Private M&A Comparative Guide –

1 Deal structure

1.1 How are private M&A transactions typically structured in your jurisdiction?

A M&A transaction can be structured in many ways – most commonly as either a share purchase or an asset deal.

When transferring the shares of a company to a new owner, the main document is a share purchase agreement setting out the terms for transferring the shares of the target from the seller(s) to the buyer.

In an asset deal, certain assets of a company are individualised and transferred to a new owner. The transfer often involves the transfer of both rights and obligations relating to the asset. An asset transfer can consist of the sale of a brand and all activities, rights and obligations relating to that specific brand.

Completion is achieved by transferring ownership and other rights and obligations relating to each asset and liability.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

The main difference is that a share transfer deal involves the transfer of an entire company, as only the ownership of the shares changes hands. The target and its assets and liabilities remain unaffected. The share transfer deal is formalised by updating the company’s register of shareholders; and usually no consents to the transfer are required from third parties or government institutions.

When transferring liabilities, as part of an asset deal the consent of the opposing party to the liability is required. The transfer of employees takes place pursuant to mandatory law and the transfer of asset can usually take place without consent; however, it often recommended to notify the counterparty of the asset (eg, a counterparty to a contract). An asset transfer often allows for the buyer to cherry-pick assets in agreement with the seller. In both structures, due diligence is conducted; however, the scope and thoroughness will vary depending on the structure.

1.3 What factors commonly influence the choice of transaction structure?

When choosing a transfer structure, key factors usually include:

• tax considerations; and
• considerations that limit the transfer of liabilities and debt.

Therefore, cooperation with tax advisers is of great importance when planning a transfer.

Also, considerations relating to the business portfolio and the expansion of certain areas of a target’s activities can dictate whether it would be more attractive to acquire activities to supplement in-house business or to acquire an entire standalone company.

Finally, other factors that may influence the choice of transfer structure include:

• the interest in goodwill;
• company-specific licences;
• employees; and
• technical knowledge.

1.4 What specific considerations should be borne in mind where the sale is structured as an auction process?

When preparing a transaction process, the seller can choose to subject the potential buyers to an auction process, allowing it to generate competition and thus potentially obtain the highest possible purchase price based on prepared sales material.

An auction is typically a more complex process involving significant preparation by legal and financial advisers – including an information memorandum, vendor due diligence reports and other relevant sales material – to allow bidders to form a qualified opinion on the value of the target. Conducting an auction process with several interested parties also puts considerable strain on an organisation. An effective auction process relies on having several interested potential buyers – preferably both industrial and financial parties. Therefore, not all companies will be fit for auction; it may be a better option to enter into a letter of intent with one preferred buyer and have a bilateral process.

2 Initial steps

2.1 What agreements are typically entered into during the initial preparatory stage of a private M&A transaction?

The first document entered into between the parties is most often a non-disclosure agreement/confidentiality agreement (NDA).

NDAs are commonly concluded for all businesses when initiating transfer negotiations. They allow the parties to share sensitive information without fearing that it will end up in the hands of competitors.

In Denmark, there are no specific requirements regarding the content of an NDA. However, the main issues usually covered by an NDA include:

• what is considered confidential information and the handling hereof;
• the duration of the confidentiality obligation;
• a non-solicitation clause regarding employees (special limitations apply in this regard under Danish law); and
• the choice of law in case of a dispute relating to the NDA.

An NDA can be prepared as either:

• a unilateral declaration of the potential buyer; or
• a mutual non-disclosure agreement.

In a bilateral process, it is common to enter into a term sheet or letter of intent setting out the terms of the potential transaction. This document is not legally binding.

In an auction process, the potential bidders will often be requested to provide an indicative offer in order for the seller to be able to shortlist the interested parties.

2.2 Which advisers and stakeholders are typically involved in the initial preparatory stage of a private M&A transaction?

