484 16 Key Provisions of the Acquisition Agreement
the exact mechanism of price reduction or damages (a dynamic component, see
Volume II).
Adjustment by virtue of the principle of equivalent treatment. In a share deal,
provisions of company or securities markets law can force the acquirer to pay
more to the target company’s other shareholders if the acquirer pays more to all
vendors of shares or at least one of them.
The adjustment of the purchase price by virtue of the principle of equivalent
treatment may become necessary in three situations: when the vendors are pro-
tected by particular provisions of law; when the vendors are protected by particu-
lar regulations in the articles of association of the target; and when the offer is a
public offer made for securities admitted to trading on a regulated market.
First, depending on the governing law, the price paid by the acquirer for target
shares to someone can influence the price that the acquirer must pay to all holders
of target shares in the context of certain transactions in which the vendors are le-
gally forced to sell their shares. Such transactions include squeeze-out or sell-out
procedures, mergers, and divisions.
Second, depending on the governing law, similar rules can be found in the tar-
get’s articles of association.^80 They are sometimes used as takeover defences (sec-
tion 18.4).
Third, there are particular rules on the adjustment of the price in the context of
public bids. The purpose of those mandatory provisions of takeover law is to en-
sure the equivalent treatment of all holders of target securities of the same class.^81
For example, where the Directive on takeover bids applies and the offeror makes a manda-
tory bid, the equitable price that the offeror must offer to pay is based on the highest price
paid by the bidder during a certain period of time before the bid and after the bid has been
made public. In the latter case, the following rule will apply: “If, after the bid has been
made public and before the offer closes for acceptance, the offeror or any person acting in
concert with him/her purchases securities at a price higher than the offer price, the offeror
shall increase his/her offer so that it is not less than the highest price paid for the securities
so acquired”.^82 The provisions of the Directive on takeover bids permit Member States to
authorise their supervisory authorities to adjust the equitable price provided that general
principles such as the principle of equivalent treatment are respected.^83 Member States may
also provide that the price already paid to target shareholders who have accepted the offer
will be increased ex post where the offeror pays a higher price in the context of a manda-
tory bid following a voluntary bid or in the context of a squeeze-our or sell-out procedure.
Share Offers
In share offers, the adjustment of the consideration is more complicated, because a
share offer basically involves the parallel acquisition of the target (in a share deal
or an asset deal) and the acquisition of shares in the acquirer (the consideration).
(^80) In a German AG, however, to contents of articles of association are constrained by
§ 23(5) AktG (“Satzungsstrenge”).
(^81) Article 3(1)(a) of Directive 2004/25/EC (Directive on takeover bids).
(^82) Article 5(4) of Directive 2004/25/EC (Directive on takeover bids).
(^83) Article 5(4) of Directive 2004/25/EC (Directive on takeover bids).