CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
which have given rise to a bid obligation (mandatory takeover bid). This disclosure should be done transparently and in such a way as to prevent a selective announcement in terms of who is being notified (as would be the case, for example, if the announcement is made via regional publication only). Publication with national reach is recommended, whereas the contents of the announcement should be relevant to the actual inten - tion of the bidder. To protect inside information and prevent market distortions, the bidder must take measures to avoid premature or unequal dissemination of information regarding the fact that it is considering or intending to launch a takeover bid. The same shall apply in relation to steps that will result in the creation of a bid obliga - tion. Therefore, the offeror shall instruct all persons who carry out activities for it in connection with the takeover bid of their duty of confidentiality and the prohibition on the use of inside information and shall take measures to prevent the dissemination of inside information and its use. The rules on the disclosure of inside information in accordance with the Market Abuse Regulation may apply. 5.2 Market Practice on Timing Obligatory public disclosures in M&A deals are rare since the vast majority of deals in the Czech Republic are private (see 5.1 Requirement to Disclose a Deal ). Market practice tends towards an active approach of the parties. They usually disclose basic information on the deal either very soon after the deal is settled or once the information on the pending deal is publicly accessible (eg, if the deal is subject to approval by the Czech Antitrust Office, which makes all announce - ments public). 5.3 Scope of Due Diligence The scope of due diligence performed in a negotiated transaction typically covers various aspects of the tar - get company’s operations, finances, legal status and other relevant areas. The specific areas covered may include financial, legal, tax, operational, technical or
environmental due diligence. The purpose of this due diligence process is to assess the target’s assets, liabilities, potential risks and overall suitability for the proposed transaction. In a public takeover, persons who have obtained con - fidential information about the bid must keep it con - fidential (in order to prevent market distortions) until the bid is publicly announced (see 5.1 Requirement to Disclose a Deal ). As a result thereof, the due diligence process in the case of a private acquisition is more open than in the case of the acquisition of a public (listed) company. 5.4 Standstills or Exclusivity If the target company is a private company, it is stand - ard market practice for the buyer and seller to enter into an exclusivity (and confidentiality) agreement, at least for a limited period of time. This motivates the buyer to effectively invest its time and financial/human resources in a particular transaction and, at the same time, the seller is aware of the expected timing of the transaction. Standstill agreements are not common in private M&A transactions, as the additional increase of shares in the target company by the shareholder is usually regulated by protective measures set out in a shareholders’ agreement or similar agreement. If the target company is a public company, the bidder and the target company are prohibited from enter - ing into exclusivity agreements or similar agreements. This is to protect the value of the target company and to prevent unequal dissemination of information about the target company. The use of standstill agreements (ie, restrictions on the acquisition of additional shares in the target company) in (hostile) takeover bids is not common. However, this may be due to the fact that historically there have been only a limited number of cases of attempted hostile takeovers. There is not enough experience and knowledge of such proce - dures. In addition to the above, standstill agreements by definition cannot be used in the case of a mandatory takeover offer or supplementary takeover offer, as in such cases, the bidder is obliged to acquire additional shares in the target company.
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