navigating your deal safely through the shallow waters of … · 2019. 12. 12. · digital mergers...
TRANSCRIPT
14 November 2019
Navigating your deal safely through the shallow waters of competition law
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IntroductionLeon Korsten, DLA Piper Amsterdam – Global Co-Chair Antitrust & Competition
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Global Overview
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European UnionJacob Borum, DLA Piper Copenhagen
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European Union
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Horizontal mergers
Continued sceptical
review
Digital mergers
Carefully scrutinized -
novel theories of harm
Sustainability
High on the agenda
European Champions
The debate will continue
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AmericasLesli C. Esposito, partner DLA Piper Philadelphia
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Americas
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Increase in merger review Revisions to the HSR
guidelines
Learning from the Big
Tech acquisitions
Vertical mergers Non-reportable deals
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Asia-PacificNathan Bush, partner DLA Piper Singapore
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China
• Consolidation of national enforcement
authority in SAMR
• Capacity building and increased
enforcement at local level
• "Fair Competition Review Mechanism" &
"Administrative Monopoly"
• Merger Review: Breaking the Beijing
Bottleneck (at least for simple cases)
• Lightning Rods: Abuse of IP, Standard
Essential Patents & Essential Facilities
• "Politically Weighted Total Domestic
Welfare?"
Singapore
新加坡
Bangkok
曼谷
Hong Kong
香港
Shanghai
上海
Beijing
北京 Seoul
首尔
Tokyo
东京
DLA Piper presence
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Hong Kong
• Building credibility with "safe" construction
cartel cases; guidance on no-poach
agreements in financial services
Singapore
新加坡
Bangkok
曼谷
Hong Kong
香港
Shanghai
上海
Beijing
北京 Seoul
首尔
Tokyo
东京
DLA Piper presence
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ASEAN
• Ride-hailing apps, cement, "big data"
and bid-rigging
• Malaysia: recommended pricing
allowed; dominance fine for Grab;
aspirations of merger review
• Indonesia: KPPU→ ICC; Statutory
amendments thwarted (again); merger
review extended to asset reviews
• Philippines: First dominance decision;
continued cartel & bid-rigging
enfrocement; new dawn raid provisions.
• Thailand and Vietnam rebooting,
Cambodia and Myanmar in process
• Singapore: CCCS expanding
consumer protection protection (e.g.,
online pricing practices)
Singapore
新加坡
Bangkok
曼谷
Hong Kong
香港
Shanghai
上海
Beijing
北京 Seoul
首尔
Tokyo
东京
DLA Piper presence
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Japan, Korea, & Taiwan
• Continued refinement despite political and
international challenges
Singapore
新加坡
Bangkok
曼谷
Hong Kong
香港
Shanghai
上海
Beijing
北京 Seoul
首尔
Tokyo
东京
DLA Piper presence
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AfricaJanine Simpson, partner DLA Piper Johannesburg
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Africa
• New Competition Legislation
• Angola, Nigeria, Madagascar
Algeria
Ghana
Egypt
Ethiopia
Kenya
Tanzania
Mozambique
Botswana
South
Africa
Namibia
Zambia
Burundi
Rwanda
Uganda
Morocco
Madagascar
Zimbabwe
Angola
Democratic
Republic of
the Congo
Malawi
EritreaSudan
South
SudanCentral Africa
Republic
ChadNiger
Libya
Tunisia
Mauritania
Togo
Benin
Côte d’Ivoire
Burkina
Faso
Mali
Equatorial Guinea
Gabon
Cameroon
Nigeria
Liberia
Guinea Bissau
Sierra Leone
Gambia
Guinea
Lesotho
Swaziland
Senegal
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Africa
• Amendments to existing competition
legislation
• Egypt, Ethiopia, Gambia, Morocco,
Mozambique, South Africa, Zambia,
Zimbabwe
Algeria
Ghana
Egypt
Ethiopia
Kenya
Tanzania
Mozambique
Botswana
South
Africa
Namibia
Zambia
Burundi
Rwanda
Uganda
Morocco
Madagascar
Zimbabwe
Angola
Democratic
Republic of
the Congo
Malawi
EritreaSudan
South
SudanCentral Africa
