I OVERVIEW OF M&A ACTIVITY
The total amount involved and the number of deals over 2015 as a whole compared to 2014 increased substantially. In 2015, there were 556 transactions with an amount of €179 billion, which is three times more than the €51 billion realised in 2014. The four largest acquisitions with a Dutch buyer in 2015 were also the largest in history. 2015 was unmistakably the year of mega transactions.
The majority of deals (70 per cent) were made by big companies with strategic deals, while the other transactions were made by private equity parties and venture capitalists. The most important deals were made by Ahold, Shell and NXP, which boosted the value of deals in the Dutch M&A market.
The expectations of the Dutch M&A market for next year are good. Cheap financing available through the capital market, and the fact that the amount and quality of acquisition candidates remain stable, are considered the main reasons for a positive forecast.
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
The Dutch legal system is based on civil law, as in most of continental Europe. The Dutch Civil Code (DCC) contains the most important rules for M&A transactions.
Based on long-standing case law, as a general rule for contract interpretation, what parties meant and could expect is key.2 However, more recent case law on the subject has focused on the importance of the literal meaning of the words in a contract in a professional environment, such as M&A practice. Consequently, contracts have become more extensive over the years and are moving towards Anglo-American standards.3
Recently, the Dutch Supreme Court ruled that commercial contracts should still be interpreted according to what parties meant and could expect, but the literal meaning is a starting point to document and evidence the intentions of those parties. As such, although great significance must be attributed to the contractual wording, the parties’ statements and conduct before the signing of an agreement can lead to the conclusion that the parties still meant something different from the literal wording. Consequently, documenting the whole process of a transaction remains important.4 In 2013, the Supreme Court also ruled that an ‘entire agreement clause’, which has become common to include in Dutch M&A contracts, does not change this, as it would relate to the content of the agreement between the parties and not to the interpretation of that content.
i Pre-contractual good faith
Pursuant to standard case law, if parties enter into negotiations, their relationship is governed by the principle of reasonableness and fairness (i.e., ‘good faith’). As a consequence, each party has the obligation to take into account the reasonable interests of the others during negotiations. Based on the principle of freedom of contract, which is another key principle relating to agreements under Dutch law, parties are free to withdraw from negotiations. However, based on the principle of reasonableness and fairness, pre-contractual good faith is deemed to exist between two negotiating parties. As a result, the Dutch Supreme Court has ruled that, at a certain stage in the negotiations, the parties cannot terminate the negotiations without being obliged to compensate the other party for its costs and, in certain circumstances, even its loss of profits.5 In addition, it may be possible to obtain an injunction requiring the other party to continue negotiations.
ii Notifications during the transaction
In the Netherlands, it is important that the parties meet the following notification requirements during a transaction process:
- a the notification of the proposed transaction with the respective party’s works council so as to take its advice, which must be taken into consideration by the respective parties to the transaction;
- b the notification of the envisaged transaction with the relevant trade unions and the Social and Economic Council (SER) so as to obtain the views of the trade unions and the SER on the proposed transaction;
- c the notification of the transaction with the Netherlands Authority for Consumers and Markets (ACM) for obtaining merger clearance (to the extent the transaction is not subject to the EU Merger Control Regulation), as set out in Section IX, infra; and
- d in certain industries, specific regulators may have to be informed or even consent to the transaction, such as the Dutch Central Bank, Authority for the Financial Markets and Public Health Authority.
As for public and M&A transactions, it should be noted that the Netherlands has adopted the opt-out arrangements provided for in the EU Takeover Directive. In consequence, companies that are registered in the Netherlands may in principle apply defensive measures to ward off a takeover bid. The purpose of this Directive is the protection of minority shareholders.
