June 2025

My company has just received a takeover offer – what should the directors do?

Our team has been very busy over the past 18 months with a range of takeovers, acting on both bidder and target side. This is a complex, heavily regulated area, so legal advice should always be sought immediately. All directors must ensure compliance with the Takeover Code, including non-executive directors.

The majority of offers are made by way of a scheme of arrangement, which is a court-led process that generally requires less shareholder support than a contractual offer.

When an offer is made to purchase the shares in a company, the provisions of the Takeover Code will apply. A key principle under the Takeover Code is that absolute secrecy is paramount. A surprisingly large proportion of takeovers leak, which necessitates the early announcement of a possible offer, including the identity of any possible bidders that have made an approach. Be especially cautious when speaking to journalists: revealing non-public information may require a market announcement.

A financial adviser should also be appointed. They, along with the legal advisers, will guide the company through the takeover process and have specific responsibilities under the Takeover Code. The financial adviser must attend all meetings and calls attended by a representative of a bidder or target and any shareholders of the bidder or target during (and sometimes prior to) the period after an offer has been made. The financial adviser needs to report back to the Takeover Panel about each such meeting.

Directors should also remember that they cannot deal in the company’s shares while they are in possession of price sensitive information, including the fact that a takeover may occur, until the market has been cleansed or the possible offer is no longer on the table.

Our favourite part of the scheme of arrangement takeover process is probably completion, which happens by delivering a copy of a court order to a postal bin round the back of Companies House in Cardiff. This often acts as a sobering reminder that being a corporate lawyer isn’t always glamorous!

We had our busiest quarter since 2021 and over £7.5bn of equity capital has been raised in London year to date through 101 transactions, including 93 follow-ons and 8 IPOs.

Should companies offer an option for retail investors to participate in a fundraising?

During fundraisings, companies often issue a large number of shares to institutional investors. This can leave existing shareholders feeling aggrieved as their shareholdings are diluted. To assuage existing shareholders, and/or to extend the diversity and reach of the company’s share register, directors may choose to undertake a retail offering.

For example, a rights issue or an open offer may be made, allowing existing shareholders to participate pro rata to their existing shareholdings. These offers, however, are increasingly rare other than for larger listed companies, as they require lengthy documentation and rely on processes that feel antiquated and onerous.

Instead, companies are increasingly using retail platforms to make shares available at the fundraising price to the public, sometimes for 24 hours, other times for up to two weeks. Brokers seeking institutional investors were traditionally sceptical about these platforms, particularly because a large retail uptake may skew the aftermarket following a fundraising; but the consensus among small-to mid-cap brokers increasingly seems to be that using retail platforms is fundamental to allowing retail investors to feel included and respected.

There is currently an £8 million limit on public offers over a rolling 12-month period, so directors should always check whether this threshold has been reached before a retail offer is considered. It is likely that following a consultation by the FCA, the threshold may be reduced to £5 million by the end of this year.

What are some key legal considerations for companies planning to raise money by issuing equity?

Equity fundraisings can progress at lightning speed, often through necessity. Nevertheless, careful planning is needed to ensure directors don’t trip over any legal obstacles.

Directors cannot allot shares without shareholder authority, and although public companies seek authority to allot a certain number of shares at each annual general meeting, this is not always sufficient to cover the entirety of a fundraising: it depends on how much authority has already been used up and what the issue price of the shares will be. Shares allotted under a share scheme do not count, so this can sometimes give a bit of leeway. Often however a shareholder meeting is required. Sometimes we see companies using a “cash box” structure, especially when the fundraising is linked to an acquisition, which de-risks the deal as it only requires just over 50% of voting shareholders to approve the allotment, rather than 75%; however, activist shareholders can be left feeling disenfranchised.

Investors sometimes like to see executive directors participating in fundraisings, proving that they have faith in the company and some skin in the game. However, we often find directors unable to participate because the company is in a ‘closed period’ with financial results only released after the fundraising, precluding them from participating under the UK’s Market Abuse Regulation. (“MAR”). In this scenario, we usually see directors confirming to the market that they intend to subscribe for shares at the issue price – they just can’t sign up until the financial results have been released.

The fact that a company is undertaking a fundraising will constitute inside information under MAR. Directors are usually able to delay the release of information about a fundraising until it launches, relying on a “safe harbour” under MAR. Insider lists should always be kept, and directors should be careful to make a note of when they decide to delay disclosure of the information and why, as the Financial Conduct Authority (“FCA”) requires companies to make a filing as soon as the information is released – or leaks – to the market. In the heat of launching a deal, this step is often left out, to the FCA’s perpetual chagrin.

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Please note: The views and opinions expressed in this interview are those of the individual financial professional(s) and do not necessarily reflect the views or opinions of Alma Strategic. These insights are provided for informational purposes only and may not be relevant at the time of reading, as market conditions can change rapidly. The information provided should not be construed as investment advice or a recommendation to buy, sell, or hold any financial product or security. Individuals should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Alma Strategic disclaims any responsibility for the accuracy or completeness of the information provided in this interview.