MERGERS AND ACQUISITIONS
change of control: every regime has a different way of looking at it. That’s great for private practice lawyers but a pain for the operators. If you are looking to buy an online gaming company which is operating in, and has licenses in several jurisdictions, you have a very complicated process to go through. And it gets more complex because if, for example, the acquiring entity is a private equity fund, or backed by private equity, you get into issues of the limited partners and the general partners: are they caught by the regulations, and can you devise a structure that circumvents the requirement for approval? Then you have to ask what the threshold is and again it’s not as simple as whether or not a non-shareholder is acquiring say 10 percent: it’s looking at control or influence. If they are already a shareholder, are they going to acquire 10% or more of the equity? In some cases, the regulation only looks at the licensed entity and not whether there’s a change of control higher up the chain. In other cases, there’s no requirement for notification or approval at all. You also get into the issue of when approval is required. Is it mandatory to acquire that approval before closing the transaction, or can you acquire it afterwards? If it’s afterwards, what happens if the approval is not forthcoming? Will the entity that you’ve just acquired lose its license, or can the transaction be unwound? So you can see that very quickly there is a lot to consider. As a buyer, the way to protect yourself against not getting the approval is to make the deal subject to conditions precedent. But if the target company is for sale via a competitive auction, you have to consider whether a competing buyer is already licensed in that jurisdiction and may take the view that they are going to get approval. In that scenario can you afford to go ahead with the acquisition unconditionally? So far we’ve been talking about gaming approvals, but there may well be other approvals required: anti-trust or financial regulatory approvals. Sometimes things can happen that are beyond the control of the vendor, particularly when the licensed entity is listed. When that happens, because it’s the licensed entity, it’s the one that suffers. There was a good example last year, when the former management of GVC, or Entain, as they became, acquired six
percent of 888, which is a listed entity. They just acquired those shares in the market, but the Gambling Commission in the UK instigated a review of 888’s license because they were concerned about the people who were looking to take control of it. So sometimes things can happen over which you have no control. The practical issue arises where, under the rules of the stock exchange on which the company is listed, there is a requirement upon shareholders to notify once they have acquired above a certain percentage interest. If there’s a jurisdiction where the change of control threshold is three percent and the stock exchange rules only require you to notify when you get to five percent, then that’s a problem. And sometimes regulators are awkward and say, “this is what our this is what our rules say, and it’s up to you to institute a method of finding out your shareholders interest”. What larger listed companies do is add a part to the constitution requiring shareholders to notify them if the interest goes above a certain level. They also reserve the right to disenfranchise you for your shareholding that goes above that threshold.
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IMGL MAGAZINE | DECEMBER 2024
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