Mergers & Acquisitions Comparative Guide

NautaDutilh Avocats Luxembourg


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NautaDutilh is an international law firm specialising in Luxembourg, Belgian and Dutch law. The firm was founded in 1724 and is one of the largest in the Benelux. More than 400 lawyers, notaries and tax advisers work at the firm’s offices in Luxembourg, Brussels, Amsterdam, Rotterdam, London and New York.
Mergers & Acquisitions Comparative Guide for the jurisdiction of Luxembourg, check out our comparative guides section to compare across multiple countries
Luxembourg Corporate/Commercial Law
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1 Deal structure

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

In most jurisdictions, including Luxembourg, M&A transactions can be divided into two categories:

  • share deals through a share purchase agreement, in which all or some of the target's shares are transferred to the buyer (the most common type of transaction); and
  • asset deals through an asset purchase agreement, in which all or some of the target's assets are transferred to the buyer.

Most M&A deals in Luxembourg involve the acquisition of Luxembourg targets.

Luxembourg law also allows for domestic and cross-border mergers, in the latter case provided that:

  • the merger is allowed under the applicable foreign law; and
  • the target complies with the requirements and formalities of its domestic law.

Auction processes are not common. Bid process letters, on the other hand, are often used in the form of letters of intent.

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

The main characteristics of a share deal are as follows:

  • The buyer takes over the entire target, including any existing assets and liabilities.
  • The share purchase agreement tends to provide for a less cumbersome procedure for the buyer: it will benefit from the automatic continuation of all contracts, except for those that provide otherwise (eg, change of control clauses).

The main characteristics of an asset deal are as follows:

  • The buyer enjoys greater flexibility: it may specifically identify which assets and liabilities it is prepared to take over and which will be excluded from the scope of the sale.
  • An asset purchase agreement generally provides for a more cumbersome procedure for the buyer: asset transfers may require specific formalities, and the assignment or assumption of contracts will generally be subject to the other contracting party's consent.

1.3 What factors commonly influence the choice of sale process/transaction structure?

The choice of sale process and/or transaction structure is mainly influenced by the following factors:

  • the commercial and financial situation of the target (eg, solvency, profitability);
  • the level of risk and flexibility;
  • third-party financing;
  • the carve-out of part of the target's business;
  • the method to determine the purchase price; and
  • the current shareholding in the target's capital.

2 Initial steps

2.1 What documents are typically entered into during the initial preparatory stage of an M&A transaction?

The most common documents are letters of intent, which are generally coupled with confidentiality undertakings, with or without exclusivity provisions.

2.2 Are break fees permitted in your jurisdiction (by a buyer and/or the target)? If so, under what conditions will they generally be payable? What restrictions and other considerations should be addressed in formulating break fees?

Break fees are valid in principle and are generally negotiated by the parties at the start of the transaction.

In principle, break fees are payable to the party that suffers damage due to breach of a contractual provision. Particular attention should be paid to the corporate interest if the payer of the break fee is the target.

2.3 What are the most commonly used methods of financing transactions in your jurisdiction (debt/equity)?

Acquisitions are usually financed through a combination of third-party debt and shareholder financing. Third-party debt is most often incurred at the level of the target's subsidiary through the refinancing of existing third-party debt. Shareholder financing may take the form of:

  • equity contributions – that is, shares with or without a share premium and, under certain conditions, without the issuance of shares in exchange; or
  • shareholder debt – that is, shareholder loans, possibly in the form of instruments (eg, notes, bonds, certificates).

2.4 Which advisers and stakeholders should be involved in the initial preparatory stage of a transaction?

The advisers that are usually involved in the initial preparatory stage of an M&A transaction are the financial, technical, legal and tax advisers.

With regard to stakeholders, the employees of the target must be informed of the bid and consulted through their representatives. However, the binding nature of this obligation may vary depending on:

  • the structure of the transaction; and
  • the number of employees of the target.

Specific information must be provided if the transaction qualifies as a 'transfer of undertakings' under EU Regulation 2001/23 and/or the applicable provisions of the Luxembourg Labour Code (this is more likely to be the case if the transaction is structured as an asset deal).

For public takeover bids, the Bid Law also requires that the offer prospectus detail the intentions of the buyer in terms of safeguarding jobs and management, and regarding the future business of the target (which at least informs the customers and business partners of the target).

