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How A No-Deal Brexit Would Affect Life Sciences Cos.

Posted in Brexit, Life Sciences

Latham lawyers explain the impact of a no-deal Brexit scenario and how it will impact life sciences companies operating in the UK

By Frances Stocks Allen, Hector Armengod, Christoph Engeler, and Robbie McLaren

There are now fewer than three months to go until the United Kingdom’s exit from the European Union on March 29, 2019. On Jan. 15, 2019, the UK government rejected the provisional deal proposed by the prime minister and accepted by the EU which would have offered terms for Brexit and future interactions between the UK and the EU following the withdrawal date. Unless the EU and the UK agree to an alternative deal, the withdrawal date is delayed or Article 50 is revoked, all EU primary and secondary law will cease to apply to the UK with effect from the withdrawal date, and the UK will become a “third country” for the purposes of EU legislation. Under this no-deal Brexitscenario, all provisions of EU law relating to EU member states will no longer apply to the UK, with potentially chaotic results for the life sciences industry.

In particular, the impact on marketing authorizations could be highly disruptive. The marketing authorization holder, or MAH, of a marketing authorization approved via the European Medicines Agency’s centralized approval procedure (each a CMA) must be established in the European Economic Area. Following the withdrawal date, the UK will no longer be part of the EEA, so any CMA held by a UK MAH will need to be transferred to an entity within the EEA prior to the withdrawal date. If not, it will be unlawful for the relevant CMA-approved product to be placed on the market in the EU. The EMA follows a 30-day timeline from submission of a CMA transfer application to finalization of the EMA’s transfer opinion. However, after the transfer opinion is issued, the European Commission must deliver its decision on the transfer before it becomes effective, a process which generally takes between two and three months, following which product labeling must be updated and implemented. To the extent that a CMA transfer application is not already underway, it will be too late to transfer such CMA to an EU MAH before the withdrawal date and avoid disruption to supply, even where bridging stock will be used to build supply in markets as a contingency measure.

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Addressing Pensions Liabilities for Underperforming Portfolio Companies

Posted in Employment and Benefits, M&A and Private Equity

By Catherine Drinnan and Shaun Thompson

Click for larger image.

This year has seen a significant number of business failures, particularly on the high street, as businesses have struggled in the face of market fragility and Brexit uncertainty. When a UK portfolio company is underperforming, the presence of a defined benefit pension (DB) plan with a large deficit can be a significant problem. Companies with large pension deficits require contributions that affect cash flow and make exiting more difficult when the time comes to sell.

If a business slips into distressed territory, however, there are mechanisms whereby a company can divest itself of a DB scheme. As companies respond to Brexit and challenging conditions in some sectors, we believe that 2019 will see more of these types of arrangements. In our view, PE deal teams should consider how to respond if portfolio companies are at risk. While the mechanisms can be effective in allowing a company to continue trading (in some form), PE owners should note a number of important factors before deciding to attempt this. Continue Reading

Effect of a “No-Deal” Brexit on IP in the UK

Posted in Brexit

The UK government’s technical notices provide some certainty for holders of cross-border copyrights, trade marks, patents and other IP rights.

By Deborah Kirk and Terese Saplys

With thanks to Grace Erskine for her contribution.

On 24 September 2018, the UK government published a series of technical notices explaining how a “no-deal” Brexit would impact intellectual property rights in the United Kingdom, including: copyrights, trade marks and designs, patents, and the exhaustion of intellectual property rights. It seems timely to revisit the content of these technical notices, given that on 15 January 2019 the UK Parliament will vote on (and, as has been widely reported by various media outlets, seems likely to reject) the proposed deal as agreed between Prime Minister Theresa May’s cabinet and the EU.

The UK Government has outlined how each of these intellectual property rights protections would or would not change following the UK’s exit from the European Union, which is currently anticipated to be 29 March 2019. This blog post summarises the areas identified in the technical notices of particular interest and concern to companies with cross-border operations. Continue Reading

Italian Football Ready to Re-Join Financial Elite

Posted in M&A and Private Equity, Media and Entertainment

Increased revenue, improved governance, and innovative financing in Serie A are drawing interest from overseas investors.

By Giancarlo D’Ambrosio

In the 1980s and 1990s, Italian football dominated the European football industry, achieving consistent success on the field and attracting a vast global audience. Italy’s top division, Serie A, is still among the best in the world, but the English Premier League and Spain’s La Liga have overtaken Serie A as a financial force. The Premier League and La Liga have developed and commercialised their products in the overseas market in recent years, creating a gap between them and rival European leagues. Yet a shift is underway, and — due to more stable revenues, improved governance, and innovative financing structures — Italian football is ready to re-join Europe’s financial elite.

