a “put-up or shut-up” (PUSU) determination.

In its consultation regarding a change to the Takeover Rules, the Panel proposes introducing a default PUSU period of 28 days after a potential bidder is publicly identified. Before the 28-day period expires, the potential bidder must announce a firm intention to make an offer or announce that it will not proceed (after which it is barred from making an offer for 12 months). Under the new regime, if a target announces a possible offer for its securities, it will no longer have the option to conceal a potential bidder’s name.

In respect of an offer or possible offer for an Irish incorporated listed public company to which the Takeover Rules apply, an announcement must be made as soon as a firm intention to make an offer is communicated to the offeree board. The bidder does not have to be named (though this is due to change under proposed amendments to the Takeover Rules).

Before a public announcement is made, strict confidentiality must be maintained within a select group. If the target is subject to rumour and speculation, or there is anomalous movement in its share price prior to an announcement, or the number of persons having knowledge of the potential bid is extended beyond a restricted circle (typically interpreted very conservatively), an announcement must be made to the market unless the Takeover Panel consents otherwise. 

In a private M&A transaction, where a bidder or seller is a public company, it may be required to make a disclosure depending on the market where it trades. 

Market practice on the timing of disclosure in the case of public M&A follows the requirements of the Takeover Rules.

In a negotiated business combination, the scope of due diligence will usually involve a review of publicly available information only for the target company and responses to enquiries raised.

Due in no small part to the proliferation of virtual data rooms, the effect of the pandemic on the scope of due diligence has been quite limited in many sectors such as tech, and 2021 transpired to be a record year for M&A in Ireland. Notwithstanding this, the pandemic (as well as Brexit) has sharpened the focus on supply chain issues as well as on MAC clauses and business interruption.

A bidder will typically look for exclusivity restricting the offeree from engaging with other potential bidders. It would also be common for the offeree to seek commitments from the bidder, including a standstill, preventing the bidder from building up shares in the target company. As noted above, there are disclosure requirements and other restrictions on stakebuilding in Irish public companies regulated by the Takeover Rules.

It is customary for companies seeking to implement an offer regulated by the Irish Takeover Rules, whether by means of a tender offer or scheme of arrangement, to enter into an implementation agreement, including various mutual undertakings, representations, warranties and indemnities and termination rights.

The offer or scheme document is required to contain details of the terms and conditions of the offer, as well as the terms of terminating any transaction agreement.

The intention to make an offer must first be disclosed to the target’s board or advisers. This initial phase of negotiations of the terms of a bid is not prescribed.

Where a bid is a hostile one, the target can apply to the Takeover Panel to announce a firm intention to make an offer or that it does not intend to do so (put-up or shut-up). If the proposed amendments to the Takeover Rules are implemented, this will change to a fixed 28-day PUSU period.

The Takeover Rules contain a firm timetable for the conduct of a bid. The timetable commences once the bidder has made an announcement of a firm intention to make an offer, which contains the material terms of an offer. The bidder then has 28 days to post the formal offer to the target company’s shareholders. The acceptance condition (the level of shareholder acceptance that will satisfy the offer) must be satisfied within 60 days of the firm announcement. All other conditions must be satisfied within 21 days, after which the offer will be declared unconditional.

The process for completing a statutory squeeze-out can be completed in an additional 30 days (subject to any objections filed in the High Court).

Scheme of Arrangement

A scheme of arrangement should be possible to conclude within three months, subject to regulatory or other issues. The scheme proposal document must be posted to shareholders within 28 days of the announcement of a firm intention to make an offer, unless the Takeover Panel consents otherwise. As the scheme requires Irish High Court approval, the court’s timetable must be factored in. Subject to the requisite shareholder approval and Court sanction, the scheme is binding on all shareholders.

There is a mandatory offer threshold. Unless the Takeover Panel waives the obligation, a bidder is required to make a mandatory offer (for cash consideration or with a full cash alternative) for the remaining securities in a target if:

• it, or persons acting in concert, acquires shares resulting in it holding more than 30% of the voting rights in the company; or
• its holding of between 30% and 50% of the voting rights in the target company increases by more than 0.05% of the aggregate percentage voting rights of the entity in any 12-month period.

