1. Relevant Authorities and Legislation

1.1 What regulates M&A?

The acquisition of publicly-traded Israeli companies is governed primarily by the Companies Law, 5759-1999 (the "Companies Law") and the Securities Law, 5728-1968 (the "Securities Law"). In particular:

  • Sections 314 to 327 of the Companies Law deal with acquisitions by way of merger. These sections are augmented by the Companies Regulations (Merger), 5760-2000.
  • Acquisitions by way of tender offer are governed by Sections 336 to 340 of the Companies Law, and by the Securities Regulations (Tender Offer), 5760-2000.
  • Acquisitions by way of a court-approved merger or similar arrangements are governed by Sections 350 and 351 of the Companies Law, as well as by the Companies Regulations (Application for Settlement or Arrangement), 5762-2002.
  • The Securities Regulations (Periodical and Immediate Reports), 5730-1970 govern the reporting obligations of public Israeli companies that are party to a merger.
  • In the event that securities, and not cash, are used as consideration for an acquisition, then the provisions of Section 15 of the Securities Law dealing with the requirements for a prospectus are also implicated.

Additional regulatory schemes also play a role in regulating acquisitions (see question 1.4 and question 2.12 below).

Please note that often companies known to the business world as "Israeli companies" are in fact companies organised under the laws of the State of Delaware or other jurisdictions, operating in part through Israeli subsidiaries. In these cases, the acquisition would be governed primarily by U.S. law, but some of the various regulatory approvals described below may nevertheless be required.

1.2 Are there different rules for different types of public company?

For the most part, the acquisition of an Israeli public company will be structured and implemented in the same manner regardless of whether the company trades solely on the Tel Aviv Stock Exchange (TASE) or trades on a foreign exchange. However, Israeli companies that are traded solely overseas, or that are dual-listed on the TASE and on a recognised non-Israeli exchange, may benefit from certain dispensations:

  • Foreign/dual-listed companies need not conform with the Israeli law requirements for a Special Tender (see question 5.1 below) where the relevant foreign law places limitations on such companies' tenders for acquiring control of target companies, or where acquiring control obligates the offeror to make a tender to the shareholders among the general public. [Note that U.S. law is not deemed to comply with these requirements.]
  • Under new regulations, Israeli law requirements concerning proxy statements need not be followed where shareholders will be provided with proxy statements pursuant to applicable foreign law.
  • The reporting requirements under the Securities Regulations (Periodic and Immediate Reports), 5730- 1970 do not apply to Israeli companies traded abroad or dual-listed, although the foreign filings of dual companies are required to be filed in Israel as well.

1.3 Are there special rules for foreign buyers?

In general, there are no inward investment restrictions and foreign buyers are encouraged to invest in Israeli companies. However, there are certain restrictions on the ownership by non-Israeli entities or persons of interests in Israeli companies in certain sensitive industries (see question 1.4 below). In addition, nationals of some countries that are, or have been, in a state of war with Israel, may not own securities in Israeli companies.

1.4 Are there any special sector-related rules?

There are a number of specific industrial sectors with regulatory requirements that would affect the process of an acquisition:

  • The acquisition of 5% or more of the shares of a bank or a bank holding company requires a permit issued by the Governor of the Bank of Israel after consultation with the Bank of Israel's Licensing Committee.
  • The acquisition of 5% or more of the shares of an insurance company requires a permit from the Superintendent of Insurance Businesses.
  • The acquisition of certain percentages in companies providing telecommunications services may require a licence from the Ministry of Communications.
  • The acquisition of 5% or more of the shares of El Al (the Israeli national air carrier) requires a permit from the government.
  • In certain cases regarding the acquisition (primarily by means of privatisation of government companies) of companies controlling natural resources or essential services, the State of Israel will retain certain veto rights and other powers.

See also the discussion in question 2.12 below regarding general consents and regulatory approvals that may be required in an acquisition transaction.

