In this edition
Material adverse change (MAC) conditions are difficult to invoke. In Australian takeover bids, they may also infringe the law if they require the bidder to form an opinion. Reliance on MACs in bids is therefore fraught. More specific out clauses will normally afford the bidder more reliable protection against changed circumstances.
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The Takeovers Panel’s recent decision in Ross Human Directions illustrates its readiness to intervene where, in a 'friendly' takeover, the deal protections in favour of the bidder in the Implementation Agreement do not strike an appropriate balance between, on the one hand, providing the bidder with a sufficient incentive to proceed with its bid and, on the other, ensuring that the scope for competing bids to emerge is not unduly restricted. If the contractual balance is too far in favour of the bidder, the Panel will be swift to redress that imbalance.
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One of the features of takeovers that makes them interesting to observe is that the parties are constantly trying to anticipate what others will do and work out how best to counter those moves.
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By far the most important indicator of likely success in a takeover is securing a board recommendation. While it won't guarantee that a superior bid won't appear out of the woodwork, it is very difficult for a bid to succeed without a recommendation, particularly when a target has a large number of retail shareholders that will be likely to be looking for guidance from the board.
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