Public to Private Deals: A Growing Trend for Private Equity

Posted in M&A and Private Equity

By Ben Coleman and Catherine Campbell

Public to private deals (P2Ps) have remained a strong feature of the UK private equity deal market in 2018, with five take-private bids reaching an enterprise value of more than £1 billion already this year. Large P2Ps have already surpassed 2017 totals, which saw just one PE bid for a public company above the £1 billion mark. The increase in P2P deal values has also been coupled with greater P2P activity generally over the past couple of years. There were 18 P2Ps in 2016 and 14 in 2017, compared to just four P2Ps in 2013 and nine in 2014. Club deals have also become more common, demonstrated by Blackstone and CVC’s acquisition of payments company Paysafe last year.

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Will the trend continue?

We believe that the steady flow of P2P transactions is likely to continue, driven in part by a scarcity of high-quality private assets for sale in the UK market. PE deal teams are seeking opportunities in public markets and are increasingly scouring these markets for value. Companies under siege from short sellers, or undervalued by shareholders, can result in under valuations, offering PE firms opportunities and offsetting the significant bid premium required on a public takeover deal. Continue Reading

New National Security Threat to UK Private Equity Deals

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

By Jonathan Parker, Calum Warren, and Catherine Campbell

The UK government has assumed an increasingly interventionist approach to foreign takeovers in recent years. In June 2018, the UK adopted new powers to review deals on national security grounds, extending the scope and breadth of its control regime. In July, the UK went a step further and published a White Paper on a new and significantly extended foreign investment notification regime, which likely will lead to wider and closer scrutiny of many transactions, including private equity deals.

The government’s jurisdiction over transactions is expanding with most areas of the economy within scope, new information-gathering powers, longer review periods, and stricter penalties for noncompliance. Changes could come into effect as early as next year, and deal teams must assess the implications for private equity deals.

National security review anticipated to catch more deals than current merger control regime

The new regime is intentionally broad and has the potential to catch almost all deals. Indeed, the government has made it clear that no sector is off limits. Energy, communications, transport, and nuclear likely will receive the most focus; however, national security concerns can arise in any deal. Continue Reading

German Federal Court Reinforces Informal Modifications of Property Purchase Agreements

Posted in Commercial, Dispute Resolution

Ruling finds that parties may make informal modifications without notarization after the conveyance has become binding.

By Christian Thiele

The German Federal Court recently ruled that parties may informally modify a property purchase agreement if the conveyance has become binding — thereby confirming prior case law. The Court further held that the parties may also make such informal modifications if they have granted fiduciary instructions to the notary not to file the conveyance with the land register until the purchaser has paid the full purchase price.

The case

On 4 May 2011, the defendant bought three apartments from the plaintiff by virtue of a notarial purchase agreement at a price of €309,692. The parties declared the conveyance and applied for the entry in the land register. In the purchase agreement, the parties instructed the notary to file the conveyance only when the purchaser paid the full purchase price. On 24 July 2012, the defendant demanded a €27,100.76 reduction of the purchase price. The plaintiff accepted the reduction in writing, and the defendant paid the reduced price. However, the plaintiff then requested the payment of the full purchase price, arguing that the reduction of the purchase price was invalid because the amendment had not been notarized. Continue Reading

SFO Update: Lisa Osofsky’s First 50 Days

Posted in Dispute Resolution

New SFO Director reaffirms her intentions and priorities for the agency.

By Stuart Alford QC, Nathan Seltzer, and Christopher Ting

Fifty days have passed since Lisa Osofsky took over at the UK’s Serious Fraud Office (SFO), pledging to be a “different kind” of director. In her first days, Osofsky set out her priorities for the agency, which included:

  • Improved cross-border coordination
  • Improved corporate engagement
  • Continued use of Deferred Prosecution Agreements
  • Use of technology in investigations

This blog post will analyse what Osofsky has accomplished since joining the SFO, including her first major strategic decision, a further explanation of her priorities, and key personnel changes.