2.5 Can the target in a private M&A transaction pay adviser costs or is this limited by rules against financial assistance or similar?

Luxembourg law contains provisions on financial assistance for certain types of corporate forms. In general, the financial assistance provisions prohibit a company from directly or indirectly advancing funds, making loans or providing security with the view to the acquisition of its shares by a third party, except in limited circumstances. A whitewash procedure is available for certain types of companies, subject to stringent conditions.

In principle, the direct payment of advisory costs, without any kind of advance, loan or security interest, will not qualify as financial assistance. However, it will be necessary to assess whether the payment is in line with the target's corporate interest.

3 Due diligence

3.1 Are there any jurisdiction-specific points relating to the following aspects of the target that a buyer should consider when conducting due diligence on the target? (a) Commercial/corporate, (b) Financial, (c) Litigation, (d) Tax, (e) Employment, (f) Intellectual property and IT, (g) Data protection, (h) Cybersecurity and (i) Real estate.

(a) Commercial/corporate

In general, there are no specific commercial/corporate aspects to consider for targets that do not conduct activities other than holding the shares of underlying group companies. If the target conducts activities subject to a licence, specific rules and regulations will need to be considered, depending on the activity, including with respect to the change of shareholding, which may need to be authorised by the competent regulator.

A bill was introduced in 2020 regarding the screening of foreign direct investment (FDI). The bill is still at a relatively early stage of the legislative process and is subject to amendment; but once adopted, an FDI-related assessment will also need to be taken into consideration for M&A transactions.

(b) Financial

In general, there are no specific financial-related aspects to consider for targets that do not conduct activities other than holding the shares of underlying group companies. If the target conducts activities subject to a licence, specific rules and regulations will need to be considered, depending on the activity, with respect to the way in which the acquisition is financed.

(c) Litigation

In general, there are no specific litigation aspects to consider for targets that are privately held and do not conduct activities other than holding the shares of underlying group companies. Luxembourg is a member state of the European Union and the relevant EU rules and regulations applicable to choice of jurisdiction and enforcement of judgments thus apply in Luxembourg.

If there are pending disputes when the due diligence process is performed, the buyer's attention should be drawn to the following items:

  • the value of the dispute – the potential cost in the event of a negative decision is of the utmost importance (depending on the materiality threshold set for the due diligence); and
  • whether the seller has sufficient provisions to cover the costs of the proceedings and a potential payment order, which should be reflected in the target's annual accounts.

(d) Tax

Generally speaking, the following main points for the acquisition of the shares in targets that do not conduct other activities than holding the shares of the underlying group companies should be considered:

  • Ensure that the target has duly and timely filed its corporate tax returns, withholding tax returns and other returns.
  • Verify the existence of advance tax agreements, advance pricing agreement(s) and functional currency agreements (if the share capital of the target is denominated in foreign currency), and ensure that the structure implemented is in line with the aforementioned agreement(s).
  • Ensure that the aforementioned returns are in line with the Luxembourg tax rules, administrative practice and agreements/request (if any) – in particular, the filing positions adopted for the tax treatment of the shares held in underlying subsidiaries and the applicable thin capitalisation rules.
  • Obtain confirmation that the target is not value added tax registered.
  • Ensure that all intra-group transactions have occurred at arm's length and, if applicable, are sustained by Organisation for Economic Co-operation and Development compliant transfer pricing documentation.
  • Ensure that the target has paid all taxes due and payable as well as related payments (eg, fines or interest for late payment, if any)

(e) Employment

In general, there are no specific employment aspects to consider for targets that are privately held and do not conduct activities other than holding the shares of underlying group companies. However, if the target conducts activities that require it to have employees, the buyer's attention should be drawn to several key items:

  • If the transaction qualifies as a 'transfer of undertakings' within the meaning of EU Regulation 2001/23 and/or the applicable provisions of the Luxembourg Labour Code, the target's personnel (ie, the employment contracts) will be automatically transferred to the buyer, which will become the new employer. In this case, due diligence will be of the utmost importance, to ensure that all Luxembourg labour law standards and requirements are met.
  • If the transaction qualifies as a transfer of undertakings, the target's employee representative bodies (if any) will also be automatically transferred (fully or partially, depending on the situation) to the buyer.
  • In terms of liability, the buyer should remain attentive to the possibility of 'false senior executives'. Indeed, under the Luxembourg labour law, 'senior executive' is a special status to which specific conditions apply; such employees are not subject to the Luxembourg provisions on working time. Sometimes, employers think that certain employees should be categorised as senior executives, but the applicable conditions are not in fact met. In this case, the erroneously categorised senior executives may take legal action in order to:
    • challenge their classification as senior executives; and
    • claim the payment of arrears of salary, notably overtime (150% of the employee's usual wage).