In the initial preparation stage, the key advisers will be tax advisers, financial advisers (auditors and corporate finance house) and legal advisers. These advisers help the seller to structure the transaction.

Also, advisers with specific knowledge of the target business or the market – including the geographical market – and technical, strategic and IT advisers may be involved in structuring the transfer.

2.3 Can the seller pay adviser costs or is this limited by rules against financial assistance or similar?

In the Danish market, the seller can pay advisers’ costs without limitation by rules against financial assistance. If the costs were to be paid by the target, however, the situation would be different. As a main rule, the target is not allowed to pay for adviser costs unless the company directly benefits from the advice.

3 Due diligence

3.1 What due diligence is typically conducted in private M&A transactions in your jurisdiction and how is it typically conducted?

Due diligence is most often conducted electronically through an online data site provided by the seller/target. The professional data sites available have the advantage of including all necessary features, such as:

• ensuring access mapping
• redaction tools; and
• handling and structuring Q&A sessions.

The most common issues included in the due diligence process include (depending on the transfer in question):

• corporate;
• accounting and financing;
• management and employees;
• contracts;
• related-party matters;
• operating equipment;
• real property;
• insurance;
• disputes;
• IP rights;
• information technology;
• data protection;
• public permits and other licences, regulatory matters etc;
• tax and value added tax; and
• environment.

The due diligence process most often results in the buyer’s advisers preparing a due diligence report, including findings and recommendations. The due diligence report often serves as the basis for further negotiations with the seller.

3.2 What key concerns and considerations should participants in private M&A transactions bear in mind in relation to due diligence?

When conducting due diligence, the buyer may uncover issues that cannot be fully clarified or mended. In this scenario, the parties will have to agree on commercial solutions such as:

• agreement on risk specific warranties
• specific indemnities provided by the seller;
• a reduction in the purchase price; and/or
• an earnout mechanism.

The parties should also be aware of the possibility of obtaining warranty and indemnity insurance covering all unknown liabilities under the warranties (ie, issues not discovered during due diligence), ensuring that the seller will not be met with claims after closing of the transaction.

3.3 What kind of scope in relation to environmental, social and governance matters is typical in private M&A transactions?

Environment, social, and governance risks are considered non-financial risks. Each company will have a different risk profile and must develop its own internal control system and embed this into business processes.

Currently, we are witnessing a shift in focus from a sole financial focus to an additional focus on non-financial risks. Due to this change in focus, there is also increased interest during an M&A process on:

• clarifying the non-financial risks in a target; and
• evaluating whether the target has an effective risk management process in place.

4 Corporate and regulatory approvals

4.1 What kinds of corporate and regulatory approvals must be obtained for a private M&A transaction in your jurisdiction?

Usually, a sale and a purchase transaction require the corporate approval of the boards of directors of both seller and buyer. Sometimes, a sale requires a change in the object of the company, which can require approval from third parties or authorities.

From a regulatory perspective, approval may be required from authorities under:

• the merger control regime;
• the financial regulatory regime; and/or
• the new regime for the screening of foreign investments and acquisitions of Danish companies.

4.2 Do any foreign ownership restrictions apply in your jurisdiction?

As a main rule, anyone – including Danish nationals and foreigners – is allowed to own and operate a business in Denmark.

However, Denmark has recently implemented new foreign direct (and indirect) investment screening legislation. The overall objective of the act is to prevent ‘unwanted’ direct and indirect ownership of companies that are considered ‘critical’.

The Investment Screening Act operates with two schemes, as follows.

First scheme: The first scheme requires the mandatory prior approval of the Danish Business Authority where:

• a foreign investor located outside Denmark invests (directly or indirectly) in a Danish company that conducts business within the sensitive sectors identified in the act; or
• a foreign investor located outside the European Union/European Free Trade Association (ETFA) enters into certain financial agreements with a Danish company that conducts business in sensitive sectors.

