Trends in Dutch public M&A: Resilience in times of Covid-19

Despite expectations that Covid-19 might lead to a dramatic decline, there were seven public offers during this period in line with the average pace of the last five years.

What stood out for us in this period was:

Key trends

Covid-19 challenged deal terms

Covid-19 impacted the public M&A market, with a number of parties using the pandemic to challenge the terms of deals already announced, not least Blackstone’s acquisition of NIBC, where a reduced price was eventually agreed. In addition, there was a focus on material adverse change (MAC) clauses and ordinary course of business interim covenants provisions, which could be invoked to renegotiate price, not necessarily to abandon the deal (as illustrated by the EssilorLuxottica-HALGrandVision transaction).

Increased activity by private equity funds

With one P2P deal announced ahead of the pandemic, and three in the first half of 2021, private equity (PE) became a growing force in public transactions, while PE appetite and fire power remains strong and private targets may become more scarce. Funds that navigated the Dutch P2P obstacle course tend to return and (international) PE may realize the benefits and first mover advantage available to bidders, like significant deal protection.

Controlling shareholders take back full control and delist

This was the case with Altice and Hunter Douglas. Was Covid-19 the reason for this trend or did it provide the opportunity or trigger? The latter seems most likely. In many of the transactions large, but not necessarily controlling, shareholders were instrumental in triggering or the transaction being successful: NIBC (JC Flowers), ICT Group (Teslin) and Neways (ZBG, VDL).

Fresh evidence that unsolicited bids rarely succeed

KPN’s pursuit of its own sound strategy rebuffing multi-billion approaches by EQT and KKR without any protections from the KPN foundation (stichting) or (the threat of) intervention from the government. Moreover, in May 2021 a statutory reflection period was introduced giving target boards the right to call time-out on a bid for 250 days while they consider an offer or seek to repel an activist campaign.

Fiduciary out expanding

Traditionally boards can only terminate a merger agreement if a superior offer emerges. But a new phenomenon, based on U.S. practice, has emerged and is gaining currency in the Netherlands allowing boards to cite fundamental (positive) intervening events as the reason for changing their recommendation on a deal (Qiagen, Altice, Hunter Douglas, ICT Group).

Shareholder activism and opposition resulted in for price increases

Shareholder opposition on deals and other forms of activism – are likely to remain a feature of Dutch public M&A. Shareholder coalitions and negotiated price increases occurred for example on the Altice, ICT Group and Hunter Douglas transactions.