Depending on the situation, this could trigger unforeseen costs.

(f) Intellectual property and IT

The Luxembourg financial sector regulator, the Commission de Surveillance du Secteur Financier (CSSF), has issued circulars on the outsourcing of IT activities in the financial sector. These outsourcing rules apply in addition to the European guidelines and often provide for stricter requirements. Close attention should therefore be paid to the following:

  • CSSF Circulars 17/655 and 17/656, which contain specific IT outsourcing requirements for IT system management and operation services, consultancy, development and maintenance services, hosting services and infrastructure ownership;
  • CSSF Circular 12/552, recently updated by CSSF Circular 20/759; and
  • CSSF Circular 17/654 on IT outsourcing relying on cloud computing infrastructure, which applies in place of CSSF Circulars 17/655 and 17/656 in the event of cloud-based outsourcing (and the specific criteria for application are met).

(g) Data protection

Surveillance in the workplace (eg, monitoring employees' use of IT tools) is regulated by Article L261-1 of the Labour Code and is possible only under certain conditions. Furthermore, information obligations apply with respect to the employees and employee representative bodies.

(h) Cybersecurity

Financial institutions are subject to notification obligations in the event of incidents that affect the security of their networks and information systems pursuant to the Act of 28 May 2019 implementing the Network and Information Security Directive (2016/1148/EU).

Furthermore, all financial institutions subject to supervision by the CSSF must report on fraud and incidents occasioned by external cyberattacks.

Finally, payment service providers have specific notification and reporting obligations in the event of major operational or security incidents. The European Banking Authority Guidelines on major incident reporting have been adopted and supplemented by CSSF Circular 18/704.

(i) Real estate

Verifications should be made with the Land Registry to confirm title to, and any encumbrances on, real property.

3.2 What public searches are commonly conducted as part of due diligence in your jurisdiction?

Public searches relating to privately held target companies that conduct no activities other than the holding of shares of underlying group companies (ie, unregulated entities) may be conducted with the Luxembourg Trade and Companies Register (RCS). The information available will depend on the type of company. For the most common type, the société à responsabilité limitée, the search will provide information on:

  • the constitutional documents and any changes thereto;
  • the shareholders;
  • the board members; and
  • the financial statements.

The information contained in the RCS may not be up to date, so the search results are not conclusive evidence of the abovementioned items. There is no public register for share pledges.

For targets that conduct regulated activities, it may be possible to conduct a public search on the type of licence, depending on the licence and the competent regulator.

3.3 Is pre-sale vendor legal due diligence common in your jurisdiction? If so, do the relevant forms typically give reliance and with what liability cap?

It is increasingly common for a seller to provide a vendor due diligence report. This is usually limited to an executive summary with a red flag report, which can be made subject to a materiality threshold.

Reliance may be given, but this is not necessary. Liability caps vary per transaction and depend on many factors, such as the scope of the vendor due diligence, the size of the transaction and the advisers.

4 Regulatory framework

4.1 What kinds of (sector-specific and non-sector specific) regulatory approvals must be obtained before a transaction can close in your jurisdiction?

For Luxembourg targets that are privately held and do not conduct activities other than holding the shares of underlying group companies, there are currently no regulatory approvals that need to be obtained before the transaction can close. This may change with the introduction of forthcoming draft legislation on the screening of foreign direct investment (FDI), with the possible introduction of a prior notification procedure to be carried out by the buyer before making an investment in an enterprise, part of an enterprise or a group of enterprises established in Luxembourg and operating in a strategic sector.

For Luxembourg targets that conduct regulated activities, depending on the regulatory framework, certain approvals by the applicable Luxembourg regulator may need to be obtained before the transaction can close (eg, the Commissariat aux Assurances, Commission de Surveillance du Secteur Financier (CSSF)).

4.2 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have?

There are no bodies responsible for supervising M&A activity in Luxembourg, but some authorities (eg, the Commissariat aux Assurances, the CSSF) may need to be informed or consulted if the target is a regulated entity and prior authorisation may be required.

