M&A in 2021 – Resilient, agile and coming off mute

We have published our new M&A report, which we have titled “M&A in 2021 – Resilient, agile and coming off mute”, here.

In it we look at the prospects for M&A in 2021 – whilst the significant regional and global questions from last year may not have gone away, there are reasons for optimism. Issues we discuss in the report include:

  • the lessons learnt from the impact of the pandemic that we are building into deal process and documentation, in particular around termination rights, for whatever black swan event next comes along;
  • the continued rise of FDI regimes and their deployment by governments in the pandemic;
  • the significance of shifts taking place in ESG, and the energy transition agenda in particular as a driver of M&A;
  • the rebound in activity in the public markets as bidders seek to take advantage of lower valuations; and
  • the distressed deals that we might expect to see in 2021, when governmental support necessarily runs out and the true impact is felt in the most damaged sectors.

Colleagues from our offices around the world also share their views and experiences of M&A in 2020, and their outlook for 2021.

 

Gavin Davies

Gavin Davies
+44 20 7466 2170

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Caroline Rae

Caroline Rae
+44 20 7466 2916

Stephen Wilkinson

Stephen Wilkinson
+44 20 7466 2038

The regulatory regime for companies following the UK’s withdrawal from the EU

The UK ceased to be a Member State of the European Union on 31 January 2020. A transition period then applied until 31 December 2020. During the transition period, EU law continued to apply in and to the UK, and the UK continued to trade as part of the Single Market.

The Brexit transition period ended on 31 December 2020, with the EU and UK having agreed to the terms of their future relationship through a Trade and Cooperation Agreement – you can read more about the implications of the agreement here.

Retained EU law

As of 1 January 2021, EU law no longer applies in the UK. By virtue of the European Union (Withdrawal) Act 2018, directly applicable EU law in force in the UK at the end of the transition period is retained as part of the UK statute book. Retained EU law has broadly the same status as any other UK enactment and is subject to the same rules/processes for amendment as any other UK primary or secondary legislation (or if made under devolved powers, the rules of the relevant legislature in Scotland, Wales or Northern Ireland).

EU Exit statutory instruments

The Government has made secondary legislation dealing with a range of corporate law matters to ensure that both Retained EU law and existing UK law and regulation (for example that referenced EU concepts or bodies) could operate effectively once the transition period ended. These regulations include:

FCA Rules

The FCA has made a number of changes to its Handbook that apply with effect from the end of the Brexit transition period, including changes to the Listing, Prospectus Regulation, Disclosure Guidance and Transparency Rules.

The impact of the rule changes for UK incorporated companies which have securities admitted only to a UK regulated market will be minimal. Issuers which have shares admitted to a regulated market in the UK and in an EEA state will have to adjust their systems and controls and, for example, make additional notifications to regulators for certain matters, including in relation to PDMR transactions.

Takeover Code

The Takeover Panel has similarly made a number of changes to the Takeover Code that were required as a result of Brexit. The changes will not have a significant impact on transactions.

 

Sarah Hawes

Sarah Hawes
+44 20 7466 2953

Barnaby Hinnigan

Barnaby Hinnigan
+44 20 7466 2816

Roddy Martin

Roddy Martin
+44 20 7466 2255

Public M&A podcast – Takeover Panel consultation

In our latest public M&A podcast, we discuss the consultation paper published by the Takeover Panel (PCP 2020/1), in which it is proposing to amend various provisions in the Takeover Code relating to the conditions to an offer and to the offer timetable.

The key changes include:

  • removing the special treatment afforded to conditions relating to clearance by the European Commission and the Competition and Markets Authority;
  • making it easier for parties to request a timetable freeze;
  • giving further guidance on when a bidder will be permitted to invoke a condition to an offer;
  • only allowing offers to go unconditional as to acceptances when all other conditions have been satisfied; and
  • introducing a long stop date on a contractual offer.

In the latest episode in our public M&A podcast series, Mark Bardell and Antonia Kirkby discuss the proposed changes and what impact they may have on bids in practice.

To listen to the full conversation please visit SoundCloud, Spotify or iTunes.

Our earlier blog post on the proposals is available here.

Our public M&A podcast series

All our UK public M&A podcasts are available on our public M&A podcast page. In earlier episodes we discuss:

  • formal sale processes;
  • standards of disclosure on public M&A;
  • statements of intention;
  • conditions to an offer and when a condition can be invoked;
  • public to private (or P2P) bids;
  • the influence of target shareholders on a bid; and
  • how the UK Takeover Code applies in a distressed situation.

 

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Mark Bardell

Mark Bardell
+44 20 7466 2575

 

What does the UK’s new national security investment screening regime mean for investors?

On 11 November 2020 the UK Government introduced the National Security and Investment Bill (NSI Bill) to Parliament, setting out significant legislative reforms which will overhaul the review of transactions and investments on national security grounds in the UK, against a backdrop of tightening of foreign direct investment (FDI) regimes globally. Continue reading

New FDI regime in the UK with immediate effect

The government has introduced a new National Security and Investment Bill to Parliament, which will overhaul the regime for reviewing transactions on national security grounds in the UK.

The new regime will be “pro-active” immediately: whilst it will not be possible to notify deals for clearance under the new regime prior to formal commencement of the final Act, once the Act comes into force the government will have powers to call in any deal that falls within the scope of the new regime which is completed any time from 11 November 2020 onwards.

