NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
and completion can take days, weeks or months. The timeframe depends on numerous factors, including the timing for receipt of regulatory approvals (such as OIO consent or NZCC clearance), the receipt of third- party consents to change of control or assignment of key contracts, the timeframe for when the acquirer’s funding becomes available, and the overall complexity of the transaction. Public M&A Transactions In a public M&A transaction, the period between the submission of a non-binding indicative offer and the signing of a definitive agreement also varies consider - ably, depending on the same factors described above. Once a definitive agreement is signed, statutory and regulatory timeframes govern the period to closing. These differ depending on whether the transaction is proceeding as a full or partial takeover offer or a scheme of arrangement. • Takeover offer: For a takeover offer under the Takeovers Code, the minimum offer period is 30 days; however, most bidders commence with a slightly longer offer period. The initial offer period is typically extended at least once to provide extra time for receipt of regulatory approvals and to deal with typical developments in the offer process, including satisfaction or waiver of conditions. The maximum offer period is 90 days from the date the offer is posted, subject to certain extensions permitted under the Code. • Scheme of arrangement: For a scheme of arrange - ment under Part 15 of the Companies Act, there are several sequential steps between signing the scheme implementation agreement and closing, each with its own embedded timeframe. Taking these sequential steps into account, the short - est possible length of time between signing the scheme implementation agreement and closing is approximately two months. Typically, due to exter - nal factors such as delays in receiving regulatory approvals (including OIO consent or NZCC clear - ance), the timeframe can be extended to anywhere from three months to a year. 6.2 Mandatory Offer Threshold New Zealand does not have a typical mandatory offer threshold. Instead, the Takeovers Code prohibits any
person (together with their associates) from becoming the holder or controller of more than 20% of the voting rights in a code company unless an exception applies. The three primary exceptions to the 20% threshold are: • making a full offer to all shareholders (which must be for all shares not already held by the offeror and its associates); • making a partial offer (which must be approved by an ordinary resolution of shareholders other than the offeror); or • obtaining shareholder approval by way of an ordinary resolution of shareholders other than the acquirer (and its associates) prior to the acquisi - tion. In addition, where a person already holds or con - trols more than 50% but less than 90% of the voting rights, that person may increase their holding through a “creep” provision by acquiring up to a further 5% of the voting rights in any 12-month period. An acquisition or control of voting rights in excess of the 20% threshold (or any increase beyond that threshold) will, in the absence of a permitted excep - tion, be in breach of the Takeovers Code rather than triggering a mandatory offer. 6.3 Consideration Consideration in the form of cash, shares or a com - bination of cash and shares is used in New Zealand M&A transactions. In a public M&A transaction, an all-cash consideration is generally preferred by tar - get boards (due to the certainty of value it offers and the difficulty of offering share consideration to retail shareholders in compliance with securities laws) and is much more common than an all-scrip or combined scrip-and-cash consideration. Earn-Out Mechanisms and Deferred Consideration Earn-out mechanisms and deferred consideration are commonly used in private M&A transactions but are generally not employed in public M&A transactions. In private M&A transactions, it is more common for any valuation gaps to be bridged by earn-out mecha - nisms, deferred consideration or vendor finance.
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