Mergers & Acquisitions

In Greece, private and public M&A transactions can be structured either as asset deals or as share deals. Asset deals involve the transfer of specific assets and liabilities, while share deals involve the transfer of shares in a company. Additionally, corporate transformations such as mergers, hive-downs or divisions can be used, which result in the universal succession of the transferred business by the transferee by operation of law. Public M&A transactions typically involve tender offers – either voluntary or mandatory – for the acquisition of shares in publicly listed companies, depending on the percentage of voting rights acquired.

• Asset deals:
• • Advantages: Flexibility in selecting specific assets and liabilities; potential for lower transaction costs.
  • Disadvantages: Complexity in transferring individual assets and liabilities; potential for higher tax implications.
• Share deals:
• • Advantages: Simplicity in transferring ownership; continuity of business operations and contracts.
  • Disadvantages: Assumption of all liabilities, including unknown or contingent liabilities; potential for higher due diligence costs.
• Corporate transformations:
• • Advantages: Universal succession by operation of law; potential tax incentives; streamlined transfer process.
  • Disadvantages: Regulatory complexity; potential for higher legal and administrative costs.

Several factors influence the choice of sale process and transaction structure in M&A transactions in Greece:

• Tax considerations: The tax implications for both the buyer and seller, including potential tax incentives for corporate transformations.
• Regulatory requirements: The need for regulatory approvals and compliance with sector-specific regulations.
• Liability concerns: The desire to limit the assumption of liabilities, which may favour asset deals over share deals.
• Business continuity: The importance of maintaining business operations and existing contracts, which may favour share deals.
• Transaction costs: The overall costs of the transaction, including legal, administrative and due diligence expenses.
• Timing: The urgency of completing the transaction, with corporate transformations potentially offering a more streamlined process.

During the initial preparatory stage of an M&A transaction in Greece, the following documents are typically entered into:

• Confidentiality agreement: This ensures the secrecy of commercially sensitive information shared during the due diligence process.
• Exclusivity agreement: This legally commits the seller to deal exclusively with the potential buyer for a specified period, allowing the buyer to conduct due diligence and decide on the acquisition.
• Letter of intent or term sheet: This outlines the main terms and conditions of the proposed transaction, which may or may not be legally binding depending on the parties’ intention and the wording.

Break fees are not very common in Greece. They may be agreed between the parties at their sole discretion and are subject to the general principles of Greek private law, such as the prohibition on the abusive exercise of rights.

In Greece, acquisitions are commonly financed through a combination of debt and equity. Buyers often use:

• their own funds, including new equity; and
• external financing such as loans or the issuance of notes.

Bank financing, including classic bank loans and bond loans, is also prevalent. Bond loans are favoured due to their preferential tax treatment and ease of transfer.

The initial preparatory stage of an M&A transaction in Greece typically involves the following advisers and stakeholders:

• Legal advisers: To handle legal due diligence, structuring and documentation.
• Financial advisers: To conduct financial due diligence and valuation.
• Tax advisers: To assess the tax implications and optimise the transaction structure.
• Technical advisers: If required, based on the nature of the target’s activities.
• Directors and key management: To provide insights into the target’s operations and strategic fit.

Law 4548/2018 imposes restrictions in relation to financial assistance (a whitewash process may be required to comply with these rules) and related-party transactions.

In Greece, there are no ex ante specific points relating to the standard aspects of legal, financial and tax due diligence. The due diligence exercise is shaped by:

• the complexity and the particular sector of the target; and
• the risk appetite of the buyer.

Common public searches conducted as part of due diligence in Greece include the following:

• Commercial Registry: For information on the company’s:
• • articles of association;
  • representation;
  • financial statements; and
  • good standing.
• Insolvency Registry: For information on bankruptcy petitions and decisions.
• Land Registry and Cadastre: For information on:
• • rights in rem on real estate property; and
  • assignments on business receivables.

Pre-sale vendor legal due diligence is common in Greece, especially in case of a bidding sale process. Vendor due diligence reports are often provided to prospective buyers, which may rely on these reports if:

• the advisers have consented to such reliance; and
• the potential buyer’s internal policy provides for such a scenario.

The liability cap for reliance on vendor due diligence reports is typically negotiated between the parties and may vary based on the transaction’s specifics.

In certain sectors, transactions are subject to prior approval by the respective supervising or regulatory authority – for example:

• the Bank of Greece for credit and financial institutions or insurance companies;
• the Hellenic Capital Market Commission for investment firms;
• the Hellenic Gaming Commission for gaming companies; and
• the Regulatory Authority for Energy, Waste and Water.

Furthermore, in certain sectors, special restrictions may apply; for example, the foreign ownership of gas and electricity companies is prohibited when the same buyer already holds a stake in a domestic power supplier.

Non-sector specific regulatory approval relates to the merger control system. The Hellenic Competition Commission (HCC) must be notified in advance of proposed business combinations meeting relevant thresholds prescribed by Law 3959/2011 on the Protection of Free Competition.