With respect to investments, the first scheme applies only if the investment equity stake constitutes a percentage threshold of at least 10% or control by other means. Prior approval should be obtained every time a certain higher threshold is reached.

Second scheme: The second scheme provides for the voluntary notification of the Danish Business Authority when a foreign investor located outside the EU/EFTA invests in (directly or indirectly) or enters into certain financial agreement with a Danish company, if such investment/financial agreement may comprise a threat to national security or public order in Denmark.

With respect to investments, the second scheme applies only if the investment equity stake constitutes a percentage threshold of at least 25% or control by other means.

Please note that other conditions apply.

4.3 What other key concerns and considerations should participants in private M&A transactions bear in mind in relation to consents and approvals?

The parties to a private M&A transaction should always keep in mind that consents and approvals might take time to obtain. When considering the timeframe of a private M&A transaction, it is of significant value to the transaction if the advisers:

• initiate the approval processes as soon as possible; and
• inform all parties of the possible impact on the transaction to ensure alignment among the interested parties.

5 Transaction documents

5.1 What documents are typically prepared for a private M&A transaction and who generally drafts them?

Several documents are typically prepared for a M&A transaction, in addition to the main transfer agreement.

The most common documents include the following:

• Non-disclosure agreement: This document, also known as a confidentiality agreement, is generally drafted by the seller.
• Exclusivity agreement: If not included in a letter of intent, an exclusivity agreement may be relevant. This document is generally drafted by the buyer and affords exclusivity to the potential buyer for a limited period.
• Letter of intent: This document is generally drafted by the buyer and sets out the intentions of the parties, such as the timeframe for the transaction.
• Due diligence checklist. This document sets out the structure of the due diligence process. It can be delivered by both the seller’s or buyer’s advisors.
• Set of warranties/guarantees: This document is normally drafted by the seller and negotiated by the parties. The warranties/guarantees are provided by the seller.
• Share transfer agreement: The main document setting out the terms applicable to the transaction.
• Shareholders’ agreement: In situations where the seller will continue as a shareholder in the target, a shareholders’ agreement might be relevant.

5.2 What key matters are covered in these documents?

Non-disclosure agreement: This usually covers the following matters:

• what information is considered confidential;
• that the information is provided only for the purpose of negotiating the potential acquisition and may not be used for any other purpose, either by the buyer or by anyone else;
• that the recipient is obliged to keep the information confidential and not disclose it to third parties, except for internal employees, consultants and others who need the information as part of the transfer process;
• the duration of the confidentiality obligation;
• an employee non-solicitation obligation of the buyer and sometimes the seller (subject to mandatory Danish legislation); and
• the applicable law and venue in case of a dispute relating to breach of the non-disclosure agreement.

Exclusivity agreement: This is an agreement which affords exclusivity to the potential buyer for a limited period. During the exclusivity period, the seller cannot initiate negotiations with other potential buyers.

Letter of intent: This is a document that states the intentions of the parties and provides the basis for the sales process and negotiations between them. It only states the intention of the parties, so as such it is non-binding for the most part.

Due diligence checklist: This includes the information to be delivered to the buyer relating to the target. The due diligence checklist must be designed to ensure that all relevant information relating to the target is disclosed to ensure that the seller has provided the information relevant for the buyer. The due diligence material limits the liability of the seller, since the information disclosed to the buyer will be assumed to be known to the buyer.

Set of warranties/guarantees: This document includes the commercial warranties provided by the seller to the buyer. The warranties are often negotiated based on information delivered by the seller during the due diligence process.

Share Transfer Agreement: This document sets out the terms of the transaction, including the purchase price, terms for its payment, conditions for closing, deliveries to be made on closing, the claim mechanism, any pre- or post-closing covenants and governing law and venue.

Shareholders’ agreement: This regulates the joint ownership of the company. A shareholders’ agreement is often a comprehensive and thoroughly negotiated document governing:

• the control of the company;
• the information level; and
• the exit process.