Cash is the most common form of consideration, but it is also often offered in other forms such as securities.

It is common for a takeover offer to be subject to various conditions, though the practical effect of these is limited by the Takeover Rules. Offer conditions must not normally include any condition the satisfaction of which depends solely on subjective judgments by the directors of the offerer or offeree (as the case may be) or is within their control (Rule 13.1).

In addition, before an offerer can invoke a condition or pre-condition so as to cause an offer to lapse, it must satisfy a test “material significance” in the context of the offer and satisfy the Takeover Panel that it is reasonable to do so. If it is a condition of the offer that that implementation agreement not be terminated, the termination events must be included as conditions to the offer (Takeover Panel Practice Statement, February 2017). 

Under the Takeover Rules, any bid must be conditional on the bidder acquiring shares carrying more than 50% of the voting rights in the target company. The bidder will set its own acceptance condition well above the 50% threshold, typically at a level that facilitates both a scheme of arrangement and the operation of statutory squeeze-out provisions (in a conventional takeover offer).

The threshold for relying on compulsory acquisition rights is the acquisition of 90% of the issued share capital, for companies fully listed on a regulated market in any EU or EEA member state or 80% for companies listed on Euronext Growth or AIM of the London Stock Exchange, NASDAQ or the NYSE.

These are the thresholds that the bidder must meet if it wishes to rely on a squeeze-out mechanism to acquire 100% of the target entity.

The acquisition of public companies cannot be conditional on the bidder obtaining finance. A bidder may only announce a firm intention to make an offer under the Takeover Rules (Rule 2.5 announcement) when it and its financial advisers are satisfied, after careful and responsible consideration, that the bidder is able and will continue to be able to implement the offer.

Where the offer is a cash offer or there is a cash alternative, the Rule 2.5 announcement must include a “cash confirmation” commitment from the bidder’s financial adviser that resources are available to the bidder to satisfy full acceptance of the offer. If the confirmation proves to be inaccurate, the Takeover Panel may direct the person who made the statement to provide the necessary resources, unless the Panel is satisfied that the person acted responsibility and reasonably in making the statement.

In private M&A transactions, deals may include financing conditions if these are negotiated between buyer and seller.

Break fees are permissible under the Takeover Rules but require the prior approval of the Takeover Panel. In the Irish public M&A transactions completed in 2021, expenses reimbursement agreements were entered into in most cases, under which a bidder could be reimbursed its acquisition costs up to a value of 1% of the offer in certain circumstances. The offer document is required to contain details of any expenses reimbursement arrangement.

The target may enter into an exclusivity agreement subject to directors’ fiduciary duties and the Takeover Rules. Directors have an obligation to act at all times in the best interests of the company, and any request for match rights or non-solicitation provisions must be considered carefully in this light.

It would be uncommon for a bidder to seek to acquire less than 100% ownership of a target. If a bidder acquires a shareholding that is less than 80% or 90% (as applicable depending on the market of the target entity), the bidder will be unable to trigger a compulsory acquisition of the remaining minority shareholders.

Any additional governance rights outside of those provided by statute to >50% or >75% shareholders would need to be contained in the target entity’s constitution. Such rights would need to be carefully considered in case they require the consent of a class of shareholders or if an exercise of same would constitute oppression of minority shareholders. 

Shareholders may cast their vote by proxy if they are unable to attend a meeting in person (or attend a meeting held virtually). A proxy has the same right as the shareholder to speak and vote at the meeting and on a poll. 

Squeeze-out mechanisms are available to acquire compulsorily the shares of dissenting shareholders. The thresholds are outlined at 6.5 Minimum Acceptance Conditions. Where the target is fully listed on a regulated market in an EU or EEA member state, the acceptance criteria is 90%. The bidder has three months from the last closing date of the offer to give notice to dissenting shareholders. The dissenting shareholder has 21 days to apply to the Irish High Court for relief. 

If the target is listed on Euronext Growth or AIM, Nasdaq or NYSE, the bidder must receive 80% acceptance within four months of publication of the offer in order to trigger the squeeze-out procedure.