The primary bodies responsible for supervising M&A activity in Greece include the following:

• HCC: This body oversees merger control and competition law compliance.
• Hellenic Capital Market Commission: This body supervises transactions involving listed companies and investment firms.
• Sector-specific regulators: These oversee transactions in their respective sectors and include:
• • the Bank of Greece;
  • the Regulatory Authority for Energy, Waste and Water; and
  • the Hellenic Gaming Commission.

These bodies have the power to:

• review, approve or block transactions;
• impose conditions or remedies; and
• ensure compliance with relevant laws and regulations.

Transfer taxes in Greece vary based on the type of asset being transferred, as follows:

• Shares: Share sales are exempt from value-added tax (VAT) and stamp duty. Listed shares are subject to a transaction tax of 0.2%, owed by the seller.
• Business transfers: Transfers of business assets may be subject to VAT (24%) or stamp duty (2.4%), depending on the VAT status of the parties. While VAT is borne by the buyer, stamp duty is usually:
• • borne jointly by both parties; or
  • a matter of agreement between the parties.
• Real estate: Transfer tax is generally 3%, plus a municipal tax of 0.09%. Additional costs include:
• • Land Registry fees (approximately 5.75% to 5.95%); and
  • notary fees.
• The buyer typically bears these costs.

Income tax on capital gains from M&A transactions depends on:

• the legal status of the seller (individual or legal entity); and
• the VAT status (and tax residency).

In Greece, sellers typically provide representations and warranties covering various aspects of the target. These include:

• title to shares and assets;
• the amount and composition of share capital;
• past tax and other liabilities;
• the accuracy of financial statements;
• the lack of encumbrances on assets;
• good standing;
• regulatory compliance;
• intellectual property;
• data protection; and
• employment issues.

Specific representations may be added depending on:

• the sector or the business of the target; and
• the due diligence findings.

Breach of these representations and warranties can lead to claims for damages by the buyer. The seller may be liable for any losses incurred due to inaccuracies or misrepresentations, and the buyer may seek indemnification for specific breaches.

Customary limitations on a seller’s liability in Greek M&A transactions include time and quantum limits, such as:

• de minimis amounts;
• overall cap amounts; and
• tipping baskets.

Greek law does not allow limitations on liability in cases of gross negligence or wilful misconduct. The statute of limitations for claims is typically:

• two years for movables (including shares);
• five years for real estate properties; and
• five years for tax claims.

The statute of limitations for claims can be extended under certain conditions.

The use of warranty and indemnity (W&I) insurance in high-value M&A transactions is increasing. Typically, the buyer arranges for this insurance before:

• finalising the sale and purchase agreement (SPA); or
• completing the transaction.

W&I insurance provides coverage for:

• the seller’s representations and warranties; and
• indemnities outlined in the SPA.

The cost of the premium is generally a percentage of the total insurance coverage limit and must be paid in full when the policy is initiated. Common exclusions from this insurance include:

• any disclosures made in the SPA;
• findings from due diligence;
• forward-looking warranties; and
• high-risk areas such as bribery and corruption.

To ensure that a seller has sufficient substance to meet any claims, buyers in Greece often use escrow agreements or bank guarantees:

• An escrow agreement involves retaining a portion of the purchase price in an escrow account until certain conditions have been met or risks have been resolved.
• Bank guarantees provide additional security by ensuring that funds are available to cover potential claims.

These mechanisms help to mitigate the risk of the seller being unable to fulfil its obligations post-closing.

Sellers in Greece often give restrictive covenants in sale and purchase agreements to protect the buyer’s interests. These typically include:

• non-compete clauses;
• non-solicitation clauses; and
• confidentiality clauses.

The enforceability of these covenants depends on their reasonableness in terms of:

• duration;
• geographical scope; and
• the nature of the business.

Generally, non-compete and non-solicitation covenants are enforceable for up to two years.

In Greek M&A transactions, it is common to have conditions to closing, especially when there is a gap between signing and closing. Typical conditions include:

• the absence of a MAC; and
• the bring-down of warranties.

These conditions ensure that:

• the target’s situation remains stable; and
• the representations and warranties provided at signing are still accurate at closing.

Other common conditions include:

• obtaining regulatory approvals; and
• fulfilling pre-closing covenants.

The bidder must:

• inform the board of directors of the target about the commencement of the process; and
• release a prospectus that includes all necessary details for the bid, which must be approved by the Hellenic Capital Market Commission within 10 to 20 working days.

Once approved, the prospectus must be made public within three days at the offices of the bidder and its adviser. An acceptance period, lasting from four to eight weeks, then begins. During this period, the prospectus, along with an opinion from a financial adviser, must be provided to the employees of the target. At the conclusion of the acceptance period, the results of the public bid must be disclosed to the public.