5.3 On what basis is it decided which law will govern the relevant transaction documents?

The parties often include information on choice of law and venue in each transaction document. If the law and venue have not been agreed between the parties, the rules of international law will apply and determine which law will govern the relevant transaction documents.

6 Representations and warranties

6.1 What representations and warranties are typically included in the transaction documents and what do they typically cover?

Warranties should be tailored to the transaction in question; but some of the most typical representations and warranties concern the following:

• Accounts and financial information: Warranties regarding the accuracy and completeness of accounts and financial information.
• Authority, title and shares: Warranties regarding ownership of assets, shares or IP rights, as well as the authority to enter the agreement and to perform their obligations under the agreement.
• Litigation: Warranties regarding pending or threatened litigation that could significantly impact the business or the transaction.
• Compliance with laws: Warranties regarding compliance with applicable laws and regulations.
• Contracts: Warranties regarding the existence, validity and enforceability of material contracts.
• Employee matters: Warranties regarding employment matters, including compliance with relevant employment laws, risk of claims and so on.
• Tax matters: Warranties regarding compliance with applicable tax laws, rules and regulations and the accuracy of tax returns and so on.
• Real property: Warranties regarding ownership of real property or ongoing lease agreements.
• 
  Environmental matters: Warranties regarding:

• • compliance with environmental laws and regulations;
  • the risk of environmental contamination; and
  • the disclosure of any environmental permits or liabilities.

• Insurance: Warranties regarding the existence and adequacy of insurance coverage, including any material claims of interest and pending insurance claims.
• Regulatory compliance: Warranties regarding compliance with specific industry regulations and licences, such as financial regulations or healthcare-related certifications.
• 
  Material contracts and customers: Warranties regarding:

• • the accuracy and completeness of material contracts;
  • customer relationships; and
  • the disclosure of any significant changes or defaults.

• Product liability: Warranties regarding the safety and regulatory compliance of products.
• Conduct of business pending closing: Warranties regarding the period between signing and closing, to ensure that the seller has carried on business in the ordinary course on a going-concern basis during the period pending closing.
• IP rights: Warranties regarding IP rights such as patents and trademarks.
• Information technology: Warranties regarding verification that all information technology – including third-party software – which is necessary for the operation of the business is owned by, licensed by or under the control of the target.
• Data protection and privacy: Warranties regarding verification that all data has in all respects been and is being collected and processed in accordance with mandatory requirements and data protection laws.
• Duty to loyally disclose material facts: Warranties stating that the seller has faithfully disclosed all relevant information to the buyer.

6.2 What are the typical circumstances in which the buyer may seek a specific indemnity in the transaction documentation?

A specific indemnity relates to a known risk often disclosed during a due diligence process and in relation to which the buyer seeks adequate security from the seller. Typical specific indemnities could relate to pending/threatening lawsuits or claims.

6.3 What remedies are available in case of breach and what is the statutory timeframe for bringing a claim? How do these timeframes differ from the market standard position in your jurisdiction?

It is recommended that a provision be included in a share purchase agreement on:

• how the parties should indemnify each other; and
• their remedies in the event of breach of contract.

The parties most often agree that the possibility of a pro rata reduction in the purchase price and cancellation of the agreement cannot be claimed.

Compensation for loss is the most common remedy but is often limited by agreement between the parties – for example:

• limited to liability for direct losses (contra indirect losses); and
• 
  agreed amount limitations, including:

• • a de minimis threshold for a claim;
  • a basket/tipping basket (several claims combined exceeding an agreed threshold); and
  • a cap (maximum liability amount).

The parties often agree to a timeframe for bringing claims under the agreement – often:

• 18 to 24 month as a general time limitation; and
• longer for tax claims and claims relating to environmental liability.

The time limitations often extend beyond the statute of limitations under Danish tax and environmental law, to provide sufficient security for the buyer. Often no time limitation applies to claims for breach of fundamental warranties, such as title.