It is common in a recommended offer to obtain irrevocable commitments from the principal shareholders of the target company. The commitment will usually provide for the shareholder to accept the offer within a certain time period of it being made and refrain from doing anything which might frustrate the bid. The bidder will seek such irrevocable commitments before the announcement of a firm intention to make a bid. It is a matter for negotiation as to whether there will be an “out” for the shareholder if a better offer is made.

Prior to a public announcement concerning an offer or possible offer of an Irish incorporated public limited company to which the Takeover Rules apply, strict confidentiality must be maintained.

An announcement must be made to the market if the offeree is the subject of rumour and speculation or there is anomalous movement in its share price (unless the Takeover Panel consents otherwise).

Once the bidder’s intention to make an offer is disclosed to the target’s board or advisers, the bidder must make a public announcement. The announcement must include certain specified information, including the identity of the bidder (and its controlling entity if any) and the shares held by the bidder in the target.

Once a firm intention to make a bid is announced (Rule 2.5 announcement), the bidder is bound to proceed with a formal offer and must be able to implement the bid throughout the offer period.

If transferable securities are offered as part of the consideration, the bidder must publish either a prospectus or a document containing equivalent information.

A prospectus must contain all information necessary to enable investors to make an informed assessment of the assets, liabilities, financial position, profits and losses and prospects of the issuer, and the rights attaching to the securities in question. It must include a description of the business, audited financial information for the last three financial years, an operating and financial review of that period and a confirmation that the issuer has sufficient working capital for 12 months.

Bidders need to produce financial statements in their disclosure documents.

Where cash is offered as consideration, bidders must produce a turnover and profit or loss before taxation for the last two financial years and a statement of net assets as shown in the latest published audited accounts.

Where securities are offered as consideration, the Takeover Rules require more detailed financial statements. This includes turnover, net profit or loss, charge for tax, extraordinary items, minority interests, the amount absorbed by dividends, earnings and dividends per share, for the last three financial years (Rule 24.2).

Financial statements must be disclosed in the form they have been prepared.

A number of transaction documents must be disclosed in full, for inspection and on the parties’ website, except with the consent of the Takeover Panel.

These include: 

• the offer document, and each revised offer document;
• the target company’s board circular and the response circular of the target board concerning every revised offer;
• audited consolidated accounts of the bidder or target (as appropriate);
• all material contracts entered into by the bidder or target (as appropriate) in connection with the offer, documents relating to financing arrangements of the bidder, documents evidencing an irrevocable commitment – elements can be redacted with Takeover Panel consent; and
• asset valuation certificate and report (if valuation obtained).

When in an offer period, a bidder or target company must publish all announcements, press releases, documents and statements on their website as soon as possible and by 12 noon the next business day.

The fiduciary duties of directors are codified in the Companies Act 2014, s.228. Some key directors’ duties are:

• to act in good faith in what the director believes to be the best interests of the company;
• to act honestly and responsibly;
• to exercise the degree of skill and care that may reasonably be expected from a person of the director’s background, knowledge and experience;
• to avoid conflicts of interest between the director’s duties to the company and his own interests; and
• not to fetter his ability to exercise independent judgement (unless expressly permitted in the company’s constitution or by the members). 

In the early stages of a business combination, it would be a responsibility of the directors to obtain competent independent advice (which is also a requirement of the Takeover Rules (Rule 3.1)). Directors’ duties will apply to the decision to engage with or seek additional bidders, the engagement with such bidders and the decision to recommend a bid. Any steps to be taken to resist a hostile bid must be taken in good faith, in what the directors consider to be the best interests of the company.

Directors’ duties are owed primarily to the company. Directors are also obliged to have regard to the interests of the company’s employees and members when carrying out their duties. However, this duty is enforceable only by the company and in the event of conflict, the director’s primary responsibility is to the company.

Where a company is insolvent or at risk of insolvency, directors may owe a duty to the company’s creditors. 

Directors must also ensure that they do not fall foul of the prohibition on taking “frustrating action” set out in the Takeover Rules (Rule 21.1).