The Transparency Law (3556/2007) provides that certain disclosure requirements are triggered when an individual or entity reaches, surpasses or falls below specific thresholds of total voting rights in a target (5%, 10%, 15%, 20%, 25%, 33.33%, 50% and 66.66%). Additionally, disclosure is required if a person holding more than 10% of the voting rights experiences an increase or decrease in its holding by 3% or more.

There are heightened disclosure obligations following the announcement of a takeover offer. Specifically, the following parties must disclose to the Hellenic Capital Markets Commission and the public any acquisition of shares and the acquisition price:

• the bidder;
• any individual or entity holding at least 5% of the voting rights in the target; and
• the members of the board of the company whose shares are being offered as consideration.

This obligation also extends to any individual or entity that acquires at least 0.5% of the voting rights in:

• the target;
• the bidder; or
• the company issuing securities.

In the context of public takeovers, once a takeover bid has been submitted, a bidder that successfully acquires at least 90% of the total voting rights in the target is entitled to request the transfer of all remaining shares of the target to it. This right – known as the squeeze-out right – can be exercised within three months of the expiry of the takeover bid’s acceptance period. When this right is exercised, the compensation for the acquisition of the remaining shares must be in the same form and at least equal to the compensation offered in the original takeover bid.

In a tender offer, the bidder must include a signed cash confirmation from an EU credit institution for an amount equal to 100% of the tender offer consideration, plus any applicable fees and taxes. This confirmation must:

• be included in the tender offer prospectus; and
• remain valid until completion of the tender offer.

To delist a company in Greece, the bidder must acquire at least 90% of the total voting rights in the target through a tender offer. Once this threshold has been reached, the bidder can exercise the squeeze-out right to acquire the remaining shares, leading to the delisting of the company. Shareholders holding at least 95% of the capital of a société anonyme also have the right to squeeze out minority shareholders by paying fair compensation determined by the court.

Bumpitrage – where shareholders push for a higher offer price during a takeover bid – is not a common feature in Greek public takeovers. The regulatory framework and market practices in Greece do not typically encourage such strategies. However, shareholders may still negotiate for better terms or seek alternative offers, especially if they believe that the initial offer undervalues the target.

In the case of a mandatory public bid, the consideration for the price per share cannot in any circumstance be less than:

• the average market price in the last six months before the date on which the bidder was obliged to file a takeover bid; or
• the price at which the bidder acquired other shares during the last 12 months.

In the context of public offerings, a mandatory takeover bid must not include any terms or conditions except those pertaining to the acquisition of necessary administrative or regulatory approvals. Conversely, in a voluntary takeover bid, the bidder has the flexibility to:

• specify a minimum number of shares that must be tendered by shareholders for the obligation to purchase the shares to take effect; and
• set a cap on the number of shares that it is required to buy.

Shareholder irrevocable undertakings to accept a takeover offer are not very common in Greece.

Although hostile bids are not expressly mentioned in Law 3461/2006 for public takeovers, such bids are allowed, provided that the general statutory provisions regulating takeovers are observed.

In the case of a public takeover, prior to submission of the bid, the potential bidder must:

• notify:
• • the target’s board of directors; and
  • the Hellenic Capital Market Commission; and
• make a public announcement of the tender offer, disclosing the minimum required content under the applicable provisions, to ensure transparency and enable shareholders to make informed decisions.

The primary defence available to a target board against a hostile bid in Greece is to seek alternative offers. However, the board of directors must remain neutral and may not take any action that might frustrate the tender offer without obtaining prior authorisation from the general meeting of shareholders. The board can also issue a negative opinion on the tender offer:

• providing reasons for its opposition; and
• encouraging shareholders to reject the bid.

The M&A landscape in Greece is vibrant, driven by:

• economic stability;
• legislative reforms; and
• increased foreign investment.

Significant deals in the past 12 months include:

• the divestment of stakes in major Greek banks by the Hellenic Financial Stability Fund; and
• the merger of Attica Bank with Pancreta Bank.

The energy sector continues to see substantial M&A activity, particularly relating to renewable energy projects; while the real estate and hospitality sectors also remain active, with substantial project developments and acquisitions of distressed assets. Another sector gaining significant traction over the last months is private education, with foreign educational institutions entering the Greek market by acquiring stakes in and facilitating partnerships with Greek private schools.

In the next 12 months, Greece is expected to continue attracting foreign direct investment (FDI), particularly in strategic sectors such as energy, hospitality and technology. Legislative reforms, including a new Development Law, are anticipated to further enhance the investment climate. The introduction of an FDI screening mechanism in line with EU standards is also expected, which may increase scrutiny of foreign investments. These developments are likely to:

• maintain the positive trajectory of M&A activity; and
• create new opportunities for investors.

To ensure the smooth closing of M&A transactions in Greece, it is essential to:

• conduct thorough due diligence;
• clearly define the terms and conditions in the transaction documents; and
• obtain all necessary regulatory approvals.

Potential sticking points include:

• discrepancies in valuation;
• regulatory hurdles; and
• unforeseen liabilities.

Effective communication and collaboration between all parties involved are crucial for a successful transaction.