6.4 What limitations to liability under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

The seller will seek to ensure that claims for the seller’s breaches of contract are limited to claims exceeding a certain amount. Often such a limitation of liability is combined with a ‘basket’ function, meaning that when losses exceed the basket threshold, the losses can be indemnified.

Often, the parties also agree to limit the liability of the seller to a fixed maximum amount to the extent the claim does not relate to the seller’s fraud or gross negligence.

Finally, the losses are often limited to direct losses or, if warranty and indemnity (W&I) insurance is taken out, direct and foreseeable indirect losses.

6.5 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

In our experience, W&I insurance is becoming more common and more frequently used in the Danish M&A market, especially for acquisitions exceeding €6.5 million. This is due to the costs relating to obtaining insurance coverage.

6.6 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

In deals where no W&I insurance is available, the usual approaches taken in the Danish market to ensure that the seller has sufficient substance to meet claims by the buyer include:

• keeping funds in escrow for an agreed period;
• the seller agreeing to uphold a minimum net capital in following the transfer; or
• deferred payments.

6.7 Do sellers in your jurisdiction often include restrictive covenants in the transaction documents? What timeframes are generally thought to be enforceable?

The most common restrictive covenants are non-compete clauses and non-solicitation clauses. Such restrictive covenants are often included to prohibits the seller from competing with the target post-closing and from soliciting the target’s customers and business connections.

6.8 Where there is a gap between signing and closing, is it common to include conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

It is standard conditions precedent to include regulatory conditions (if such approvals are required) to closing; and sometimes MAC, conduct of business pending closing covenant and (less frequently) bring-down of essential warranties are also included as conditions precedent depending on the negotiations.

6.9 What other conditions precedent are typically included in the transaction documents?

As a general rule, regulatory conditions, MACs and contact of business pending closing covenant are the most common. Sometimes, we also see conditions related to the completion of carveouts or specific consents from counterparties to material commercial agreements.

7 Financing

7.1 What types of consideration are typically offered in private M&A transactions in your jurisdiction?

Typically, payment is made in:

• cash;
• buyer’s stock;
• deferred payment; and
• promissory notes from seller to buyer.

7.2 What are the key differences and potential advantages and disadvantages of the various types of consideration?

Some of the key types of consideration and their potential advantages and disadvantages include the following:

• 
  A buyer that pays with cash must either use its own cash reserves or borrow money. Cash-rich companies do not have to borrow to effect large deals, but most companies do require external financing. In this case, acquirers must consider the impact on their cost of capital, capital structure, credit ratios and credit ratings.
• For the buyer, the main benefit of paying with stock is that it preserves cash. For the seller, a stock deal makes it possible to participate in the future growth of the business, but also involves risk of having its value reduced due to factors outside its control.
• 
  An earnout agreement may be attractive:

• • for the seller, because it enables the seller to potentially obtain a higher price from the buyer; and
  • for the buyer, because it enables the buyer to achieve a reduction in its initial investment by deferring payment of part of the purchase price and preserving cash or availability under its credit facilities and avoiding overpaying.

• Seller-financed transactions can be quicker and cheaper than conventional ones. The seller will often require the buyer to pledge the shares in the target as security for the loan.

7.3 What factors commonly influence the choice of consideration?

The main factors are:

• the cost of obtaining external financing;
• the duration of the required financing; and
• the type of business of the target.

7.4 How is the price mechanism typically agreed between the seller and the buyer? Is a locked-box structure or completion accounts structure more common?

The most common price mechanisms are:

• completion accounts with adjustment for net working capital; and
• debt and locked-box accounts, sometimes supplemented with an interest rate from the locked-box date until closing.

Both price mechanisms can be supplemented with a deferred payment regime (eg, an earnout mechanism).