1.5 What are the principal sources of liability?

Liability, for the most part, will derive from failure to address the technical rules that apply to the tender offer process and to any misrepresentation made by an offeror in offer documents. There are additional rules of general application that apply to such matters as insider trading and market manipulation. Civil and criminal sanctions can apply to companies and to their directors and officers.

2 Mechanics of Acquisition

2.1 What alternative means of acquisition are there?

There are three primary procedures to gain 100% of the shares of a public company:

  • Reverse Triangular Merger. Since the coming into effect of the Companies Law in 2000, the reverse triangular merger has become the most common way for a non-Israeli company to gain full ownership of an Israeli public company. The acquirer typically establishes a wholly-owned subsidiary in Israel ("Merger Co"). Merger Co merges with and into the Israeli target company, with the Israeli target surviving the merger and becoming a wholly-owned subsidiary of the acquirer. The consideration payable to the shareholders of the Israeli target company may be cash or the acquirer's stock, or a combination of the two. The board of directors and the shareholders of the target company need to approve the transaction in the manner set forth in question 2.12 below.
  • Tender Offer. The acquirer makes an offer to purchase some or all of the shares of the target company. The offer may be conditioned upon successful acquisition of all of the shares of the target company. If the requisite majority of target shareholders approve, then the acquirer can acquirer 100% of the shares of the target. Two problems render this procedure impractical at best if the goal is to acquire all of the shares of the target: first, the holders of 95% of the issued and outstanding shares of the target (not 95% of the shares of responding shareholders) must respond positively to the offer, a percentage that most investment bankers and other advisers find daunting; second, target shareholders, whether or not they accept the tender offer, have a three-month window, following consummation of the transaction, to apply to the court to challenge the fairness of the transaction. These problems are not as acute if the goal is to acquire control, and not necessarily full ownership, of the target.
  • Court-Approved Merger. Sections 350 and 351 of the Companies Law appear, on their face, to deal with arrangements between companies and their creditors and shareholders. However, on the basis of certain English precedents, these statutes have been used to effect mergers between two companies. The procedure requires two applications to the court: one to authorise the convening of a special meeting of the shareholders and creditors of the target company; and a second to approve the arrangement reached by the creditors and shareholders. In the current regulatory climate, this procedure, although cumbersome and requiring court approval, enables the parties to surmount certain difficulties posed by Israeli securities law. See question 2.6 below.

Tender offers aimed at acquiring control, but not full ownership, of the target are discussed in question 5.1 below.

2.2 What advisers do the parties need?

Typically, in order to execute an acquisition transaction, the parties will need the following advisers:

  • Legal Counsel. Assuming the acquirer is not an Israeli company, it will require Israeli legal counsel and may also require U.S. (or home country) legal counsel. Israeli counsel is required to make sure that the applicable corporate, regulatory and tax matters are properly considered. U.S. (or home country) counsel may be required to assure compliance with the acquirer's internal corporate requirements and with applicable non-Israeli securities antitrust, and other laws. The target company can often make do with just Israeli counsel.
  • Investment Bankers. In larger transactions, both the acquirer and target will be advised by investment banking firms, who guide the parties, sometimes help structure the transaction, and, with respect to the target, are called upon to give independent appraisals of the fairness of the consideration being offered to the target shareholders.
  • Accountants. Often accountants for one or both parties are involved in conducting due diligence and obtaining tax rulings (as described in question 2.12 below).

