Any entity seeking to purchase a company has a variety of legal mechanisms to choose from under Bermuda law. Today, I will focus on the two most commonly used methods - tender offers and amalgamations.

A tender offer is made by the acquisitive entity ("the Acquirer") to some or all shareholders to purchase the existing issued shares of the company ("the Target").

Except to the extent that the Target cooperates in supplying information to assist the Acquirer in making an offer, the directors of a Target are not legally required to take a position for or against the offer or the price offered.

There are several advantages to this method of acquisition. The tender offer is made on the Acquirer's terms, and does not have to be made to all shareholders.

The offer need not be conditional on specific levels of acceptance, and nor does it have to deal with any dissent procedure.

Depending on the Target's bye-laws, the offer can be made without shareholder or Board approval of Target. These advantages all have a positive effect on both the costs and timeliness of the process.

There are, however, some disadvantages. There is no guarantee of acquiring outright ownership, or even of achieving control of Target.

As there may be limited access to information that would enable the Acquirer to determine the value to be offered, a tender offer may have to be made without detailed knowledge of the Target.

Once the deal has been approved by the holders of 90 per cent in value of the shares (excluding shares already owned by the Acquirer at the date of the offer), the Acquirer has two months during which to notify the dissenting shareholders that it desires to acquire their shares.

A dissenting shareholder may apply to the Bermuda Supreme Court (the "Court") for an appraisal of fair value but otherwise the Acquirer will be entitled and obliged to purchase the shares on the same terms as offered to the approving shareholders.

If an Acquirer holds 95 per cent, or more, of the shares, the Acquirer may give notice to the remaining shareholders of its desire to acquire their shares on the terms set out in the notice. A remaining shareholder may apply to the Court for an appraisal.

The usual structure for an acquisition in Bermuda is an amalgamation, which is a combination of two or more companies into a single company, which becomes the universal successor to the assets and liabilities of its predecessors.

The Board of Target submits to its shareholders, for their approval, an amalgamation agreement already approved by the Board. The amalgamation becomes effective when the Registrar of Companies issues a Certificate of Amalgamation.

This takes place after the shareholder vote and certain filings with the Bermuda regulators have been made.

The process is based on a valuation of the Target normally undertaken, in the context of a widely held company, in reliance on a third party adviser, e.g. an investment/merchant banker.

As a matter of law, the directors of a Target must act honestly and in good faith with a view to the best interests of the company, primarily its shareholders (present and future).

In this context, it is likely that the directors assume a direct obligation to shareholders because they ultimately commit the shareholders to a transaction and valuation that the Board has approved.

Limits can be placed by an Acquirer on the cost uncertainty resulting from the dissent process by including percentage levels of dissent that would give the Acquirer an option to terminate the amalgamation if those levels are exceeded.

There are two clear advantages to this method of acquisition. Once the amalgamation agreement receives the requisite approval of the shareholders it is binding on all shareholders, and it guarantees control and outright ownership of the new company.

There are several disadvantages, however, the key one being the dissenting rights provisions of the Companies Act 1981.

Shareholders who oppose the amalgamation and who do not think fair value has been offered for their shares, may apply to the Court for an appraisal.

This value becomes binding on the Acquirer. Importantly, although the amalgamated company succeeds to the assets and liabilities of the amalgamating companies as a matter of Bermuda law, this does not automatically mean that this effect will be recognised under the laws of all jurisdictions.

Any such amalgamation must also receive the consent of the Bermuda Monetary Authority. Amalgamations generally take longer than a tender offer, due to the need for Board and shareholder approval.

Whichever method of acquisition you choose, remember that the process can be a difficult one without the assistance of expert help. For that reason, be sure to consult an attorney who specialises in the area.

Attorney Alison Dyer-Fagundo is a member of the Telecommunications, Technology and Intellectual Property Law Team within the Corporate Commercial Practice Group of Appleby Spurling Hunter. A copy of Ms Dyer-Fagundo's column can be found on the Appleby Spurling Hunter website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters described herein, persons are advised to consult with a lawyer.