In addition to the relevant provisions in the DCC, the rules to be observed in the context of a public bid are set out in the Euronext Rulebook and the Dutch Financial Supervision Act, which are set out in more detail in the Decree on Public Bids.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
i Simplification of private company law
On 1 October 2012, the Act on the Simplification and Flexibilisation of Private Company Law took effect. This Act aims to create a simple and flexible legal framework for private companies with limited liability in the form of a BV. As set out in Section VI, infra, this has affected the way private M&A transactions are financed. Almost four years into this legislation, some case law has emerged, but nothing particularly significant yet. As expected, the lower court has ruled that matters that took place before the change of legislation should be assessed under the law that was applicable then.6 As a result, these former rules and case law will remain relevant for years to come.
ii The Clawback of Bonuses Act
On 1 January 2014, the Clawback of Bonuses Act took effect making the clawback of excessive bonuses of directors of public companies (NVs) and the day-to-day policymakers of financial institutions such as banks and investment firms possible.
The Act will make it possible to revise a yet-unpaid bonus that has been awarded to a director to an appropriate amount if, according to standards of reasonableness and fairness, payment of the bonus would be unacceptable. The Act will also make it possible to claw back a bonus paid to a director if it has been paid based on incorrect information. The Act also applies to shares or options forming part of a director’s pay.
iii The Alternative Investment Fund Management Directive (AIFMD)
On 22 July 2013, the AIFMD took effect. In the Netherlands, the AIFMD is incorporated into the Dutch Financial Supervision Act. As a result, private equity and venture capital firms are supervised by the Authority for the Financial Markets and the Dutch Central Bank. Depending on the size of the assets under management, either a relatively light regime or a full-compliance regime will apply. Fund managers who solely offer participation rights to qualified investors and who were exempted of the supervision before the incorporation of the AIFMD are also included.
iv The Financial Undertakings (Remuneration Policy) Act
On 7 February 2015, the Financial Undertakings (Remuneration Policy) Act took effect. The government introduced a set of rules that required financial undertakings to conduct a controlled remuneration policy that will exclude the excessive variable in remuneration.
A bonus ceiling of 20 per cent has been introduced for the variable remuneration of Netherlands-based undertakings. Some exceptions have been made to allow a bonus ceiling of 100 per cent, or 200 per cent in some cases. Furthermore, it is now mandatory to publish the remuneration policy, the distribution of the severance payment is restricted and guaranteed variable remuneration has been banned.
v The Financial Markets (Amendment) Act 2015
On 1 April 2015, the Financial Markets (Amendment) Act 2015 took effect. The Act introduced a banker’s oath for some assistants of financial undertakings and a banking disciplinary procedure for bank employees.
The range of people who will have to take the banker’s oath has been enlarged. For banks, all employees need to take the oath. Employees of other financial undertakings, such as insurance companies, have to take the oath if they have contact with customer data and if they can materially affect the risk profile of the company. Bank employees who violate the banker’s oath can be punished under the banking disciplinary procedure.
vi Amendment of Article 2:333k DCC
On 1 July 2015, a law changing the rules of employee participation in cross-border mergers of limited liability companies took effect. Article 2:333k of the DCC has been amended in accordance with Article 16 of the Directive concerning cross-border mergers of limited liability companies (2005/56/EC).
This law change derives from a judgment of the Court of Justice of the European Union of 20 June 2013.7 The Court ruled that Dutch law did not conform to Article 16, Paragraph 2, Subsection b of the Directive. The law change means that employees of branches that are part of a cross-border merger of an acquisition situated in other Member States will receive the same participation rights as employees in the Netherlands.
vii Authorised Public Housing Institutions Reform Act
On 1 July 2015, an amendment entered into force that aims to improve the functioning of corporations often structured as foundations and associations that are admitted or wish to be admitted as institutions operating exclusively in the interests of public housing (housing associations).
This change entails further restrictions to the business of housing associations and tighter criteria for provisioning requirements. It also contains several provisions relating to the internal governance of housing associations in addition to – or different from – Book 2 of the DCC and the Housing Association Governance Code.
Housing associations have until 1 January 2017 to change their statutes, regulations, legal form, organisation and activities in accordance with the Authorised Public Housing Institutions Reform Act.
IV FOREIGN INVOLVEMENT IN M&A TRANSACTIONS
International interest continued to rise in 2015. Transaction activity was dominated by cross-border transactions. Stock markets are open, the high-yield bond market is doing well and institutional investors consequently had acquisition funds available. Foreign investors tend to be particularly interested in larger, more liquid deals. In comparison to 2014, the investment market in the Netherlands, where foreign companies invest in Dutch-based companies, has increased dramatically, by 47 per cent. The largest investors in the Netherlands have traditionally been from its neighbouring countries, from the United States and increasingly from Chinese investors.