2.3 How long does it take?

The timetable is a function of the structure of the transaction:

  • Reverse Triangular Merger. Once the merger agreement is negotiated and signed, which can take anywhere from several weeks to several months, each of the merging parties must provide notice to its shareholders of the convening of a shareholders meeting for purposes of approving the merger, and file a formal "merger proposal" with the Israeli Registrar of Companies. The filing of the merger proposal (which is a relatively short, technical document, with information about the parties and terms of the transaction) starts a time clock, and the merger can only take effect on the later of: (i) 50 days from the filing; or (ii) 30 days from the approval of the shareholders of each of the merging companies.
  • Tender Offer. A tender offer for full ownership of the target company is commenced by the filing of a tender offer memorandum (the "Tender Memorandum"), which must state the last date for accepting the offer (the "Final Date"). The Final Date must not be sooner than 14 days nor later than 60 days following the date of the Tender Memorandum. If, by the Final Date, the target shareholders who did not accept the offer constitute less than 5% of the target company's issued share capital, the acquirer may acquire all of the shares of the target company. The shareholders (even those accepting the offer) then have the right within three months of acceptance to approach the court to seek a determination that the consideration was less than fair value.
  • Court-Approved Merger. Once the merger agreement is negotiated and signed, which can take anywhere from several weeks to several months, the target company files an application to the Israeli court to authorise the convening of a meeting of shareholders and, if relevant, creditors. The court will typically respond within two weeks, but is not required to do so. The response will authorise the holding of a meeting of shareholders and creditors, typically within approximately 30 days. After the meeting is held, the court is again petitioned to approve the results of the meeting. The total time elapsed is approximately 60 days from the initial court application, although the time may be extended if the court does not rule on the various applications in a timely manner.

2.4 What are the main hurdles?

The principal milestones are: (i) preparation of a term sheet or letter of intent (not legally required, and not required at all in the case of a tender offer); (ii) performance of legal, business and accounting due diligence; (iii) drafting and negotiation of a definitive merger agreement (in the case of a merger) or Tender Memorandum (in the case of a tender offer). Thereafter, the continuation depends on the structure that has been selected:

  • In a tender offer, the offer is made and it is then determined whether there has been a sufficient positive response. Receiving the required 95% response is the main hurdle.
  • In a reverse triangular merger, the parties give notice of and hold shareholder meetings, make statutory notices to creditors and workers committees, and wait for the statutory "time clock" to lapse. Receiving the requisite shareholder approval is the main hurdle.
  • In a court-approved merger, the parties apply to the court first to hold a meeting of shareholders and creditors, and next to approve the results of the meeting. Obtaining the requisite shareholder and court approvals are the main hurdles.

2.5 How much flexibility is there over deal terms and price?

With respect to reverse triangular mergers and courtapproved mergers, there are no rules that dictate minimum offer price or other deal terms. With respect to tender offers, the offer must be made in writing to all the shareholders of the target, and the offer must be on equal terms for all target shareholders holding the same type of security. Even where a tender is approved by the requisite majority of shareholders, in the case of a "full" tender offer, any shareholder may still appeal to the court to determine that the terms of the offer are less than fair value. Case law in Israel indicates that the court in such cases will not necessarily accept the market (trading) value of the shares as the fair value, and may determine a fair price based on the asset value (assets less liabilities) of the company.

2.6 What differences are there between offering cash and other consideration?

Apart from cash, the most common consideration used in the acquisition of Israeli companies is the publicly-traded stock of the acquirer. The use of the acquirer's securities as the "currency" for the acquisition raises issues under the Securities Laws. In general, unless an exemption is available, the offer of securities (including the securities of an acquirer) to more than 35 Israeli resident offerees (including the shareholders and option holders of the target) requires an Israeli prospectus. Israeli "institutional" investors, as defined in the Securities Laws, are not included in the 35. In addition, exemptions are available with respect to the assumption of the options held by the targets option holders. There are four ways to deal with this issue:

