CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
5. Negotiation Phase 5.1 Requirement to Disclose a Deal The majority of M&A deals in Croatia are pri - vate deals, typically concerning acquisitions of shares in limited liability companies (which can - not be public), so in principle there are no statu - tory deal disclosure requirements. This being said, where a deal concerns a publicly listed company (whether the listed company is a target company or an acquirer or seller), inside information must be disclosed (made public) when required under Article 17 of the Regulation (EU) No 596/2014 (the “Market Abuse Regula- tion” ). Information related to the financial instru - ment or an issuer is considered inside informa - tion if the following conditions are met: • it is precise; • it is not made publicly available; • it directly or indirectly relates to one or more issuers of the financial instruments or one or more financial instruments; and • if publicly available, it would likely have a significant impact on the price of the relevant financial instruments (noting that there is a likelihood of a significant impact if a reason - able investor would consider such information when making an investment decision). In light of the above, it is rather unlikely that the target would be required to disclose information when first approached or when negotiation com - mences. Depending on the level of detail, the disclosure requirement may be triggered when a non-binding letter is signed or at any other point in the transaction when the above criteria have been met with respect to information. The sign - ing of the definitive agreement would certainly trigger the disclosure requirement.
5.2 Market Practice on Timing When disclosure is mandated under the Mar - ket Abuse Regulation, there are essentially no deviations regarding market practice on the tim - ing of disclosure and the legal requirements, as the market Abuse Regulation requires that the disclosure is made as soon as possible. 5.3 Scope of Due Diligence In Croatia, investors typically opt to conduct legal, financial and tax due diligence, although in recent years separate environmental due dili - gence is also conducted in more transactions, distinct from the legal due diligence (this is becoming customary for acquisitions related to industries in which there is a higher likelihood of significant exposure in relation to environmental issues). The exact scope of the legal due diligence usu - ally depends on the specifics of the target com - pany, but in general it will cover corporate, com - mercial agreements, employment, regulatory, litigation, financing and real estate. If the transaction is structured so that there is a bidding process in which multiple potential buyers participate, then it is more likely that the data room will be pre-populated by the target/ seller, and then updated on the basis of requests made by specific potential buyers/bidders. Oth - erwise, it is rather common for the data room to be populated with documents requested by the potential buyer. There have been no major changes to the scope of due diligence as a result of the COVID-19 pandemic, although perhaps more emphasis has been placed on force majeure and material adverse change clauses in the review of com - mercial agreements specifically.
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