One interesting deal was the acquisition by US-based FedEx Corporation of TNT Express NV from PostNL BV for €4.4 billion. Another interesting deal was the acquisition of USG People NV from USG People shareholders by Japan-based Recruit Holdings Co Ltd. The acquirement of USG People NV was undertaken to expand their business in Europe, and the agreement was reached with a €1.4 billion offer. The deal made between UK-based AstraZeneca Plc and Acerta Pharma BV was also interesting. Acerta Pharma BV sold 55 per cent of its shares for €3.2 billion.
The investment market is booming. For example, the United States invested an amount of US$16 billion in the Netherlands with a volume of 79 deals. Foreign involvement in Dutch M&A transactions is also evidenced in the fact that more than half of the Dutch companies that were sold were bought by foreign parties.
V SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES
One of the most striking deals was the acquisition of BG Group from BG Group shareholders by Royal Dutch Shell for €65 billion. Another interesting deal was made by Royal Ahold NV and Belgian-based Delhaize Group SA with Delhaize shareholders. They combined their businesses through a merger, under which Ahold shareholders will own around 61 per cent and Delhaize shareholders will hold 39 per cent of the combined company’s equity.
Key trends can be found in several different sectors. There has been an increase of activity in the technology, media and telecommunication market. In 2015, there were more than 250 transactions in this sector. The reason for this can be found in the fact that companies are seeing technological innovation as a key part of the business model. Getting critical business technologies into a company is one of the most important reasons to consider an acquisition. Another reason for the interest that foreign companies have in Dutch (technology) companies is the declining value of the euro, and the innovative and entrepreneurial character of Dutch companies. There has been an increase in the number of property investors in the Netherlands. Investments in property have risen (with the exception of industrial property). Office buildings with a value of €100 million and over were particularly popular transactions, amounting to more than 200 transactions. In addition, there has been an increase of activities in healthcare. An aging population, driving a demand for care on the one hand and technological development on the other, provides an attractive market for investors. This also led to an increase in the life sciences sector, where technology and health play a big role. Another key trend is the growing amount of transactions in the oil and gas market, as illustrated by the large acquisition of BG Group by Royal Dutch Shell. There is a lot of movement in this sector.
VI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS
i Sources M&A financing
In addition to strategic buyers, private equity and venture capital are the main sources of M&A funding. Banks are increasingly interested, and are regaining their role in the third-party financing of larger M&A and private equity transactions; however, the number of alternative forms of financing, especially in the mid-market, continues to grow.
Crowd funding is continuing to increase in popularity, and is growing in terms of transaction size where it is used. Both early-stage and late-stage ventures that meet certain requirements can apply for specific state loans that are known as ‘credit for innovation’. These loans are risk bearing to some extent, require no collateral, and do not have strict repayment and interest conditions.
In larger transactions, Loan Market Association documentation is common, but the financing of smaller amounts is often based on the templates of the relevant bank.
ii Structure bank finance
When there are one or more banks involved, depending on the size of the deal, the loans are divided into separate facilities that often include an amortising loan, a bullet loan and a working capital facility. If more than one bank is involved, one of the banks will act as a security agent that holds the collateral for the full debt. The borrower consequently owes the full debt to the security agent, and also owes each of the banks the part of the debt corresponding with their participation in the financing. A payment to the security agent will reduce each bank debt accordingly. This typically Dutch ‘parallel debt’ is used because the concept of a trust is, in principle, not recognised in the Netherlands, and to avoid seniority and execution issues. When a bank transfers its participation in the loan, the collateral remains unaffected since it is held by the security agent.
iii Financial assistance
Targets are usually public companies (NVs) and private companies (BVs).
Before the simplification of the private company law (see Section II, supra), financial assistance was not allowed for BVs and NVs. Some forms of lending taking into account the free distributable reserves were allowed, but no security or guarantees could be given. However, case law provides for an NV to attract financing with collateral for the payment of a dividend that may then be used for the acquisition. This effectively allows for a debt pushdown up to that amount.
