Acting in concert under the UK Takeover Code: The new definition

Changes to the rules on who will be presumed to be “acting in concert” for the purposes of the UK Takeover Code are now in force.

The changes, which were set out in RS 2022/2, centre on the Panel’s approach to groups of companies and investment entities.

Whilst many of the changes codify the Panel’s existing practice, there are some areas where its approach has changed.

The key changes include the following:

The changes to the test

• The threshold at which entities within a group are presumed to be acting in concert has been raised from 20% to 30%.

• The Panel will look at both voting rights and equity interests / economic rights, and there is guidance on how indirect interests should be calculated and when interests need to be aggregated.

• Long derivative / option positions will be taken into account in determining whether the thresholds have been met.

How the rules apply to different entities

• An interest in a limited partnership will be treated as analogous to equity share capital.

• The Panel’s treatment of private equity portfolio companies has changed, and the previous practice of accepting comfort letters about wider portfolio companies has been discontinued.

• There are specific provisions and guidance on how the rules apply in the context of a consortium offer, to joint ventures and to sovereign wealth funds.

• An investment manager of, or investment adviser to a bidder, an investor in a new bid vehicle or the target will be presumed to be acting in concert with the bidder or target (as appropriate).

Why it matters

It is important to understand how the new definition applies to a group of companies or investment entity, regardless of whether they intend to be a party to public M&A transaction, because:

• the Panel treats persons who are acting in concert as a single person and so if one of them deals in shares, without aggregating the interests of the wider group, it could trigger a requirement to make a mandatory offer under Rule 9 of the Code or set a floor level price for any future bid by another entity in the wider organisation; and

• it may impact the disclosures that an investor is required to make if a bid is announced for a company in which it holds shares. 

The changes are discussed in more detail in our briefing here.