Changes to presumptions on acting in concert under the Takeover Code

The Takeover Panel has published the final changes to the definition of “acting in concert” and the circumstances in which the Panel will presume parties to be acting in concert with each other (RS 2022/2). The main focus of the changes is the Panel’s approach to groups of companies and investment entities.

The changes will take effect on 20 February 2023 and will apply to all companies and transactions from that date.

Parties will be acting in concert if they co-operate to obtain or consolidate control of a company, or frustrate the successful outcome of a bid for the company. Under the Takeover Code, certain categories of people are presumed to be acting in concert.

The concept of acting in concert is relevant for determining when a mandatory takeover offer may be required; the minimum level or particular form of consideration that has to be offered on an offer; and restrictions on, and the disclosure of, dealings even outside of an offer. Entities that will be affected by the changes therefore need to understand them, even if they do not intend to undertake or participate in a UK public M&A transaction.

The Panel is replacing the current presumption in relation to groups of companies with two new presumptions:

• under the first, companies will be presumed to be acting in concert if one controls the other or is under the same control as it. Control for these purposes is where a company is interested in 30% or more of the voting rights, or a majority of the equity share capital, of the other company; and
• under the second, companies will be presumed to be acting in concert with each other if one is interested in 30% or more of the other company’s equity share capital.

The impact of the changes in practice means that:

• the threshold at which entities within a group are presumed to be acting in concert will be raised from 20% to 30%;
• the Panel will look at both voting rights and equity interests; and
• the rules will apply equally to limited partnerships, trusts, individuals and other legal or natural persons.

The changes are particularly relevant for investment entities, fund managers, private equity portfolio companies and joint ventures, and the response statement discusses how the rules apply to them in particular scenarios.