Page 9 - Quarterly Q1-Q2 2018

Better Safe than Sorry
It is not unheard of that the target itself or its advisers leak information to the market in the hope of a more preferable bidder (a so called “white knight”) or as another takeover defense tactic to frustrate the bidder or for testing whether there
is any room for higher price. Therefore, from the bidder’s perspective, the earlier the information on the potential transaction leaks to the market the higher the risk is that the transaction price or at least transaction costs increase(s). In a worst case scenario, the leakage may prevent the completion of the transaction altogether.
In connection with a decision on delaying disclosure, the listed company must establish a project-specific insider register on persons who have access to the inside information. With the help of the insider register, listed companies are able
to monitor who has access to inside information
on the transaction. This reduces the risk of
leakage and abuse of inside information because the companies must ensure that the persons included in the register have been informed of the prohibition to exploit or disclose inside information.
As a rule of thumb, listed companies should ensure that the information on an M&A transaction is regarded as inside information at an early stage of the M&A process. A predefined low internal limit
in the disclosure policy for valuation or strategical materiality of an M&A transaction helps to ensure that information regarding a potential transaction is considered inside information at an early stage and that the persons involved are registered into insider registers soon enough. This “better safe than sorry” approach does not only limit the risk of abuse of inside information, but it certainly is in the interest of the listed company. By defining the information on the planned transaction as inside information, the risks of endangering a successful transaction and competing bids are effectively mitigated.
Jan Ollila
Senior Partner, Head of M&A & Private Equity
Sakari Sedbom
Senior Associate
KEY INSIGHTS
Loose lips sink ships –
leakages of information on a potential transaction can increase the transaction costs or prevent the deal from happening.
Better safe than sorry –
establish internal policies according to which the information on an M&A transaction amounts to inside information at an early stage.
Not just an administrative burden –
insider lists help listed companies to monitor the transfer of information and decrease the risk of information leakages.
TAGS
Transaction Powerhouse M&A
Inside information Insider list Disclosure Policy