ENRC Appeal

In her first major strategic decision for the SFO, Osofsky decided not to appeal the ruling in Director of SFO v Eurasian National Resources Corporation to the Supreme Court. On 5 September, the Court of Appeal overturned a High Court decision in favour of the SFO’s interpretation of legal professional privilege and reaffirmed the boundaries of litigation privilege if litigation is reasonably in contemplation. Amidst speculation that the SFO would further appeal that judgment, Osofsky issued a statement on 2 October that the SFO would not take the decision to the Supreme Court. Continue Reading

Findings from FCA Thematic Review on AML and CTF Systems and Controls Provide Timely Reminder for Firms

Posted in Finance and Capital Markets

Examples of good and poor practices provide helpful guidance, and a reminder of supervisory expectations.

By Frida Montenius, Jonathan Ritson-Candler, and Charlotte Collins

The FCA has published TR18/3, setting out the findings from its thematic review of the anti-money laundering (AML) and counter-terrorist financing (CTF) systems and controls in 13 Electronic Money Institutions (EMIs). Although the review only focused on EMIs, the findings have wider read-across and therefore are of interest to all firms within scope of the Money Laundering Regulations 2017 (MLRs 2017).

Indeed, given the FCA’s current focus on financial crime as a priority area in its supervisory (and enforcement) activities — and the fact that updating policies and procedures to reflect changes brought about by the MLRs 2017 perhaps may have been overlooked by some — now is a good time for firms to reflect on AML and CTF systems and controls and check that they are up to date and meeting expectations. Continue Reading

English High Court Confirms the Strict Duty of Full and Frank Disclosure

Posted in Dispute Resolution

English High Court confirms that without notice applicants are under an onerous duty to satisfy the requirement of full and frank disclosure.

By Oliver E. Browne, Robert Price, and George Schurr

In the recent cases of Fundo Soberano de Angola & ors v. Jose Filomeno dos Santos & ors [2018] EWHC 2199 (Comm) and Galagaev & ors v. Ananyev & ors (2018) QBD (Comm) (unreported), the English High Court has confirmed that the duty of full and frank disclosure is a serious and onerous obligation that applies to litigants and their legal advisers alike. In Fundo Soberano v. dos Santos, Popplewell J held that legal advisors have a responsibility to ensure their client understands and complies with the duty of full and frank disclosure on a without notice application, just as a legal advisor has an obligation to ensure a client understands and complies with the general duty to disclose documents under CPR Part 31. Further, the full and fair manner in which material is presented to the court, not simply its disclosure, is of critical importance to the court’s consideration of whether the duty has been discharged. Males J held in Galagaev that in large and complex cases, it is incumbent upon the applicant’s legal advisors to draw the judge’s attention explicitly to material issues and to explain their impact on the applicant’s case. Simply directing the judge to the relevant material without explaining the significance of the material in question may be insufficient to discharge the duty of full and frank disclosure.

Following these judgments, legal advisors would be well advised to inform their clients of the serious nature and extent of their obligations as soon as a without notice application is considered. In particular, if advising lay clients “from different legal and cultural backgrounds and with varying levels of sophistication” (Fundo Soberano v. dos Santos at §53), practitioners must positively act to ensure that their lay clients undertake “the fullest inquiry into the central elements of their case” (Fundo Soberano v. dos Santos at §83). To the extent that the circumstances require, practitioners must actively supervise their clients’ compliance with that obligation to ensure that the applicant’s case is presented as fully and fairly as the duty requires. Continue Reading

Italy to Complete Implementation of the Market Abuse Regulation

Posted in EU and Competition, Finance and Capital Markets

Legislative Decree 107/2018 clarifies new reporting obligations, disclosure obligations, and sanctions, effective September 29.

By Antonio Coletti and Isabella Porchia

Italy has published in the Italian Official Gazette Legislative Decree no. 107 of August 10, 2018, amending the Italian legislative provisions (Legislative Decree no. 58/1998) to transpose the Market Abuse Regulation no. 596/2014 (MAR). The decree will enter into force September 29, 2018 — marking Italy’s completion of the implementation process of MAR. The process began in March 2017 with the amendments to the Commissione Nazionale per le Società e la Borsa (CONSOB) Issuers Regulation. Continue Reading

European Court of Justice Delivers Victory for EU Transparency and Accountability

Posted in Dispute Resolution, Environment, EU and Competition

Landmark ruling requires the European Commission to disclose impact assessments used as a basis for its legislative decision-making process.