The restriction has been completely lifted for BVs, but remains in place for NVs. A workaround can be found for non-listed NVs by converting them into a BV. Although there are no longer financial assistance rules to abide by in the case of a BV, the company board members have the continuing duty to only act in the company’s interest, which may affect their willingness to cooperate with the financial assistance. In addition, if this would prejudice the position of other creditors, the collateral may be voided by those creditors or a trustee in bankruptcy in certain circumstances. In practice, the board and, in the case of a non-listed company, the shareholders, adopt a resolution that ensures that the transaction and the financial assistance are beneficial to the company to mitigate these risks.
VII EMPLOYMENT LAW
i The Works Councils Act (WCA)
The WCA stipulates that a company’s management must grant its works council, which any company employing more than 50 persons should have, an opportunity to render advice on, inter alia, an envisaged transaction.
The advice must be requested in writing at such a point in time that the works council’s advice may have significant influence on the intended decision. The works council will often not render its advice upon the proposed decision until there has been at least one consultation meeting with the entrepreneur on the subject.
Unless the management decision corresponds with the advice given by the works council, the employer is obligated to suspend the implementation of its decision within one month after it has notified the works council of its decision.
During this one-month waiting period, the works council has the possibility to submit an appeal to the Enterprise Chamber of the Amsterdam Court of Appeal if the decision is not in accordance with the advice of the works council; or if facts or circumstances have become known that, if known by the works council at the time of its advice, would have given it reason to provide different advice.
The Enterprise Chamber may rule that the entrepreneur has to reverse its decision in whole or in part, and that the effects of the decision are to be undone.
ii Whistleblowers (Safe Haven) Act
On 1 July 2016, the Whistleblowers (Safe Haven) Act entered into force. The Act stipulates that employers with 50 or more employees have to develop and introduce regulations for whistleblowers. The Act stipulates minimal requirements that the regulations have to comply with, such as internal reporting procedures, a definition of the suspected wrongdoing and a stipulation on the confidentiality of the identity of the reporting person. In the new Act, the works council has an explicit right of consent concerning intended decisions to establish, alter or withdraw the whistleblowers regulations.
iii Dutch Work and Security Act (WWZ)
Dutch employment law has been amended substantially with the introduction of the WWZ. As of 1 July 2015, the formulation and procedure for the termination of employment contracts is also changed. The procedure under which an employer may terminate an employment contract depends on the reason of termination. Dismissal for business economic reasons and after long-term disability will be assessed by the Employee Insurance Agency (UWV). Dismissal related to inadequate performance, culpable acts, omissions by the employee or other personal reasons will be submitted to the court. In general, it will cost less to make employees redundant as a result of this change.
With the introduction of the WWZ, references to the articles of law in purchase agreements may no longer be correct. This could lead to uncertainty about, for example, the qualification of whether someone is a good or bad leaver based on the wording in a shareholders’ agreement. To prevent disputes in the future, such clauses should be adapted to the new formulation and the correct articles of the law wherever and whenever appropriate. In the event that an outdated formulation is still included in an agreement, several options make sense for the parties. Parties can either come to an agreement that they will connect with the new rules, or they can agree that binding advice or arbitration will take place under the old law. If a party is not inclined to agree with such options, the case can be made that the agreement should be read with the original intention in mind as far as the law reasonably allows.
For collective dismissals, specific rules apply. In the event that an employer wishes to dismiss at least 20 employees for economic reasons, it is required to comply with the Dutch Collective Redundancy (Notification) Act (WMCO).
Pursuant to the WMCO, an employer who intends to dismiss at least 20 employees within the same UWV area within a period of three months has the obligation to notify its intention of a collective dismissal in a timely manner to the UWV and the relevant trade unions in writing. The trade unions must be informed of the proposed redundancies and be invited to a meeting with the employer. The obligation to notify and to supply additional information provides trade unions with the opportunity to start negotiations with the employer regarding the necessity of the collective dismissal and possible stipulations or redundancy schemes.
