ROMANIA Law and Practice Contributed by: Ileana Glodeanu, Andreea Cărare, George Ghitu and Delia Dumitrescu, Wolf Theiss
Moreover, depending on the industry, due diligence exercises will also analyse specific regulatory issues, such as: • regulatory compliance – ie, necessary authorisa - tions and permits, and sector-specific compliance; • change of control provisions, consents and notifi - cations to be made prior to the transaction; • intellectual property and IT issues, such as trade marks, patents, web domains, software licences, IT infrastructure, cybersecurity and data privacy policies; and • ESG and sustainability matters, anti-bribery, anti- corruption and AML, which have become the norm for due diligence exercises in share deals. A phased approach to legal due diligence is increas - ingly common. In the first phase, a more general review of areas that are relevant to the bidders’ ini - tial valuation is conducted. Subsequently, a more in- depth legal review is conducted by selected preferred bidders, focusing on areas of concern or materiality identified in the first phase. This approach allows bid - ders to focus their resources on the most promising opportunities. 4.2 Vendor Due Diligence Historically, vendor due diligence was not a wide - spread practice in the Romanian M&A market. This was largely due to the prevalence of bilateral sale processes, where a single buyer and seller would negotiate directly; competitive auction processes ini - tiated early in advance and having multiple bidders were relatively rare. In such a context, buyers typically conducted their own (buy-side) due diligence, and the need for a formal, seller-commissioned vendor due diligence report was limited. However, the Romanian M&A landscape has evolved significantly in recent years. As the market has matured and the activity of private equity funds – both as buy - ers and as sellers – has increased, competitive auc - tion processes have become more common. The shift has been particularly notable in transactions involving larger or more complex targets, or where the seller is a private equity fund seeking to maximise value and process efficiency. As a result, the use of vendor due diligence has grown and is now an increasingly rec -
ognised feature of Romanian M&A, especially in deals with a strong private equity component or interna - tional investor interest. Vendor due diligence investigations aim to expedite the sale process by providing a comprehensive, inde - pendent overview of the target and reducing the time and resources required for multiple bidders to conduct their own initial investigations. Vendor due diligence investigations are also encouraged in order to pre - pare the targets for sale, and are used to anticipate and identify any possible legal issues that may give rise to price reductions, special indemnities and/or conditions precedent being requested by the buyer. In auction scenarios, vendor due diligence ensures all bidders have access to the same baseline informa - tion, supporting a level playing field and maintaining competitive tension throughout the process. Traditionally, when vendor due diligence was used, the most common output was a legal fact book – a descriptive document summarising key legal facts. These fact books are less analytical and more focused on presenting the current state of affairs, rather than providing in-depth risk analysis or recommendations. With the increased sophistication of the market, more detailed vendor due diligence reports are now being prepared, especially in larger or cross-border transac - tions. These reports may cover legal, financial, tax, commercial, technical and cybersecurity aspects, and are often prepared by independent third-party advis - ers at the seller’s instruction. For certain transactions, particularly where time or cost constraints exist, a shorter “red flag” report may be produced, highlight - ing only material issues that could impact valuation or deal execution. As the market matures and auction processes become more sophisticated, there has been a growing trend – particularly in larger private equity-driven or inter - national deals – towards sell-side advisers offering a form of reliance to the successful bidder (and some - times to shortlisted bidders). However, this remains less common in Romania than in more established Western European markets, and the terms of reliance are often heavily negotiated. Even where reliance is offered, it is standard for buyers (and their financiers, sponsors and advisers) to conduct their own confirm -
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