Mergers and Acquisitions in Denmark
Mergers and Acquisitions in DenmarkUpdated on Tuesday 13th June 2023
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Denmark offers numerous investment opportunities as it has one of the most developed economies in Europe. Foreign investors seeking to start a business in Denmark have several options, among which registering a new company, buying a shelf company or even buying an existing company on shares in an existing company. The latter falls under the merger and acquisition (M&A) procedures in Denmark. Purchasing a Danish company by merging with it or by acquiring it entirely has various advantages, among which owning a company with an established reputation on the local market.
M&A procedures fall under various laws which can be explained by our lawyers in Denmark.
You can also watch our video below for more information on mergers and acquisitions in Denmark:
Legislation related to merger and acquisition transactions in Denmark
The main laws governing mergers and acquisitions in Denmark are:
- the Commercial Code;
- the Competition Law;
- the Employment Law;
- the Intellectual Property Law;
- the Sale of Goods Law;
- the Income Tax Law.
Considering mergers and acquisitions can target both private and public Danish companies, in the case of public companies this type of transactions fall under the Securities Trading Law and the Takeover Act. Also, mergers and acquisitions between Danish and companies in EU countries fall under EU regulations on M&A transactions. Our Danish law firm can explain the differences between mergers and acquisitions related to the private and public sectors.
Merger and acquisition procedures in Denmark
A foreign investor or company can merge with one or more Danish companies by purchasing them partially or entirely. In the case of acquisitions, foreign investors or companies are allowed to buy shares in a Danish company. No matter the transaction, a thorough company due diligence process is required in order to evaluate the total worth of the Danish company’s assets.
The transaction itself will be completed by drafting and signing a sale-purchase agreement. The terms of the agreement must first be presented to the shareholders of the companies involved in the M&A deal and can also be negotiated.
In cases where the merger and acquisition transactions are above certain thresholds, the deal will be supervised by the Danish Competition Council.
Legal title and transfer of shares, business, and assets
The legal title and transfer of shares, business, and assets are important considerations in the context of mergers and acquisitions in Denmark. Understanding the buyer's acquisition of ownership rights, the liability of the seller, and the necessary legal requirements for protecting the buyer's interests is crucial in conducting Danish mergers and acquisitions transactions.
When a buyer acquires shares in a company, a business, or assets, he/she obtains what is known as "legal title." In Denmark, the legal title represents full and unrestricted ownership rights. Danish law does not differentiate between legal and beneficial title. It is best to consult a lawyer in Denmark before acquiring shares in a company.
The acquisition of legal title is not negotiable and is prescribed by law. As long as the buyer acts in good faith and certain security measures are in place, he/she will gain complete ownership rights.
Under Danish law, the transfer of legal title to shares, businesses, or assets happens automatically by operation of law. It means that once the transfer is completed, the buyer becomes the rightful owner.
The seller bears the responsibility for ensuring the validity of the title being transferred. In case of any deficiencies in the title, the seller is usually held strictly liable, meaning they are responsible for compensating the buyer.
As mentioned before, it is highly advisable to contact a Danish law firm in this process.
Due diligence for mergers and acquisitions in Denmark
Conducting thorough due diligence is essential in M&A transactions. It helps identify potential risks, liabilities, and opportunities associated with the transaction.
In the initial stage of due diligence, the possible financial, operational, and commercial risks and factors that contribute to the value of a deal are thoroughly analyzed. In the case of acquisitions, a specialized lawyer in Denmark can help identify a wide range of cost-saving and growth-oriented strategies. We also advise talking with an accountant in Denmark for more details about finance.
For selling a business, lawyers assist in understanding the risks involved to maintain its value, while also finding ways to increase its worth and exploring potential benefits that may not directly match the remaining organization.
It is important to engage experienced professionals, including legal advisors, financial experts, and industry specialists, to conduct due diligence in mergers and acquisitions transactions in Denmark.
Negotiation in M&A transactions in Denmark
Understanding the rules and practices regarding confidentiality, disclosure, and the timing of making offers and public announcements is crucial when engaging in M&A activities in Denmark.
If a bidder is not given access to due diligence, he/she can only rely on information that is already publicly available. This includes information published by the target company, such as announcements and financial statements on websites such as the Danish Financial Supervisory Authority (FSA). Corporate information, documents, and annual accounts can be obtained or requested from the Danish Business Agency. You can contact our attorneys in Denmark if you need help gathering this information.
Negotiations between the bidder and the target company can be kept confidential if both parties agree. However, once the bidder decides to make an offer, disclosure becomes necessary.
These considerations help both the bidder and the target company navigate the legal and regulatory landscape while protecting sensitive information during the mergers and acquisitions process in Denmark.
If you are interested to learn more about the M&A activities in the country, here are some useful insights:
- In 2021, the level of mergers and acquisitions activity in Denmark was at an all-time height, with 561 transactions involving Danish companies;
- The combined value of all these deals was approximately 5,904.5 million dollars;
- The merger and acquisition deal between Alm Brand AS and Codan Forsikring AS had a substantial value of 1,800.0 million dollars in 2021.
For details on the taxation of the legal entity once the merger or acquisition is complete, you can contact our accountants in Denmark. We offer complete bookkeeping and accounting services focused on keeping the updated ledgers, preparing the annual financial statements, making the needed tax filings and payments, handling payroll, as well as issues concerning value-added tax for companies that are subject to this tax.
For full information on mergers and acquisitions, do not hesitate to contact our attorneys in Denmark. You can also rely on us if you want to open a new company in Denmark.