Offer related arrangement
M&A / Merger ModelAny agreement between a UK target and a bidder in connection with an offer, prohibited by Rule 21.2 of the Takeover Code except with the Panel's consent.
Also written: offer related arrangements, offer-related arrangement, offer-related arrangements, Rule 21.2
Rule 21.2 prohibits the target, and anyone acting in concert with it, from entering into an offer related arrangement with the bidder during an offer period or when an offer is reasonably in contemplation, unless the Panel consents. The definition is deliberately wide: any agreement or commitment in connection with an offer, including an inducement fee or anything with a comparable economic effect.
The carve outs are narrow and worth knowing, because they are the whole of what a UK bidder can actually get. Confidentiality undertakings, commitments to help obtain regulatory clearance, irrevocable commitments and letters of intent, and arrangements relating to existing employee incentive schemes.
So the American deal protection package does not travel. A no shop, a matching right and a target break fee are all offer related arrangements, and the reason a UK deal has none of them is a single rule rather than three separate customs. This is also why the 1% cap that is still widely quoted is out of date: since 2011 the position has been prohibition with narrow exceptions rather than a cap.
The Panel does consent in defined situations, a formal sale process and a white knight responding to an announced hostile offer being the standard examples, and any fee permitted there is capped and small. The practical question in a UK deal is therefore never how large a fee should be, but whether the arrangement may exist at all.
Worked example
A bidder for a UK listed target asks for a no shop, a matching right and a break fee of a few percent, as it would at home.
All three are offer related arrangements under Rule 21.2, so none is available without the Panel's consent, which it will not give on those facts.
What the bidder gets instead is irrevocable undertakings from large shareholders, signed before the announcement, which the rule expressly carves out.