BUSINESS GROWTH

APRIL 2017
Mergers & Acquisitions

Contents
Providing for valid hold harmless covenants in favor of directors in
Italy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Structuring European M&A activity: why Gibraltar? . . . . . . . . . . . . . . . . . . .7
Aspects to Consider when Closing a Merger in Venezuela . . . . . . . . . . 12
Injunctions in Canada Can Reach Far and Wide . . . . . . . . . . . . . . . . . . . . . 16
Investing in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Securities and Exchange Commission’s Approval: Is it a Sine Qua Non
for every Asset(s) Acquisition Transaction? . . . . . . . . . . . . . . . . . . . . . . . . . 21
In the second term of the Obama Administration . . . . . . . . . . . . . . . . . . 25
Tax advisors in Israel are scrambling to find the best solution . . . . . . . 30
M&A activity in Lebanon has been traditionally embryonic . . . . . . . . . 34

Mergers & Acquisitions
Providing for valid hold harmless covenants in
favor of directors in Italy.
By Alberto Rittatore Vonwiller,
Antonio Franchi
In doing business are commonly set up hold harmless (or indemnity) covenants
to protect directors against actions initiated by the company managed by them,
company’s shareholders or any third party, in relation to the activities carried out
by directors in their office. Such covenants are entered into at the beginning, in the
meanwhile or at the end of a corporate management office or in connection with
extraordinary operations (such as, by way of example, M&A transactions) as well. It
As a consequence, a valid hold harmless covenant
may be entered into in all cases in which a guarantor
assumes damages or liabilities arising from negligent
or grossly negligent actions of the guaranteed towards
third parties.
Nevertheless, it has to be considered that in case
the indemnity covenant refers to the liability of the
guaranteed for acts committed by itself against
the guarantor such indemnity cannot cover grossly
negligent actions, because the exemption in advance
between creditor (guarantor) and debtor (guaranteed)
from responsibility for grossly negligent actions (or
for willful misconduct) is forbidden pursuant to article
1229 of the Italian Civil Code.
Given the above, it is necessary to check whether the
above considerations may also apply as regards the
hold harmless covenant to cover the consequences of
criminal or administrative illegal actions.
Regarding the violation of criminal laws, the above
criteria apply, for which the indemnity is invalid only
if the responsibility of the person indemnified was
caused by his/her willful misconduct.
To this regards it is worthy to mention that it is not
of secondary legislation that regulates the insurance
sector, it is not valid any form of indemnity to cover
risks relating to the imposition of administrative fines.
This is because such an indemnity agreement would
deprive the power of reaction of the State towards the
administrative offenses provided for by provisions for
the protection of the public interest. Nevertheless, an
exception to this principle is made by fiscal rules, by
which for cases of infringement carried out without
fraud or gross negligence, the individual, the company,
the association or the entity may assume the debt of
the person (director) responsible of the infringement
(usually, the CEO or the director charged with the
responsibility of Tax compliance) (see Article 11,
section 6 of the legislative Decree December 18, 1997,
no. 472, as subsequently amended).
An important aspect for the purposes of setting up
a valid hold harmless covenant is represented by
providing for a determined or determinable object.
In fact, it could be argued that a wide hold harmless
covenant – with no indication of a specific event or
behavior from which future liability might arise – may
be held invalid for conflict with Article 1346 of the
Under Italian law such covenants are not specifically
envisaged in the Civil Code, nor in any other law or
regulation, whilst they are qualified atypical guarantees
to be considered valid in case interests worthy of
protection are pursued pursuant to articles 1322
(Freedom of contract), 1343 (Unlawful consideration)
and 1418 (Causes of nullity of the contract) of the
Italian Civil Code.
Therefore, in the Italian system, it is firstly necessary to
ascertain if limits of public policy exist to the eligibility
of atypical guarantees (or atypical contracts / hold
harmless covenants). To this regards, it is commonly
accepted that it is contrary to the public policy only the
covenant to indemnify a party from damages deriving
from its willful misconduct (or damages related to
intentional abuse).
admissible a hold harmless covenant to protect the
directors who committed the crime of false accounting
as envisaged by article 2621 of the Italian Civil Code,
which is by nature a fraudulent offense (see article
2621 of the Italian Civil Code, as amended by Law May
27, 2015, no. 69; see also Court of Cassation on June 16,
2015, no. 33774).
With respect, however, to the breach of administrative
provisions of law, it has to be noted that, in application
Italian Civil Code, by which the object of the contract
has to be possible, lawful, determined or determinable.
A valid and enforceable indemnity, therefore, requires
that the facts from which the liability (or the debt or
the damage) can arise are indicated and well-specified
so that the potential extent of the risk can be defined
economically.
These facts can be represented by any act, fact or
circumstance, to the extent they are determined or

Mergers & Acquisitions
determinable: such as behaviors that are related to
the duties of the person to be indemnified or activities
carried out by the latter, breaches of any nature, facts
or acts concerning specific sectors, provided they are
not committed with fraudulent behavior (nor with
gross negligence, in case the acts covered by the
indemnity covenant are committed by the guaranteed
towards the guarantor).
An additional element to be necessary for the validity
of the hold harmless covenant – except the cases
(difficult to implement concretely) in which the
liability or debt positions are well-specified and welllimited
– is represented, then, by the determination
or determinability of a maximum amount for the
assumption of debt.
To this regards, it is however necessary to keep in mind
that, if responsibility, damages or debt positions could
not be determined to certain economic extents, the
provision of a cap that defines the boundaries of the
economic value of the indemnity is to be considered
necessary on the basis of the application of the
principle of public policy, imperative, envisaged by
Article 1938 of the Italian Civil Code on the guarantee
related to future or conditional obligations, according
Structuring European M&A activity: why
Gibraltar?
By Ian Felice,
Tania Rahmany
Alberto Rittatore Vonwiller
Partner at Carnelutti Studio Legale Associato
T: +39 02 65585 1
Email: alrittatore@carnelutti.com
Alberto Rittatore Vonwiller is a partner in Carnelutti Studio Legale Associato. He is a member of the firm’s corporate
and M&A department, where his practice focuses on mergers and acquisitions and corporate finance work,
Antonio Franchi
Partner at Carnelutti Studio Legale Associato
T: +39 02 65585 1
Email: afranchi@carnelutti.com
Antonio Franchi is a partner in Carnelutti Studio Legale Associato. He is a member of the corporate and M&A
department, where his practice focuses on civil, commercial and corporate law. He advises Italian and foreign
entities, including listed companies, in corporate and M&A matters, capital contributions in the form of transfers
of businesses and shares, joint ventures, shareholders’ agreements, sale and purchase of real estate properties and
The European M&A market saw record trends in 2015,
with Q4 2015 being the highest ever quarter for deal
value in Europe, exceeding €420billion 1 . A weakening
euro resulted in strong US investment playing an
important role, and amounting to over US$ 208 billion.
This seems to have particularly fuelled European
M&A, which saw deal values increase 40% in the first
quarter of 2016, compared to the same period in 2015,
despite uncertainty in Europe in the lead-up to the UK
referendum on retention of its EU membership 2 .
The increasingly international nature of transactions
1 Deloitte“Impact of the EU referendum on M&A activity in the UK”
accessed on 5th August 2016 on https://www2.deloitte.com/content/
dam/Deloitte/uk/Documents/international-markets/deloitte-uk-impact-of-the-eu-referendum-on-ma-activity-in-the-uk.pdf
2 Ibid
is evidenced by the fact that cross-border M&A
represents significant proportions of overall activity.
The key challenge in structuring deals of this nature
is to minimise costs for the purchaser, both in terms
of professional fees and importantly, tax liabilities.
Gibraltar provides unique attributes which make it an
ideal international financial centre for structuring M&A
transactions.
The recent decision of the UK to leave the EU will affect
Gibraltar, which depends on the UK’s EU status for its
own membership. While this has inevitably created a
period of uncertainty, the EU methodologies discussed
in this article will certainly remain available until such

