Public M&A 2013/14: the Leading Edge
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Public M&A 2013/14: the leading edge June 2014 Public M&A 2013/14: the leading edge Contents 2 Introduction 31 Italy 31 Deal activity 4 Global market trend map 31 Market trends 6 The leading edge: country perspectives 32 Case studies 6 Austria 34 Japan 6 Deal activity 34 Deal activity 6 Market trends 34 Market trends 6 Changes to the legislative framework 35 Case study 7 Case study 36 Netherlands 8 Belgium 36 Deal activity 8 Market trends 36 Market trends 8 Changes to the legislative framework 37 Changes to the legislative framework 9 Case study 38 Points to watch 39 Case studies 10 China 10 Deal activity 40 Spain 11 Market trends 40 Deal activity 11 Case study 40 Market trends 41 Changes to the legislative framework 12 EU 42 Points to watch 12 Changes to the legislative framework 43 Case studies 14 France 44 UK 14 Market trends 44 Deal activity 15 Changes to the legislative framework 45 Market trends 16 Case studies 45 Changes to the legislative framework 19 Germany 46 Deal protection measures 19 Deal activity 47 Points to watch 20 Market trends 48 Case study 22 Case study 50 US 24 Hong Kong and Singapore 50 Deal activity 24 Deal activity 50 Market trends and judicial and 25 Market trends legislative developments 28 Market trends 51 Litigation as a cost of doing business 29 Case study 53 Case study 54 Contacts Freshfields Bruckhaus Deringer LLP 1 Public M&A 2013/14: the leading edge Introduction Market trends 2013 saw a modest increase in global public M&A activity. 2014 has so far seen a more pronounced increase in public M&A and a few high-profile transactions have been announced. As usual, the US market has driven this activity, with Most markets have among the largest transactions announced in 2013 (eg Silver Lake’s and Michael seen greater confidence Dell’s $25bn purchase of Dell Computer, 3G Capital’s and Berkshire Hathaway’s among investors, $27bn acquisition of Heinz) and 2014 (Comcast’s $45bn acquisition of Time Warner Cable and Actavis’s $25bn acquisition of Forest Labs). Other markets boards and investment have seen some large transactions as well (eg the recently announced proposed/ committees. possible transactions between Holcim and Lafarge, Pfizer and AstraZeneca and GE and Alstom, among others). Overall volumes and values outside the US, unsurprisingly, lag behind both the US and pre-crisis highs. That said, in the last six months or so, most markets have seen greater confidence among investors, boards and investment committees. This resulted from, among other things, macroeconomic stability and growth prospects, continued access to historically inexpensive financing and significant cash reserves (at least insofar as well-placed corporate buyers are concerned). Most markets are expected to experience an uptick in public M&A dealmaking in 2014. Certainly many directors are telling us (and with their actions, showing us) that shareholders are less focused than they were on companies returning surplus cash to them and are now more open to boards exploring larger M&A opportunities as a way to drive earnings growth. Sectors where this is most apparent include pharma/healthcare (which is going through fundamental macro-level changes in 2014), TMT and industrials. Although activity in a number of markets has been muted, and there are differences between markets’ regulatory and legal regimes, we have observed a number of public M&A related trends that are common across the globe and that are likely to remain topical in the near term. • Regulatory interventionism. The number of competition authorities is growing globally. And there is a perception that many authorities are becoming increasingly interventionist and less transparent. This is creating increased uncertainty around both the outcome and timing of certain regulatory processes in the context of transactions (even where the relevant market is not the deal’s centre of gravity). There have certainly been a number of high-profile examples of public M&A transactions either being delayed or blocked by competition regulators in the last 12 months (eg UPS/TNT in the Netherlands, Britvic/Barr in the UK and AB Inbev/Modelo in Mexico). And as can be seen by the coverage of the recently announced proposed Holcim/ Lafarge merger, regulatory considerations and their associated processes are increasingly seen as important on public M&A deals. It is worth noting that, as the reported demands of the UK tax authority in relation to the proposed (but cancelled) Omnicom/Publicis merger have shown, 2 Public M&A 2013/14: the leading edge regulatory interventionism on public M&A deals is not only restricted to interventionism by competition authorities. Another example is French foreign investments legislation which has recently been expanded, notably to cover the proposed GE/Alstom transaction. US-style shareholder activism has increased • US tax inversions. The rules on US tax inversions – whereby a US company relocates its residency