iosco growth and emerging markets committee farlow.pdf2014/04/25 · • m&a regime –...

Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology

used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an

office of any such law firm.

© 2014 Baker & McKenzie LLP

IOSCO – Growth and Emerging Markets Committee

1

Adam Farlow

Partner, Baker & McKenzie LLP

Capital Markets | London

Mauritius - April 2014

–© 2014 Baker & McKenzie LLP

My topics

• The Global perspective – trends and observations

• The Regulatory and Legal Environment

• Listing considerations

2


Huge growth in US financial assets since 1980

3


Markets have become global

cross-border deals

account for more than 70% of funds

raised on the top four exchanges -

HK, LSE, NYSE and NASDAQ

4


What’s behind the increasing

Internationalization?

5


EMs play an increasingly important role – but with

significant room to grow financial depth

6


2013 IPO Activity

IPO activity back at highest level since 2007

98

38

32

5247

55

6974

19

70

180

75

48 50

113

21

9

4238

15

37

-$20

$0

$20

$40

$60

$80

$100

$120

$140

2007 2008 2009 2010 2011 2012 2013 YTD

Issu

an

ce

Vo

lum

e (

$b

n)

Americas Asia EMEA # of Deals >$50m

319 223 275 47 59 21 58 188 21 149 529 103 140 352 65 148 195 45 211 156 93Number of Deals

$200

Source: Goldman Sachs

7


2013 EMEA Key Transactions >$50m

IPO Volumes by Sector and Geography

By Industry By Region


0.0

1.5

3.0

4.5

6.0

7.5

9.0

10.5

12.0

13.5

15.0

1 7 9 7 6 9 10 1 6 14 14 9

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

($b

n)

# Deals:

UK

37.6%ROE

21.5%

ROW

9.7%

France 6.5%Germany 5.4%Ireland 4.3%

Russia 4.3%

Poland 4.3%

Italy 3.2%

Norway 3.2%

IND29.0%

RE21.5%

FIG17.2%

NR11.8%

TMT8.6%

CRG6.5%

HC 5.4%

8

http://www.google.co.uk/url?sa=i&rct=j&q=&source=images&cd=&cad=rja&docid=HRPdjZkgO9xjYM&tbnid=5vIOnc2rqrSOcM:&ved=0CAUQjRw&url=http://www.auhmap.mobi/alnoorhospital.html&ei=8efFUbXEC-2l0wXY2YGAAg&bvm=bv.48293060,d.d2k&psig=AFQjCNHLMFpVlCBBZjn4VvyCw2z5naXAjQ&ust=1372010854720565


Breakdown of total ECM activity

2008

2011

2009

2012

2010

2013

IPO21%

ABO28%

CB11%

Rights40%

IPO24%

ABO32%

CB8%

Rights36%

–Total = $224bn

–Total = $184bn –Total = $303bn

–Total = $145bn

–Total = $351bn

–Total = $141bn

IPO10%

ABO52%

CB16%

Rights22%

IPO6%

ABO37%

CB8%

Rights49%

IPO3%

ABO41%

CB10%

Rights46%

ABO57%

IPO17%

CB14%

Rights12%

9


© 2014 Baker & McKenzie LLP 10

European Senior Loan Volume

€0B

€20B

€40B

€60B

€80B

€100B

€120B

€140B

€160B

€180B

2006 2007 2008 2009 2010 2011 2012 2013

Total

€0B

€10B

€20B

€30B

€40B

€50B

€60B

€70B

€80B

2006 2007 2008 2009 2010 2011 2012 2013

Total

European High Yield Bond Volume

Note: HY volume excludes PIK instruments & short-term bonds; reflects corporate bonds only. In case of a global issue, the portion allocated to European HY investors is counted (if unknown, the entire global issue is counted). In the case of multi-tranche bonds issued within the same transaction, each tranche is counted separately.


Market Size: ELLI vs. BofA MLHY

€0B

€70B

€140B

€210B

€280B

€350B

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ELLI MLHY

Source: S&P European Leveraged Loan Index (ELLI); Bank of America Merrill Lynch European High-Yield Bond Index

11

The Regulatory

Landscape


A lot to comply with . . . for intermediaries

• Basel III /EU: Capital Req’ts Directive IV

• Mandated disposals of non-core assets

• Sanctions – EU, OFAC, Other

• UK: Bribery Act; US: FCPA

• US: Dodd-Frank

• US: JOBS Act

• US: FATCA

• EU: European Market Infrastructure Regulation

• EU: Solvency II

• EU: MIFID II

• EU: MAD/MAR

• EU: Alternative Investment Fund Managers Dir. 14


A lot to comply with . . . for issuers

Securities laws

• US: federal and state

• EU: Prospectus Directive Regulation

• EU: National legislation and Interpretations

• Listing rules of the Exchanges

• Corporate laws

Ongoing obligations

• Corporate governance

• Regular public disclosures (EU Transparency

Directive; 1934 Exchange Act in US)

• Rules against Market Abuse – MAD (EU), Rule 10b-

5 (US)

• Takeover Directive (EU); Williams Act (US) 15


• Onerous public disclosures – both at time of offering and ongoing

• Longer process – 3 to 6 months or more

• Market windows that open and shut

• Cost

• Liability

• Less control of the company; corporate governance changes

• Fear of the unknown

• Liquidity

• Public profile and ongoing analyst following

• Size of transaction

• Quality of investors

• Better price/interest/terms

16


What is the relevant market?

17


• Rule of Law generally

• Adequate and clear rules from all relevant regulators

• Likelihood of expropriation

• Insolvency regime – debtor or creditor friendly? Self-help permissible? Security enforceable?

• Netting – especially for hedging purposes

• Tax – Withholding, Capital Gains, Stamp Duty

• Currency controls, Capital Controls, BEE

• Tax/Accounting/Reporting/Disclosure

• Regulator – consistent, clear, communicative

• M&A regime – Takeover Code, Poison Pills

• Ease of Follow-Ons – pre-emption levels, time periods

• Corporate Governance – SOX, Board Structures, Minority Protections

• Listing req’ts - Free float

• Transparency/Enforcement – esp insider trading/manipulation

18

Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology

used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an

office of any such law firm.


IOSCO – Growth and Emerging Markets Committee

19

Adam Farlow

Partner, Baker & McKenzie LLP

Capital Markets | London

Mauritius - April 2014

iosco growth and emerging markets committee farlow.pdf2014/04/25 · • m&a regime –...

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