Introduction
A UK take-private, or public-to-private (P2P) deal, runs in a different order from most buyouts. In a US merger, a sponsor signs with commitment letters, and no third party has to vouch in public that the money exists. Under the Takeover Code, the rulebook the Takeover Panel applies to bids for UK companies, the money must be certain before the bid is announced: the bidder's adviser confirms the cash publicly, and the lenders commit on terms that leave them almost no way out. Secrecy comes first too, because a leak forces the target to name the sponsor and starts a 28-day clock. The US board process is covered in US take-privates from the sponsor seat; the UK machinery is traced here through EQT's 2023 purchase of the veterinary drug maker Dechra Pharmaceuticals.
From Approach to Announcement: Leaks and the 28-Day Deadline
A sponsor's approach goes privately to the target board and stays private only while the circle is small. Rule 2.2 requires an announcement once an approach is followed by rumor and speculation or an untoward share price movement, or when talks are about to widen beyond a very restricted number of people. The announcement that starts the offer period must, under Rule 2.4, name every potential offeror the board is talking to or has not unequivocally rejected.
Naming starts the bidder's clock. Under Rule 2.6 of the Code, a named potential offeror must, by 5.00 pm on the 28th day, announce a firm intention to make an offer or announce that it will not, and the Panel normally consents to an extension when the target board asks for one. The deadline and the naming rule date from the 2011 reforms that followed Kraft's hostile Cadbury takeover.
- Put Up or Shut Up (PUSU) Deadline
The deadline under Rule 2.6 of the UK Takeover Code by which a publicly named potential bidder must announce a firm offer or state that it will not bid. It falls 28 days after the bidder is first named and can be extended with Panel consent.
Walking away has a price: a no intention to bid statement under Rule 2.8 bars the sponsor from bidding for six months, with limited exceptions such as the target board's agreement or a third party's firm offer. For the coverage bank, diligence, debt and co-investor commitments and the offer documents must all fit inside the deadline.
Dechra: A Named Price, an Extension and a Lower Bid
On April 13, 2023, after press speculation, Dechra and EQT confirmed talks about a possible cash offer of 4,070 pence a share, about £4.6 billion, with Abu Dhabi Investment Authority (ADIA) money expected alongside, and the board said it was prepared to recommend that price. On May 11 the deadline was extended to June 2 so EQT could finish confirmatory diligence. Dechra then issued a profit warning on May 22, and EQT came back at 3,875 pence. The firm offer, announced on June 2, sat 195 pence below the April figure, and the board recommended it.
Rule 2.7, the Cash Confirmation and Certain Funds
A firm offer announcement under Rule 2.7 commits the bidder to proceed, and the Code permits one only when the bidder has every reason to believe it can implement the offer. For a cash bid, the announcement and the offer document must carry a cash confirmation: under Rule 24.8, an appropriate third party, usually the bidder's bank or financial adviser, confirms that resources are available to satisfy full acceptance. The confirming party is not expected to produce the cash itself if it acted responsibly and took all reasonable steps to assure itself the cash was available, so advisers check the equity and debt documents almost as closely as the lenders do.
At Dechra, BofA Securities and Morgan Stanley, joint financial advisers to the bidding company, gave the confirmation in the Rule 2.7 announcement. The bid, valuing the shares at about £4.46 billion, was funded by EQT equity, equity from Luxinva, an ADIA subsidiary taking 26% of the bidder, and debt under an interim facilities agreement.
How Certain Funds Shapes the Debt Package
With an adviser vouching for the money, a financing condition is not a realistic option, so UK bids are financed on a basis the market calls certain funds.
- Certain Funds
A lending commitment, standard in UK takeover financing, under which lenders may refuse to fund during an agreed period only on a short list of major events, such as the borrower's insolvency, a major misrepresentation by it or illegality. A weaker business, market disruption or unfinished lender diligence are not grounds to refuse.
The usual vehicle is an interim facilities agreement (IFA), a short-form loan agreement signed before the announcement that could fund completion on its own and is normally replaced by long-form senior facilities before closing. Three consequences follow:
- Duration: lenders carry the risk until completion. Dechra's scheme became effective on January 16, 2024, more than seven months after the firm offer.
- Protection by price: lenders manage that exposure through flex terms and fees, because they cannot add exits.