The forthcoming legislation on FDI screening will also need to be taken into account once adopted.

4.3 What transfer taxes apply and who typically bears them?

There are no transfer taxes levied on the sale of shares or units, unless the units are those of a Luxembourg tax-transparent entity, in which case the assets are deemed to be sold directly for Luxembourg tax purposes. If the Luxembourg tax-transparent entity holds real estate located in Luxembourg, the deemed sale of the assets will be subject to registration and transcription duties of 6% and 1% respectively. The 6% registration duty can be increased by a municipal surcharge, depending on the municipality in which the real estate is located (eg, for property located in Luxembourg City, the surcharge is 50%, meaning the registration duty will be 9%).

5 Treatment of seller liability

5.1 What are customary representations and warranties? What are the consequences of breaching them?

The basic representations and warranties include title, free transferability and non-encumbrance, authority and capacity; but the list may be, and usually is, extended to include other matters specific to the deal and of particular importance in light of the circumstances. The extent of the representations and warranties will also depend on whether there is warranty and indemnity insurance.

The consequences for breach of the representations and warranties are usually set out in the agreement itself and made subject to limitations both in time and in terms of the indemnification amount. Under Luxembourg law, a breach of contract may be compensated if it can be proven that there was a breach, that damage resulted and that the damage was caused by the breach.

5.2 Limitations to liabilities under transaction documents (including for representations, warranties and specific indemnities) which typically apply to M&A transactions in your jurisdiction?

Luxembourg law generally allows for contractual limitation and exclusion of liability (and therefore the resulting indemnification), subject to certain conditions and restrictions, such as for fraud and wilful misconduct.

An exclusion of the seller's liability is possible; whereas any and all claims that arise from matters included in a disclosure letter or information disclosed during the due diligence process will be carved out.

It is also possible to limit the amount of the seller's liability and provide that such liability will be triggered only as from a certain threshold (ie, claims of a minimal value will not trigger liability, unless they reach an aggregate amount agreed on by the parties).

It is also usual to cap the limitation at a certain amount and to limit the liability in time.

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

Warranty and indemnity insurance has become fairly common in M&A transactions.

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

There is no Luxembourg-specific approach to these matters. The usual escrow and parent guarantee mechanisms are sometimes used.

In this respect, Luxembourg has specific legislation (the Act of 7 July 2003) on escrow mechanisms that ring-fence escrow accounts from other assets of the qualifying financial institution holding the account, thus rendering the escrow account bankruptcy remote in the event of the financial institution's insolvency.

In addition, a new Act of 10 July 2020 introduced the concept of a professional payment guarantee – a commitment pursuant to which a person (the guarantor) undertakes to pay the beneficiary, at the request of the latter or an agreed third party, a sum determined in accordance with agreed terms, in relation to one or more receivables or the risks associated therewith.

5.5 Do sellers in your jurisdiction often give restrictive covenants in sale and purchase agreements? What timeframes are generally thought to be enforceable?

Non-compete and non-solicitation covenants are customary in Luxembourg and are mostly used to prevent the seller from:

  • establishing a new business that would directly compete with the business being sold (non-compete provisions); and
  • poaching employees and/or customers of the target group (non-solicitation provisions).

The exact terms and conditions of such covenants will depend on factors such as:

  • the governing law of the share purchase agreement;
  • whether an employment relationship is involved; and
  • the specificities of the acquired business.

The covenants will usually be limited in time and geographic scope.

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

Both MAC and bring-down of warranties clauses are common when there is a gap between signing and closing. Other provisions, such as obligations to operate in the ordinary course of business, are also common.

6 Deal process in a public M&A transaction

6.1 What is the typical timetable for an offer? What are the key milestones in this timetable?

The timetable and procedure for a public takeover bid governed by the Takeover Act are as follows:

  • disclosure of the bid (immediately for voluntary bids or 'at the earliest opportunity' for mandatory bids);
  • submission of an offer prospectus to the Commission de Surveillance du Secteur Financier (CSSF) (within 10 working days of the bid being made public) for approval. The CSSF has a period of 30 days to approve the prospectus, but can decide to extend this period.
  • preparation of a memorandum by the board of the target setting out and explaining its opinion on the bid, after having consulted the target's employee representatives, among other things; and
  • acceptance period, which can range from two weeks following the publication date of the prospectus to six months from the date of the bidder's decision to make public its takeover bid.