Republic
ChadNiger
Libya
Tunisia
Mauritania
Togo
Benin
Côte d’Ivoire
Burkina
Faso
Mali
Equatorial Guinea
Gabon
Cameroon
Nigeria
Liberia
Guinea Bissau
Sierra Leone
Gambia
Guinea
Lesotho
Swaziland
Senegal
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Africa
• Regional Regulators
• COMESA, EAC, WAEMU, ECOWAS
/ ERCA, CEMAC
Algeria
Ghana
Egypt
Ethiopia
Kenya
Tanzania
Mozambique
Botswana
South
Africa
Namibia
Zambia
Burundi
Rwanda
Uganda
Morocco
Madagascar
Zimbabwe
Angola
Democratic
Republic of
the Congo
Malawi
EritreaSudan
South
SudanCentral Africa
Republic
ChadNiger
Libya
Tunisia
Mauritania
Togo
Benin
Côte d’Ivoire
Burkina
Faso
Mali
Equatorial Guinea
Gabon
Cameroon
Nigeria
Liberia
Guinea Bissau
Sierra Leone
Gambia
Guinea
Lesotho
Swaziland
Senegal
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Practical tips on navigating competition lawNicholas Lerche-Gredal and Michael Klöcker, partners DLA Piper Copenhagen
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Practical tips
• Buyer or seller
• Does it matter? Both sides must take competition law and merger
filing requirements into consideration
• Merger control screening
• Get overview of merger control issue from the beginning – know
your deal structure
• Deal certainty
• Be prepared! Competition law may be an obstacle for M&A
processes, but when prepared well, time is saved in the long run
• Due Diligence
• When acquiring a business, you also acquire the cartel
• CP’s
• Sharpen your pen!
• Guarantees
• Insurance for buying a cartel?
• Long stop date
• Investigations seem to take longer
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Coffee break
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Panel discussion: Mapping selected corporate issues in the M&A process
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Panel discussion -Presenters
Bob BishopPartner, London
T: +44 (0)20 7796 6631
Jens Krogh PetersenPartner, Copenhagen
T: +45 33 34 00 46
Morten RosendahlLegal Counsel,
Rockwool Nordic
T: +45 41 73 76 69
morten.rosendahl@
rockwool.com
Daniel ColganPartner, Brussels
T: +32 2 500 6504
Lesli C. EspositoPartner, Philadelphia, US
T: +1 215 656 2432
Kjetil JohansenPartner
T: +47 2413 1611
2019
Global M&A Intelligence Report
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Deal type, process and who wins the auction game?
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46%
53%
47%
54%
47%
53%
2016 2017 2018
PE v trade sellers: deals > EUR50m
PE Trade
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39%
49%45%
61%
51%55%
2016 2017 2018
PE v trade buyers: deals > EUR50m
PE Trade
2018 saw a swing towards trade as a buyer class globally. We have
seen trade increasingly willing to transact deals on private equity
terms utilising locked box structures with buy-side insurance and
very limited seller recourse, which may partially explain the swing,
but the results are also significantly impacted by trade (especially
US and China) buying heavily into Europe – especially the Nordic
region. It may also be the case that some private equity activity is
overshadowed by caution over Brexit, US/China trade and other
global factors.
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6%19%
37%43%
1%
3%
2%2%
93%
78%
62%55%
EUR <25m EUR <25≤ 50m EUR >50≤ 50m EUR >100m
Global: Deal process by deal value (%)
Auction Broken Auction Non-auction
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Overall, we saw a reduction in the use of an auction process in
2018 across all deal sizes. This is perhaps one of the factors which
we think demonstrates a slightly softer market than in 2017.
However, an auction remains a common feature of mid-large deals
(with approximately 40% of EUR50-100 million deals and 45% of
deals over EUR100 million opting for an auction process).
The types of sellers opting for auctions remained constant. Private
equity sellers continued to opt for an auction in more of their exits
(around 40% compared to around 15% of trade and individual
sellers), aiming to maximise sale proceeds and achieve the
cleanest possible exit (often with the use of insurance).