7.5 Is the price typically paid in full on closing or are deferred payment arrangements common?

The purchase price is commonly paid in full at closing. Deferred payments are often used only as an earnout. We do not normally see deferred payment of the initial purchase price.

7.6 Where a deferred payment/earn-out payment is used, what typical protections are sought by sellers (eg, post-completion veto rights)?

The seller will often have a strong desire to ensure that the target can operate in the same way after closing to maximise the chance of a higher payment under the earn-out period. This manifests itself through a list of acts and omissions that the buyer must observe and obtain the consent of the seller to execute. However, the determination of the final outcome will depend on the negotiation strength of the parties, as the buyer will often have an equally strong desire to remain in full control of the target.

7.7 Do any rules on financial assistance apply in your jurisdiction, and what are their implications for private M&A transactions?

The target is limited by the rules on financial assistance. The target cannot pay for adviser costs unless it benefits directly from the advice. In addition, the buyer is prohibited from obtaining an acquisition loan and (directly or indirectly) allowing the acquired target to pay for that loan. Also, the buyer cannot provide security for an acquisition loan by pledging assets in the acquired target.

However, certain mechanisms for debt push down into the target are available. The use of such mechanisms require thorough pre-execution planning.

7.8 What other key concerns and considerations should participants in private M&A transactions bear in mind from a financing perspective?

Besides the prohibition of the target’s financial assistance (which is not an absolute prohibition, but under specific circumstances is allowed), we often see a strict focus on the timing of perfection of security. Security in an asset must be given at the same time as the loan is made available to the borrower in order to avoid a risk of the security being set aside if the borrower within three (3) months (and in case of related parties within two (2) years) after the obtaining of the loan initiates winding up procedures or becomes insolvent. This often entails that advisors of the financing parties need to coordinate minutely together with the transaction advisors as the money flow is needed to pay the purchase price on the same day to the seller(s), and the security must be perfected at the same time.

8 Deal process

8.1 How does the deal process typically unfold? What are the key milestones?

In a share or asset transfer, there are several common process steps:

• 
  Planning and preparation: This involves:

• • assessing the target’s value;
  • potentially preparing a term sheet and a share purchase agreement; and
  • preparing for the due diligence process.

• Due diligence: The buyer conducts due diligence of the target to assess its financial, legal and operational health. This involves a comprehensive review of financial statements, contracts, IP rights and so on.
• 
  Negotiation: The parties negotiate the terms of the transfer, including:

• • price;
  • payment structure; and
  • allocation of risk.

• Contract execution: Once the negotiations have been finalised, the share purchase agreement is executed between the buyer and the seller.
• Closing and payment: When all the conditions in the share purchase agreement have been met, the actual transfer takes place and payment for the target is made.

8.2 What documents are typically signed on closing? How does this typically take place?

The documents typically delivered on closing are:

• a closing memorandum;
• an updated register of shareholders;
• minutes of general meetings;
• minutes of board meetings;
• a new executive service agreement; and
• new articles of association;

If the seller will be part of the target going forward, a shareholders’ agreement is also executed.

In Denmark, the closing process usually takes place virtually through digital signing.

8.3 In case of a share deal, what is the process for transferring title to shares to the buyer?

Title to the shares will pass at closing and will be registered by the target in its register of shareholders. There are no notification requirements and no duty applies to the transfer of the shares.

8.4 Post-closing, can the seller and/or its advisers be held liable for misleading statements, misrepresentation, omissions or similar?

If the matter is not covered by the warranties provided by the seller, liability is limited to matters based on fraud, wilful misconduct or gross negligence by the seller and/or its advisers.

8.5 What are the typical post-closing steps that need to be taken into consideration?

The typical post-closing steps most often include the election and registration of:

• a new board of directors;
• new legal owners and ultimate beneficial owners;
• new executive management; and
• new auditors.

9 Competition

9.1 What competition rules apply to private M&A transactions in your jurisdiction?

There are two competition regimes that apply to private M&A in Denmark:

• the Competition Act; and
• the EU Merger Regulation.