If a works council has been established, it will be requested to give its advice pursuant to Article 25 of the WCA.
Upon receipt of the notification, the UWV will assess whether all required information has been submitted, and whether the works council and the trade unions have been properly informed. Subsequently, a waiting period of one month needs to be complied with, during which the employer may not effectuate any contemplated dismissals. The waiting period may, however, be waived by the trade unions.
iv The SER Merger Code 2015 (Merger Code)
The Merger Code is a code of conduct for mergers established by the SER, which is a tripartite advisory council to the government.
The Merger Code is aimed at the protection of the interests of employees in the event of a merger.
The Merger Code has no legal foundation; nor is it based on any statutory power of the SER. Not being law, it essentially has no binding force. In the event of infringement of the Merger Code, the merger committee established by the Merger Code may, however, make a public statement of censure or a public announcement. Since its existence, the Merger Code has been complied with, apart from in a few exceptions that have generally received extensive and negative publicity.
The Merger Code requires the parties to a merger to notify the trade unions involved in the merger, as well as the Secretary of the SER. The Merger Code defines a merger as a direct or indirect acquisition, or transfer, of control over a company or a part of a company, or the formation of a group of companies. The obligations set forth in the Merger Code may apply to both the acquiring company and the company being acquired, but the Merger Code explicitly does not apply to intragroup transactions.
Scope of application
The rules of the Merger Code shall be observed in any merger involving at least one enterprise established in the Netherlands and regularly employing at least 50 employees; or in any merger involving an enterprise belonging to a group of enterprises where the enterprises established in the Netherlands together regularly employ at least 50 employees.
If the Merger Code applies, the merging companies have the obligation to notify the trade unions and the SER before making any public announcement on the merger or on the intention to merge. These notifications must be done at such a point in time that the opinion of the trade unions on the proposed merger is capable of having a substantial effect on the final decision of the parties in respect of the merger (including the terms of the merger).
In the notification, the management boards of the companies involved must disclose and explain the reasons for the merger, their intentions as to the company policy to be followed as a result of the merger, the social, economic and legal consequences expected on account of the merger, and any intended measures to be taken in relation thereto.
Following the notification, the companies involved must allow the trade unions the opportunity to discuss these matters, including the measures that will be taken to mitigate any potentially negative consequences of the merger for the employees involved.
The SER concluded that, since the earlier revision of the Merger Code in 2000, certain problem areas had emerged. In early 2014, the SER appointed a committee to revise the Merger Code and to resolve identified problem areas. According to the SER, the relevant problem areas related to the stronger market conditions in industries that were historically part of the government or the non-profit sector. Governmental authorities and not-for-profit organisations, but also liberal professions (such as lawyers), did not fall within the scope of the Merger Code 2000. This all led to the new Merger Code 2015.
v Transfer of undertaking
The concept of a transfer of undertaking, as set forth in Directive 2001/23/EU, has been implemented in Dutch law in Section 7:662 et seq of the DCC. Pursuant to Section 7:663 DCC and 7:662 Subsection 2 DCC, a transfer of (part of an) undertaking is defined as ‘a transfer following an agreement, a merger or a legal separation of an economic entity which retains its identity after the transfer’. Consequently, a transfer qualifies as a transfer of undertaking if three conditions are met: there must be a transfer, either on the basis of a contract, a legal merger or legal separation, of an economic unity that retains its identity following the transfer.
Contract, legal merger or legal separation
On the basis of Dutch law, the transfer has to be based on a contract between parties, a legal merger or a legal separation. It should, however, be noted that this condition has been subject to a certain degree of corrosion, as the application of the rules governing the transfer of undertaking have been applied in instances where there was no contract between the transferring company and the acquiring company, but the transfer was deemed to have taken place ‘in the context of contractual relations’.
An ‘economic entity’ is defined as a unity of organised means, meant to implement (mainly) an economic activity. Case law distinguishes roughly between two sectors: the labour-intensive and capital-intensive sectors. Whether a company belongs to one or the other sector depends on whether labour is an essential element of the activities of the company.
