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Freshfields Transactions

| 2 minutes read

The Long Arm of the Law – US Issues in Cross-Border Public M&A

There’s no escaping it – US securities and tender offer laws are implicated in essentially every public M&A deal, no matter where in the world the bidder and target are located and whether the consideration is cash and/or shares. This is because the relevant US rules are concerned not with the location of the bidder and target or the governing law of the transaction, but instead with the location of the target’s shareholders. So, if the target has any US-resident beneficial shareholders (and let’s face it – it will), the bidder will need to be cognizant of the US securities and tender offer regime.

Don’t worry, there are exemptions from the US rules available in many cases, especially where the target is not listed on a US exchange. The table below sets out, at a very high level, the exemptions and structures most commonly used in this scenario. As you can see, transactions involving only cash consideration generally present fewer US issues than those involving share consideration; and schemes of arrangement (or similar court-sanctioned proceedings) in many jurisdictions are exempt from the relevant US rules altogether.

The last decade has seen a substantial amount of cash-only M&A activity, supported by strong stock market performance. And where schemes of arrangement are available, these have been a popular structure for friendly M&A transactions. The upshot of all this has been that US considerations in M&A structuring have often taken a back seat.

So what about going forward? With less frothy share prices and opportunistic buyers on the hunt, we anticipate that the next M&A cycle is going to see more deals featuring share consideration, as well as more hostile and contentious activity (and therefore proportionally fewer schemes of arrangement). US issues in public M&A are therefore going to be more salient than ever, and bidders should make sure these are considered at the earliest possible stage.

If you’d like more detail on this topic, get in touch with us or your usual Freshfields contacts to discuss.


US Tender Offer Rules
(applicable with cash and/or share consideration)

US Securities Act*
(applicable with share consideration)

Tier I Exemption

(target share capital <10% US)

  • Broadly exempt from most US tender offer rules
  • Exempt from SEC registration
  • A simple one-off SEC filing may be required

Tier II Exemption 

(target share capital <40% US)

  • Exempt from many US tender offer rules
  • Remaining requirements tend to be procedural and easy to comply with
  • Without appropriate structuring, shares issued into the US will need to be registered with the SEC
  • US counsel should therefore be consulted at the earliest stage

Schemes of Arrangement

  • Schemes of arrangement in many (though not all) jurisdictions are exempt from relevant US rules
  • Where there is potential for the scheme to flip to a takeover offer, US issues should be considered at an early stage to avoid last minute surprises

Statutory Mergers

  • US tender offer rules are not implicated
  • Proxy materials cannot be sent to US retail shareholders, but such shareholders can receive merger consideration, including shares
  • Certain procedures must be implemented to avoid SEC registration, so consult US counsel at the earliest stage

*Absent an applicable exemption, it is unlawful to offer or sell securities into the US without an effective SEC registration statement. The SEC registration process is lengthy, resource-intensive and results in onerous ongoing filing and corporate governance requirements.

Note: This blog post assumes the target is not an SEC registrant. Where the target is registered with the SEC, additional considerations will apply and US counsel should be involved from the start.