Mergers and acquisitions masterclass (IBA Annual Conference, 2019)
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Report on a session of the Corporate and M&A Law Committee at the IBA Annual Conference, Seoul
Wednesday, 25 September 2019
Rapporteur
Dovile Burgiene
Walless, Vilnius
Session Co-Chairs and Moderators
Dovile Burgiene Walless, Vilnius
Tarun Stewart Paul Weiss, New York
Speakers
Vinati Kastia AZB & Partners, Delhi
Isabella Ramsay Mannheimer, Stockholm
Ralf Morshäuser Gleiss Lutz, Munich
Franziska Ruf Davies Ward Phillips & Vineberg, Montreal
The mergers and acquisitions (M&A) masterclass session took place on 25 September 2019 and was moderated by Dovile Burgiene and Tarun Stewart. This interactive panel discussion gathered expert lawyers from jurisdictions around the world to discuss practical solutions for newly emergent issues in the M&A sphere.
The panel opened the session with a sub-topic on due diligence in M&A transactions and discussed the importance of due diligence issues arising from the public domain, including accounting fraud and bribery, corruption and sanctions issues. Vinati Kastia outlined that new due diligence risks are emerging in relation to data breaches and cybersecurity, compliance with the General Data Protection Regulation, the effect of ‘fake news’ and the ‘#MeToo’ movement. Concerning the latter, Kastia also mentioned the growing popularity of ‘Weinstein clauses’ in M&A documentation, requiring a target to disclose sexual harassment complaints, incidents of harassment and related settlements.
A second sub-topic focused on the growing trend of government intervention in M&A deals. Isabella Ramsay drew attention to the trend of using national security as a justification for governmental interference, as well as increased intervention by financial regulators and competition authorities in a number of sectors (eg, technology, infrastructure and energy). Ramsay also discussed a new policy from the European Commission (the EU Regulation 2019/452, applicable from 11 October 2020), which is designed to ensure union-wide coordination and cooperation in the screening of foreign direct investment likely to affect security or public order in EU Member States. The upcoming regulation, according to Ramsay, will likely increase regulatory concerns on both the sell-side and buy-side of M&A transactions, will impose a duty to share more information about investments and investors, and introduce closer cooperation with transactional teams.
The third sub-topic concerned the power balance between sellers and buyers in M&A deals, which currently tends to favour sellers. Ralf Morshäuser began with a discussion of best practices for sellers, including making use of competitive dynamics, using ‘dual track’ sales processes, soliciting ‘pre-emptive’ bids, using warranty and indemnity insurance, and ensuring a lean and stringent M&A process. The presentation was followed by a discussion about a possible buyer’s reactions to these strategies and whether power might be shifting back to buyers in M&A deals. Morshäuser highlighted possible reasons for a power shift, such as stock market volatility, financing difficulties, trade wars and the potential impact of Brexit.
The last sub-topic addressed new players in M&A marketplace. Franziska Ruf discussed the rise in the number of new types of buyers. Beyond the traditional buyers, Ruf identified the increased importance of: (1) sovereign wealth funds; (2) pension plans; (3) hedge funds; (4) family offices; (5) endowments and foundations; and (6) insurance companies. The discussion focused on an assessment of such buyers’ behaviour in comparison with traditional buyers. The rise of distressed-focused hedge funds was also mentioned by the audience. This new manner of investing in the obligations of companies that have filed for bankruptcy – or are likely to file for bankruptcy – attracts investors seeking high returns as it is followed by the belief that ‘… the greater the level of risk, the higher the potential return’.
Finally, the session ended with a discussion regarding shareholder activism.
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