Retention of identity
The economic unity – or business – that is transferred needs to retain its identity. This is a condition that depends on the circumstances of the specific case. As a guideline, the identity of the economic unity will generally be retained when the activities are virtually continued as if nothing had changed since the transfer or when the activities are continued after a short break.
If the above conditions are met, the employees working in the business that is transferred will enter into the employment of the acquirer of the business by operation of law. All rights and obligations under the employment agreements between the transferor and its employees transfer by operation of law to the acquiring company. The acquiring company will consequently have to continue applying all terms and conditions of employment – including wages, bonuses and seniority – that the employees had during their employment with the transferring company.
If part of a business is transferred, the employees that work for that specific part of the business transfer to the acquiring company. The remainder of the employees will stay with the transferring company. This generally constitutes no problems for employees that only work for the transferred part of the business. However, that does not imply that support staff that work for the entire company will not have to be employed by the acquiring company. The specific circumstances of the case determine whether the support staff must be employed by the acquiring company in the case of a transfer of undertaking.
Furthermore, based on case law, it is not possible to harmonise the terms and conditions of employment directly after the transfer of undertaking. This, however, is not an everlasting prohibition, and it is possible to harmonise the terms and conditions of employment at a certain point in time.
There is a general prohibition against terminating employment contracts on account of a transfer of undertaking. Only if the employer can provide evidence of economic, technical or organisational reasons (ETO reasons) will the termination of employment contracts be considered. Whether any ETO reasons exist will depend on the facts and circumstances of a particular case.
In deviation from the general rule that all rights and obligations under the employment agreements between the transferor and its employees transfer by operation of law to the acquiring company, specific rules exist with respect to the transfer of pension entitlements. Similarly, specific rules exist regarding the transfer of collective employment terms and conditions.
VIII TAX LAW
As a general introduction, corporate tax planning and structuring has increasingly been subject to debate and political attention. Where today’s economy has become more interconnected, tax laws fell behind and kept a strong national focus, resulting in gaps and mismatches allowing for double non-taxation. Base erosion and profit shifting (BEPS) is a general concept, referring to tax planning undertaken by internationally operating companies through exploiting mismatches and profits being shifted.
In performing tax due diligence, the impact of the OECD’s BEPS action plan needs to be evaluated, and requires more forward-looking, and not just historical, due diligence. The latter will also impact the general pricing of the transaction – taking into account tax risks – as well as the possibilities for deal structuring and post-closing integration.
When structuring M&A transactions, the starting point remains that share purchase transactions are generally Dutch tax neutral and are therefore often preferred from a seller’s perspective. Share purchases generally do not attract Dutch transfer taxes, stamp duties or VAT. Capital gains on such transactions are usually not subject to Dutch taxation. Ordinarily, the tax basis of the target’s assets and liabilities is not affected by a sale and transfer of its shares.
By contrast, an asset purchase generally triggers taxable capital gains for the seller and results in a step-up of the tax basis of the assets for the purchaser. In view of this, purchasers may prefer an asset purchase over a share purchase. Under certain circumstances, an asset purchase may, however, also be preferable from a seller’s point of view, for example if assets are sold at a loss or if the seller has losses to offset a capital gain.
An asset purchase generally does not attract Dutch transfer taxes, stamp duties or VAT, except for a transfer of Dutch real estate, which is subject to a 6 per cent real estate transfer tax, which may also apply to a share deal if a legal entity’s only asset is real estate.
The statutory dividend withholding tax rate is 15 per cent, which may be reduced under certain circumstances. For instance, a zero per cent rate is applicable with respect to payments made to corporate shareholders established in the EU or the EEA holding 5 per cent or more of the shares in the distributing entity. For qualifying ownership structures, tax treaty protection might also prevent dividend withholding taxes being due. Qualifying shareholdings are exempted from tax on capital gains. With certain de minimis thresholds, excessive costs on loans and certain related expenses are, as a starting point, not deductible; however, there are no other thin capitalisation rules in place.
IX COMPETITION LAW
i The Dutch Competition Act (DCA)
The DCA provides a system of merger control for operations that affect the Dutch economy. It incorporates and largely copies the system of European merger control, and prohibits mergers that create or strengthen a dominant position resulting in a significant restriction of effective competition on the Dutch market or a part thereof.