6.2 Can a buyer build up a stake in the target before and/or during the transaction process? What disclosure obligations apply in this regard?

The Takeover Act does not address per se whether a potential bidder can build a stake in a listed company before launching a bid. In some cases, the bidder's intention to make a bid could constitute inside information and lead to market abuse.

However, the Transparency Act sets out disclosure rules for substantial shareholdings that require notification to the CSSF and the issuer within a certain period of time – namely, when the voting rights attached to the securities held reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 33,33%, 50% or 66.67% of the issuer's total voting rights following a sale or purchase of securities (or depositary receipts). It is also possible for issuers subject to Luxembourg law to impose lower or intermediate disclosure thresholds in their articles of association.

6.3 Are there provisions for the squeeze-out of any remaining minority shareholders (and the ability for minority shareholders to 'sell out')? What kind of minority shareholders rights are typical in your jurisdiction?

Squeeze-out mechanisms for listed entities are provided for by the Takeover Act and the Squeeze-Out Act 2012. In the context of a takeover bid, a bidder that holds at least 95% of the capital and voting rights in the relevant company has the right to launch a follow-on squeeze-out for the remaining shares. This right must be exercised within three months of the end of the bid acceptance period.

The remaining minority shareholders may challenge the price proposed by the majority shareholder by filing an objection with the CSSF, which will decide on the price to be paid by the majority shareholder for the shares.

Another sell-out procedure allows minority shareholders to sell their shares for a fair price to a majority shareholder when the latter holds (alone or in concert) shares representing more than 90% of the target's voting rights.

6.4 How does a bidder demonstrate that it has committed financing for the transaction?

A bidder can announce a bid only if it:

  • can provide the necessary funding in cash; or
  • has taken all reasonable measures to ensure the delivery of any consideration in kind.

A bidder must include in its offer prospectus information concerning the financing of the takeover bid.

Equity commitment letters and/or debt commitment letters usually serve as evidence that the acquisition vehicle will have sufficient funds to finance the acquisition.

Escrow accounts may also be used to guarantee that sufficient financing will be made available.

6.5 What threshold/level of acceptances is required to delist a company?

A decision to delist will typically be taken by the issuer's board of directors (or any other corporate body designated in its articles of association), in accordance with the rules and thresholds set out in the company's articles. The Rules and Regulations of the Luxembourg Stock Exchange (LuxSE) provide that an issuer of securities must send a justified request to LuxSE if it wishes to be delisted. LuxSE will take into account the interests of the stock market as well as those of investors, and set a date as of which the suspension or withdrawal of the issuer's securities will take effect. It may request that the issuer issue a press release sufficiently in advance of the date on which the suspension or withdrawal is scheduled to take effect.

6.6 Is 'bumpitrage' a common feature in public takeovers in your jurisdiction?

Bumpitrage is a common strategy of shareholder activists. In our experience, it is more common in North America and the United Kingdom than in Luxembourg, where there is less shareholder activism.

6.7 Is there any minimum level of consideration that a buyer must pay on a takeover bid (eg, by reference to shares acquired in the market or to a volume-weighted average over a period of time)?

In the context of a voluntary bid, the consideration proposed is deemed fair when the bidder acquires at least 90% of the voting rights targeted in the initial public takeover bid.

For a mandatory offer, the price must be 'equitable', which Article 5(4) of the Takeover Act defines as the highest price paid for the same shares by the bidder, or by persons acting in concert with the bidder, over a period of 12 months prior to the bid. If, after the bid has been made public and before the offer closes, the bidder (or any person acting in concert with the bidder) purchases securities at a price higher than the offer price, the bidder must increase its offer to this price.

6.8 In public takeovers, to what extent are bidders permitted to invoke MAC conditions (whether target or market-related)?

The Takeover Act regulates only the conditions for mandatory takeover bids. Voluntary bids may be made contingent on reaching a specified percentage of the share capital or voting rights. In theory, it is possible for an offer to be made subject to a MAC clause, in which case the offer will often provide that occurrence of a MAC must be evidenced by an auditor's opinion, to be provided on or prior to the day before publication of acceptance of the offer.

