The M&A Report: Postcards from the edge

We canvassed M&A veterans for their reflections on a changing environment for advisers as Brexit and uncertainty loom over Europe’s deal markets

Takeovers to come

‘What you have seen over the past 18 months is a larger number of major deals fall over, such as alliburton/Baker Hughes. There is no doubt antitrust has become harder in mega M&A, due to the number of jurisdictions you now have to file in and increased scrutiny from regulators. Parties to these deals have to have the appetite to live with a long gap between announcement and closing and be prepared to make divestments of the type we have seen in AB InBev/SABMiller. There are only a handful of top global firms that can provide the EU, US and Chinese antitrust advice on these type of deals.

We are confident there will be further foreign takeovers of UK plcs given the fall in sterling. Notwithstanding ongoing uncertainty around Brexit and the US elections, we are encouraged that the M&A landscape is quite well set for a stronger second half of the year.’

Charlie Jacobs, senior partner, Linklaters

Keeping busy

‘Market conditions are not bad – anyone focused on purely domestic UK transactions may be having it quieter – but most of our clients and deals are international. And that is active with corporate, institutional and private equity clients all busy. Pharma, telecoms, financial institutions group, consumer and media are all active. It’s not just one or two sectors. Real estate is cautious and the commodity sectors continue to be restrained. But generally, since the referendum, we have had the busiest calendar Q3 that we have had in the last three years.  We are confident and see no reason not to be.’

Simon Marchant, London head of corporate, Freshfields Bruckhaus Deringer

A dying art

‘The number of listed companies has halved in the last 20 to 25 years and that’s in part because private equity has become a much larger player. The amount of public company M&A has been reduced and has become more complicated as the rules have developed to a more sophisticated level so [fewer] law firms are equipped to do public company M&A than 20 years ago.

The changes to the Takeover Code are still causing a problem with the “put up or shut up” rules and the difficulty of putting together a significant, unwanted bid in 28 days.

The uncertainty around Brexit remains a real constraint on the likelihood of major capital commitments. You don’t want to buy an asset which would be 10% cheaper in three months’ time.’

Nigel Boardman, partner, Slaughter and May

Life goes on

‘The only certainty with Brexit is that it will develop over a good number of years and consequently people are not going to postpone decisions indefinitely. It’s part of the new normality. Brexit’s only one of the things on the global stage. There are many other geopolitical and macroeconomic issues that multinationals are wrestling with.

We’re seeing a good pipeline of work. It’s more fragile than last year but good nonetheless. A lot of our work is cross-border but most of the commentary you see is UK-focused.’

Jonny Myers, head of private equity, Clifford Chance

Harder to build reputation

‘Reverse takeovers is a trend that will continue. The UK is a hot geography for investors from Asia and North America. Infrastructure is an opportunity as there needs to be upgrades in infrastructure.

It will be much more difficult in the future to have star M&A partners. When I started in 1987 there were a handful of firms that could do the big deals and those firms had far fewer partners so you would have the same people – the Rawlinsons, the Boardmans – doing those deals again and again. You now have a much larger group of lawyers across the City. You have a far more diverse group of firms who are challenging to do those deals. It will be harder for any individual to build that kind of reputation in future.’

Simon Beddow, partner, Ashurst

Always another problem

‘Among the sectors we expect to be active are pharma, fast-moving consumer goods and betting/gaming. In oil and gas, there will be winners, losers and opportunities. In terms of factors holding back deals, we have seen slowing Chinese growth, US tax measures, which have constrained inversions, the lead up to and aftermath of the Brexit vote, and conflict in the Middle East. But I wonder if there’s ever been a time when we haven’t worried about macroeconomic issues which might threaten M&A activity. Overall, we’re confident that we’ll have plenty to do.’

Andy Ryde, head of corporate, Slaughter and May

American dream

‘August was an interesting time. Most of the banks took the month off for the first time in a while. It’s too early to tell how the rest of the year will pan out.

The finance market is Americanised. It has been for a long time. If you want to be a genuinely credible global finance practice, you’re going to have to understand the US market and be strong there. Trends start in the US and they end up making their way here.

We’re seeing a shift where PE houses and sponsors generally are wanting to broaden their relationships with other firms whereas historically it’s always been “that’s our firm”. Private equity houses are very sophisticated users of legal services and they know exactly what they want.’

Karan Dinamani, partner, Allen & Overy

Low opinion

‘I closed a deal with a French infrastructure fund the day after Brexit who spent the entire day telling me how stupid the British were.’

Charles Currier, head of corporate, CMS Cameron McKenna

Keeping positive

‘We are very upbeat, despite the general concern that has been around London generally. The department is performing very well and we are seeing a good pipeline.’

Aedamar Comiskey, head of corporate, Linklaters

Brexit denial

‘We have been very busy over the summer. It feels like we are in denial over Brexit on the M&A side at least for the time being. If you look at our book we have a wall of M&A, particularly in the infrastructure space. This should mean we have a good run up to Christmas.

The IPO space is still in the doldrums, perhaps in the next six to nine months it might start to reopen. The mega deals may be fewer and [farther] between, but the mid and upper mid-market deals will still happen.’

Spencer Summerfield, head of corporate, Travers Smith

Slow growth drives deals

‘At this point we should be cautiously optimistic. There are a lot of reasons out there that people may not do deals, but businesses still need to grow. GDP growth is low across many economies. As a result, if you want to expand your business in a shorter timeframe, it’s probably going to have to be through acquisition.’

Dominic Morris, partner, Allen & Overy

Seeking clarity

‘Sentiment generally is very cautious. There is a lot of volatility in virtually all markets. There are some obvious sectors where you would expect more activity; fintech remains an area that is going to be hot. There was a heavy element of that in the Visa deal.

At the moment, with the financial services clients so all-over-the-shop, there are not huge strategic deals in the sector, but that will change as we get closer to clarity [on Brexit terms].

The competition aspects of these deals are becoming more and more involved. If the government were to throw some grit into the works it could slow things down here.’

Charles Martin, senior partner, Macfarlanes

A (foreign) buyers’ market

‘There are likely to be more opportunities with the fall in the pound. I have a Chinese investor talking to me about the opportunities. Next year could be exciting, we are likely to see a few more months of people trying to work out what is happening with the referendum, but there are likely to be more opportunities as people look to the UK to buy assets, particularly in financial services.’

Simon Branigan, partner, Linklaters

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