Mergers & Acquisitions
time as Article 50 of The Lisbon Treaty is triggered by the
company and a company registered anywhere in the
number of shareholders a company can have,
Stock Exchange. The fact that capital gains are not
UK government and EU law ceases to be applicable to
EU, and another between that company and the UK
which enables a Gibraltar company to be funded
taxed makes an IPO for institutional investors and
the UK.
company.
easily with a large share capital, which would be
private equity houses to be attractive.
1. Membership of the EU
Companies looking to enter into the European singlemarket
can use Gibraltar as a gateway to Europe. In
contrast with the other international financial centres,
it is often compared to, such as Jersey or Guernsey,
Gibraltar’s membership of the EU enables a Gibraltar
company to passport services throughout Europe at low
cost, with the support of a cooperative, easily accessible,
responsive and business-focused regulator.
These factors make Gibraltar an attractive location for
inbound European M&A activity from the US and Asia.
A Gibraltar vehicle could also be used for the structuring
of deals involving other EU member state companies,
which is facilitated by the fact that Gibraltar has
transposed the Cross Border Merger Directive (“the
CBMD”).
The CBMD facilitates cross-border M&A activity for
limited companies by providing a simple framework
drawing largely on national laws applicable to domestic
mergers. This avoids the sometimes prohibitively high
costs of cross-border M&A deals, as well as avoiding the
winding up of the target company. A Gibraltar company
can merge with a company registered in any other EU
member state. Interestingly, the CBMD does not operate
between Gibraltar and the UK, which are not deemed to
be the separate EU Member States for this purpose. The
same result can be obtained, however, by undertaking
two cross-border mergers, one between the Gibraltar
Gibraltar’s EU membership and first class regulatory
regime means that holding structures or special purpose
vehicles in Gibraltar will be fully compliant with the
standards expected by the European Commission
and applicable tax laws. This, coupled with Gibraltar’s
adoption of EU standards of administrative co-operation
in the field of taxation and other tax information
exchange regimes, resulted in Gibraltar scoring “largely
compliant” in its review by the OECD. This reputation
facilitates dealings with third parties, ensuring lack of
transparency does not hinder the business.
2. Flexible company law regime
for modern-day transactions
and business-focused tax laws
• Corporate law and tax regime
Gibraltar overhauled its Companies Act in 2014,
to include some features which make Gibraltar
companies attractive for structuring acquisition
vehicles and facilitating M&A activity. Gibraltar
corporate vehicles enjoy the flexibility of the
English common law; a legal regime which is
widely used and preferred by businesses around
the world.
A Gibraltar company only requires one director
and one secretary (which can be corporate
entities), with no requirements for agents or
resident directors (although the location of
management and control can determine the
company’s tax residence). There is no limit on the
subjected to a fixed capital duty of only £10. It is
also possible to have different share classes, such
as redeemable shares, or shares with preferential
rights to dividend and/or a return of capital on a
winding up.
There are no minimum capital requirements and
share capital can be denominated in any lawful
currency. Shares can be issued per any value
and at a premium. Nominee shareholdings are
also permitted.The taxation of companies are
relatively simple, and also facilitate business
needs. All companies are chargeable on taxable
profits accrued and derived in Gibraltar, at a fixed
rate of 10%. Capital gains are not taxed, and
no withholding tax is imposed on the payment
of interest or dividends. Interest income is
generally not taxable, unless it is inter-company
loan interest that is received by or accrues to
a company and is in excess of £100,000 p.a.
Furthermore, the transfer of shares in a Gibraltar
company is not subject to any tax or duty, unless
the company whose shares are transferred holds
Gibraltar real estate.
• Gibco as an investment vehicle
Gibraltar Private Limited companies are able
to convert to public companies, as well as a
number of different forms. The shares of Gibraltar
companies have been listed on international
recognised stock exchanges, such as the London
It is also possible for Gibraltar companies to
return capital to shareholders (e.g., by delivering
redemption proceeds on a redemption of the
shares) as opposed to distributing profits by
way of dividend.The fund industry in Gibraltar
has been growing at a rapid pace and continues
to expand. There are many types of fund in
Gibraltar, including private funds, Experienced
Investor Funds (EIFs), Non-UCITS Retail funds and
protected cell companies. This makes Gibraltar a
serious option for basing investment funds.
3. Mergers and schemes of
arrangement
Mergers are possible for public companies, and
the Companies Act 2014 provides a framework
for reconstructions and schemes of arrangement.
The recent prohibition on cancellation schemes of
arrangement in the UK (by virtue of the Companies Act
(Amendment of Part 17) Regulations 2015) has resulted
in stamp duty payments on the transfer of shares being
an additional cost to a purchaser. Given that cancellation
schemes were the overwhelmingly preferred structure
for conducting high value acquisitions, the closure of

Mergers & Acquisitions
this loophole has resulted in a significant increase in
duty in the UK. In Gibraltar, no stamp duty is payable
arrangement, who wish to take advantage of the
redomiciling to Gibraltar to take advantage of the
costs involved in an acquisition. While the rate of stamp
on shares (unless the transaction involves real estate
benefits structuring the acquisition in this way
competitive and flexible taxation and legal regime.
duty in the UK is currently only set at 0.5%, this can
located in Gibraltar). In an increasingly cost-conscious
can provide redomicile under the Companies Act
Companies registered in any of the following
market, this can amount to a significant saving for the
2014. Once redomiciled to Gibraltar, the scheme of
jurisdictions may redomicile into Gibraltar:
purchaser.
arrangement provisions under Gibraltar corporate
Any of the EEA States, Anguilla, Bermuda, British
The proposal is illustrated below:
law can be utilised. Similarly, after completing an
Antarctic Territory, British Indian Ocean Territory,
1. Shares in UKCo cancelled, in consideration for the
M&A transaction, the new business may consider
Cayman Islands, Falkland Islands, Guernsey, Isle of
issuing of shares in Gibraltar HoldCo
Ian Felice
2. BuyerCo purchases shares of Gibraltar HoldCo. No
Partner at Hassans
amount to a significant quantity in a high-value M&A
deal. Purchasers of UK businesses may therefore consider
whether the stamp duty saving could be retained by
using Gibraltar to structure the deal.
The UK prohibition on cancellation schemes does not
prevent a cancellation scheme of arrangement from
being used to insert a holding company over the target
company. It is possible therefore, to insert a Gibraltar
holding company over the UK target, by cancelling the
shares in the UK company in consideration for issuing
to the shareholders, new shares in a Gibraltar company
which will hold shares in the target. A purchaser could
then acquire the shares in the Gibraltar company by way
of a share transfer.
The shares of a Gibraltar company with a share register
maintained outside the UK are not subject to stamp
stamp duty is payable in the UK on shares in Gibraltar
companies and no stamp duty on shares in Gibraltar.
In addition, there would be no tax on the dividends
received from the UK target to the Gibraltar HoldCo, and
no withholding tax on dividends paid from Gibraltar
HoldCo to the BuyerCo. Corporation tax would only be
on profits accrued and derived in Gibraltar, at a flat rate
of 10%.Furthermore, the lack of VAT provides significant
savings on professional fees.
4. Redomiciliation
Gibraltar law permits redomiciliation of companies
registered in a number of other countries to Gibraltar,
as well as the redomiciliation of Gibraltar companies
elsewhere. This can be vastly helpful in the context
of M&A transactions. In the above example, for
instance, companies incorporated and registered in
jurisdictions which do not recognise the scheme of
T: +350 200 79000
Email: ian.felice@hassans.gi
Ian Felice commenced work with Hassans in 1999 and is a Partner of the Corporate and
Commercial Team. During his time at Hassans, Ian has become deeply involved in transactional
work relating to the use of Gibraltar-based structures, principally for UK and European
commercial property investments, and regularly advises on corporate restructuring and
acquisition, Joint Venture work and on the floatation of Gibraltar companies on recognised
Stock Exchanges.
An LLB (Hons) Graduate from the University of Nottingham, Ian completed his Bar Vocational
Course at the Inns of Court School of Law in London. A member of the Honorable Society of the
Middle Temple, Ian was called to the Bar in England and in Gibraltar in 1999 and in the BVI in
2010.
Tania Rahmany
Trainee Solicitor at Hassans
Tania Rahmany joined Hassans as a Trainee Solicitor in October 2015 and is currently
undertaking a seat in the firm’s Corporate & Commercial Team. She is an LLB graduate of Queen
Mary College, University of London, and completed an LLM LPC in International Legal Practice
at the University of Law, Guildford.