6.9 Are shareholder irrevocable undertakings (to accept the takeover offer) customary in your jurisdiction?

A bidder may seek to obtain from reference shareholders commitments to tender or vote, although the enforceability of 'hard' undertakings to tender is debatable and has never been tested before the Luxembourg courts. However, such commitments must comply with the requirements of the Act of 30 May 2018 on markets in financial instruments.

7 Hostile bids

7.1 Are hostile bids permitted in your jurisdiction in public M&A transactions? If so, how are they typically implemented?

There is no particular legal impediment to launching a hostile bid in Luxembourg. The rules on and the procedure for hostile bids are set out in the Takeover Act, which imposes restrictions on the target.

However, since hostile bids do not have the support of the target's board of directors (in particular, during the due diligence process), they are not common. As hostile bids are not supported by the target's board, due diligence is usually limited to publicly available information. However, given the increase in market transparency, the bidder may already have access to a significant amount of information.

7.2 Must hostile bids be publicised?

Friendly and hostile bids must be publicised in accordance with the provisions of the Takeover Act, which requires that the bidder immediately make public its decision to launch a bid and that the Commission de Surveillance du Secteur Financier (CSSF) be informed of the bid before the decision is made public.

7.3 What defences are available to a target board against a hostile bid?

Luxembourg has implemented an opt-in system, whereby companies have the option of applying the provisions of Articles 10(2) and 10(3) (board neutrality rule), as well as Article 12 (breakthrough rule) of the Takeover Act. This opt-in is reversible. The decision to opt in is taken by the general meeting of shareholders in accordance with the rules applicable to amendment of the company's articles of association, and must be communicated to the CSSF and all supervisory authorities of EU member states in which the company's securities are admitted to trading on a regulated market or where such an admission has been requested.

In accordance with the Takeover Act, when a bid is made public, any action by the target's board of directors to frustrate the bid must be authorised by the company's shareholders (except for researching alternative bidders).

Pursuant to the board neutrality rule, the target's board must call a general meeting of shareholders to approve or confirm:

  • any decisions taken before the acceptance period which do not form part of the ordinary course of the company's business and whose implementation could result in frustration of the bid; and
  • any decisions taken during the acceptance period that could result in frustration of the bid.

Pursuant to the breakthrough rule, any restrictions on the transfer of securities provided for in the target's articles of association will not apply to the bidder during the time allowed for acceptance of the bid.

Companies that have not opted in may be able to use defensive measures to thwart a bid. The board's actions must be in the target's overall interest and comply with financial market rules.

The articles of association can allow the board to:

  • cancel or limit any preferential subscription rights;
  • issue new shares solely to certain shareholders, employees or similar;
  • reserve an issuance to certain classes of shares; or
  • issue warrants/stocks options or convertible debt instruments.

More aggressively, the board may decide to sell to a third party some of its 'crown jewels'; but this tactic could be considered to breach the target's corporate interest.

Finally, the board can seek alternative bidders to frustrate a public takeover bid.

8 Trends and predictions

8.1 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?

Like the rest of the world, the Luxembourg M&A market has been affected by the COVID-19 pandemic. Currently, there are two main trends in private M&A transactions:

  • regular M&A activity for steady businesses that were not or were only slightly affected by the crisis; and
  • the purchase of distressed businesses at discounted prices.

Despite the COVID-19 pandemic, M&A activity in Luxembourg has remained quite stable. However, due to the measures taken in response, we have noticed an increase in 'virtual' deals, with the use of qualifying electronic signatures in place of wet ink signatures, as well as virtual meetings.

8.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms? In particular, are you anticipating greater levels of foreign direct investment scrutiny?

As discussed in question 3.1, it is expected that the foreign direct investment screening bill – which is still at a relatively early stage of the legislative process and subject to further amendment – will need to be taken into consideration for M&A transactions. Though not yet in its final form, the bill provides for a screening mechanism based on a prior notification obligation and a pre-evaluation procedure.

9 Tips and traps

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

The vast majority of M&A transactions in Luxembourg involve cross-border aspects. Coordination and communication with the advisers and other parties involved (eg, buyer, seller, target, management team, insurance company, third-party debt provider) in the various jurisdictions are key to a successful closing. Other important parts of the Luxembourg legal adviser's role in achieving a smooth M&A process include:

  • understanding the economics of the deal and the global picture;
  • managing cultural differences;
  • operating efficiently in different time zones; and
  • ensuring adequate staffing.

Co-Authored by Antoine Laniez, Audrey Derep and Paul Leconte

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.

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