  • An Israeli prospectus may be prepared. An Israeli prospectus must be prepared in the Hebrew language. Doing so is expensive, time-consuming, and may involve requirements that are inconsistent with or contradict home country securities laws. Moreover, once an Israeli prospectus is prepared and filed, the company becomes subject to Israeli periodic and immediate reporting requirements. As a result, this alternative is not typically used.
  • Structure the transaction as a court-approved merger. In the context of a court-approved merger, as described above, the Israel Securities Authority ("ISA") has the power to grant an exemption to the prospectus requirement. A number of transactions have been done in this manner.
  • Dual-list the acquirer's securities on the Tel Aviv Stock Exchange. If available, the dual listing of the acquirer's securities on the TASE also enables the ISA to permit the transaction to go forward on the basis of the acquirer's U.S. (or other home country) securities filings, without the requirement of a Hebrew language Israeli prospectus. There are at least two examples of transactions done in this manner.
  • Pay the Israeli residents cash. Israeli residents can be provided with the cash equivalent of the securities being offered to the target shareholders.

Each of the above alternatives is problematic. A draft amendment to the Securities Laws has been circulated. If adopted, the amendment would allow the ISA to grant an exemption in an acquisition setting where the acquirer's securities are traded on a recognised foreign exchange, and thus provide relief for this problem.

2.7 Do the same terms have to be offered to all shareholders?

See question 2.5 above.

2.8 Are there any limits on agreeing terms with employees?

In general, employees' approval is not required for a change of control. In certain cases, a change of control of the employer may be deemed constructive termination, entitling the employee to resign and receive severance pay. However, that is not likely to be the case of the employee continues to work in the same position for the same legal entity and at the same premises.

Acquirers typically want to ensure that key target employees have entered into or reaffirmed employment agreements. In doing so, certain restrictions will apply:

  • For the most part, non-competition undertakings will not be enforced against employees. They may be enforced against founder-employees who are receiving significant consideration for the sale of a business.
  • Employees may not waive certain basic rights, including the right to statutory severance, vacation and notice pay.

For the most part, when the target company is in the high tech industry, the employees will not be represented by labour unions and employees will not be seeking to revise the terms of their employment.

2.9 What documentation is needed?

See the descriptions of the different forms of acquisition transaction in questions 2.1, 2.3 and 2.4 above.

2.10 Are there any special accounting procedures?

Companies which are publicly traded in Israel must report the merger to the ISA, and the report must include audited financial statements, in accordance with Israeli GAAP, or in accordance with foreign GAAP for foreign companies, as well as additional details stipulated in the regulations.

2.11 What are the key costs?

The key transaction costs are likely to be legal fees and payments to bankers and accountants. There are some filing fees which are insignificant in comparison to the professional fees (less than $1,000).

2.12 What consents are needed?

Apart from consents that may be required with respect to particular industrial sectors (see question 1.4 above), the following consents and regulatory approvals are typically necessary (or desirable) to execute the transaction:

  • Antitrust. Depending on the size and market share of the merging companies, approval of the Antitrust Commissioner may be required pursuant to the Restrictive Trade Practices Act, 5748-1988.
  • Office of the Chief Scientist. Many Israeli technology companies have received research and development funding from the Office of the Chief Scientist of the Israel Ministry of Industry, Trade and Labour (the "OCS"). If so, OCS approval will be required for the transaction and various restrictions will apply to intellectual property developed with OCS assistance.
  • Investment Centre. Many Israeli companies benefit from "Approved Enterprise Status" or qualify as "Benefited Companies", in each case a tax-advantaged status conferred by the Investment Centre of the Israel Ministry of Industry, Trade and Labour. If the target company has such a status, approval of the Investment Centre will be required.
  • Israel Securities Authority. If the acquirer is assuming any stock options held by target employees or other target option holders, it is possible that an exemption will be required from the ISA. Such exemptions are available as a matter of course if the acquirer's securities are traded on a recognised foreign exchange. In addition, if stock is being used as consideration for the acquisition, there may be other matters requiring ISA approval (see question 2.6 above).
  • Israel Tax Authority. Although not legally required, it is often desirable to obtain pre-rulings from the Israel Tax Authority with respect to two matters: (i) clarifying the withholding obligation imposed on the acquirer in connection with payments made to the selling target shareholders; and (ii) providing that the assumption of option by the acquirer would not result in an immediate tax event for target option holders.

