M&A and Private Equity

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M&A deal teams face complicated legal issues amidst rapidly changing global sanctions and guidance.

By Richard Butterwick, Les P. Carnegie, Charles Claypoole, Beatrice Lo, Mikhail Turetsky, Andrew P. Galdes, Ruchi G. Gill, Thomas F. Lane, and Catherine Campbell

Russia’s invasion of Ukraine has created new headwinds for M&A dealmakers, as a complicated matrix of sanctions and export controls poses legal challenges for both buyers and sellers, as well as transaction targets. With sanctions regimes becoming ever more complex, deal planning and execution requires expert legal counsel and skillful navigation.

PE firms seeking to attract a broader range of bidders to portfolio company sales should assess the changing needs of infra-investors.

By Tom D. Evans, John Guccione, Brendan Moylan, David J. Walker, George Venables, and Catherine Campbell

As the boundaries of what constitutes “infrastructure” assets have blurred in recent years, PE firms are more frequently encountering specialist infrastructure investors in transactions beyond asset classes traditionally viewed as “core” infrastructure, such as utilities and roads. This growing trend is evident in Antin Infrastructure’s successful sale of medical diagnostics business Amedes Group to buyers including OMERS Infrastructure and a consortium of investors, as well as Arcus Infrastructure Partners’ acquisition of crates and pallets business HB Returnable Transport Solutions. With certain infra-investors now branding themselves as “private equity infrastructure” and multiple PE houses seeking or raising infrastructure funds, these crossover deals are likely to attract attention from both PE firms and infrastructure investors for some time.

PE deal teams can increasingly access direct lending for large, cross-border buyouts but regulatory and structuring challenges across jurisdictions remain.

By Marcello Bragliani, Tom D. Evans, Michel Houdayer, Joseph Kimberling, David J. Walker, Thomas Weitkamp, Antonina Semyachkova, Catherine Campbell, and Yien Ee

Direct lending has long been a feature of the debt market, and has recently taken market share on predominantly small- to medium-cap deals. However, as syndicated debt markets remain dislocated, direct lenders are stepping up on a growing range of European PE transactions, such as The Access Group’s c.£3.2 billion refinancing, one of the largest unitranche deals in Europe to date.

Sponsors and dealmakers can satisfy investor demand for greater diversity and leverage opportunities for fund innovation.

By Tom D. Evans, Kem Ihenacho, David J. Walker, Clare Scott, Jennifer Cadet, Anne Mainwaring, and Catherine Campbell

Diversity has become a key focus for every industry in recent years, and private equity, like many other parts of the financial sector, still has significant progress to make in terms of diversity and inclusion. Private equity lags behind others in the financial services industry across a range of diversity metrics — according to a report published by EY in December 2021, just 10% of private equity roles are held by women.

The key issues PE deal teams are facing amidst rapidly changing global sanctions and guidance.

By Les Carnegie, Charles Claypoole, Tom D. Evans, David J. Walker, Ruchi Gill, Alli Hugi, Thomas Lane, and Catherine Campbell

Russia’s recent invasion of Ukraine has created new headwinds for PE firms, as a matrix of sanctions and export controls pose legal challenges for portfolio companies and transaction targets. With sanctions regimes getting ever more complex and such complexity unlikely to reduce any time soon, deal planning and execution requires expert legal counsel and skilful navigation.

The film, television, and digital content production industries are ripe for PE investment, thanks to shifting revenue structures and European quotas.

By Tom D. Evans, Farah O’Brien, Libby Savill, David J. Walker, Rachael Astin, Jon Fox, and Catherine Campbell

Camera lensThe extraordinary growth of entertainment streaming platforms over the last decade has made investments in the film, television, and digital content production industries more attractive than ever. Large-cap buyout firms have competed with strategic acquirers to invest heavily across the sector, with Amazon’s US$8.45 billion acquisition of MGM underscoring the level of interest. Unlike many industries that were adversely affected by COVID-19, the film, television, and digital content production industries have grown. This growth is driven not only by the “streaming wars”, with more and more platforms vying for eyeballs and subscriptions, but also by a now truly-global sector, leveraging online platforms to reach a worldwide audience.