Aspects to Consider when Closing
a Merger in Venezuela
Miguel Velutini, Reinaldo Hellmund and Carlos Martínez
the complexities of successfully completing a
merger in Venezuela, where a number of filings
must be made in order to perform the legal
steps required to close a merger. In such regard,
the process of completing a merger will require
proper organization, planning and will typically
last for approximately 6 months before it will be
completed.
From a legal standpoint, the decision to
merge two companies shall be adopted in the
shareholders’ meeting, a meeting that would
discuss how both entities should be merged. The
Articles of Incorporation of the companies often
contain special quorum and voting requirements
in order to approve a merger, but if the Articles
that may be relevant. Even though the law does
not specifically require it, commercial registries
require that the merger agreement should be
notarized. 2
Financial statements of both companies dated
on the date of the merger shall be prepared and
presented to the commercial registry together
with the notarized merger agreement and the
shareholders meetings of both companies
approving the merger.
It is important to point out that the registration
processes before the Commercial Registries
are frequently delayed for many reasons,
including the fact that Commercial Registries
often request changes to be made on the
Venezuela is currently
going through a very
complex situation in
which the climate for
doing business has become
difficult for all parties
involved in any part
of the economic process.
and processes in a vast amount of governmental
entities, a fact that requires the commitment
of a substantial amount of resources and time
for each entity that exists and operates in the
country. As a consequence of the foregoing,
many businesses that were structured with
various legal entities for different reasons,
including tax and liability mitigation, have opted
to downsize their operations by merging their
of Incorporation are silent, the decision shall be
adopted in a meeting where 75% of the shares
representing the total capital is present and
with the affirmative vote of at least, half of the
shareholders attending the meeting 1 .
The companies to be merged shall enter into a
“merger agreement” which shall be executed
by authorized representatives of both parties.
The merger agreement must set forth the
terms and conditions of the merger, such as
documentation that has been presented, to the
form in which documents are presented or in the
supporting documents that shall be filed. These
requirements changes from one Commercial
Registry to another. Therefore, the timing of the
merger is an important issue and so, it is very
crucial to go beforehand to the Commercial
Registry with much anticipation as possible, so
as to understand the requirements established
by the Commercial Registry in which the specific
The regulatory burden for entities doing business
subsidiaries into one or some few entities, in
specifications that could lead to the survival of
merger documentation will be registered.
in the country is very high, and companies are
order to have fewer structures to operate.
the entity, and conditions that could cease the
Once the shareholders meetings are registered in
required to be registered, keep in place records
The reality described above also permeates into
entities’ existence, as well as any other matter
1 Article 280 of the Venezuelan Code of Commerce.
2 Based on an Article 23 of Resolution Number 19 of the Ministry
of Interior, Justice and Peace dated January 13, 2014

the Commercial Registry or registries the merger
agreement shall be published in an authorized
legal publication. In practice, the shareholders
meetings approving the merger are also
published.
The merger will not be effective until a
3-month period which will be counted from
the date on which the publication previously
indicated has been made. The Commercial
Code establishes that the merger may be closed
before such period if evidence of payment
of the company’s debts or the approval of all
creditors is evidenced. However, this is very
unusual since in practice, there are just too many
potential creditors for any given company, and
the 3-month period is seen in practice as almost
mandatory without exception.
During the 3-month period indicated before, any
creditor can oppose the merger, which if done,
will suspend the merger until the suspension is
lifted through a definitive judicial decision.
Once the 3-month period elapses without any
opposition from the creditors of the merging
companies, the merger may become effective
and the surviving company shall assume all
rights and liabilities of the company that ceases
to exist. In such manner, most practitioners and
authors assume the position that the surviving
company is the universal successor of the
company which ceases to exist.
Once the merger becomes effective, many
notices to all kind of governmental entities shall
be made. In such regard, the Tax administration
shall be notified of the merger within one month
from the date the merger became effective.
Also, an income tax return shall be filed for
the “short” fiscal period of the entity that is
extinguished and that will end on the date the
entity ceases to exist.
In addition, all governmental entities in which
the company that ceases to exist is registered
(such as the social security administration,
Miguel Velutini
T: +58 (212) 285 4944
Email: mvelutini@romen.com
Mr Velutini specialises in the areas of corporate law, oil and gas, project finance, mergers and acquisition, foreign investment,
banking and secured transactions.
Mr Velutini has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel to
the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil and gas
sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies and divisions of companies in
Venezuela; as counsel in the negotiation of various infrastructure joint venture agreements. In addition, Mr Velutini actively counsels
Reinaldo Hellmund
T: +58 (212) 285 4944
Mr Hellmund specialises in the areas of corporate law, oil and gas, project finance, financing and lending transactions, secured
transactions, merger and acquisition foreign investment.
Mr Hellmund has represented several international oil companies in their business in Venezuela, including structuring of association
agreements for extra heavy crude oil, gas, pipelines projects and operation agreements. Mr Hellmund has represented lenders,
underwriters and project sponsors on several of the most important financing, oil & gas and project finance transactions seen in
Venezuela.
Mr Hellmund has participated as counsel to various companies in the restructuring and re-financing of their debt; as counsel to
the lenders and sponsors in the structuring and implementation of various financing agreements in Venezuela in the oil and gas
sector; as counsel to both buyers and sellers in the acquisition, sale and spin-off of various companies in Venezuela; as counsel in
the negotiation of various infrastructure joint venture agreements. In addition, Mr Hellmund actively counsels various clients in

Mergers & Acquisitions
IN A COMPETITIVE M&A MARKET, TRUST
By Mary Walsh
Merrill DataSite provides due diligence platforms for financial transactions
worldwide, and as such is a leading indicator of trends and future trends
across global deal markets. However, no one needs us to tell them that M&A
markets are currently bullish; there’s no doubt about it. There has been a flurry
of activity over recent months, and dealmakers in private equity, corporate
From the latest Mergermarket M&A Insider reports
sponsored by Merrill DataSite, we know global deal
value was up 27% year on year from May 2014 to May
surpassing their targets, including Silverfleet, Inflexion,
Carlyle, Equistone and Bridgepoint. Added to that, debt
is cheap, so when an acquisition situation comes along
establishing a successful team that really forms the basis of
good M&A deal-making, ultimately making the difference in
a competitive situation.
When relationships are established,
generate success, and work for mutual
benefit, why change them?
This philosophy has been a long standing tenet of Merrill
DataSite’s. We support expediting due diligence processes
for our clients – old and new. Yes, we do that through
technology, but largely we achieve this through the human
element in our part of the transaction. Our Project Managers
work 24 hours a day, seven days a week in dedicated
teams to ensure there is always someone available and
ready to answer the phone, to open the project, or to load
documentation onto the due diligence platform. This builds
trust with our clients that we can deliver, and that’s the
differentiator.
You have to deliver quality, of course, but you have to deliver
it fast. It’s a universal truth when talking to professionals in
M&A that there are time pressures. Time-squeeze is a fact of
life, and processes that clients may previously have built a six
month contingency for are now being demanded within two
months or less.
Clients want to complete a transaction or make decisions
quickly in order to capitalise on the opportunities they
are being presented with and to gain the winning edge. If
they can seal the deal quicker than anyone else, establish
a relationship with the seller and gain their trust, then it is
less likely that the process will drag on or go to auction. For
example: one large, global sponsor recently completed an
acquisition after they told the target company that they
could finish the process in five days.
The law firms under the pressure of these ever compressed
timelines advise buyers that due diligence processes have to
be done as fast as possible, which means using a supporting
cast of experts who can simplify the process. This is done by
auto-enabling every document placed in a virtual data room
so it becomes fully searchable within seconds, information
can be found quickly and easily, smoothing the process, with
project managers ready in the wings if needed.
If an M&A client can steer their deal towards a swift
conclusion, saving time and money in the process, they will
be happy. If they can keep out the competition and prevent
their asset from going to auction, that is all to the good. If
they can invest their capital and have that generating profit,
rather than languishing, waiting to be put to good use, all
the better. And, if trusted partners and advisors can help
2015, whereas deal volume was down 30.9% – proving
competition for assets is growing fierce.
One major issue related to this is that there is simply too
much cash – both dry powder and on corporate balance
sheets – chasing deals, which is raising competition to new
heights, increasing some valuations to pre-financial crisis
levels.
Numerous new funds have closed in recent months,
individuals want and need to be ready to move fast.
Law firms and M&A lawyers know better than anyone the
demands this can place on every layer of their organisation
– from Partner to Associate. Everyone understands that
when serving the client, delivering what they want (and fast)
is paramount, because delivery engenders trust and trust
engenders repeat business.
It is gaining trust, building long-term relationships, and
Mary Walsh
Regional Director at Merrill DataSite
T: +44 (0) 20 3031 6300
Email: mary.walsh@merrillcorp.com
Mary Walsh is regional director at Merrill DataSite, the world’s leading provider of virtual data room solutions for due diligence and
document management. She joined the corporation in 2013 and is responsible for International Sales in the United Kingdom. Now
based in the European Headquarters of Merrill Corporation, Mary was previously posted in New York and later Paris. She brings more
than 10 years executive level sales experience, working with the world’s leading fund managers, consultancies and corporations.

