In June 2010, the Takeover Panel's Code Committee published a consultation paper suggesting possible amendments to the Takeover Code following high profile criticism of the UK takeover regime in the wake of Kraft Food's hostile bid for Cadbury. In October 2010, the Panel announced the Committee's conclusions on the principal issues consulted on. While the areas that will be the focus for changes to the Code are not surprising, the potential scope of the changes is perhaps more radical than the market anticipated.

The Committee's decision to truncate the "put up" or "shut up" process was not unexpected. That said, the move towards automatic deadlines of four weeks and, in particular, the identification of potential offeror(s) in any announcement which commences an offer period, was more surprising. In view of the risk of a leak following an approach to an offeree, offerors are going to need to be much more ready to launch an offer when making an approach or a possible offer announcement. To suggest the truncated timetable will put a brake on takeover activity is probably a bit strong, but for financial or private equity bidders, given their due diligence and financing requirements, consortium bidders and those bidders offering securities as consideration (with the related requirement for regulatory approval of securities offering documentation), the shorter timetable will mean the takeover landscape might become more challenging.

The Committee's decision to do away with the more restrictive deal protection measures that have become a feature of takeover practice is welcome as they have made it more difficult for later competing bidders. However, the decision to abolish break or inducement fees is more questionable. While break fees have become standard practice in takeovers, rarely have they been interpreted as a barrier to a competitive bidder. Break fees serve a legitimate purpose and the expectation of an offeror who makes a recommended offer to receive some form of compensation if a higher competing offer is made, in recognition of the risk and cost inherent in launching any public offer, has merit and encourages bid activity. A tightening up of the permissible triggers for payment of break fees or the comfort required from financial advisers to the Panel on the negotiation of the fee level might have been alternative considerations. So far as schemes of arrangement are concerned, the impact of the Committee's approach to deal protection suggests the end of implementation agreements.

The Committee's desire for a greater degree of transparency about an offeror's bid finances, the level of advisory costs to be paid and the offeror's plans for the offeree is not surprising. However, requiring advisory fees to be disclosed remains a bold move (even if it will not particularly impact on the conduct of takeovers) and while the Panel currently requires an offeror to be clear about its intentions for the offeree, the ability to hold the offeror to such statements for a period of 12 months after the offer closes is an interesting development.

In due course the Committee will publish one or more consultation papers detailing the proposed amendments to the Code in full. For more information on the proposed amendments set out in the October Panel statement, see The Takeover Panel's conclusions from its review of certain aspects of the regulation of takeover bids.