2.13 What levels of approval or acceptance are needed?

The level of approval is a function of the structure of the acquisition transaction:

  • Reverse Triangular Merger. First, the board of directors of each merging company must approve the merger by a regular majority, and must specifically find that, taking into account the financial condition of the merging companies, there is no reasonable concern that the surviving company will be unable to meet the obligations of the merging companies to their creditors. Second, the shareholders of each merging company must approve the merger. The requisite majority will typically be 50% (75% for companies established prior to the entry into force of the Companies Law); however, a greater majority may be fixed in the company's articles of association. If any of the shares of the merging company are held by the other merging company, or by a person or entity holding 25% or more of the means of control of the other merging company, or by a relative of the aforesaid ("Interested Shareholders"), then a majority of the shareholders, excluding the Interested Shareholders, must support the merger. If the merging company is the target company, then each class of securities must approve the merger. Court approval can be substituted for class approval. In certain circumstances, approval of the "absorbing" company as defined under the Companies Law will not be required.
  • Tender Offer. See question 2.1 above with regard to a full tender offer and question 5.1 below with regard to a "special" tender offer.
  • Court-Approved Merger: In addition to the approval of the court, a court-approved merger requires the approval of the majority of the shareholders present and voting, representing at least 75% of the shares present and voting. If there are different classes of shares, then the same approval level is required from each class.

2.14 When is the consideration settled?

If the target is listed on the TASE, payment will be made to the TASE Clearing House, which will distribute the payment among the target shareholders.

3 Friendly or Hostile

3.1 Is there a choice?

One can engage in a hostile acquisition by means of a tender offer made directly to the shareholders of the target. In practice, for the reasons set out in question 2.1 above, the carrying out of a tender offer for 100% control is fraught with uncertainty and not likely to be a realistic option. However, a "special" tender offer for control, as described in question 5.1 below, is a realistic alternative to a friendly arrangement.

3.2 How relevant is the target board?

The approval of the target board of directors is required to implement an acquisition by way of merger or courtapproved merger. The approval is of the target board is not required in connection with an acquisition by means of a full tender offer. The board of the target is required, in connection with a "special" tender offer (see question 5.1 below) to provide its opinion as to whether the offer is "worthwhile" or to explain why it is not providing such an opinion.

3.3 Does the choice affect process?

Yes, a hostile takeover is only possible by means of a tender offer. The other methods of acquiring a company require the cooperation of the target board.

4 Information

4.1 What information is available to a buyer?

Assuming the target is not willing to supply information directly, the bidder can obtain information from several public sources:

  • For companies traded in the TASE, information is available from the TASE and from the ISA. "Magna" is the Israeli equivalent of the SEC's EDGAR, and is hosted by the TASE and the ISA (http://www.magna.isa.gov.il/). Magna's information includes: financial filings (quarterly and annual), detailed annual reports (akin to a 20F or 10K), and reports on substantial events (immediate reports). These are available in Hebrew. Dual-listed companies (listed on non-Israeli exchanges) may make submissions in English.
  • The Israeli Registrar of Companies contains information regarding pledges aganist the company's assets. For private companies, the Registrar of Companies contains additional information, such as the company's articles of association and other filings, such as appointment of directors, share issuances etc. It does not include financial statements.
  • Many Israeli companies are traded abroad, primarily on the Nasdaq, and in such cases information is publicly available from the SEC.

4.2 Is negotiation confidential?

Israeli companies listed only in Israel are required to report any event that is outside the ordinary course of business or which may have a substantial influence on the company or the price of the securities of the company. In general, companies are required to report to the ISA as an "immediate report" the existence of substantially advanced negotiations, even before signing a definitive agreement. These reports are publicly available. Immediate reports may be delayed (and often are) where reporting (i.e. public exposure) may jeopardise the consummation, or detrimentally influence the terms, of the transaction, provided that the information regarding the negotiations was not previously published in the media.

