UK Law and Practice Contributed by: Carly Gulliver, Giles Distin, David Anderson, James Dawson, George Danczak and Elvan Hussein, Addleshaw Goddard
9.2 Technology Company Due Diligence Due Diligence Provided to Bidder by Target There is no general limit on the volume or granularity of the information a target may provide to bidders, or that bidders may request, in respect of a UK takeover offer. Bidders should be mindful that a listed company in the UK is subject to public disclosure requirements, so the level of due diligence tends to be lighter than for a private M&A due diligence exercise. Private equity bidders, in particular, may seek more detailed due dili- gence information, which targets may sometimes be nervous to provide, on the basis of the equal disclo- sure rule referred to below. Bidders and targets will also need to have careful regard to competition rules that restrict the exchange of competitively sensitive information. Target Company Obligation to Provide Due Diligence to All Bidders In certain circumstances, a UK public company that is subject to a potential takeover offer is required to pro- vide the same due diligence information to any subse- quent bona fide potential bidder for the company as has been provided to any earlier potential bidder(s), if a subsequent bidder requests that information under Rule 21.3 of the Takeover Code. For bilateral takeover bids, because of this equal information requirement, a target may be cautious as to the volume, granularity and sensitivity of due diligence information provided to one potential bidder, being concerned that other – potentially less preferred – bidders (including direct competitors and/or hostile bidders) may approach the target and demand access to the same informa- tion. This might be the case even where a target may be concerned that a direct competitor is requesting such information in connection with a fishing exercise rather than because it is genuinely interested in mak- ing a compelling offer for the target. In formal sales processes, a target company would normally voluntarily disclose the same information to all potential bidders who have formally agreed to par- ticipate in a sale process. Level of Disclosure of Technology Information There is also no general limit or practice on the volume or granularity of technology due diligence information
exchanged in takeover bids, subject to the principles referred to above. Such information exchange may be more significant in respect of technology and tech- enabled businesses. Level of Technology Due Diligence Allowed by the Board of Directors For a private M&A transaction, the level of due dili- gence will be more extensive compared to a listed company due to the lighter disclosure requirements for private companies. Directors of technology or tech-enabled businesses should expect a higher level of technology due diligence on a company’s cyber- security arrangements and its AI policies and capa- bilities (if any). There is no limit to the volume and granularity of information that can be provided. In an auction process, directors will be mindful to limit the amount of information provided at the initial diligence phase, in order to protect any commercially sensitive information, and vendor due diligence is becoming All companies must be mindful of their obligations under the GDPR – namely, the sharing of personal data and special category personal data. Employment diligence is expected to be on an anonymised basis for the majority of the transaction. There are additional considerations where, for example, the target compa- ny is in the cybersecurity sector. The parties may need to consider whether the relevant individuals require security clearance before they can be granted access to review sensitive information. The parties may also need to consider using “clean teams” that are permit- ted to access commercially sensitive information as part of an M&A transaction. increasingly popular. 9.3 Data Privacy
10. Disclosure 10.1 Making a Bid Public Announcement Requirements Firm intention to make an offer
A public announcement is required under the Takeover Code when a firm intention to make an offer has been notified to the target board. This is called a “Rule 2.7 announcement” and should be released via a regula- tory information service (for example, RNS).
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