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M&A In Belgium: Tips And Tricks

By Steven De Schrijver, Philippe Van den Broecke & Frédéric Verspreeuwen
Posted: 19th June 2012 09:24

Although 2011 started very promising in terms of M&A activity in Belgium, the market slowed down in the second half of the year.  The main reason for this downturn was the general lack of confidence on the investors’ side in Europe, for which Belgium is unfortunately not immune.  In addition thereto, the uncertain political situation in Belgium during most of 2011 and the problems faced by Dexia, one of the country’s leading banks, no doubt have contributed to the uncertainty in the market.
Nevertheless, M&A activity may be expected to increase again in the course of 2012.  Macroeconomic parameters are relatively strong, unlike other European countries, Belgium’s GDP is expected to grow this year by 0.9% and Belgium still has many assets when it comes to attracting foreign investment.
Belgium has a lot of healthy and well-managed family-owned businesses that are middle market, in particular in the consumer market industries (food, beverages, and consumer products).  These companies tend to maintain strong balance sheets and are more and more opening up to private equity investments.  As a result, foreign private equity companies and investment funds will still find interesting middle market assets in Belgium.

Belgium’s exceptional strategic location at the heart of Europe and its proximity to numerous important European cities are also an essential asset for foreign investors.  Belgium hosts an impressive number of international institutions and centres of decision-making.

In addition, Belgium is a centre of knowledge where top tier universities have played a major role in the development of, amongst others, the biotech and pharmaceutical industries.  The Belgian workforce is highly skilled, very productive and multilingual, and the Belgian public authorities are seeking to reduce labour costs through business-friendly measures. 
Incorporating a company in Belgium is relatively easy and does not require more than a couple of days.  Finally, Belgium offers modern and efficient business infrastructures, well-developed transport and logistics, and a high quality of life in general.

However, despite the many advantages Belgium has to offer, the current M&A climate is still not the same as it was before the 2008 crisis.  Banks are still somewhat reluctant to provide funds to finance takeovers that are not for the most part funded by the acquirer’s own equity.  In order to deal with this lack of available debt, advisers are challenged to find innovative funding structures in order to allow their clients to raise the required capital.

Moreover, negotiation processes tend to take more time than before since buyers request more stringent information covenants, substantive security packages and tight financial covenants.  As a consequence, more deals get canceled before closing.  Legal and financial advisers should therefore always try to speed up the preparation, signing and closing of the transaction, because the longer an acquisition process takes the more chance there is that the deal will collapse.  At the same time, they should assist their clients in focusing the due diligence investigation on the key issues.

Employment law is strictly regulated in Belgium and is therefore one of the important issues which require specialised advice before as well as after the closing of a deal.  The pre-closing concerns mainly relate to the possible information and consultation obligations and to the retention of key employees.  The post-closing issues relate to the so-called collective employment conditions and include the integration of works councils and other bodies of employee representation, the shift to a different joint industrial committee (which can result in the change of employment conditions, including wages, vacation periods, etc.) and the application and impact of different collective bargaining agreements at company level.  Regarding compensations and benefits, a takeover often requires the development of a strategy to streamline salaries and fringe benefits in view of the integration of the acquired business into the group.
Below we have outlined some tips that may be useful when acquiring a Belgian company:

- Be careful with the letter of intent (LOI).  Under Belgian law, there is a binding agreement as soon as there is consent between the parties regarding the object and the price of the sale.  Hence, it is important to indicate in the LOI which provisions are binding and which are not.  The LOI can be used to negotiate a few important deal points.

- Pay a lot of attention to your due diligence.  Define the scope carefully, implement a realistic but strict timetable and make sure to carry out due diligence on the business culture of the target in order to examine organisational health, leadership talent and managerial abilities.

- Educate the seller.  Convince your counterpart to hire a good lawyer, to start preparing the data room as soon as possible, to answer all questions and to start timely with the preparation of the disclosures.

- Start timely with the preparation of the tax structure of the transaction (e.g., share deal v. asset deal).  It makes no sense to prepare the acquisition documents if the tax structure is not yet in place.

- Make sure that you get the management of the target on board.  Specify roles for the top executives that will remain with the target.  Put the right executive compensation system and incentives in place.

- Be careful with earn-outs.  The sellers will usually wish to maintain some form of legal status, control, or power of veto, in view of ensuring the ‘earn-out’ is successful for them.  This may cause anxiety for the buyer as far as formulating long-term planning and integration.  Make sure that all details are clearly outlined as far as both parties’ interests are concerned before finalisation.

- Design the post-closing integration as carefully as the takeover itself.  Apply the guiding principles that were important to the success of the acquiring company to the acquired business but do not change things too quickly.  Nevertheless, get the transition over as quickly as possible.

Astrea is an independent law firm in based in Antwerp and Brussels with over 40 attorneys (10 of whom are partners).  Established in 2006, the Firm has experienced continued growth and advises a growing list of domestic and international clients in all major areas of business law (including corporate/M&A, finance, employment, commercial, IP, ICT, real estate, transport & logistics, administrative, environmental, litigation and tax).  Working closely with some of the finest law firms around the world, Astrea’s partners advise on complex, cross-border and domestic transactions and legal matters.
Astrea’s corporate department consists of 16 attorneys (3 of whom are partners), who all have extensive experience in multi-jurisdictional M&A transactions, private equity, corporate restructuring and corporate litigation. 
Our attorneys are multilingual and combine specific legal expertise with relevant industry knowledge and a pragmatic and solution-oriented approach.
Steven De Schrijver is a partner in the Brussels office of Astrea.  He has 20 years of experience advising Belgian and multinational companies on mergers and acquisitions, joint ventures, corporate restructurings, acquisition financing, private equity and venture capital, debt structuring and secured loans.  He has been involved in several national and cross-border transactions mostly in technology-oriented sectors.
Steven is also recognised as one of the leading commercial IT lawyers in Belgium specialising in new technologies (such as data protection, e-commerce, software licensing, technology transfer, IT-outsourcing, cloud computing, etc.).
Steven holds a law degree from the University of Antwerp (magna cum laude, 1992) and an LLM Degree from University of Virginia School of Law (1993).  He received the ILO Client Choice Award 2012 in the General Corporate Category for Belgium.
He is fluent in Dutch, French and English and has good notions of German and Spanish.
Steven can be contacted via email at or alternatively by calling +32 3 287 11 11 / Mob. +32 475 388 955.
Philippe Van den Broecke is a partner in the Antwerp office of Astrea.  He has 20 years of experience in corporate law, and more in particular in the field of M&A, corporate restructuring, private equity and venture capital, debt structuring and corporate litigation. 
Philippe holds a law degree from the Vrije Universiteit Brussel (1993) and is member of the Bar of Brussels since October 1993.
He is fluent in Dutch, French and English. 
Philippe can be contacted via email at pvdb@astrealaw.beor alternatively by calling +32 3 287 11 11 / Mob. +32 475 388 955.
Frédéric Verspreeuwen is a partner in the Antwerp office of Astrea.  He advises domestic and international clients on national and international acquisitions and restructurings general corporate law, financial law and bankruptcy matters. 
Frédéric holds a law degree from the Antwerp University (2000) as well as a Master after Master in Company Law from the University of Ghent (2001) and the University of Brussels (2003).

He is fluent in Dutch, French, English and German.

Frederic can be contacted via email at frederic.verspreeuwen@astrealaw.beor alternatively by calling +32 3 287 11 12 / Mob. +32 478 240 710.

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