Mergers & Acquisitions
Investing in Italy
By Gianfranco Puopolo
According to recent data regarding the Italian M&A market, the 2008 financial crisis is
over. Compared to the previous year, the Italian M&A market registered a significant
increase of deals having an aggregate value of approximately 49 million euro. Out
of over 500 transactions completed in 2014, more than 37% of the deals were crossboard
transactions while Italian companies targeted domestic companies as well as
investments abroad. 1 Just to name a few of the deals that took place in 2014, worthy
of mention are the acquisition of Indesit by Whirlpool and Grom – a local ice-cream
business – by the Unilever Group while Italian investments abroad targeted, for example,
1 KPMG M&A Report 2014
home country. As a member of the Monetary Union,
Italy has a strong currency – the Euro – which has a
significant impact on imports and exports and that is
not subject to the loss of purchasing power, as may be
the case for weaker currencies. Further, by investing in
underdeveloped areas, such as Southern Italy, an entity
may become eligible to apply for state grants and nonrefundable
facilities.
Moreover, it cannot be denied that Italian
craftsmanship is without rivals and that Italy offers
a combination of state-of-the-art technology and
creativity that make Italian products unique worldwide.
This is a rare blend that will be difficult to find
elsewhere in Europe and the “Made in Italy” brand
gives a product unquestionable added value.
The awakened interest in the Italian market and the
reprise of acquisitions by foreign as well as Italian
investors have been triggered by a variety of factors
such as monetary policies enacted by the European
Central Bank and recent reforms of the Italian labour
market.
The quantitative easing plan approved by the ECB
has injected a significant amount of cash into the
market and the supply of liquidity to banks and
credit institutes has promoted lending to enterprises.
Businesses now find themselves having easy access to
have been mitigated by recent reforms enacted by the
government headed by Prime Minister Matteo Renzi.
The primary piece of labour legislation passed by the
Renzi Government, known as the “Jobs Act”, has deeply
reformed the Italian labour market.
While the Jobs Act in its entirety is still being
implement, it provides for new types of employment
contracts and has simplified the hiring and firing
process, streamlining the entire employment
relationship and making it easier to dismiss employees.
With a view at promoting employment, the Jobs Act
offers tax breaks to companies that hire personnel with
permanent employment contract and has reorganized
existing social shock-absorbers.
Since the implementation of the Jobs Act, indicators
show that the unemployment rate has gone down
for the first time in years. Labour Unions, however,
continue to be key players in employment negotiations
processes and their role and influence should not be
under estimated.
The Challenges of Investing in
Italy
The reforms introduced by the Renzi Government
accompanied by the BCE’s monetary policies have
certainly generated greater stability in the overall
Italian scenario. Nonetheless, there are still many
Foreign investors have always displayed a special
interest towards the Italian market. Italy is a gateway
to the European Union. Investing in Italy means
acquiring the possibility of taking advantages of the
single market, including the freedom of establishment
or the freedom to provide services thus overcoming
the barriers that Non-EU entities are likely to face
in order to do business in the EU directly from their
funds that they are willing to invest in new projects,
whether in Italy
or abroad.
Also, rigid labour laws that have always been of
concern to foreign companies doing business in Italy
challenges that foreign investors must address within
the context of an M&A deal.
Depending on the specific field of business, investors
may unexpectedly find themselves tangled in red
tape and authorization proceedings that sometimes

Mergers & Acquisitions
discourage investors coming from jurisdictions that
do not impose the same degree of government
involvement.
In this respect it is noteworthy to point out that while
EU nationals – whether individuals or corporations –
usually benefit from the same treatment reserved to
Italians, non-EU nationals may be required to meet
certain criteria of eligibility in order to be enabled to
do business in Italy, for example they may be required
to establish an Italian subsidiary. Also, foreign clients
often approach the Italian market with a certain degree
of mistrust that follows the many commonplaces on
Italy.
Foreign companies are often trapped in the meanders
of Italian bureaucracy that Italian themselves have a
hard time dealing with. Foreign investors that are used
to streamline processes in their home countries will
have to cope with more complex laws and sometimes
unreasonable, albeit mandatory, courses of action.
Gianfranco Puopolo
Partner at PG Legal
What is Our Role
In the face of these challenges, in addition to providing
highly professional and qualified legal services, our
goal is to lead our clients through the various steps
of any mandatory processes in order to overcome
potential obstacles in completing a transaction,
whether this obstacle consists in obtaining a license
to operate a specific type of business or dealing with
unions to renegotiate workers’ rights.
We lead our clients through the red tape and explain to
them the legal scenario within which they will operate.
In this respect, we assist our clients by dealing directly
with government officials and regulatory authorities
with which we have established sound relations, and
provided detailed guidelines on how to do business
in Italy. We adopt a comprehensive approach that
addresses all the potential issues related to an M&A
transaction and specific type of business, from legal to
tax to regulatory and suggest a range of solutions that
Securities and Exchange Commission’s Approval: Is it a Sine Qua
Non for every Asset(s) Acquisition Transaction?
By Fidelis Adewole
The Securities and Exchange Commission (“SEC”), established under
the Investments and Securities Act, 2007 (“ISA”) is the body charged
with the overall regulation of capital market activities in Nigeria.
The SEC has also unwittingly become a competition regulator.
Accordingly, the SEC has the responsibility of reviewing, approving
and regulating mergers, acquisitions, takeovers and all forms of
business combinations. (ISA, s. 13.)Thus, every merger, acquisition or
T: +39 02 760 13359
Email: g.puopolo@pglegal.it
Gianfranco assists companies in complex transactions where he represents institutional investors, sellers or buyers.
He represents Italian and foreign listed companies in acquisitions or reorganization of businesses. Highlights of his
work include representing the leading Ukrainian conglomerate in the acquisition of steel mills in Italy and in other
EU countries. Gianfranco assists insurance companies and financial institutions on corporate transactions and on
the establishment of subsidiaries in Italy. Gianfranco sits on board of directors and advisory boards of companies
investing in Italy. He appears as an expert in his field in major legal directories such as Chambers and Legal 500.
There are two topical issues among practitioners
relating to the requirement for SEC’s approval for
asset acquisitions: (A) whether the SEC’s approval
is required for an asset acquisition; and (B) if the
SEC’s approval is required, whether there is or there
should be a monetary threshold or asset value that
would trigger the SEC approval requirement? The
ISA is not altogether clear on these and the lack
of clarity is due largely to the language used in
the SEC Rules and Regulations, 2013[1] (the “SEC
Rules”).

