Brexit Progress Report: 1 of 10 Key Regulatory Focus Areas for UK/European Wholesale Markets in 2019

Posted in Brexit, Finance and Capital Markets

By David BermanCarl Fernandes  Nicola Higgs, Rob Moulton and Charlotte Collins

In our January publication, we highlighted what we were seeing as the top regulatory focus areas for our clients during the year ahead, focusing on wholesale market structures and conduct risk.

In a series of 10 blog posts, we will take a closer look at the key areas highlighted, mapping developments from the first half of 2019, and looking ahead to the remainder of the year.

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HM Treasury Kicks Off Financial Services Future Regulatory Framework Review

Posted in Finance and Capital Markets

Call for evidence on regulatory cooperation marks the first phase of the planned review.

By Carl Fernandes, Nicola Higgs, Rob Moulton, and Charlotte Collins

The Chancellor announced in the Spring Statement that HM Treasury would undertake the Financial Services Future Regulatory Framework Review — examining the long-term effectiveness of the UK regulatory regime and considering where change might be necessary, particularly in light of Brexit.

The Review will take stock of the overall approach to regulating the UK financial services sector, including how the regulatory framework may need to adapt in the future. The Review will seek to address the following four key challenges: Continue Reading

Prospectus Regulation: How to Navigate the New Rules on the Summary Section

Posted in Finance and Capital Markets

New length restrictions will require issuers to focus on key information for investors.

By James Inness and Connor Cahalane

Under the Prospectus Regulation, which comes into force on 21 July 2019 (See EU Prospectus Regulation: New Format and Content Requirements), issuers preparing equity prospectuses will need to comply with new rules on the summary section. While the changes allow some flexibility on the information issuers must include in the summary, there are new requirements and restrictions that issuers need to be aware of.  Continue Reading

Antitrust Clearance: Keeping Your Deal On Track

Posted in EU and Competition

In our latest video series, out antitrust lawyers discuss key merger control issues that dealmakers should consider to ensure a smooth antitrust review of strategic transactions.

Click on the video playlist below or visit our video gallery page to hear their views on key topics impacting global transactions; gain practical tips on how to minimize antitrust risk, and ensure a timely deal close.

If you have any questions or comments on these topics, please get in touch with our team.

Private Equity Set to Get Active With Activists

Posted in M&A and Private Equity

Companies previously considered immune from activist campaigns have come under pressure, driving new public and private deal opportunities for private equity.

By Richard Butterwick, Christopher DrewryTom EvansHarald SelznerDavid Walker, Ben Coleman, and Catherine Campbell

US shareholder activists are an established presence in Europe. In 2018, activist campaigns targeted 160 European companies, according to Activist Insight. In the UK, 17 companies faced activist demands in the first quarter of 2019 alone. Activist funds have prompted public company boards to look more critically at their portfolio and product mixes, as well as their geographical footprints, either to avoid activist attention or to respond to activist activity.

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M&A activist campaigns that advocate for breakup or take-private transactions create obvious opportunities for PE firms. However, deal teams should take note of both recent activist strategies in the US and developments in the broader activist landscape. In our view, such strategies and developments will likely spread to Europe and create new PE opportunities. Continue Reading

2019 Is Different From 2008: 4 European Restructuring Developments for Private Equity Firms to Consider

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

Persisting political and economic uncertainty means awareness of market changes remains crucial.

By Simon BaskervilleTom Evans, David Walker, Stephanie Dellosa, and Catherine Campbell

The 2008 distress cycle triggered defaults and restructurings for European PE portfolio companies, as maintenance covenant defaults and balance sheet deleveraging forced refinancings and debt-for-equity swaps. While restructuring conditions for PE firms are stronger in 2019 than they were in 2008, persisting political and economic uncertainty means that awareness of market developments remains important.

Permissive Intercreditor Arrangements Impact Schemes of Arrangement

UK loan document developments have made new and more flexible tools available for sponsors to effect debtor-led restructuring processes. In response to the 2008 crisis and a sponsor-driven market, we have begun to see increasingly accommodative intercreditor documentation, reducing the need for court-sanctioned schemes of arrangement in restructuring deals. Previously, a scheme of arrangement (requiring the support of 75% in value and a simple majority in number of affected classes, e.g., lenders) was needed to restructure a company’s debt, where unanimous consent of lenders was not possible. It is now common for intercreditor agreement terms to circumvent the need for a scheme of arrangement and, therefore, the court process for certain forms of restructuring, including debt-for- equity swaps. This allows restructurings to be effected contractually with lower levels of support, such as a simple majority. In our view, this positive development for private equity firms allows portfolio companies to more easily reach agreement with lenders and effect quicker, more cost-effective, and private restructurings. Continue Reading

Cornerstone Investments: A Foundation for Private Equity-Sponsored IPO Exits

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

Cornerstone investments can assist a firm’s overall exit objective, particularly when there are bidders for a portfolio company but no outright buyer.