4.3 What will become public?

If a public report is required, then the report must contain the essential elements (consideration, special terms, etc.) of the transaction. In cash transactions (though not in share swaps) it is often possible to avoid disclosing the name of the acquirer, and it is sufficient to provide a generic description such as "a publicly-traded US corporation".

4.4 What if the information is wrong or changes?

In a merger or court-approved merger, the merger agreement will govern the ability of the parties to terminate the agreement in the event of breaches of representations and warranties or discovery of new information. With regard to tender offers, the offeror may retract the tender offer during the time that the tender is "open" for response, if circumstances arise of which the offeror neither knew nor should have known, or which the offeror did not or could not foresee, provided that the unknown or unforeseen circumstances are such that a reasonable offerer would not have made the offer had he known of them at the time of issuance of the Tender Offer Memorandum.

5 Stakebuilding

5.1 Can shares be bought outside the offer process?

Various limitations apply to the purchase of shares outside of or prior to a full tender offer.

  • Special Tender. Where the target is a public Israeli company (listed in Israel or abroad), any acquisition resulting in a shareholding exceeding (i) 25% (where no other shareholder holds at least 25%); or (ii) 45% (where no other party holds 45%) of the voting rights, must be made by means of a "Special Tender", which requires making an offer containing the information required by law on equal terms to all shareholders, and purchasing pro rata from the accepting shareholders. The provisions of the law regarding Special Tenders do not apply where the target company is a foreign or dual-listed company, if the law of the foreign jurisdiction places limitations on the acquisition of control of the company or if acquisition of control obligates the acquirer to make an acquisition offer to all the company's public shareholders.
  • Full Tender. In an offer to buy shares of a public company such that following the acquisition the bidder will hold 90% or more of the company's shares, if holders of less than 5% of the outstanding shares of the target reject the offer, all the shares which the offeror offered to purchase will be transferred to him (i.e. against the will of the holders of less than 5% of the shares). If the holders of 5% of more of the target shares object, then the bidder can only acquire 90% of the target's shares.

5.2 What are the disclosure triggers?

Holders of 5% or more of the voting rights in an Israeli public company must report their identity to the company and thereafter report any additional acquisition of securities, providing details of the number of shares acquired, the consideration paid and certain other information.

5.3 What are the limitations?

In general, a party can acquire shares on the open market or from multiple sellers in private transactions. However, once the party holds 5% or more of the voting rights of the target, he is subject to disclosure as described in question 5.2 above, and once he reaches the triggers described in question 5.1 above, he is subject to the rules of a "special" or "full" tender offer, as applicable.

6 Deal Protection

6.1 Are break fees available?

In the absence of clear statutory direction or case law on the issue of break up fees, the consensus among practitioners is that reasonable break up fees, payable by the target company if it accepts a competing offer, or by a shareholder who fails to vote as promised in favour of a transaction, are permissible under Israeli law.

6.2 Can the target agree not to shop the company or its assets?

Israel has no clear statutory or case law guidance on the issue of "fiduciary outs". Accordingly, some practitioners take the view that a board of directors, in the reasonable exercise of its business judgement, may, consistent with its fiduciary obligations, agree for a reasonable period not to seek or present alternative proposals to shareholders. Others take the view that if the courts were called upon to rule on this issue, they would adopt rules similar to those adopted in the State of Delaware, and would require directors to present superior competing proposals to the shareholders. As a result of this legal lacuna, the issue of the extent of a "no shop" becomes a negotiated commercial issue in Israeli acquisition transactions.

6.3 Can the target agree to issue shares or sell assets?

In general, there is no Israeli statutory or case law that would prohibit the target from issuing shares or selling assets to frustrate an acquisition provided that such steps could be defended as a reasonable exercise of business judgement consistent with fiduciary obligations. Under the Companies Law, in the context of a "special" tender offer, directors and officers who take steps (other than negotiations aimed at improving the offer) intended to frustrate a tender offer will be liable to the bidder and the target shareholders unless they had reasonable grounds to believe that the steps taken were in the best interests of the target company.