Italian football investment is ready to kick–off. Increased revenue from TV rights deals will drive improved financial performance and present opportunities for investors. This past summer, broadcasters Sky and Perform sealed a deal to screen Serie A fixtures for €973 million per season until 2021, following a competitive auction process. The domestic rights deal followed an agreement to sell international rights to IMG for €371 million, at nearly double the rate of the previous cycle. Changes to Champions League regulations, allowing four Serie A clubs to qualify for Europe’s elite tournament, will further boost revenue in 2019. Continue Reading

Corporate Buyers Poised to Reap W&I Insurance Benefits

Posted in EU and Competition, Finance and Capital Markets, M&A and Private Equity

By Drew Levin. Maarten Overmars, Richard Butterwick, Terry Charalambous, and Catherine Campbell

Warranty and indemnity insurance (W&I) has become a common feature of European transactions in recent years, amid a strong sellers’ market that has enabled vendors to offload risk to buyers. According to the most recent edition of the Latham & Watkins Private M&A Market Study, which examined transactions between July 2016 and June 2018, the proportion of transactions employing W&I has continued to increase — from 8%, 13%, and 22% of deals in the previous three editions of the survey, to 32% for the latest period surveyed. We believe M&A deal teams should be aware of changes and enhancements to W&I that will bring insurance coverage closer in line with the US market. In our view, the developments are positive for M&A bidders. Continue Reading

Corporates Must Evaluate M&A Competition Strategy Ahead of Brexit

Posted in EU and Competition, M&A and Private Equity

By Greg Bonné, Jonathan Parker, Richard Butterwick, Terry Charalambous, and Catherine Campbell

As the UK Competition and Markets Authority (CMA) prepares to assume sole jurisdiction for UK competition reviews post-Brexit, M&A deal teams must evaluate the competitive consequences of deals bridging the Brexit period and update their competition strategy accordingly.

Corporates may not be able to implement the same merger control strategies as in the past. Continue Reading

New UK National Security M&A Regime Expected in 2019

Posted in M&A and Private Equity

By Jonathan Parker, Jana Dammann, Steven Croley, Calum Warren, Richard Butterwick, Terry Charalambous, and Catherine Campbell

In June 2018, the UK adopted new powers to review certain technology related deals on national security grounds, extending the scope and breadth of its control regime to those that concern computing hardware, or quantum technology for supply in the UK (see Latham Client Alert: 12 June 2018). In July, the UK government went a step further and published a White Paper on a potential new and significantly extended foreign investment notification regime, which will likely lead to wider and closer scrutiny of many transactions, including strategic M&A deals. These potential new UK rules are part of a wider global trend, with heightened scrutiny of foreign investment control increasing in a number of other jurisdictions.

The government’s White Paper proposes expanding the jurisdiction over transactions subject to potential national security review, with most areas of the economy within the proposed enlarged scope, supported by new information-gathering powers, longer review periods, and stricter penalties for non-compliance. Although the recommendations in the White Paper have not been enacted into law, changes could come into effect as early as next year, and we expect that deal teams will be assessing the implications for M&A deals in 2019 and beyond. Continue Reading

China’s War on Pollution Hits M&A Deal Environment

Posted in Environment, M&A and Private Equity

By Paul Davies, Richard Butterwick, Terry Charalambous, and Catherine Campbell

In recent years, China has taken significant steps in developing its environmental policy. In 2014, China’s Premier Li Keqiang declared a “war on pollution”, which began in earnest in 2017. Since then, regulators have been more proactive in enforcing environmental regulations. Factory closures have become a key part of this strategy, causing significant disruption to the global supply chain this year.

In our view, M&A dealmakers and corporates should carefully consider environmental and supply chain due diligence in China, as companies work out how to navigate the factory shutdown process. Corporates should, as part of their environmental, social, and governance (ESG) strategy, review whether their group entities and target companies are likely to be affected in the event that critical supply chains are broken. Engagement with environmental agencies in China is useful, but environmental policy and consistent regulatory enforcement are still maturing. The appropriate level of due diligence could prove to be critical to a company’s ongoing operations. Continue Reading

Addressing Pensions Liabilities for Underperforming Companies

Posted in Employment and Benefits, M&A and Private Equity

By Catherine Drinnan, Shaun Thompson, Richard Butterwick, Terry Charalambous, and Catherine Campbell

This year has seen a significant number of business failures, particularly on the high street, as businesses have struggled in the face of market fragility and Brexit uncertainty. When a UK company is underperforming, the presence of a defined benefit pension (DB) plan with a large deficit can be a significant problem. Companies with large pension deficits require contributions that affect cash flow and make exiting more difficult when the time comes to sell.

If a business slips into distressed territory, however, there are mechanisms whereby a company can divest itself of a DB scheme. As companies respond to Brexit and challenging conditions in some sectors, we believe that 2019 will see more of these types of arrangements. In our view, corporates and M&A deal teams should consider how to respond if companies are at risk. While the mechanisms can be effective in allowing a company to continue trading (in some form), corporates should note a number of important factors before deciding to attempt this. Continue Reading

Private Equity Buyers Poised to Reap W&I Insurance Benefits

Posted in M&A and Private Equity

By Drew Levin, Maarten Overmars, and Catherine Campbell

Click for larger image.

Warranty and indemnity insurance (W&I) has become a common feature of European transactions in recent years, amid a strong sellers’ market that has enabled vendors to offload risk to buyers. According to the most recent edition of the Latham & Watkins Private M&A Market Study, which examined transactions between July 2016 and June 2018, the proportion of transactions employing W&I has continued to increase — from 8%, 13%, and 22% of deals in the previous three editions of the survey, to 32% for the latest period surveyed. We believe PE deal teams should be aware of changes and enhancements to W&I that will bring insurance coverage closer in line with the US market. In our view, the developments are positive for PE bidders.

The Impact of US Buyers on European W&I Policy Terms

US buyers are very active in the European deal market, and their influence is becoming increasingly evident in W&I terms. US buyers are pushing for more US-like W&I terms on European deals, and the changes have enhanced policies. Insurers are thinking outside of the box and providing new products. We believe US PE bidders will reap the benefits as policies begin to resemble their home market and PE bidders from other jurisdictions will also benefit as terms become enhanced. Continue Reading

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