By James InnessTom Evans, David Walker, Sonica Tolani, Connor Cahalane, and Catherine Campbell

Cornerstone investments, which involve taking a stake in an about-to-list company, have been popular in Asia and in Nordic countries for several years, and are becoming a more regular feature in European deals. The £300 million IPO of peer-to-peer lender Funding Circle in November 2018 and the £2.18 billion IPO of payment processor Network International in April 2019 were both completed with cornerstone investments of around 10%.

Why Consider a Cornerstone Investment?

Despite difficult market conditions, we have seen continued interest in IPOs from PE firms, either as a sole exit option or alongside auctions in a dual-track process. Cornerstone investments can assist a firm’s overall exit objective, particularly if a firm attracts bidders for a portfolio company but fails to find an outright buyer. Strong early support from cornerstone investors can help with marketing an IPO to other investors, increasing the likelihood of a successful listing and paving the way for an exit. Continue Reading

Is Artificial Intelligence Set to Transform Private Equity Dealmaking?

Posted in Emerging Companies and Technology, M&A and Private Equity

With the explosion of AI applications, private equity houses and their portfolio companies must understand where key opportunities lie.

By Tom Evans, Kem Ihenacho, David Walker, Laura Holden, Hector Sants, Claudia Sousa, Catherine Campbell, and Patricia Kelly

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Artificial intelligence (AI) developments provide increasing opportunities for private equity, including deal sourcing and portfolio company analysis/enhancement, particularly in businesses that can adopt a customer subscription model or leverage big data opportunities. However, the adoption of AI technologies, and investments in new AI businesses, pose significant challenges. To ensure that time and capital are deployed productively, firms must understand the market space and usage for these tools, and the workings and accuracy of any underlying technology. How technology models and algorithms work, where underlying IP resides, and where data is stored are key. Whilst the use of AI is often discussed, it is much less often understood; we are seeing an explosion of AI applications and PE houses and their portfolio companies need to understand where the opportunities are for them to exploit.

A Tool to Secure Deal Opportunities and Drive Portfolio Company Growth 

According to a survey conducted by Intertrust, 90% of private equity firms expect AI to have a transformative impact on the industry. AI-backed data analytics are playing a growing role in analysing and identifying deals. QuantCube Technology, for example, provides in-depth data analysis, drawing on customer reviews and social media posts to develop predictive indicators of events, such as economic growth or price changes. There are now companies offering AI-driven technologies that claim to help source PE deals. While this presents a potentially compelling use of AI for investors, it remains to be seen whether these technologies will deliver results.  Continue Reading

What Investors Should Know About the Berlin Rent Cap

Posted in Commercial

The Berlin government’s envisaged five-year rent cap on residential properties has caused significant uncertainty among investors in housing portfolios.

By Constanze Kugler and Christian Thiele

On 18 June 2019, the Berlin Senate published a position paper specifying details of an envisaged five-year rent cap on residential properties in the German capital. The cap would significantly strengthen current restrictions on rent increases, which can only occur subject to certain rules and within certain limits. Berlin’s government aims to pass the statute later this year and enter it into force no later than January 2020.

Key Provisions

The position paper outlines the following key terms of the rent cap: Continue Reading

Enforcement of an Award Adjourned Against a Non-Party to an Arbitration Agreement

Posted in Dispute Resolution

Parties should avoid uncertainties by stipulating the applicable law to the arbitration agreement.

By Eleanor M. Scogings and Robert Price

The decision in J (Lebanon) v. K (Kuwait)[i] provides a useful analysis of which law (i.e., the law of the arbitration agreement or the law of the seat) governs the issue of whether a non-party has become party to the arbitration agreement and, more broadly, how to determine which law governs the arbitration agreement if there is no express choice. While in this case there was an express choice, the judgment highlights the uncertainties that arise if the parties have made no express provision regarding the law of the arbitration agreement. Moreover, the case demonstrates the jurisdictional difficulties that arise when arbitration proceedings are brought against a non-party to an arbitration agreement.

The English High Court adjourned the claimant’s (J’s) application to enforce an arbitral award against a non-party to an arbitration agreement (K), pending the outcome of set aside proceedings at the seat of the arbitration in Paris. The Court overturned the tribunal’s decision that the law of the seat (French law) should determine whether K was bound by the arbitration agreement contained in a franchise development agreement (FDA). Rather, the court held that the question was one of English law, as the law governing the arbitration agreement. Applying English law, the Court held that K had not become party to the arbitration agreement in the FDA by novation or joinder, and accordingly adjourned the enforcement of the award pending the decision of the Paris Court of Appeal. Continue Reading