- Commitment up front: every lender signs before the firm offer, inside the deadline.
How banks size and price such commitments is covered in underwriting and commitment letters.
Scheme of Arrangement or Contractual Offer
A UK take-private is implemented either as a scheme of arrangement, a shareholder vote sanctioned by the court, or as a contractual takeover offer.
| Feature | Scheme of arrangement | Contractual offer |
|---|---|---|
| Legal basis | Companies Act 2006, Part 26 (section 899) | Offer to each shareholder under the Code |
| Approval threshold | Majority in number and 75% in value of those voting at the court meeting | Acceptances above 50% of votes (Rule 10), often set higher |
| Ownership outcome | 100% on the effective date | Squeeze-out only at 90% of the shares the offer covers |
| Who runs the timetable | The target and the court | The bidder, with conditions met by Day 60 |
| Hostile use | Needs the target's cooperation | Possible |
The court acts twice: a convening hearing orders the shareholder meetings, and after the vote and the clearances a sanction hearing approves the scheme, which takes effect once the order reaches the Registrar of Companies. Dechra's shareholders approved on July 20, 2023, the court sanctioned the scheme on January 12, 2024, and the shares were delisted on January 17.
What a Scheme Gives a Sponsor and Its Lenders
The scheme vote counts only shares that are voted. On a hypothetical register where 70% of the shares vote, 75% of that turnout is 52.5% of the company, and a holder of just over 17.5% can block. Event-driven funds that buy after announcement, the strategy in merger arbitrage explained, can build exactly that kind of blocking stake.
The larger prize is 100% ownership on a single date. Section 678 of the Companies Act bars a public company from giving financial assistance for the purchase of its own shares, so the target re-registers as a private company before it guarantees and secures the acquisition debt, and lenders want no minority holders left behind. An offer that stalls below the 90% squeeze-out threshold in section 979 leaves that problem. Offers keep their uses, from bidder control of the timetable to hostile bids, and Dechra's bidder reserved a switch to one with a 75% acceptance condition.
How Continental Europe Differs
Continental bids run under national law, often as tender offers, within the European Union's Takeover Bids Directive, which lets each member state set its squeeze-out threshold between 90% and 95%. Funding certainty is not a UK peculiarity: for a cash offer, Germany requires an independent investment services firm to confirm in writing that the bidder has secured the funds. Works councils, German delisting offers and national investment screens are covered in European private equity sponsors.
Deal Protection, Management Incentives and Equal Information
The Code strips out most of the protection a US sponsor negotiates. Under Rule 21.2, the target may not enter into any offer-related arrangement with the bidder without Panel consent; an inducement fee of normally no more than 1% is possible only for a competing bidder against a hostile offer or in a formal sale process. Compared with the US fees in the break-up fee guide, a UK target pays nothing if it walks.
Sponsors therefore seek protection from shareholders, through arrangements the rule still allows. Irrevocable undertakings commit holders to vote for a scheme or accept an offer, and a hard irrevocable binds even if a higher bid appears. Dechra's bidder held hard irrevocables over only about 0.4% of the shares, from directors and their relatives.
Management Incentives and the Rule 3 Adviser
Sponsors want managers to reinvest and take incentive equity, the subject of management incentive equity and sponsor dilution. Under Rule 3.1 the target board must obtain competent independent advice on whether the financial terms are fair and reasonable; Investec gave it at Dechra. Under Rule 16.2, once a bidder agrees or is far advanced on incentives for shareholding managers, that adviser must publicly call them fair and reasonable. Independent shareholders must approve them where managers roll into the bidder on terms not offered to other holders; significant or unusual arrangements also need the Panel's consent, which it can make subject to such a vote. Dechra's bidder said it had held no such talks and might do so after completion.
Taken together, the rules bind the bidder far more tightly than the target. The board can change its recommendation without paying a fee; a sponsor that has announced has a cash confirmation on the record, lenders on certain funds and conditions it can invoke only with the Panel's consent.
That makes the PUSU deadline the sponsor's real decision point. Before it, walking away costs diligence fees and a six-month lockout. After a firm offer the bid is close to a binding promise, so the work that wins a UK take-private, from lender commitments to a price the board will recommend, is finished inside those 28 days.
