AUSTRALIA Law and Practice Contributed by: Alberto Colla, Keith Tan, Hugh McDonald and Dean Zinn, MinterEllison
which they have a material personal interest, provided notice of the interest has been given. For public companies, a director with a material personal interest being considered at a direc - tors’ meeting must not be present or vote on the matter at the meeting, subject to limited excep - tions. The rules governing conflicts of interest in Australian M&A transactions are generally well understood and managed. This includes estab - lishing an IBC and governance protocols where appropriate (see 8.2 Special or Ad Hoc Commit- tees ). Despite this, failures to appropriately man - age conflicts of interest in an M&A context are occasionally ventilated in the Takeovers Panel. For example, in a 2021 matter, the Takeovers Panel found that conflicts of interest between the directors of the bidder and the target (which shared common directors) were not adequately managed because governance protocols to address those conflicts were not implemented prior to negotiating the agreed terms of the pro - posed transaction and were not adequately dis - closed to the target’s shareholders.
prior attempt at friendly engagement with the target’s board. Hostile takeovers remain far less common than “friendly” transactions, as they involve consider - ably higher execution risks and other uncertain - ties. This is because: • a hostile bidder has no opportunity to under - take due diligence on the target beyond the target’s market disclosures and other publicly available information; • a hostile bidder will usually encounter vigor - ous defence from the target board, including actively soliciting statements from key share - holders of their intention to: (a) reject the offer; (b) actively solicit competing bids; and (c) (if the target board is confident in its as - sessment of under-value) engage an inde - pendent expert to opine negatively on the fairness and reasonableness of the offer; • a hostile bidder will not have the benefit of any of the deal protections that a friendly bidder typically secures (eg, exclusivity and break fee coverage), which leaves a hostile bidder commercially exposed if a competing offer emerges; and • a hostile bidder may need to be willing to accept less than 100% ownership, noting that hostile takeovers rarely result in an acquisi - tion of 100% ownership without the recom - mendation of the target board (which typically requires a price increase during the offer process). For these reasons, the majority of business com - binations in Australia are made with the pub - lic support and recommendation of the target board, usually via a court-approved scheme of arrangement which delivers a binary “all or noth- ing” outcome.
9. Defensive Measures 9.1 Hostile Tender Offers
Hostile takeover bids are permitted in Australia. They typically arise in response to a failure by the target board to engage with an initial friend - ly proposal or the rejection by the target board of an initial friendly proposal. In those circum - stances, the prospective acquirer may bypass the target board and make an offer directly to the target shareholders. In some cases, a prospec - tive acquirer will launch a hostile bid without any
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