Mergers & Acquisitions
SEC APPROVAL FOR ASSET
ACQUISITIONS?
restructuring if SEC finds that “such acquisition,
whether directly or indirectly, of the whole or any
It is settled law that in the interpretation of statutes,
every clause of a statute must be construed with
ensure that such asset acquisition will not cause
substantial restraint of competition or tend to
Rule 421(1) of the SEC Rules defines “acquisition” as
part of the equity or other share capital or of the
reference to other clauses/provisions of that statute
create monopoly in that line of business enterprise.
“the take-over by one company of sufficient shares
assets of another company, is not likely to cause
in order to have a consistent enactment.
(SEC Rules, rule 423(2)(a).)
in another company to give the acquiring company
substantial restraint of competition to create
Nigerian Ports Plc v Okoh (2006) All FWLR 1145
Even where the SEC’s prior approval is not obtained
control over that other company” (emphasis
monopoly in any line of business” (emphasis
at 1157H and Canada Sugar Refining Co. Ltd. v R
for an asset acquisition, the SEC has the power
supplied). Further, Rule 433 of the SEC Rules also
supplied).
(1898) AC 735.
to break up such a company where it considers
defines “acquisition” as “where a person or group
One of the documents that is required to
Second, assuming that the term “acquisition”
that such an acquisition constitutes a restraint to
of persons buys most (if not all) of a company’s
accompany a letter of intent to be submitted by
as defined in Rule 421(1) is limited to share
competition or creates a monopoly in a particular
ownership stake in order to assume control of a
an applicant seeking approval from the SEC under
acquisitions, asset acquisitions will still be subject
industry. (SEC Rules, rule 432.)
target company” (emphasis supplied). Rule 421(1)
Rule 434 of the SEC Rules is a report of valuation
to the SEC’s prior review and approval. This is
A ground for the SEC to order a break-up of a
is limited to shares acquisitions.
of shares/assets to be acquired. (SEC Rules rule
because asset(s) acquisition is unarguably a form of
company is where the company enters into an
Rule 433 suggests that for there to be an
434(xvii).) Again, Rule 436 of the SEC Rules sets out
business combination which falls within the SEC’s
agreement or business undertaking which has
“acquisition” the acquirer must assume control of
the contents of Information Memorandum for an
scope of regulation.
the effect of preventing, restricting or distorting
the acquiree after the acquisition. The assumption
acquisition.
By section 13(p) of ISA, one of the functions/
competition in any part of the Nigerian market.
of control of the acquiree does not necessarily
Part of the background information to be
powers of the SEC is to “review, approve, regulate
(SEC Rules, rule 432(3)(a).)
occur in asset acquisition transactions. It is fair
contained in an Information Memorandum is the
mergers, acquisitions, take-overs and all forms of
It is, therefore, prudent (assuming it is not
to say that both Rule 421(1) and Rule 433 do not
“list of assets to be acquired and their value (where
business combination and affected transactions
mandatorily required) to seek the SEC’s approval
contemplate SEC approval for asset acquisitions.
applicable)”. (SEC Rules rule 436(1)(d). Moreover,
of all companies” (emphasis supplied). Also, Rule
before entering into any agreement for asset
It is however arguable that the SEC’s approval is
Rule 437 of the SEC Rules requires that an executed
422(2) of the SEC Rules states specifically that the
acquisition which may have the effect of
required for asset acquisitions for at least three
share/asset purchase agreement should be
provisions of Part I (on take-overs, mergers and
preventing, restricting or distorting competition in
reasons. First, there are copious references to
forwarded to the SEC post-acquisition.
acquisition) of the SEC Rules shall apply to “every
any part of the Nigerian market.
“asset(s)” under Part I of the SEC Rules that deals
The definitions of “acquisition” under the SEC Rules
merger, acquisition or combination between or
If the SEC reviews the transaction documentation
with “take-overs”, “mergers” and “acquisition”.
suggest that the scope of acquisition under the
among companies, involving acquisition of shares
and comes to the determination that its approval
Rule 422 of the SEC Rules sets out the scope of
SEC Rules is limited to shares and does not cover
or assets of another company” (emphasis supplied).
is not required, it [the SEC] would issue a “No
SEC’s regulation under Part I of the SEC Rules to
asset acquisitions, notwithstanding, numerous
Thus, all take-overs, mergers, acquisitions,
Objection” to the transaction.
include “every merger, acquisition or combination
between or among companies, involving
acquisition of shares or assets of another company”
references to “asset” under Part I (on take-overs,
mergers and acquisition) of the SEC Rules which
clearly show that the term “acquisition” as used in
business combinations undertaken by companies,
partnerships or agencies of the federal government
are subject to the SEC’s approval.
WHEN SHOULD THE SEC
APPROVAL REQUIREMENT
APPLY?
(emphasis supplied).
the SEC Rules also involves asset acquisition and
Third, SEC’s competition regulator status makes it
The writer is of the strong view that it is not every
Further, Rule 423(2) of the SEC Rules states that the
therefore subject to the SEC’s prior review and
incumbent for the SEC to review and approve every
asset acquisition transaction that requires the SEC’s
SEC shall approve a merger, acquisition or external
approval.
asset acquisition between companies in order to
approval. Otherwise, the SEC will be inundated

Mergers & Acquisitions
with applications/requests for approval and the
SEC will be unable to perform its other functions
as the sale of a company’s asset, irrespective of the
value, would require the SEC’s prior review and
approval.
There are at least three tests that could be adopted
for determining when the SEC’s prior review and
approval will be required for an asset(s) acquisition
transaction. These tests are: (1) the asset value test;
(2) the operating asset test; and (3) the competition
test.
Asset Value Test. This test involves setting a
threshold in terms of the value of the assets to
be sold/transferred. The SEC’s prior review and
approval will be required where the value of such
asset is above the set threshold.
Operating Asset(s) Test. The SEC’s prior review
and approval should be required in an asset(s)
acquisition transaction where all or substantial
part of the operating asset(s) (that is, asset(s)
constituting the business of a company) of a
company are to be sold or transferred to another
entity.
For example, the sale/transfer of all or substantial
number of telecommunications masts/towers
by a telecommunications company will require
the SEC’s prior review and approval under this
test as telecommunications masts/towers are the
operating assets of telecommunication companies.
Competition Test. As stated above, the SEC in
reviewing approving acquisitions or any business
combinations has the obligation to ensure that
such transaction would not cause substantial
restraint of competition or create a monopoly in a
U.S. Agencies Take a Tough Approach to Merger
Remedies
by Ilene Knable Gotts
In the second term of the Obama Administration, both the U.S. Federal Trade Commission
(“FTC”) and the U.S. Department of Justice, Antitrust Division (“DOJ”)—the two
Fidelis Adewole
Senior Associate at G. Elias & Co
T: +234 (1) 460 7890
Email: gelias@gelias.com
Fidelis Adewole is a senior associate with G. Elias & Co., one of Nigeria’s leading business law firms. He is a seasoned
litigator and has advised on numerous mergers and acquisitions across various sectors of the economy. He recently
advised Asset Management Corporation of Nigeria on the sale of Enterprise Bank Limited.
Fidelis holds a Bachelor of Laws degree from Ambrose Alli University, Ekpoma and was called to the Nigerian bar in
2005. He is a member of the Chartered Institute of Arbitrators (UK) and Chartered Institute of Taxation of Nigeria.
To support these efforts, the FTC has also
announced plans to conduct a “merger
retrospective” to determine the effectiveness
of remedies imposed in some of the prior
mergers. 1
In total, the FTC proposes studying 92 merger
orders issued by the Commission between
1 Press Release, Fed. Trade Comm’n, FTC Proposes to
Study Merger Remedies (Jan. 9, 2015), available at https://
www.ftc.gov/news-events/press-releases/2015/01/
ftc-proposes-study-merger-remedies.
2006 and 2012. The study will include
interviews of the buyers of divested assets,
significant competitors in each market, and
customers.
The current antitrust enforcement
environment means that merger parties
should be prepared for the potential of
prolonged review and protracted consent
negotiations in transactions that raise