The provisions regarding merger control set forth in the DCA apply to mergers, acquisitions, public bids and all other transactions that may bring about a concentration. The concept of a concentration is defined along the lines of the rules developed by the European Commission in the context of EC concentration control. Consequently, concentrations shall be deemed to arise where:
- a two or more previously independent undertakings merge;
- b one or more persons or legal entities already controlling at least one undertaking, or one or more undertakings acquire, whether by purchase of securities or assets, by contract or by other means, direct or indirect control of the whole or parts of one or more other undertakings; or
- c a full-function joint venture is established.
iii Turnover thresholds
A concentration that meets certain thresholds as regards the turnover of the undertakings concerned will have to be notified to the ACM. A concentration remaining below the threshold turnover levels may be effectuated without a notification to the ACM.
Section 29 DCA provides that a concentration must be notified to the ACM if the combined turnover of all undertakings concerned exceeds €150 million in the calendar year preceding the concentration; and at least two undertakings concerned each achieved a turnover of at least €30 million in the Netherlands.
iv Alternative thresholds for specific industry sectors
Notwithstanding the general thresholds set out above, alternative thresholds exist for undertakings in certain specific industry sectors. Such specific thresholds apply to concentrations in – for instance – the healthcare sector, which is a sector that has recently seen substantial M&A activity in the Netherlands.
A concentration between at least two healthcare undertakings must be notified to the ACM if the combined turnover of all undertakings concerned exceeds €55 million in the calendar year preceding the concentration; and at least two of the undertakings concerned each achieved at least €10 million in the Netherlands, of which at least €5.5 million turnover is achieved by providing healthcare.
These sector-specific thresholds have been implemented due to the fact that the Dutch healthcare market is a fast-changing market, and is deemed to require specific attention to prevent a concentration from creating or strengthening a dominant position. The thresholds are intended to be temporary, and will apply until at least 1 January 2018.
Specific rules also apply to concentrations involving insurance companies and for credit and financial institutions within the meaning of the Dutch Financial Supervision Act.
v Assessment in two phases
The process with the ACM is divided into two phases, the first being the assessment by the ACM of whether a licence is required, which has a filing fee of €17,450. If a licence is required, the second phase is entered, which has a filing fee of €34,900. If no licence is required, the transaction can be executed.
A concentration that has been effectuated without having been duly notified or without the waiting period having been observed will be regarded as being null and void under the laws of the Netherlands.
In addition, the ACM has wide powers to impose fines and orders in the context of concentration control. Failure to notify a concentration will usually lead to a fine upon discovery by the ACM. Fines may run up to 10 per cent of the worldwide turnover in the year preceding the year of the fine. Moreover, the ACM may order injunctive measures or may impose periodic penalties to force the undertakings concerned to remedy their infringement of the law on both the companies and the directors involved.
vii Exemptions standstill period
A number of exceptions can apply to the prohibition on implementing a concentration prior to clearance from the ACM. In the event of a public takeover bid, the prohibition does not apply, provided that the bid is immediately notified to the ACM and the acquirer does not – without the prior approval of the ACM – exercise the voting rights attached to the share capital until the ACM has assessed the transaction.
The ACM can also grant an exemption from the standstill obligation if the waiting period would seriously jeopardise the concentration – for instance, in the event of a relaunch of a business following bankruptcy.
A considerable number of deals are either in progress or planned, according to current intelligence. Furthermore, it is likely that the pace at which deals are done will continue to increase. While the Dutch M&A market as a whole is expected to grow, the Dutch property market and healthcare industry seem to be especially targeted.
1 Carlos Pita Cao and François Koppenol are partners at AKD NV.
2 Hoge Raad, 13 March 1981 (Haviltex).
3 Hoge Raad, 19 January 2007 (Meyer Europe BV/PontMeyer BV).
4 Hoge Raad 5 April 2013 (Lundiform/Mexx).
5 Hoge Raad 18 June 1982 (Plas/Valburg).
6 Rechtbank Gelderland, 17 February 2014.
7 Judgment C-635/11 of the Court of Justice of the European Union on 20 June 2013.