NETHERLANDS Law and Practice Contributed by: Maarten de Boorder, Rutger Sterk, Bas Vletter and Samuel Garcia Nelen, Greenberg Traurig, LLP
Foreign Direct Investment On 1 June 2023, the broad NSI Act entered into force, introducing a new screening procedure/foreign invest - ment review framework under Dutch law, in addition to those set out in sector-specific legislation. The notifi - cation requirement resulting from the NSI Act applies irrespective of the nationality of the acquirer. The NSI Act applies to certain acquisition activities in relation to a target company established in the Netherlands that is one of the following: • a vital provider; • a provider or managers of a corporate campus; or • an undertaking active in the field of sensitive tech - nology. A corporate campus is defined as an enterprise that manages terrain on which a combination of business - es is active and where, with co-operation between the public and private sector, innovative technologies are developed. When in scope, the transaction needs to be notified to the Ministry of Economic Affairs, which will, in consultation with the Investment Screening Bureau ( Bureau Toetsing Investeringen or BTI), assess the transaction. A standstill obligation applies until clearance has been obtained. EU Foreign Subsidies In 2023, the FSR entered into force, thereby creating a screening regime aimed at combating distortions of competition on the EU internal market caused by foreign subsidies. The FSR imposes a mandatory pre- notification to the European Commission for transac - tions involving: • a target generating turnover in the EU of at least EUR500 million; and • an acquirer and a target that have, together, received more than EUR50 million in foreign financial contributions in the previous three years on aggregate. Notifiable transactions must obtain clearance from the European Commission before they can close, creating a standstill obligation. Sector-Specific Approvals In addition to the foregoing, transactions may be subject to sector-specific approval. For example, approval may be required from the DNB or the AFM
for transactions in the financial services sector. Cer - tain transactions in the healthcare sector (including dental clinics, which have become a popular target for PE) may be subject to the approval of the Dutch Healthcare Authority ( Nederlandse Zorgautoriteit or NZa). Sector-specific approval or specific notifications may also be required in the utilities and telecommu - nication sectors.
4. Due Diligence 4.1 General Information
Interested parties and bidders typically conduct thor - ough legal due diligence. This is particularly the case for PE transactions, which often involve debt financ - ing and more complex deal structures compared to corporate investments. Legal due diligence is aimed at identifying potential legal risks and liabilities that could have an impact on the envisioned transaction, any historic risks and liabilities, and any issues that could undermine the value drivers underlying the growth projections of the target business. Typically, buy-side advisers will prepare an issue-based legal due diligence report that outlines material findings and includes recommendations on how to address the identified risks. Sometimes, more descriptive reports are required by PE funds, especially if third parties such as banks, insurers or co-investors are involved, although issue-based reporting seems to have become the norm even if third parties are involved. Legal due diligence is typically conducted by review - ing all the relevant documentation that has been made available through a virtual data room (VDR). The VDR usually provides a Q&A tool that allows the advisers of the potential purchaser to raise questions with the sell-side. Typically, legal expert sessions with key management personnel are conducted to clarify issues and gather insights into the business of the target company. Depending on the nature of the tar - get business, common key areas of the legal due dili - gence are corporate, finance, commercial contracts, employment and pensions, real estate (title and/or lease), environment, litigation/disputes, intellectual property, regulatory compliance, information technol - ogy and data protection/cybersecurity.
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