Merger & Acqusitions
concerns requiring relief.
On June 17, 2011, the DOJ issued an updated
policy guide to merger remedies. As indicated
in the Guide:
The touchstone principle for the Division in
analyzing remedies is that a successful merger
remedy must effectively preserve competition
in the relevant market. . . .
In horizontal merger matters, structural
remedies often effectively preserve
competition, including when used in
conjunction with certain conduct provisions.
Structural remedies may be appropriate in
vertical merger matters as well, but conduct
remedies often can effectively address
anticompetitive issues raised by vertical
mergers.
In all cases, the key is finding a remedy
that works, thereby effectively preserving
competition in order to promote innovation
and consumer welfare. 2
Recent precedent includes the agencies
imposing a variety of behavioral conditions
to support a structural divestiture. Transition
services arrangements and supply
arrangements have been more routinely
included, beyond the pharmaceutical industry
where they were the norm. 3
2 U.S. Dep’t of Justice, Antitrust Division, Antitrust
Division Policy Guide to Merger Remedies (Aug. 19, 2010),
available at http://www.justice.gov/atr/public/guidelines/
hmg-2010.html
3 See, e.g., Press Release, U.S. Dep’t of Justice, Justice
Department Requires Divestitures in Order for Regal
Beloit Corporation to Proceed with Its Acquisition of A.O.
Smith Corporation’s Electric Motor Business (Aug. 17,
Mandatory licensing provisions may also
alleviate competitive concerns by enabling
competitors access to a key input; 4 some
of the consents, however, include not only
a license for technology, but the right to
purchase the technology or to transfer the
license to a third party later. 5
In addition, non-discrimination provisions
have been included to incorporate the
concepts of equal access, equal efforts, and
equal terms.
For instance, the FTC’s CoStar/Loopnet
consent contained what the FTC characterized
as “conduct relief that is unusual in a merger
settlement.” 6
In addition to requiring that the parties
divest LoopNet’s Interest in Xceligent, a
competing database that the FTC considered
to be the “most similar competitor for
information services” to CoStar, the consent
also “imposes certain conduct requirements
to assure the continued viability of Xceligent
as a competitor to the merged firm and to
2011), available at http://www.justice.gov/opa/pr/2011/
August/11-at-1056.html; Hold Separate Order United
States v. Bemis Co., Inc., No. 1:10-cv-00295 (D. DC Feb.
28, 2010), available at http://www.justice.gov/atr/cases/
f255700/255715.htm.
4 See, e.g., Press Release, U.S. Dep’t of Justice, Justice
Department Requires Google Inc. to Develop and License
Travel Software in Order to Proceed with Its Acquisition
of ITA Software Inc. (Apr. 8, 2011), available at http://
www.justice.gov/opa/pr/2011/April/11-at-445.html; Press
Release, U.S. Dep’t of Justice, Justice Department Allows
Comcast-NBCU Joint Venture to Proceed with Conditions
(Jan. 18, 2011), available at http://www.justice.gov/opa/
pr/2011/January/11-at-061.html.
5 See, e.g., United States v. Cameron Int’l Corp., No. 1:09-
cv-02165 (D. D.C. Nov. 17, 2009), available at http://www.
justice.gov/atr/cases/f252000/252080.htm.
6 Press Release, Fed. Trade Comm’n, FTC Places Conditions
on CoStar’s $860 Million Acquisition of LoopNet
(Apr. 26, 2012), available at http://www.ftc.gov/
opa/2012/04/costar.shtm.
reduce barriers to competitive entry and
expansion. These additional provisions will
facilitate Xceligent’s geographic expansion
and prevent foreclosure of [the parties’]
established customer base.”
The consent, for five years, (1) prohibits CoStar
and Loopnet from restricting customers’
ability to support Xceligent; (2) requires
Co-Star and Loopnet to allow customers to
terminate their existing contracts, without
penalty, with one year’s prior notice; and
(3) bars the merged firm from requiring
customers to buy any of its products as a
condition for receiving other products, and
from requiring customers to subscribe to
multiple geographic coverage areas to gain
access to a single area in which they are
interested.
In addition, the consent requires, for three
years, that CoStar and LoopNet continue
to offer their customers core products on a
stand-alone basis.
A related provision prohibits the parties from
limiting use of the REApplications product, a
software tool for managing market research
in connection with customers’ purchase,
lease, or license of CRE database services from
competitors.
There have also been situations recently in
which the agencies have required divestitures
to include out-of-market assets (i.e., a
divestiture package that goes beyond the
assets in the relevant market). 7
In Community Health Systems
(“Community”)/Health Management
Associates (“HMA”), 8 the FTC’s concerns
were focused on general acute care hospital
impatient services sold to commercial health
plans in two geographic areas; the FTC,
however, required that Community include in
the divestiture package the hospital facilities
and all outpatient services and operations
that were affiliated with the hospital,
regardless of whether those services were
provided at the hospital.
The FTC viewed the outpatient business as
necessary for the buyer of each hospital to be
as effective of a competitor as HMA had been
prior to the transaction.
In Sun Pharmaceutical/Ranbaxy, 9 the FTC
although the expressed concerns that
the combination would impact future
competition for three strengths of generic
minocycline tablets used to treat a variety of
infections, the Commission required the firms
7 For a discussion of remedies including out-of-market
assets from the FTC’s perspective see Dan Ducore,
Divestitures may include assets outside the market (Apr.
24, 2015), available at https://www.ftc.gov/news-events/
blogs/competition-matters/2015/04/divestitures-may-include-assets-outside-market.
8 Press Release, Federal Trade Comm’n, FTC Requires
Community Health Systems, Inc. to Divest Two Hospitals
as a Condition of Acquiring Rival Hospital Operator
(Jan. 22, 2014), available at http://www.ftc.gov/newsevents/press-releases/2014/01/ftc-requires-community-health-systems-inc-divest-two-hospitals.
9 Press Release, Fed. Trade Comm’n, FTC Puts Conditions
on Sun Pharmaceutical’s Proposed Acquisition of
Ranbaxy (Jan. 30, 2015), available at https://www.ftc.
gov/news-events/press-releases/2015/01/ftc-puts-conditions-sun-pharmaceuticals-proposed-acquisition.

Merger & Acqusitions
to sell as well assets related to three dosages
The agencies have also taken a more
Both agencies have also increasingly required
maintaining competition at the same level as
of generic minocycline capsules.
expansive stance, particularly in transactions
that the parties identify an acceptable
pre-transaction.
The FTC’s rationale for including the capsules
involving innovation and future generations
“upfront buyer” before accepting divestiture
The transaction parties, however, can face
was that it would allow the upfront buyer to
of products. For instance, the DOJ recently
packages. 14 The “upfront buyer” requirement is
substantial delay from the process: the need
use a shorter FDA regulatory process because
announced that Applied Materials Inc. and
justified by the agencies as being necessary to
to identify a divestiture buyer, negotiate a
it would control both products and use the
same ingredient (API) supplier.
In Holcim/Lafarge, 10 the FTC conditioned
clearance on the divestiture of plants and
terminals, including a terminal in Alberta,
Canada and cement plant in Ontario, Canada.
Canadian assets that are named in the FTC
consent decree were included by the FTC as
necessary to remedy competitive concerns in
Tokyo Electron Ltd. had abandoned their
merger plans after the DOJ informed them
that their remedy proposal failed to resolve
the competitive concerns. 12
Although the merger parties had reportedly
offered to divest the overlapping etching and
depositing business line of Tokyo Electron,
the DOJ thought the package did not
adequately address the future impact of the
ensure that the divestiture will be effective in
tions on Neilsen’s Proposed $126 Billion Acquisition of
Arbitron (Sept. 20, 2013), available at http://www.ftc.gov/
opa/2013/09/nielsen.shtm. Commissioner Wright dissented
from the decision on the basis that the future market
theory shall be subject to a higher evidentiary standard.
See Dissenting Statement of Commissioner Joshua D.
Wright, In the Matter of Nielsen Holdings N.V. and Arbitron
Inc. FTC No. 131-0058 (Sept. 20, 2013), available at http://
www.ftc.gov/os/caselist/1310058/130920nielsenarbitron-jdwstmt.pdf.
14 The public attention on Advantage Rent A Car’s filing
for bankruptcy four months after the FTC approved its
divestiture to resolve concerns in the Hertz/Dollar Thrifty
deal exemplifies the risk —though extremely rare—that
can arise for an agency from accepting an antitrust
remedy. See David McLaughlin, Mark Clothier, and Sara
Gay Forden, Hertz Fix in Dollar Thrifty Deal Fails as Insider
Warned, Bloomberg (Nov. 29, 2013), available at http://
www.bloomberg.com/news/articles/2013-11-29/hertz-fixin-dollar-thrifty-deal-fails-as-insider-warned.
divestiture agreement, and have that buyer
and the package vetted by the agencies before
the main transaction is permitted to proceed
can literally add months to the review process.
For transaction parties with overlapping
products/services that are likely to raise
antitrust concerns, the recent enforcement
activities and trends raise the potential for
prolonged investigations and protracted
northern U.S. markets.
deal on innovation in future generations of
Finally, in ZF Friedrichshafen AG/TRW
semiconductor equipment.
Automotive Holdings Corp., 11 the FTC
Similarly, in the Nielson/Arbitron transaction,
conditioned approval of the $12.4 billion
the FTC focused on protecting a future market
merger that creates the world’s second-
for syndicated audience cross-platform
largest auto parts supplier with the divestiture
measurement services.
of TRW’s linkage and suspension business
The consent conditioned that transaction’s
in North America and Europe, even though
approval on Nielsen’s obligation to:
only suppliers that have production facilities
1. continue its cross-platform project
Ilene Knable Gotts
in the United States, Canada, and Mexico
were deemed capable of competing for U.S.
business.
10 Press Release, Fed. Trade Comm’n, FTC Requires
Cement Manufacturers Holcim and Lafarge to Divest
Assets as a Condition to Merger (May 4, 2015) available at
http://www.ftc.gov/news-events/press-releases/2015/05/
ftc-requires-cement-manufacturers-holcim-lafarge-divest-assets.
11 Press Release, Fed. Trade Comm’n, FTC Puts Conditions
on Merger of Auto Parts Suppliers ZF Friedrichshafen
and TRW Automotive Holdings Corp. (May
5, 2015) available at https://www.ftc.gov/news-events/
press-releases/2015/05/ftc-puts-conditions-merger-autoparts-supplier-zf
with ESPN Inc. and Comscore Inc.; and
2. license Arbitron’s people meter and
related data, as well as software and
technology being used in the ESPN
project, to an FTC-approved third
party for up to eight years. 13
12 Press Release, U.S. Dep’t of Justice, Applied Materials
and Tokyo Electron Ltd. Abandon Merger Plans after Justice
Department Rejected Their Proposed Remedy (Apr.
27, 2015), available at http://www.justice.gov/atr/public/
guidelines/hmg-2010.html.
13 Press Release, Fed. Trade Comm’n, FTC Puts Condi-
Partner at Wachtell, Lipton, Rosen & Katz
T: +1 212 403 4357
Email: IKGotts@wlrk.com
Ilene focuses on mergers and acquisitions. She is regularly recognized as one of the world’s top antitrust
lawyers, including in The International Who’s Who of Business Lawyers, Chambers Guides, and PLC Which Lawyer
Yearbook. Mrs. Gotts has served as the Chair of the American Bar Association’s Section of Antitrust Law (2009-
2010) and Chair of the New York State Bar Association’s Antitrust Section (2006-2007). She is a frequent guest
speaker, has had approximately 200 articles published, and has edited several books.