By Antonio Morales and Rosa Espín

The Grand Chamber of the Court of Justice of the European Union recently issued a landmark judgment finding that impact assessments should be considered public documents. This decision sets a legal precedent in connection with the transparency, accountability, and decision-making processes of European institutions.

Case Background

A non-profit organization active in the field of environment protection had sought to access two impact assessment reports, which had played an influential role in the proposals of certain environmental laws. Continue Reading

European Banking Authority’s Draft Guidelines on Outsourcing: Discussion of Key Themes

Posted in Brexit, Emerging Companies and Technology, EU and Competition, Finance and Capital Markets

The EBA’s draft guidelines on outsourcing will impact cloud outsourcing and institutions’ deployment of FinTech.

By Fiona MacleanCharlotte Collins, and Terese Saplys

On 4 September 2018, a wide audience of interested individuals gathered at Canary Wharf for a public hearing (Public Consultation) to listen to what the European Banking Authority (EBA) had to say in relation to its long-awaited Draft Guidelines on Outsourcing (Draft Guidelines). The Draft Guidelines, which review the existing CEBS Guidelines on Outsourcing published in 2006 (CEBS Guidelines), are the EBA’s opportunity to refresh its recommendations on outsourcing to align more closely with the technical, political, and operational landscape banks face today. The attendees at the Public Consultation raised a number of questions which have, no doubt, given the EBA considerable food for thought. This blog post identifies and explores the key themes of the day. Beyond the key themes identified below, the Public Consultation included discussions of the issues of internal audit, reporting and registration, and supervisory oversight.


The extension of scope of the Draft Guidelines, as compared to the scope of the CEBS Guidelines, was a particular area of focus during the Public Consultation.

The Draft Guidelines describe their subject matter as “specify[ing] the internal governance arrangements that institutions … should implement when they outsource functions and in particular with regard to the outsourcing of critical and important functions” (paragraph 5 of the Draft Guidelines). The term “critical and important functions” is consistent with the wording used in MiFID II and includes functions which, if a defect or failure were to occur, would materially impair the continuing compliance of the firm’s activities and obligations. In this regard, the Draft Guidelines align with the CEBS Guidelines which described the requirements for “material outsourcing,” a term defined in a similar manner. However, while the CEBS Guidelines noted that “there should be no restrictions on the outsourcing of non-material activities of an outsourcing institution” (Guideline 5), the Draft Guidelines extend to all outsourcing, unless expressly stated otherwise. Many attendees at the Public Consultation noted that this scope was unduly onerous and would become administratively burdensome for firms to manage.

Notably, the broadening of the addressees of the Draft Guidelines (In-scope Entities), to include payment institutions (subject to the revised Payment Services Directive (PSD2)) and electronic money institutions (subject to the e-money Directive), was not discussed in detail at the Public Consultation. However, an attendee raised a question as to the applicability of the Draft Guidelines to industry utilities. The EBA confirmed they had not yet considered this point and advised that they would reflect and clarify the position in the final guidelines. Continue Reading

PE Firms Must Evaluate Competition Strategy Ahead of Brexit

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

By Jonathan Parker and Greg Bonné

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

What is Changing?

The European Commission (EC) currently acts as a one-stop-shop supranational authority for large transactions that meet Europe-wide competition turnover thresholds, obviating the need for competition filings in individual Member States. However, post-Brexit, transactions impacting competition in the UK and the EU will become concurrently reviewable, i.e., the CMA will review UK aspects and the EC will review European aspects. A significant increase in the number of UK merger reviews carried out by the CMA is likely — the CMA believes that Brexit could result in a further 50 notifications per year, nearly doubling its current workload.

Why Does it Matter?

Timing for the establishment of the CMA’s separate jurisdiction is uncertain. At the earliest, jurisdiction could be effective immediately after the UK leaves the EU  on 29 March 2019. A two-year stay is also possible, depending on the terms of separation. The period building up to the CMA’s separate jurisdiction is likely to be the trickiest for deal teams to navigate. PE firms may not be able to implement the same merger control strategies as in the past.

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Continue Reading