One corporate action to pursue corporate restructuring is the merger & acquisition (takeover) of two or more companies with the aim of improving the company’s performance and competitiveness in the national market and abroad.
There are two forms of consolidating public limited companies – an acquisition (takeover) is the purchase of a smaller company (combination of "unequals") by another in which no new company is formed; a merger is a combination of two companies (combination of "equals") to form a new company – both regulated by the Companies Act.
The Companies Act also covers the cross-border mergers of companies with share capital taking into consideration the provisions of the EU Directive on cross-border mergers of companies with share capital .
Types of Consolidation of Companies
In accordance with the Companies Act, two or more public limited companies may be consolidated by takeover (acquisition ) or by merger.
A Takeover (Acquisition)
The larger company (acquiring company) initiates the takeover which is executed by the transfer of all shares of one or more smaller companies (acquired company) to the larger company (acquiring company).
A merger involves the mutual decision of two (or more) companies to combine and become one entity, and for this purpose they form a new public limited company; the merger is executed when the total amount of shares of the companies involved is transferred to this new public limited company.
There are two merger & acquisition types: Horizontal and Vertical. A horizontal merger is a merger between two companies of the same branch of industry (which may negatively affect the competitive situation). The expected advantages are to cut costs and increase profits, owing to an increase in the degree of concentration in an industry. A vertical merger & acquisition occurs when a supplier (acquiring company) buys a reseller (acquired company), or vice-versa. The key point is that the two companies are part of the same supply chain.
As a takeover (acquisition) does not necessarily have to be a mutual decision, a larger company can initiate a hostile takeover of a smaller company (target company), if it decides to buy this company in the face of resistance from the smaller company's management. An acquisition is a friendly takeover if the target company's shareholders have approved the decision to be acquired.
Conditions of mergers & acquisitions (takeovers)
The procedure of the acquisition of companies in Slovenia is regulated by the Takeover Act.
An acquiring company must obtain prior consent issued by The Stock Market Agency and a permit issued by the Competition Protection Office. It should submit:
- an application for prior consent;
- a 'tender offer' for buying a controlling share of the target-company's stock from its shareholders;
- a prospectus for buying the target company's stock;
- an application for the conclusion of a Contract for Services with the Securities Clearing Corporation, including services relating to the receipt of the 'tender offer' and activities relating to changes in the share capital of the acquired and the acquiring company;
- a report on securities in connection with the 'tender offer', which have been obtained by an offerror in the last 6 months;
- an application filed with Competition Protection Office for the issuance of a permit as notification of concentration;
- an opinion on the acquisition issued by the management of the target company.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
Prior to merger & acquisition (takeover) the authorised auditing company will perform a valuation of assets, to specify the conversion rate.
The management of the consolidated companies will conclude an Acquiring Agreement in the form of a notarial deed, and this Agreement will be audited for each company.
The Agreement between the Competition Protection Office and the shareholders of companies, stating that the acquisition is not a prohibited takeover, is included in the Acquiring Agreement.
The merged companies must notify the Competition Protection Office of a merger (acquisition), if the total annual turnover of the companies involved during the previous financial year in the Slovenian market, exceeds 35 million EUR, providing that at least two of the companies involved from the group exceed 1 million EUR.
However, the Competition Protection Office may call upon the involved companies to notify their merger (acquisition), even if they did not exceed the stated thresholds, if together with other companies from the group they obtain more than 60 % of the market share in Slovenia.
A proposal for the entry of a takeover in the Court Register, which must include an increase in equity of the acquiring company, should be submitted at the location where the acquiring company has its registered office.
The e-VEM Web Portal offers very useful information and the certain forms relating to corporate restructuring.
On the e-administration (e-uprava) Portal and the Court Register website you will find useful information on submitting the basic data of legal entities having changed after the merger (acquisition).
The Company Law Division of the Ministry of the Economy, offers basic information about corporate restructuring.
The Competition Protection Office offers general information on legal limits relating to the merger & acquisition (takeover) of companies.
Information on the annual business results of the companies involved in mergers (acquisitions) is available at The Agency of the Republic of Slovenia for public and legal records and services (AJPES).
Information on the tax liabilities of the companies involved in a merger (acquisition) is available from the Tax Administration of the Republic of Slovenia.
The Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI) also offers useful, general information on corporate restructuring.