9.2 What key concerns and considerations should participants in private M&A transactions bear in mind from a competition perspective?

It is always recommended that merger screening be conducted as part of the due diligence process in order to understand whether there is a need to plan the process from a merger control perspective.

A notification to the Danish authorities regarding merger control will require the preparation of extensive written material and documentation. The approval process can take some time and may be prolonged by questions raised by the competition authorities. A notification process must therefore be factored into the transaction timetable.

10 Employment

10.1 What employee consultation rules apply to private M&A transactions in your jurisdiction?

The seller must inform the employees’ representatives or, in the absence of such representatives, the employees concerned in good time before the actual transfer. The information must include:

• the date or proposed date of the transfer;
• the reasons for the transfer;
• the legal, economic and social consequences of the transfer for employees; and
• possible measures for employees.

The notification must be made at the latest before the employees’ employment and working conditions are directly affected by the transfer.

Any seller that considers taking actions that are of importance to the employment of the employees in the target must, within reasonable time, enter into negotiations with the employees’ representatives or, in the absence of such representatives, the employees concerned with a view to reaching agreement with them.

10.2 What transfer rules apply to private M&A transactions in your jurisdiction?

The Act on Employees’ Rights in the Event of Transfers of Undertakings aims to protect employees against the deterioration of their rights because of a transfer of the employer company. The rules apply to transfers that result in a change of employer. Consequently, the act does not apply to a share transfer agreement, where the transferred target remains the same and only the owner of the target changes.

According to Section 2 of the act, the buyer assumes all rights and obligations in respect of employees of the target at the time of closing.

Employees are therefore entitled to the same terms of employment as before the transfer, regardless of whether the terms of employment are based on a collective agreement or an individual agreement.

10.3 What other protections do employees enjoy in the case of a private M&A transaction in your jurisdiction?

The employees enjoy protection under the EU General Data Protection Regulation (2016/679) in the sense that only information relating to employees that is necessary for the potential buyer to evaluate the target may be disclosed. As a result, information such as date of birth (but not year), religion, union relationship, disability and telephone numbers may not be disclosed to a potential buyer.

10.4 What is the impact of a private M&A transaction on any pension scheme of the seller?

A private M&A transaction has no impact on any pension scheme of the seller or the target.

The employees’ entitlement to the same rights (minimum) as before the transfer is protected by the Act on Employees’ Rights in the Event of Transfers of Undertakings.

10.5 What considerations should be made to ensure there are no concerns over the potential misclassification of employee status for any employee, worker, director, contractor or consultant of the target?

If a buyer wishes to ensure full protection relating to the classification of employees, the parties commonly negotiate warranties and/or indemnities to cover this issue. The seller often

10.6 What other key concerns and considerations should participants in private M&A transactions bear in mind from an employment perspective?

A buyer must be aware of whether employees are protected by collective agreements or by local employee agreements (both written and non-written), as this can affect not only the employees in the target but under certain circumstance also the buyer’s own employees.

Also, Danish employees are used to being included in relevant discussions concerning the target. In order to ensure a good relationship with the employees going forward, we recommend that a buyer should carefully consider its approach to employees of the target.

11 Data protection

11.1 What key data protection rules apply to private M&A transactions in your jurisdiction?

The EU General Data Protection Regulation (2016/679) applies in Denmark, as well as the Act on Data Protection.

11.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from a data protection perspective?

As the data controller of personal data registered and processed by the target, the seller must bear in mind its obligation not to disclose such personal data, unless this is found to be significant to the buyer in considering the acquisition (eg, the buyer’s opportunity to assess possible staff issues that are relevant to its overall risk assessment).

As the data controller of data disclosed by the seller to the buyer, the buyer must likewise bear in mind its obligation to ensure that no personal data is collected and processed unless it is found to be significant to the overall risk assessment.

