NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
consents/conditions, contamination and other environmental liabilities. • Intellectual property, IT and data: Ownership and registrability of core IP, licensing and assignments, open-source usage, key IT systems and contracts, cyber posture and incident history, and Privacy Act compliance including cross-border transfers. • Litigation, investigations and disputes: Pending and threatened claims, regulatory enquiries, complaints and remediation, insurance coverage and notifica - tions. • Regulatory compliance and licences: Health and safety (including PCBU duties and incident records), AML/CFT where applicable, and sector- specific approvals and operating licences. • Overseas investment and competition law: Whether consent/clearance is required, expected timetable, potential conditions and remedy risk. The depth and breadth of due diligence depends on the nature of the transaction and the target business. In recent transactions, there has been an increasing focus on ESG-related due diligence, including climate risk exposure, environmental compliance, modern slavery and supply chain integrity, reflecting the grow - ing importance of these issues to acquirers and their stakeholders. 5.4 Standstills or Exclusivity Both standstill and exclusivity arrangements are com - mon in New Zealand M&A transactions. • Standstill restriction: An NZX-listed target that agrees to provide a prospective buyer with access to its non-public information will typically insist that the prospective buyer agrees to a standstill restriction, precluding the buyer from acquiring any (further) target shares other than through a transac - tion recommended by the target’s board. Standstill restrictions are usually documented in the confi - dentiality agreement that governs access to the target’s non-public information. The duration of the standstill is a matter of negotiation, but will typi - cally extend for a period beyond the conclusion of the due diligence process (eg, six to 12 months). • Exclusivity: In a negotiated transaction, a pro - spective buyer will typically seek exclusivity (also referred to as “no shop”, “no talk” and “no due
diligence” obligations) in which the target agrees not to solicit or engage with competing propos - als. In most instances, this will be granted at the same time as a binding scheme implementation agreement is entered into (and will form part of that agreement). It is less likely that these exclusivity provisions are agreed prior to binding transaction documents being agreed. These restrictions are typically subject to a “fiduciary out”, which pre - serves the board’s ability to respond to unsolicited superior proposals that emerge during the exclu - sivity period (although there is often a break fee payable if superior proposals are entered into). It should be noted that both standstill and exclusivity restrictions must be carefully drafted to avoid breach - ing New Zealand competition laws. 5.5 Definitive Agreements In a Takeovers Code context, it is permissible (but relatively uncommon) in New Zealand for the terms and conditions of a takeover offer to be documented in a definitive agreement between the offeror and the target. The infrequency is largely because “friendly” takeovers generally occur by way of a scheme of arrangement, in which case the terms will inevitably be documented by way of a scheme implementation agreement. 6. Structuring 6.1 Length of Process for Acquisition/Sale The length of time required to complete an acquisition or sale in New Zealand depends on the nature and complexity of the transaction. Private M&A Transactions In a private M&A transaction, the period between the submission of a non-binding indicative offer and the signing of a definitive agreement varies considerably. The length of time depends on the level of due dili - gence required by the prospective acquirer, the extent of issues arising from due diligence, any pauses in negotiations due to commercial impasses and the complexity of the transaction documents (typically negotiated concurrently with due diligence). In turn, the time between signing a definitive sale agreement
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