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We have seen a slight increase in the success of private equity
bidders in auction processes. However, there has been a marked
change in approach from trade buyers, who have realised that in
order to compete with private equity, they need to be willing to be
flexible on deal terms.
Choice of whether to sell by auction or bilateral has remained
consistent, with a slight decrease in the use of auctions overall.
This is the first time we have seen an overall decline year on year.
16%
43%37%
84%
57%63%
2016 2017 2018
Trade sellers: deal process – deals > EUR50m
Auction Non-auction
61% 60%50%
39% 40%50%
2016 2017 2018
PE sellers: deal process – deals > EUR50m
Auction Non-auction
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Auctions: Who wins?
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50%50% 2017
PE Trade
43%
57%2016
PE Trade
56%
44%2018
PE Trade
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Approach to disclosure
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Approach to disclosure
While general disclosure of the data room materially impacts on the
risk profile for the buyer, it is now common practice in Europe and
Australasia and the market standard in their auction processes.
We are seeing it increasingly in Asia, primarily in auctions. However,
the US standard approach is for specific disclosure only – general
data room disclosure was only seen in 11% of US deals surveyed,
and deal process had limited impact.
Asia Pac Continental Europe Nordics UK US
Yes 100% Yes 94% Yes 92% Yes 100% No 86%
6% 8% 14%Auctions
Data room generally disclosed?
Non-auctions
Yes 71%
29%
Yes 64%
36%
Yes 93%
7%
Yes 91%
9%
No 88%
12%
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Conditional deals and common conditions
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Conditionality: by region
The majority of deals in Asia Pac, the Nordics, the US and
Continental Europe were conditional. The UK remains an
outlier with less than a third of UK deals surveyed being
conditional.
Common conditions
Merger control/anti‐trust, other regulatory approvals,
third‐party consents and shareholder approvals were the
most common conditions, with some regional differences.
Conditional deals and common conditions
1%
2%
3%
7%
8%
9%
13%
15%
17%
26%
31%
61%
70%
72%
84%
Tax
Stock exchange approval
DD
Pre-sale reorganisation
Employee/pension related
Funding
Shareholder approval
Other regulatory approvals
Third party consents
Merger approvals
UK
Continental Europe
US
Nordics
Asia Pac
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Global M&A Intelligence Report - 2019
‘‘ Last year saw a mixed market for M&A deals; the first for almost a decade to show an overall decline in deal volume. Political instability, concerns over trade wars and a more interventionist approach to M&A by governments and regulators all took their toll on the market
’’
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Restrictive covenants
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Protections between signing and closing
31% 28%
38%
52%
85%
40%46%
33%
17%
MAC Breach of warranty Breach of conduct rules
Gap termination by region
Europe
US
Asia Pac
Managing and allocating risks relating to the target business in the gap between signing and closing is one of the most complex issues in
private M&A.
Typical gap protections in all regions include:
• conduct rules for the target between signing and closing; and
• a buyer’s right not to close if there has been a material breach of warranties (given at signing and, if repeated or “brought down,” closing), a
material adverse change (MAC) or material breach of the conduct rules.
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Globally, we saw restrictive covenants in approximately 70% of deals
surveyed, principally driven by the type of seller. Private equity sellers
resist giving covenants and trade sellers will not do so when they
have businesses involved in similar activities to the target business.
Typically, restrictive covenants were a general non-compete combined
with a non-solicitation of people, customers and/or suppliers
(depending on the nature of the target business), with similar
restricted periods for both non-compete and non-solicitation.
Time periods varied across regions, principally driven by enforceability
issues in the relevant jurisdictions. Deal process had a limited impact.
In Europe, Australasia and Asia (unless US law governed) the most
common restricted period was two-three years. In the US and Asia
(when US law governed), this was more than three years.
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Restrictive covenants
6%
30%
64%
0%
7%
21% 22%
50%
6% 6%
53%
35%
≤ 1 year > 1 year ≤ 2 years > 2 years ≤ 3 years > 3 years
Non-compete periods Europe US Asia Pac
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What will 2020 and the years ahead look like?
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Round up and questions
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Thank you
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