The government first made clear its intention to introduce a new review framework in its July 2018 White Paper, but the Bill deviates from the White Paper framework in a number of important ways, with potentially significant implications for investors.

Key features of the Bill include:

  • Transactions in scope – The proposed regime would apply to investors from any country, and there will be no minimum target turnover or market share thresholds. The key question is simply whether there is an acquisition of “material influence” in a company, assets or intellectual property which potentially gives rise to national security concerns (subject to certain exceptions for transactions involving an increase in an existing shareholding).
  • Intervention on grounds of national security – The focus of the Bill is on intervention on grounds of “national security” (rather than a broader “national interest” test which had reportedly been under consideration). National security is a concept which is increasingly broadly defined and clearly goes well beyond simply defence-related interests. However, the government has stated that it will not extend to allowing intervention for “broader economic reasons”.
  • Mandatory notification in some sectors – In a significant departure from the voluntary notification regime proposed in the White Paper, the Bill requires mandatory notification (to a new dedicated government unit via a digital portal) for at least some transactions in 17 specified sectors: civil nuclear; communications; data infrastructure; defence; energy; transport; artificial intelligence; autonomous robotics; computing hardware; cryptographic authentication; advanced materials; quantum technologies; engineering biology; critical suppliers to Government; critical suppliers to the emergency services; military or dual-use technologies; and satellite and space technologies. Transactions covered by the mandatory notification requirement which proceed without obtaining clearance will be void.
  • Power to call in transactions in other sectors – In other sectors, notification will be voluntary. However, the Bill includes a retrospective “call-in” power allowing for post-completion review of any non-notified transaction. In practice, this may lead to a significant number of “failsafe” notifications being made.

For further information, see the e-bulletin prepared by our competition, regulation and trade team. We will be publishing a more detailed briefing on the bill in due course.

Mark Bardell

Mark Bardell
+44 20 7466 2575

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Caroline Rae

Caroline Rae
+44 20 7466 2916

Takeover Panel consultation on conditions to an offer and the offer timetable

The UK Takeover Panel has published a consultation PCP 2020/1 in which it is proposing to amend various provisions in the Takeover Code relating to invoking the conditions to an offer, particularly those relating to regulatory / merger control clearance, and to the offer timetable.

The consultation closes on 15 January 2021. The Panel says that it expects to publish a response statement in spring 2021 and that the rule changes will come into force three months later.

If implemented as consulted on, the key points to note are as follows:

Continue reading

Public M&A podcast – how the Takeover Code applies in a distressed situation

The Covid-19 pandemic has hit a huge number of businesses and they will be exploring various options to repair their balance sheet or protect their business.

Those options might include:

  • seeking a full takeover or
  • finding a cornerstone investor for the company

In each case, if the company is governed by the UK Takeover Code, the Code might be engaged and have an impact on the transaction.

In the latest episode of our public M&A podcast series, we look at when and how the Code might apply in a distressed situation, and what relaxations from the usual Code rules may be available.

To listen to the full conversation please visit SoundCloud, Spotify or iTunes.

Links to our previous episodes are below:

 

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Greg Mulley

Greg Mulley
+44 20 7466 2771

Our latest M&A update briefing and webinar

We have published out latest M&A update briefing in which we look at the latest developments and trends, including:

  • current M&A activity levels;
  • what has changed on M&A transactions because of the Covid-19 pandemic;
  • what we are seeing on public M&A transactions;
  • some of the particular features of a distressed M&A transaction; and
  • the potential impact of foreign direct investment controls and merger control on transactions.

The briefing is available here.

We also discussed these themes in our recent webinar, which you can access here. An audio recording of the webinar (and the other webinars in our Catalyst series) is available here.

Gavin Davies

Gavin Davies
+44 20 7466 2170

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Caroline Rae

Caroline Rae
+44 20 7466 2916

 

Public M&A Podcast Series Episode 6: target shareholders’ influence on public M&A

In the latest episode in our public M&A podcast series, we look at the role of target shareholders on a bid. We have seen shareholders influence the outcome of a bid in a number of ways recently, including:

  • agitating for a bid;
  • blocking a bid;
  • challenging a scheme at the sanction hearing; and
  • bumpitrage.

We discuss the different tactics shareholders may use and what bidders and targets can do to protect a deal.

To listen to the full conversation please visit SoundCloudSpotify or iTunes.

Links to our previous episodes are below:

Harriet Forrest

Harriet Forrest
+44 20 7466 7567

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700

Public M&A Podcast Series Episode 5: Public to private (or P2P) bids

The Covid-19 pandemic has meant that we have seen a drop off in public M&A activity in the UK, but as prices stabilise and activity picks up again, we expect to see financial buyers, such as private equity and sovereign wealth funds, leading the way.

In this podcast we discuss some of the features of a public M&A transaction in the UK that they may find challenging or unfamiliar, including the rules around:

  • secrecy
  • management incentivisation and
  • acting in concert.

To listen to the full conversation please visit SoundCloud, Spotify or iTunes.

Links to our previous episodes can be found below:

Lucy Robson

Lucy Robson
+44 20 7466 2848

Antonia Kirkby

Antonia Kirkby
+44 20 7466 2700