SPAIN Law and Practice Contributed by: Ignacio Sanjurjo, Ignacio Echenagusia, Alejandro Espín and Román Cantín, Deloitte Abogados y Asesores Tributarios, S.L.U.
The use of W&I insurance is increasingly becoming standard practice in PE transactions, such that it is emerging as one of the most frequently employed risk allocation tools. However, the additional transaction costs and the exclusion of risks uncovered during due diligence present certain limitations. 6.11 Commonly Litigated Provisions SPAs always include dispute-resolution provisions. Most unresolved disputes are submitted to courts, though arbitration is sometimes preferred for its con - fidentiality, expertise and efficiency in complex cross- border M&A deals – despite higher costs. Disputes concerning consideration mechanisms or earn-outs are typically referred to independent experts under the SPA terms. Otherwise, the most frequent source of disputes are breaches of R&W by the seller. Public-to-private (P2P) transactions are relatively uncommon in Spain due to the limited number of listed companies compared to other markets. In Spain, P2P transactions generally involve: • private investors who have progressively acquired large equity stakes in a listed company through consecutive acquisitions; and • increasingly, PE investors acting individually or forming a pool. 7. Takeovers 7.1 Public-to-Private The main drivers of P2P transactions are typically: • the desire to reduce listing-related compliance costs imposed by the law and market regulations; and • economic reasons (based on the valuation). Spanish takeover bid legislation holds that govern - ing bodies and the management of the target com - pany, any delegated or empowered body thereof, their members, companies belonging to the target com - pany’s group and anyone who might act jointly with the foregoing shall:
• adopt a neutral and passive stance; and • obtain approval from the general shareholders’ meeting before taking any action that may prevent the success of the bid (such as issuing new securi - ties that would hinder the bidder’s ability to gain control), except seeking other competing bids. The above-mentioned obligations do not apply if the takeover bid is carried out by an entity that neither has its registered office in Spain nor is subject to equiva - lent neutrality obligations in its home jurisdiction. 7.2 Material Shareholding Thresholds and Disclosure in Tender Offers Any transaction by virtue of which a shareholder reaches, exceeds or falls below a voting right stake threshold of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% or 90% in a listed company must be notified to that company, and to the National Securities Market Commission ( Comisión Nacional del Mercado de Valores CNMV). When the shareholder is a tax-haven resident, these percentages are lowered to multiples of 1% (1%, 2%, etc). In mandatory tender offers, any party acquiring control of a listed company must notify the CNMV to submit the offer to the remaining shareholders. Voluntary ten - der offers must be communicated to the CNMV once the bidder adopts the resolution to submit the offer. Following the announcement of a tender offer, any acquisition of voting rights that reaches or exceeds 1% must be reported to the CNMV. Any shareholder holding at least 3% of the share capital must notify the CNMV of any changes in its participation. 7.3 Mandatory Offer Thresholds Mandatory takeover bids are required when a person acquires “control” of a listed company. In such event, the shareholder acquiring control must make a bid for 100% of the issued shares at a fair price (ie, not lower than the highest price that the offeror paid or has agreed to pay for the same shares during the 12 months prior to the announcement of the bid).
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