Access to data will also depend on the stage at which the disclosure takes place:

• In the early stages, the data should always be kept as generic as possible (statistical data/average figures).
• If the negotiations continue with an interested buyer, data may to some extent be disclosed if it is significant to the buyer in deciding whether to acquire the target (eg, name, position and job description, length of service, salary, allowance, bonus). Even in this case, the disclosure of personal data will usually require that the information relate to key staff members such as top management or staff with vital knowledge of key products.

In general:

• the seller should always consider disclosing data only in generic terms (without personal identifiers); and
• any health-related employment terms should always include financial details only (no diagnoses).

12 Environment

12.1 Who bears liability for the clean-up of contaminated sites? How is liability apportioned as between the buyer and the seller in case of private M&A transactions?

In Denmark, the general principle is that the polluter pays for any clean-up.

In an asset transfer, the buyer generally will not assume liability for matters other than those agreed to be transferred in the transfer agreement.

In the event of a share purchase, the buyer will assume liability for any contaminated sites if the transferred target is liable.

The risk of environmental claims can be negotiated between the seller and the buyer by taking this into account in the share purchase agreement. Often, environmental risks are addressed in the seller’s warranties.

12.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from an environmental perspective?

The environmental issues taken into consideration typically include:

• an assessment of the target’s ability to comply with environmental legislation and its overall objectives, as well as compliance with any other environmental regulations or standards;
• 
  a review and assessment of whether:

• • the target has all necessary environmental permits or approvals for its current and planned activities; and
  • the target has complied with the terms and conditions of environmental permits obtained;

• an assessment of whether there is a risk of restrictions on the target’s access to its own land and facilities;
• an assessment of whether there is a risk of incurring liability for pollution or health damage; and
• an assessment of whether there is a risk of liability due to environmental or health impacts caused by the target’s products.

13 Tax

13.1 What taxes are payable on private M&A transactions in your jurisdiction? Do any exemptions apply?

We do not advise on tax matters; hence we cannot reply to these questions.

13.2 What other strategies are available to participants in a private M&A transaction to minimise their tax exposure?

We do not advise on tax matters; hence we cannot reply to these questions.

13.3 Is tax consolidation of corporate groups permitted in your jurisdiction? Can group companies transfer losses between each other for tax purposes?

We do not advise on tax matters; hence we cannot reply to these questions.

13.4 What other key concerns and considerations should participants in private M&A transactions bear in mind from a tax perspective?

We do not advise on tax matters; hence we cannot reply to these questions.

14 Trends and predictions

14.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

Currently we are noticing a return to a more buyer-friendly deal environment. Prices have fallen and more thorough due diligence investigations are being conducted when deals are being considered. In addition:

• escrow regimes have had a comeback and are increasingly being deployed by buyers in order to mitigate risks; and
• warranty and indemnity (W&I) insurance is becoming increasingly popular; and due to the smaller number of deals being conducted, W&I insurers are becoming more flexible on terms and more willing to insure deals with a valuation of less than € 6.5 million.

14.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

In 2022, Denmark adopted a new bill on the screening of foreign direct investment, in order to screen and block deals that are ‘unwanted’ from the government’s perspective. The legislation is new and is not well described, resulting in greater deal uncertainty for buyer and sellers. So far only one deal has been blocked by the new regime; but it must be expected that more deals will be blocked in the future due to the ongoing geopolitical situation.

15 Tips and traps

15.1 What are your top tips for the smooth closing of private M&A transactions and what potential sticking points would you highlight?

From our point of view, the best advice is to plan, plan, plan! A closing can be prepared right down to (nearly) the last detail; but unforeseen last-minute problems should always be expected.

The key to ensure deal certainty is to:

• keep the closing deliveries simple;
• prepare all deliveries well in advance; and
• limit the number of conditions precedent on both sides.

Good communication between advisers and the seller and the buyer is also crucial to a smooth transaction process.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.