6.4 What commitments are available to tie up a deal?

It is common, at the time of signing a merger agreement, to obtain undertakings from major shareholders to vote in favour of the merger. These undertakings are often accompanied by an irrevocable proxy in favour of the acquirer or someone acting on its behalf.

7 Bidder Protection

7.1 What deal conditions are permitted?

The tender offer may include any conditions to the consummation of the offer (such as purchase of a minimum number of shares, or purchase by a particular time).

7.2 What control does the bidder have over the target during the process?

The bidder does not have any control over the target during the process apart from the restrictions on certain activities of directors and officers as described in question 6.3 above.

7.3 When does control pass to the bidder?

The bidder takes over day-to-day control of the target only after it has acquired the target shares and held a shareholders meeting to appoint new directors.

7.4 How can the bidder get 100% control?

The only way to obtain 100% control is through the methods described in question 2.1 above. Israel does not countenance the two-step "tender offer followed by squeeze out of minority". If the initial tender offer does not achieve a 95% positive response, then the bidder can only acquire 90% of the target's shares. If it does so and tries to do a squeeze out merger of the remaining recalcitrant shareholders, it is faced with the voting requirements described in question 2.13 above; i.e., the merger must be supported by a majority of the shareholder excluding the shares held by the bidder. Thus, the same minority that frustrated the full tender offer can frustrate the subsequent merger. Note that the bidder cannot institute the merger process at all unless it had disclosed its intention to do so when making the original tender offer.

8 Target Defences

8.1 Does the board of the target have to tell its shareholders if it gets an offer?

In the case of a full tender offer, the board of the target is not involved. In the case of any other type of transaction, the board is required to act in the best interests of the company, and if the best interests of the company require bringing the proposed transaction to the shareholders for approval, then they are required to do so. However, the board may in the exercise of its business judgement determine that an offer need not be brought to the shareholders since it is not fair, beneficial or worthwhile to the company and its shareholders.

8.2 What can the target do to resist change of control?

Potential target companies concerned about hostile takeovers can enact a number of takeover defences, including:

  • Staggered board of directors. Directors are divided into different classes, with only one third of the directors elected at each annual shareholder meeting, thus making it more difficult to replace the board of directors.
  • "Poison Pill". The consensus among practitioners is that a U.S. model poison pill, permitting the issuance of target shares to all parties other than the unwanted bidder, is permitted under Israeli law.
  • "Blank Cheque Preferred". Blank cheque preferred shares, which are under the control of the directors, may be included in the company's articles of association, but only for companies traded solely abroad. Companies traded on the TASE are only permitted to issue one class of shares.

In all cases, the directors must act in a manner consistent with their fiduciary obligations. See also question 6.3 above.

8.3 Is it a fair fight?

If the goal is to achieve 100% ownership of the target, then the deck is stacked against the offeror, since a 95% positive response is required. If the goal is to achieve control of the target, the playing field is more level, as directors are required to express their view as to the fairness of the proposal, and may negotiate to improve the proposal, but may not otherwise interfere with the bid process.

9 Other Useful Facts

9.1 What are the major influences on the success of an acquisition?

The outcome of the offer process is likely to be influenced by:

  • the amount and type of consideration offered;
  • the proposed plans for the company following acquisition;
  • obtaining the cooperation of the directors and officers of the target; and
  • employing professional advisers.

9.2 What happens if it fails?

A bidder can condition its bid on the achievement of full control, and thus avoid a situation where it bids for full control and finds itself with less than 100% of the shares of the target.


The authors gratefully acknowledge the assistance of Barak Platt and Arye Schreiber in the preparation of this chapter.

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.