Assertive regulators are bringing greater clarity and new challenges as they step up oversight of fintech innovation.

By Stuart Davis, Tom D. Evans, Nicola Higgs, Christian F. McDermott, David J. Walker, Brett Carr, Catherine Campbell, and Charlotte Collins

As the fast-growing fintech industry thrives, the sector has begun to attract greater regulatory scrutiny. We expect new legal and regulatory focus and oversight of those players operating on the unregulated perimeter of financial services.

While the level of supervision is set to increase and pose challenges for industry participants, a more robust regulatory environment could play into the hands of PE buyers and create opportunities for portfolio companies best able to navigate this rising regulation. In our view, PE firms must pay heed to the tone of more assertive regulators, but that approach coupled with new regulation will create a space in which firms in nascent fintech verticals can legitimately pursue their aims with greater certainty, no longer looking over their shoulders.

While the UK government is keen to stress that the new regulation will be applied proportionately, proposals are likely to result in the redirection of resources and attention of firms, and buyout firms should remain alert to changes that may impact a range of fintech investments.

Pension consolidators are emerging as an effective solution to manage defined benefit pension plan risk.

By Tom D. Evans, Victoria Sander, David J. Walker, Shaun M. Thompson, Paul R. Lawrence, and Catherine Campbell

As inflation soars and market uncertainty creates additional volatility for UK defined benefit pension (DB) plans, PE firms now have a new option at their disposal to manage portfolio company pension risk — to transfer a portfolio company’s DB plan to an external consolidation vehicle.

A novel solution?

The first pension consolidator has emerged in the UK market, offering PE owners the option to transfer portfolio company DB liabilities. In December 2021, the UK Pensions Regulator cleared Clara-Pensions as the first pension consolidator, or “superfund” (for the purposes of companies transferring responsibility for DB funding obligations to a third party consolidator) paving the way for the fund to absorb UK DB assets and liabilities. We expect other superfunds to follow, widening the options for managing DB liabilities for PE owners.

This method of managing pension risk is especially welcome following the introduction of the Pension Schemes Act 2021, which was a game-changer for companies that sponsor a DB pension plan, and any shareholder of such a business. The new regime grants enhanced “moral hazard” powers to the Regulator and provides for criminal liability (punishable by up to seven years’ imprisonment and/or an unlimited fine) for acts or omissions deemed detrimental to a DB plan in circumstances where appropriate mitigation has not been provided. Shareholders of a portfolio company that sponsors a DB plan thus face greater theoretical risk from the Regulator’s powers.

The fertility sector is likely to present growing opportunities for PE as an emerging, multifaceted industry.

By Heather B. Deixler, Tom D. Evans, Elizabeth M. Richards, Linzi Thomas, Eveline Van Keymeulen, David J. Walker, Betty C. Pang, Stuart McRobbie, and Catherine Campbell

The global fertility sector, which has grown significantly in recent years as demand continues to soar, is expected to be valued at more than US$30 billion by 2023, up from approximately US$16 billion in 2016. While the global market is growing, fragmented European fertility regulatory regimes and complex US regulations necessitate specialised legal counsel to successfully deliver deals. Recent transactions highlight the breadth and international reach of the investment opportunities that exist, from clinic-focused businesses to those that specialise in medical device development.

The once shunned cannabis sector now offers attractive PE opportunities in many jurisdictions.

By Stuart Alford QC, Tom D. Evans, Eveline Van Keymeulen, Elizabeth Richards, David J. Walker, and Catherine Campbell

In years gone by, the prospect of significant PE investment in the cannabis industry would have been unthinkable for many. However, regulatory and legal developments have created opportunities for medical cannabis businesses and legalised new non-medical cannabis applications in many jurisdictions. According to Pitchbook, buyout firms invested US$3.54 billion into the cannabis sector in 2021 across 223 transactions, showing significant appetite for deals. PE firms now have scope to embrace growing medical and consumer interest in certain jurisdictions, while in others, such as the US, evolving legal restrictions continue to challenge investors.