M&A world braced for litigation wave

Corporate lawyers are bracing themselves for a sweeping overhaul of the M&A world, with the Takeover Panel set to become a statutory body next year.

The Department of Trade and Industry released a white paper earlier this month that sets out comprehensive reform of the Company Law Bill, including plans to make the Takeover Panel a statutory body to bring it into line with the European Directive on Takeover Bids.

The move has sparked fears among the City’s top corporate lawyers that the Takeover Code’s new legal status could lead to interference by the courts, particularly on hostile bids.

Clifford Chance M&A star and former Takeover Panel secondee Guy Norman said litigation arising from perceived breaches of the Takeover Code could spell “disaster” for potential deals.

“There only needs to be one case to make a precedent and that will open the floodgates,” he said, echoing numerous corporate partners contacted by The Lawyer. “I’m sure someone will try to do it and I have no doubt there will be a test case, but it depends on how the courts react.”

Simmons & Simmons corporate partner Selina Sagayam, who has just returned to the firm after a two-year spell as assistant secretary at the Takeover Panel, said aspects of the European directive were not clear, which increases the risk of court action.

“Aspects of the directive are quite vague in a number of areas and it has been left up to regulators to come up with the answers, and that could be challenged,” she explained.

Deputy director general of the Takeover Panel Noel Hinton told The Lawyer that he did not expect the day-to-day role of the panel to change, but said there could be court action in connection with the bill once it was passed.

“Of course, people may choose to test the system – they do now,” Hinton said. “But to all intents and purposes it will be business as usual at the Takeover Panel.”

The bill has yet to receive Royal Assent, but a dual regime featuring the Takeover Code and regulations will be introduced prior to the May deadline.