LUXEMBOURG Law and Practice Contributed by: Marcus Peter and Kate Yu Rao, GSK Stockmann SA
of thorough due diligence, as described in 1.2 Key Trends . 5.4 Standstills or Exclusivity If the bidder has obtained insider information that has not yet been made public by the target company, the relevant provisions of the Market Abuse Regulation become applicable and prohibit the bidder from trad - ing in the target company’s securities. The target company may also use contractual restric - tions on the bidder by demanding the inclusion of a standstill commitment in the definitive agreements. This would prevent the bidder from trading on the tar - get company’s securities and acquiring a controlling interest in the target. Exclusivity provisions can also be included, for exam - ple in the letter of intent agreed between the parties. 5.5 Definitive Agreements Following the issuing of a reasoned opinion recom - mending the bid by the target company’s board of directors, the parties can enter into a non-binding letter of intent or a memorandum of understanding where the intention of the parties to carry out the pro - posed transaction will be recorded. In addition, the parties normally enter into a non-disclosure agree - ment, especially with regards to virtual data rooms. 6. Structuring 6.1 Length of Process for Acquisition/Sale The length of an M&A transaction varies according to the transaction volume and the target company. The acquisition process may be completed in a few weeks when the transaction volume is small and the target company does not operate internationally. In all cases, the findings of the due diligence have an impact on the length of the process, especially if major roadblocks are found. Geopolitical tensions, pandemics and recent macroeconomic factors have also increased the severity of the due diligence process, which now requires more focus on the financial situation of the target company. In addition, if the target company/ group operates internationally, the due diligence and negotiation of the share purchase agreement could
take more than a year to complete due to the com - plexity of the transaction. In addition, the antitrust procedure alone can take several months and delays are possible due to the different pace of approvals by
authorities in different jurisdictions. 6.2 Mandatory Offer Threshold
The Takeover Law covers squeeze-out and sell-out rights for the M&A of Luxembourg-based target com - panies. In accordance with its provisions, a natural or legal person acquiring, alone or with persons acting in concert with it, control over a company by hold - ing 33.3% of the voting rights is required to make a mandatory takeover bid to all the shareholders in a Luxembourg company. 6.3 Consideration The consideration for all the shares in the target com - pany is more often in cash but all or part of the con - sideration can also be in securities. The main differ - ence relates to a risk of value loss, which does not normally exist in relation to cash considerations. For example, a payment in kind, whether in the form of stocks, receivables or options, etc, might lose value immediately after the closing of the M&A deal due to market developments. Cash payment as consideration is more practical in terms of post-closing purchase price adjustments. A portion of the purchase price can also be tied to the performance of the target company after closing by way of earn-out provisions, which may give both par - ties more security and certainty. 6.4 Common Conditions for a Takeover Offer In addition to the conditions required by the applicable laws, such as consent from merger control authori - ties or the Ministry of the Economy (as described in 2.3 Restrictions on Foreign Investments ), offers are mostly subject to extensive contractual conditions. These include pre-offer conditions such as providing certainty for the funding, antitrust approvals and non- occurrence of material adverse change. 6.5 Minimum Acceptance Conditions The management body of the target company initially approves the transaction. Subject to the articles of association of the target company, there might sub -
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