Fergus Bolster 1
I OVERVIEW OF M&A ACTIVITY
2011 was a relatively good year for mergers and acquisitions in that the recovery shown in 2010 was maintained and the market remained ahead of the historically low levels of activity in 2009. According to corporate deal activity reports and surveys, there were 212 deals involving Irish companies in 2011 with a total value of €9.2 billion. This compares with 197 deals and a total value of €10.3 billion in 2010. Despite the ongoing European sovereign debt crisis and the uncertain outlook for the Irish economy, M&A activity in the first quarter of 2012 continued in a positive manner with 51 deals representing a total value of €792 million; in terms of deal volume, this remains in line with the quarterly average for 2010 and 2011.2
As in 2010, buyers were predominantly trade players. The building and construction, financial services, food/food services and technology sectors saw the most activity although, in the building and construction sector, most of this activity consisted of foreign acquisitions undertaken by CRH plc. In total, foreign acquisitions by Irish companies represented 43 per cent of deal volume in 2011. In addition to CRH plc, other Irish public companies were also active, including DCC plc, Kerry Group plc, Glanbia plc and Origin Enterprises plc.
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
The main statutory framework in relation to mergers and acquisitions in Ireland is comprised of the Companies Acts 1963 to 2012 ('the Companies Acts'), the Irish Takeover Panel Act 1997, as amended ('the Takeover Act') and takeover rules introduced pursuant to the Takeover Act ('the Takeover Rules'), which together with relevant provisions of contract law, form the primary legal basis for the sale and purchase of corporate entities. The Takeover Rules provide for regulation of takeovers of Irish public companies by the Irish Takeover Panel, which has been designated as the competent authority for the purposes of Directive 2004/25/EC on takeover bids.
The Irish merger control rules are contained in the Competition Act 2002, as amended. The rules do not generally apply to mergers in relation to which the European Commission has exclusive jurisdiction under the EU Merger Regulation.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
Pillar A of the new Companies Bill was published in May 2011. As well as consolidating existing law in the area, the Bill proposes important changes that will make it easier and cheaper to start and run a company. The legislation published on 30 May 2011 contains all provisions relevant to the private company limited by shares ('CLS'), which account for over 90 per cent of companies in Ireland. This company type will now be put at the centre of Irish company law, and important reforms will be made to the way this company type operates:
a a CLS will be allowed to have only one director;
b a CLS will only be required to have one document in its company constitution, and the Bill provides for a default document to apply in all cases except where the company changes this;
c a CLS will have the same legal capacity as a natural person, reducing the necessity to prepare long company constitutions, and reducing legal disputes caused by the ultra vires doctrine; and
d a CLS will no longer be required to have a 'physical' AGM every year - it will be possible to do this by correspondence.
Other changes include an exhaustive listing of the duties of directors, previously contained in case law, and of all criminal offences under company law.
The Central Bank of Ireland has published a Corporate Governance Code for Credit Institutions and Insurance Firms. The Code sets out minimum statutory requirements for banks and insurance companies in respect of the governance of their institutions. The Code includes provisions on the membership of the board of directors, the role and responsibilities of the chairman and other directors and the operation of various board committees and has applied since 1 January 2011.
Among the requirements of the Code are:
a boards must have a minimum of seven directors in major institutions and a minimum of five in all others;
b limits on the number of directorships that directors may hold in financial and non-financial companies to ensure they can comply with the expected demands of board membership of a credit institution or insurance company;
c the prohibition on an individual who has been a CEO, director or senior manager during the previous five years from becoming chairman of that institution; and
d a requirement that board membership is reviewed at a minimum every three years.
The Minister for Enterprise Trade and Innovation has made Regulations to give effect to...