Merger & Acqusitions
What is Wrong with our Fiction? The Perceived
Attack on Reverse Vesting
by Janet Levy Pahima
Tax advisors in Israel are scrambling to find the best solution to
employment.
But founders who set up a company own their
shares from day one. When a few talented
individuals get together to form a company,
sometimes they worry about this from the
beginning. They may set up a type of reverse
vesting which is basically a call option. If one
founder leaves the company, the others can buy
his or her shares usually for par value.
The concern that this may raise tax implications
is subdued. The value of the company and its
shares in those early days are often low, and so
the risk of a taxable transaction is by correlation
also low.
The more popular use of reverse vesting
addresses when our young company needs an
investment of millions of dollars from a financial
investor. Venture capital firms (“VC’s”) are well
versed in understanding the crucial role founders
may play in the chances of success for their
working. This is codified in Israel’s Basic Law:
Freedom of Occupation. 1
They need another tool to safeguard their
investment. A fine or penalty that the founders
would have to pay if they leave the company?
Not worth the wasted air expressing this out loud
to a founder. It is the VC’s that are supposed to
have the money, not the founders.
Reverse vesting is the obvious choice. If a
founder refuses to keep working for the crucial
first few years after the company has received a
large investment, he or she should lose some of
his or her shares and not benefit from the future
success of the company.
This is a penalty that sounds fair – it is in the
control of the founder; it adjusts the equitable
balance of ownership if the company is worth
less because the founder left; and it does not
impose an impossible financial burden on the
founder.
Why the current increased interest in the topic?
Paranoia or calculated anticipation of the
Israeli tax authorities (the “ITA”) attacking a well
established principle?
Reverse vesting is a commonly used technique
to address the concerns that a founder of a
company who is key to its success and owns
shares of the company might simply walk away
from the company causing damage to the
enterprise’s prospects for success.
Using equity as a retention tool is nothing new.
When an employee is granted stock options that
are subject to a three or four year vesting period,
the theory is that the employee is incentivized to
stay at work for the full vesting period to receive
the full benefit of the employee’s options.
The shareholders are willing to share equity
with the employees to align interests between
the company and the employees, joining the
level of the employees’ compensation with
the success of the company and keeping the
employee motivated during his or her period of
fragile investments.
The venture capitalists could space out their
investments to correspond to milestones
including the continuation of the employment
of the founders, but that is not popular and often
not practical; they may not be putting in nearly
enough funds to keep the company going for the
full period they wish the founders to commit and
the funds invested up to the point of departure
of a founder can be tremendous.
The investors can’t force the founders to keep
So far, so good. So why are tax advisors in Israel
wary of the ITA spoiling this wonderful solution
that is so common in the global high tech world?
While there is no evidence that the ITA is about to
challenge the arrangement, the ITA, obviously is
1 The Basic Law: Freedom of Occupation (1994). The Law was
passed by the Knesset on 9th March, 1994 and published in
the Book of Laws No. 1454 of 10th March, 1994. It provides in
part:
a. Fundamental human rights in Israel are founded upon
recognition of the value of the human being, the sanctity
of human life, and the principle that all persons are free;
these rights shall be upheld in the spirit of the principles
set forth in the Declaration of the Establishment of the
State of Israel.
b. The purpose of this Basic Law if to protect freedom of
occupation, in order to establish in a Basic Law the values
of the State of Israel as a Jewish and democratic state.
c. Every Israel national or resident has the right to engage in
any occupation, profession or trade.

Merger & Acqusitions
not bound by the treatment of reverse vesting in
For example, we don’t draft Reverse Vesting
than just the founders no longer working.
It is yet to be seen if this obvious new ploy can
the Silicon Valley for example 2 ; some lawyers and
Agreements but rather Repurchase Agreements.
To the extent the founders have paid some cash
trick the ITA into believing that the additional
tax advisors fear that the ITA may look at shares
We don’t state anywhere in the agreement that
for their shares and the price to be paid upon
shares received by the investors from the
subject to reverse vesting as being deemed
the rights to the founders’ shares vest over time
exercise of the reverse vesting returns their
company are not the same as the additional
given in exchange for work and therefore could
but rather that the other shareholders will have
capital, the shares look less like ordinary income
shares the investors would have gotten if they
categorize the shares as work related income,
the right to buy back some of the founders
to the founders.
were entitled to buy shares from the founders all
taxable as ordinary income and not as capital
shares in decreasing amounts over time and for
A more recent creative idea is to grant other
with the same trigger and lack of price tag.
gains.
very little money if the founders stop working.
shareholders anti dilution rights triggered if
In addition, if there is more than one founder, this
The ITA could take the position that when the
Not that there seems to be evidence of the topic
a founder leaves the company. To implement
smacks of collective punishment. If one leaves, all
founders eventually sell their shares in an exit
heating up at the ITA, but nonetheless, lately
this concept, the other shareholders would be
founders would be diluted including those that
event (a merger or acquisition), the income
there has been much discussion in Israel, or at
issued new shares or the conversion ratio of
loyally stayed with the company.
earned on the shares should be treated as
least in the hallways of Tel Aviv tax departments
preferred shares would be adjusted to give the
Morally it would be more appropriate to use this
ordinary income, even though this seems like a
and law firms, of the risk that all reverse vesting
holders of preferred shares a larger percentage
approach, if at all, if there is only one founder
real stretch of the imagination.
clauses in high tech companies could be in
of the outstanding shares of the company; the
subject to reverse vesting so that other founders
If a founder can lose shares of a company if he or
jeopardy. That adds up to a lot of clauses in a lot
founders’ shares of the capital of the company on
do not have to serve as guarantors of each
she quits working for the company, the ITA could
of companies in a country dominated by its high
a percentage basis would decrease.
other’s commitment to the company. But with
look at those shares as not really belonging to
tech and start up culture.
the founder until the reverse vesting lifts, as if the
Good advice is to distance the shares from
founders are actually receiving shares over time,
employment. Make sure the founders’ shares in
in which case they should be taxed periodically
at the time the shares were deemed to have
been received; this translates into the dates that
the shares are released from the threat of reverse
vesting rather than the date of incorporation
of the company when the company value was
lower if not insignificant.
To protect from this troublesome threat, reverse
vesting is dressed up in colorful non-ordinary
income terminology.
2 See for example Rev. Rul. 2007-49 from Internal Revenue
Bulletin: 2007-31 dated July 30, 2007 specifying that Section
83 of the Internal Revenue Code does not apply to reverse
vesting imposed by investors (changing “substantially vested
stock” to “substantially nonvested stock”).
an exit event are not worth more than any other
shareholders’ shares. Include language that the
purpose of the reverse vesting is to avoid the
damage and harm that would be caused to the
company if the founder quit rather than any type
of compensation to the founder for staying.
Make sure it is shareholders who have the
right to buy the shares of the founders if their
employment terminates and not the company
itself. Do not include death or disability as
grounds to trigger repurchase so that it is
punishment to the founders for quitting rather
Janet Levy Pahima
Partner at Herzog, Fox & Neeman
T: +972 3 692 2097
Email: pahima@hfn.co.il
Janet is an International Mergers & Acquisitions partner at Herzog, Fox & Neeman, Israel’s leading international
law firm. In addition to M&A, Janet specializes in joint ventures, investment funds, international trade, and
advises in the general corporate field.
Janet represents multinational corporations including General Electric, Microsoft, BMC Software and SunGard
Data Systems, including in their acquisitions in Israel; venture capital funds such as Carmel Ventures in early and
late stage investments; and high-tech companies in their earliest stages of development. Janet is recommended
in PLC Which Lawyer and Chambers and has been described as an “outstanding corporate lawyer” by the Legal
500.
Prior to moving to Israel, Janet was an associate at Shearman and Sterling in New York and Tokyo.