It is common for boards to establish a special or ad-hoc committee in business combinations, tasked with progressing the transaction.

Such a committee deals with potential or actual conflicts of interest. As noted above, one of the fiduciary duties of a director is the obligation to avoid situations whereby his other interests conflict with his duty to the company.

Where a director has acted in good faith and in the best interests of the company, a court will typically defer to the director’s business judgement. As mentioned above, extreme care must be taken in takeover situations generally and as regards the issue of “frustrating action” where Irish law differs substantially from the laws of jurisdictions such as the US.

The Takeover Rules require the board of the target company to take competent independent advice (Rule 3.1(a)(i)). This typically involves financial, tax and legal advice. The offerer board is required to take competent independent advice if the directors face a conflict of interest (Rule 3.2(a)(i)).

Conflicts of interest in the context of M&A have not been the subject of judicial scrutiny in Ireland.

Hostile tender offers are permitted in Ireland but are not common. There were no hostile bids or (to our knowledge) approaches in 2021.

Defensive measures are allowed in theory, but in practice, the ability of directors to use such measures is restricted by the rule against frustrating action contained in the Takeover Rules (Rule 21.1). This rule means that a target board is prohibited from taking certain actions that may result in the frustration of an offer or potential offer (except pursuant to an existing contract) without Takeover Panel or shareholder consent, or both, in the course of an offer, or if the target board has reason to believe the making of an offer is or may be imminent.

It would be usual for a target company to engage with the Takeover Panel if considering an action that could be construed as a defensive measure.

As mentioned, the availability of defensive measures is limited by the frustrating action provisions of the Takeover Rules. 

Shareholders’ rights plans that include, eg, the option to acquire dilutive shares at a discount, are not expressly prohibited or authorised under Irish law. However, because of the rule against frustrating action, once an approach has been received or is imminent, it is too late to establish such a rights plan or issue rights without the consent of the Takeover Panel or express shareholder approval, and there are serious questions whether any such arrangements could be introduced at any time. Shareholders’ rights plans have been adopted by some Irish registered, US listed companies but have not been tested in the courts and indeed may cause serious issues with the company’s shareholders. 

We have not seen any change in the prevalence of defensive measures as a result of the pandemic. 

When enacting defensive measures, the target company’s directors are bound by their fiduciary duties under the Companies Act 2014, including a duty to act in the best interests of the company. The directors will need to comply with the company’s constitution and Irish company law.

Rule 23 of the Takeover Rules set out a general obligation as to information, which requires that the shareholders of the target receive sufficient information and advice to reach a properly informed decision about the merits or demerits of an offer.

The Takeover Rules provide that the directors of the offeree must obtain competent independent legal advice on each offer, which must be sent to the shareholders together with the considered views of the offeree board.

While directors could take action to prevent a business combination, if they did so without first consulting with shareholders and/or obtaining permission, there would be a risk that activist shareholders could challenge such action placing the company’s board placing the company's board under scrutiny.

Litigation in connection with M&A deals is uncommon in Ireland.

See above, such litigation is not common.

To our knowledge, no such disputes have been litigated in Ireland.

Shareholder activism is present but not at US levels for Irish companies with a primary Irish or European shareholder base. The focus of activists has been in relation to voting on remuneration (almost always a non-binding advisory resolution) and the appointment (and tenure) of directors. Notably in 2021, one offer for an Irish plc had to be increased to obtain shareholder support. There was a marked decline in shareholder voting participation in 2021. Due to COVID-19, most AGMs in 2021 were held in a closed or semi-closed manner, with video or audio broadcast.

Activists have encouraged companies to undertake divestitures and share buy-backs in some companies and focused on governance and company strategy. As mentioned, there has been a clear decline in voter engagement in 2021, which could be attributable by the move to online meetings. This could provide an opportunity for activist shareholders to disrupt or influence an M&A transaction.

It would not be typical for activist shareholders to seek to interfere with the completion of announced transactions, other than by exercising their vote and other shareholder rights. Particularly among Irish companies with significant numbers of US shareholders or a US listing, US-style class action litigation focusing on disclosure and valuation issues is not uncommon.