In this episode, Corporate partners Isaac Stewart and Igor Drinkovic discuss the intricacies of public mergers and acquisitions. Together they provide an overview of public M&A, including structuring options, current market trends, and key considerations for target directors when faced with a takeover offer. 

[00:28] Isaac asks Igor to explain the fundamental differences between public and private M&A. Igor discusses how public M&A involves listed companies or entities of a certain size with 50 or more shareholders and share parcels, making it a more regulated field due to the Takeovers Code.

[01:13] Isaac and Igor delve into the two primary methods for public M&A: takeover offers and schemes of arrangement. Igor explains the formal processes behind each method, including the 90% acceptance requirement for takeover offers and the 75% approval threshold for schemes of arrangement.

[03:00] Isaac enquires about scenarios where a takeover offer might be preferred over a scheme of arrangement. Igor provides real-world examples, such as the Tilt Renewables takeover, to illustrate how the choice of structure depends on the bidder's objectives and starting stake in the company.

[04:17] Isaac asks Igor about recent public M&A trends. Igor discusses the reasons behind the preference for schemes of arrangement, noting that bidders starting from nothing often choose the lower threshold of 75% for a scheme of arrangement to achieve 100% ownership.

[05:10] Isaac and Igor discuss key factors for target boards to consider when assessing a takeover offer, including value, certainty, timing, and risk. Igor emphasizes the importance of maximizing benefits for target shareholders and creating competitive tension to extract the highest price.

[06:39] Isaac highlights the importance of regularly refreshing internal valuations and understanding the control premium in a takeover offer. 

[08:00] Isaac and Igor evaluate the certainty of an offer, discussing the bidder's funding certainty and the likelihood of obtaining necessary regulatory approvals. Igor explains the impact of regulatory conditions on the success of a scheme and the importance of clear, objective financial metrics for material adverse change conditions.

[10:38] Isaac asks about the impact of regulatory conditions on the success of a scheme. Igor discusses the role of independent advisor valuations and how recent changes in takeovers panel guidance allow target boards to view the draft valualtions earlier, providing greater certainty for target boards.

[12:11] Isaac and Igor explore the process and challenges of securing shareholder approval for a scheme of arrangement. Igor discusses the importance of understanding shareholder interests and the role of proxy solicitation firms in achieving the necessary vote thresholds.

[13:18] Isaac asks Igor for predictions on public M&A activity over the next 6 to 12 months. Igor shares his expectations for continued activity in public M&A, with schemes of arrangement likely to remain the preferred structure.

Information in this episode is accurate as at the date of recording Friday, 4 October 2024.

Please contact Isaac Stewart or Igor Drinkovic or our Corporate team if you need legal advice and guidance on any of the topics discussed in the episode.

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