to a lower tax jurisdiction – have tightened over the both within and years (and are proposed to tighten further). M&A is, however, still a viable outside the US and way for a US company to achieve an inversion, if various conditions are met, continues to drive including that the non-US shareholders own 20 per cent or more of the stock of the combined company after the transaction. A number of acquisitions of corporate events. European public companies by US companies in the last 12 months have been structured as inversions (eg Elan/Perrigo and the possible Pfizer/AstraZeneca combination, as well as the proposed but cancelled Omnicom/Publicis deal). Many predict a fresh wave of inversion-driven M&A in Europe in the remainder of this year, though execution will come under a great deal of public scrutiny from lawmakers (and the recent Obama budget has requested a change to the existing regime that could eliminate inversions by as soon as early 2015). • Shareholder activism. US-style shareholder activism has increased both within and outside the US and continues to drive corporate events, such as the exploration of strategic alternatives leading to sales and spin-offs. Activists can also play a prominent role following the announcement of public M&A transactions (eg Carl Icahn in relation to Silver Lake–Michael Dell/Dell Computer and Elliott in relation to the McKesson/Celesio and the Vodafone/Kabel Deutschland deals in Germany) and can often succeed in securing a change in deal terms or even blocking the deal itself. • Dissemination of information/social media. Social media are playing an increasingly important role in companies’ investor relations communications, particularly in the US where they often feature proxy fights and takeovers. In April 2014, the SEC issued interpretative guidance that will certainly enhance the ability of market participants to use character-limited social media like Twitter to disseminate information to investors, which, while perhaps welcome news to tech-savvy activist hedge funds, is a warning call to public company boards and executive management teams to understand and be prepared for this new reality. We would expect other non-US markets to follow the SEC’s lead on this front. Content Public M&A 2013–14. The leading edge details trends and case studies in various markets, divided by jurisdiction. These reports have been prepared by lawyers in our market-leading public M&A practice, and we would be delighted to hear from you if you have any questions or comments on any aspect of the reports. Contact details for each market are on page 54. 3 Public M&A 2013/14: the leading edge Global market trends Egypt India Austria France • Increased focus on acting in concert. Austrian listed • Increasing importance of litigation in companies typically have one or a group of several the context of public offers in France. strong shareholders with large stakes; therefore, the formation of, and changes in, shareholder groups is • Significant amendments to the French takeover a focused topic of the Austrian Takeover Commission. regime have recently been introduced by the so- called Florange Law and by decree n° 2014–479 • Restructuring privilege. The exemptions applicable extending the list of strategic sectors in which to distressed target companies (Sanierungsprivileg) foreign investments are subject to prior from the strict mandatory offer regime including governmental authorisation. minimum price have been used occasionally, but not as much as expected. Germany Belgium • Most offers are made after pre-bid arrangements with core shareholders and/or target management. • Increased use of ‘intention to bid’ announcements, whereby a bidder announces its intention to make • Increased activity by private equity bidders using a takeover bid some time before proceeding with 75 per cent minimum acceptance conditions. the actual bid. • Recently, re-emergence of activist shareholders in • Most public takeover bids have included a big-ticket takeover bids trying to have offer prices market MAC linked to the BEL-20 Index since increased (or to get paid out later with a premium the financial crisis. after bid closing). • Greater emphasis on target management to increase China offer price and to strengthen other shareholders’ interest by negotiations with bidders. • Burdensome approval requirements and uneven enforcement of existing laws by the PRC regulators. Hong Kong • Concentrated ownership structure of PRC listed companies where the state continues to play an • Partial offer structure confirmed to be available, important role as controlling shareholder of most which allows a bidder to acquire up to 75 per cent listed companies. of the target while maintaining target listing. 4 Public M&A 2013/14: the leading edge Italy UK • Termination of shareholders’ agreements used to • The target recommended most offers made in 2013, control major public companies expected to make and bidders have shown a preference for schemes such companies more targetable by bidders.