Dutch public takeovers by private equity firms: opportunities and key considerations

Why private equity is driving public takeovers

Private equity has become a dominant force in European public takeovers, and the Netherlands is no exception. Today, PE firms account for nearly half of all bids for Dutch listed companies – a remarkable increase compared to a decade ago. The first half of this year alone has seen a notable uptick in P2P activity, as PE sponsors seek to capitalise on market volatility and attractive valuations.

Several factors are fuelling this trend:

• Abundant dry powder: PE firms continue to amass significant unallocated capital, with pressure from limited partners (LPs) to deploy funds efficiently.
• Attractive valuations: Many European listed companies, particularly in the small- and mid-cap segments, are trading at discounts to intrinsic value, making them appealing targets for both domestic and international buyers.
• Relative stability: As geopolitical and regulatory uncertainty increases in the US, Europe – and the Netherlands in particular – is perceived as a stable and predictable investment environment.
• Less competitive processes: P2Ps are often less competitive than private M&A auctions, allowing PE firms to negotiate directly with target boards and key shareholders.
• Value creation potential: The opportunity to implement operational improvements and strategic changes post-delisting is a key driver for PE sponsors.

Despite these advantages, many PE firms remain cautious about P2Ps due to unfamiliarity with the Dutch takeover regime. However, those who invest in understanding the local regulatory landscape often find themselves well-positioned for repeat success.

Five key considerations for PE firms in Dutch public takeovers

1. Navigating Dutch takeover rules and statutory timelines

Public takeovers in the Netherlands are governed by a robust regulatory framework, with the Dutch Authority for the Financial Markets (AFM) serving as the principal regulator. The process is highly structured, with limited flexibility regarding procedure and timing. The key phases of a typical Dutch public offer include:

• Pre-announcement phase (4–10 weeks): Negotiations leading to the signing of a merger protocol and public announcement of the intended offer.
• Pre-offer phase (6–12 weeks): Preparation and submission of the offer document to the AFM for approval.
• Public offer phase (8–10 weeks, subject to extension): The period during which shareholders may tender their shares, which may be extended to accommodate regulatory approvals.
• Post-offer phase: Achieving full ownership and delisting, either through statutory squeeze-out proceedings (approximately 3–7 months) or pre-wired back-end structures (transfer of assets after settlement of the public offer, with liquidation of the target company taking several months).

While the process may appear complex, it offers predictability and transparency through a well-defined timetable. Early engagement with experienced legal and financial advisors is essential to navigate the regulatory landscape and avoid common pitfalls.

2. Achieving full ownership

A key feature of Dutch public takeover law is the absence of a binding shareholder vote on the offer itself. Unlike in the US or UK, where a majority shareholder vote can compel all shareholders to sell, Dutch shareholders retain the discretion to tender their shares or remain as shareholders in the listed company. This means that, following a public offer, any shareholders who choose not to tender simply continue as shareholders, and the company remains listed unless the bidder acquires at least 95% of the issued and outstanding shares.

This framework presents a unique challenge for bidders seeking full ownership and delisting of the target company. However, Dutch law and market practice provide two well-established routes to achieve this objective:

Statutory squeeze-out proceedings: If a bidder succeeds in acquiring at least 95% of the issued and outstanding share capital and 95% of the voting rights, it can initiate statutory squeeze-out proceedings. This legal process enables the majority shareholder to compel the remaining minority shareholders to transfer their shares, thereby achieving 100% ownership. Squeeze-out proceedings are conducted before the Dutch courts and, while effective, can take several months to complete.

Back-end structures: In situations where the bidder does not reach the 95% threshold, Dutch market practice has developed alternative mechanisms – commonly referred to as “back-end structures” – to facilitate full ownership. These structures are typically agreed upon between the bidder and the target company as part of the transaction documentation.

The most straightforward back-end structure involves an asset sale, whereby the target company sells its business to the bidder, followed by the liquidation of the target company and a distribution of the liquidation proceeds to the remaining shareholders. However, in recent years, more sophisticated multi-step structures have become prevalent. These may include legal mergers or other corporate reorganisations designed to efficiently transfer the business to the bidder and ultimately achieve delisting.

Back-end structures require careful planning and execution, as they must comply with Dutch corporate law, tax considerations, and the interests of minority shareholders. Early engagement with experienced legal and financial advisors is essential to ensure that the chosen structure is robust, efficient, and capable of withstanding potential challenges.

3. Certainty of funds

A cornerstone of the Dutch takeover regime is the requirement for bidders to demonstrate “certainty of funds.” When submitting the offer document to the AFM – within 12 weeks of the initial announcement – the bidder must publicly disclose the financial means available to pay the offer price, whether in cash or other consideration (such as shares in an exchange offer).

Unlike some other jurisdictions, Dutch rules do not require submission of commitment letters or finance documents to the AFM, nor is there a requirement for a third-party cash confirmation. The AFM relies on the bidder’s public disclosure as evidence of funding. However, in practice, bidders – especially those relying on syndicated loans – should finalise their financing arrangements before announcing the bid to ensure compliance and avoid execution risk. Close coordination with financing partners is therefore critical.

4. Management participation

Management participation is a common feature of PE-led transactions, with target company management often invited to invest alongside the new owners post-transaction. Under the Dutch takeover rules, any arrangements regarding management participation agreed prior to publication of the offer memorandum must be disclosed in the offer documentation.

To avoid premature disclosure, many PE firms defer finalising management participation until after the offer memorandum is published. However, this can create uncertainty for management teams, potentially impacting deal momentum and alignment. Transparent communication and careful planning are essential to maintain trust and ensure a smooth transition (and to avoid the perception of conflicts of interest).

5. Shareholder roll-overs

In Dutch P2P transactions, it is increasingly common for bidders to offer certain existing shareholders the opportunity to “roll over” their shareholding in the target company into the bid vehicle. This can be an effective way to bridge valuation gaps and align interests, particularly where key shareholders are seeking continued exposure to the business.

However, roll-overs require careful structuring. Under Dutch takeover rules, reinvesting shareholders are deemed to be “bidders” from the outset, and the “best price rule” prohibits offering reinvesting shareholders a higher price or guaranteed upside compared to other shareholders. This means that any roll-over arrangements must be carefully documented and disclosed, with attention to both legal and tax implications.

Early engagement with legal and tax advisors is crucial to ensure compliance and avoid disputes with non-reinvesting shareholders, who may scrutinise the fairness of the offer price.

Conclusion: seizing the opportunity in Dutch P2Ps

Public-to-private transactions offer private equity firms a compelling opportunity to create value in the Dutch market. While the process is highly regulated and requires careful navigation of legal, financial, and stakeholder considerations, it also provides structure, transparency, and the potential for significant upside.

By proactively addressing the key considerations outlined above, PE firms can position themselves for successful P2P transactions and build a strong track record in the Dutch market.

Our Hogan Lovells Amsterdam team has extensive experience advising private equity sponsors and other parties on all aspects of Dutch public takeovers. Contact us for expert guidance on navigating the Dutch takeover regime and structuring your next deal for success.

For more information or to discuss your specific needs, please reach out to our Corporate M&A team in Amsterdam.

Authored by Jaap Geleijns and Jacob Hoogslag.