Merger & Acqusitions
Mergers and Acquisitions Regulations in Lebanon
by Christiane Ghneim
M&A activity in Lebanon has been traditionally embryonic compared
to its neighboring Gulf countries, considering the size of the
Lebanese market which consists of SMEs and small family businesses,
and that merger and acquisition transactions among such entities
Nonetheless, the banking sector was subject
to a special treatment, as it benefitted from
a dedicated law aiming at encouraging the
mergers and acquisitions among banks in
Lebanon, under the strict supervision of the
Lebanese Central Bank. The purpose of such
laws and regulations was to address the
situation of banks in difficulty that showed
good management, to maintain the rights of
depositors and employees, and to preserve
the stability of the market through incentives
and soft loans granted to the acquiring banks.
Consequently, this law contributed to the
improvement of the sustainability and reliability
of the banking sector in Lebanon.
In 1996, the Beirut Stock Exchange (BSE) relaunched
the trading activity in its hall, following
a thirteen-year compulsory suspension. The
Committee of the BSE, which is responsible
for managing, regulating and developing the
markets, protecting the interests of the investors
trading at the Stock Exchange, monitoring the
activities of the issuing companies and providing
information to the issuers and traders at the
Stock Exchange on an equal footing, organized
part of the M&A for listed companies.
Recently, a new Financial Markets Law was
enacted and a Capital Market Authority (CMA)
was established accordingly in August 2011.
The CMA is an independent and autonomous
regulatory body that aims to regulate and
supervise the activities of capital markets in
Lebanon and to create the adequate legal
framework for the development of the Lebanese
Financial Markets, including the issuance of
all regulations pertaining to mergers and
acquisitions (M&A) for listed companies.
M&A REGULATIONS IN LISTED
COMPANIES
REGULATORY FRAMEWORK
Public M&A is regulated by the Lebanese
Commercial Law (articles 210 to 213 of
Legislative Decree 304 of December 24, 1942 and
its modifications), and Decree 7667 of December
16, 1995 regarding the implementation of the
BSE by-laws.
The CMA is the regulatory body and the
enforcing authority in connection with
acquisition of shares in public companies and the
execution of M&A bids. Its control unit regulates
the capital markets and its sanctions committee
examines violation cases transmitted by the
Board, investigates them and takes the necessary
decisions further to proceedings involving all
concerned parties, as specified in its rules of
operation.
STRUCTURAL CONSIDERATIONS
Lebanese law does not mention structural
differences between friendly acquisitions (in
which the target is willing to be acquired) and
hostile takeovers (where the target is opposed
to the acquisition). An acquisition is structured
as a tender offer by the bidder and regulated by
article 161 of the decree 7667 /1995 which states
that:
“Any investor or group of investors […] wishing
to own more than 10% of the voting rights in
a company quoted in the official or secondary
market, or wishing to acquire the absolute
or specified majority in this company, should
present a draft for a tender public offer or
bartering via a financial broker.”
The period of the offer in a bidding transaction
should not take less than ten Stock Exchange
sessions, and there are no limitation of initial

Merger & Acqusitions
offer price limit. However, article 168 of decree
Any subscription or transaction in the Lebanese
final decision on the matter within the above-
the merging bank from income tax for
7667/1995 states:
banks’ shares is subject to prior approval of the
mentioned deadlines, the Central Bank shall be
an amount equivalent to taxes due on
“In the event an investor or another group
Central Council of the Lebanese Central Bank as
deemed to have taken an implicit decision of
a portion of its profits, provided this
of investors presents a counter-proposal, this
follows:
rejecting the merger request as submitted.
portion does not exceed the cost of
counter-proposal cannot be accepted unless the
• if the subscriber acquires more than
TAX INCENTIVES
the merging operation and a ceiling of
counter-price exceeds the price of the current
5% of the bank’s shares or from the
In order to encourage M&A activity within
two billion Lebanese pounds. […] The
offer by more than 5%”.
voting rights related to these shares,
the banking sector, the legislator granted the
merged bank (s) shall also be exempted
M&A REGULATIONS IN BANKS
REGULATORY FRAMEWORK
whichever is greater;
• if the subscriber owns at the time of the
subscription 5% or more of the bank’s
banks with several tax incentives, including the
following:
• Article 7 of Law 192 of January 4, 1993
from the tax stipulated in article 45
of the Income Tax Code, in case of
approval of the revaluation of its (their)
M&A of banks are regulated by the Lebanese
Code of Money and Credit (articles 132/b-d and
133/b-d), the provisions of Law 192 of January
4, 1993 and their amendments regarding the
facilitation of banks’ M&A as well as Law 308 of
April 3, 2001 organizing the issuance and trade
of stocks and bonds and acquisition of real estate
by banks.
The regulatory body is the Central Council of the
Lebanese Central Bank which set all regulations
concerning purchases of shares in banks, and
those concerning the banks’ M&A.
The Central Council of the Lebanese Central
Bank, after consultation with the Banking Control
Commission, supervises all takeovers in the
banking and financial services sector, ensures
that all regulated entities comply with applicable
laws and regulations, and has all discretionary
powers to approve or reject any takeover within
the banking and financial services sector.
STRUCTURAL CONSIDERATIONS
shares or from the voting rights related
to these shares whichever is greater.
Any merger that includes a bank or a financial
institution shall be contingent upon the approval
of the Central Council of the Lebanese Central
Bank. Consequently, the deals are governed by
the Central Council of the Lebanese Central Bank.
The Central Council shall take, after consultation
with the Banking Control Commission, a
provisional decision approving or rejecting the
merger within sixty days from the filing of the
bank’s application and the attachments specified
by the Law.
In case of approval, the Central Council
shall specify the conditions, deadlines and
guarantees required for its final decision. The
Central Council shall take a final decision on the
merger within thirty days from the submission
date of documents that prove the fulfillment
of conditions and guarantees required by the
Council.
In case the Central Council has not taken a
states that: “During the year that follows
the year in which the Central Council
took its final decision on approving
the merger, the Council may exempt
Christiane Ghneim
Associate at Aziz Torbey Law Firm
T: +961 1 616161
Email: cghneim@torbeylaw.com
fixed assets”.
• Article 8 of Law 192 of January 4,
1993 states that: “All formalities and
procedures required by the merging
Christiane Ghneim is an associate at the Eptalex Beirut office of Aziz Torbey Law Firm where she works in the
banking and corporate practices. Her transactional experience includes several acquisitions where she was
involved in the due diligence phases and the drafting of transaction agreements.
Christiane also works on the in¬cor¬po¬ra¬tion and re¬lo¬ca¬tion of com¬pa¬nies as well as the dai¬ly
operations of busi¬ness¬es. She is a law graduate from Saint-Joseph University (USJ) and holds a Master of
Advanced Studies (DEA) in Internal and International Business Law from the Lebanese University- french section.