mergers and acquisitions

By Robbie McLaren and Catherine Campbell

Current Trends

The M&A market is constantly evolving — from the predominantly seller’s market of H2 2019, through the tumultuous times of H1 2020, to the strong rebound of H2 2020 and to the highly competitive seller’s market of H1 2021 — deal dynamics are shifting. Deal terms vary by transaction size, industry sector, and jurisdiction. Having a thorough knowledge of market trends is critical to negotiating and executing a successful deal.

By Robbie McLaren and Catherine Campbell

Current Trends

The M&A market is constantly evolving — from the predominantly seller’s market of H2 2019, to the tumultuous times of H1 2020, dynamics are shifting. Deal terms vary by transaction size, industry sector, and jurisdiction. Having a thorough knowledge of market trends is critical to negotiating and executing a successful deal.

Seventh Edition

Latham & Watkins has produced the seventh edition of its annual survey of European private M&A transactions. We analysed the acquisition documents from more than 260 deals signing or closing between July 2018 and June 2020 (inclusive), on which our European offices advised.

The guidance includes a refresher on “failing firm” defence claims, for which the CMA will maintain a high bar.

By John D. Colahan, Stephanie Adams, and Peter Citron

On 22 April 2020 the UK’s Competition and Markets Authority (CMA) published guidance on its assessment of mergers during the COVID-19 pandemic. This follows the guidance the CMA issued on 18 March 2020 regarding its working arrangements during the pandemic.

The new guidance is welcome as a clear statement that it is business as usual in terms of the ability of parties to notify mergers and engage with the CMA, but that the CMA is ready to adapt within the framework of its existing rules to the particularities of the present crisis.

Shifting environment presents the chance to unearth value and should pave the way to boost the number of mid-market deals.

By Manuel Deó

The Spanish M&A market in 2018 has been characterised by a series of large-cap transactions, helped by an abundance of cheap financing for the right deals. The total deal value on large-cap transactions in 2018, including ACS and Atlantia’s €32.1 billion takeover of Abertis, has already surpassed 2017 totals.

In the year to October, 772 transactions closed in Spain, compared to 791 in the same period last year. Yet, deal values totalled US$98.6 billion this year to October, dwarfing the US$36.7 billion total in the same period last year. IFM’s €2.16 billion acquisition of OHL Group’s concession business, which closed in April, was just one of several significant buyouts in a country known for mid-market M&A.

Buyers scouring the market for consolidation opportunities in 2018 have been particularly active in real estate, energy, healthcare, and infrastructure sectors. While Spain has enjoyed a host of deals above the €1 billion mark, the mid-cap market remains healthy with abundant opportunities likely to appear over the next 12 months. Sellers want to transact quickly, and there is strong competition for each asset.

By Daniel Treloar

Last year marked a continuation of strong M&A volumes, with US$3.15 trillion in global transactions according to data provider, Mergermarket. Strong activity, driven by cheap debt and a low growth environment, has continued into Q1 2018, and large deals are expected to be a fixture of the M&A landscape in the year to come. The buoyant M&A market has led to extensive reorganisation work for both sellers and buyers, particularly for mega-deals that frequently require substantial post-deal integration and non-core divestment work — a trend Latham believes will continue while M&A levels remain high. However, while well-executed reorganisations can help facilitate a smooth M&A process or integration project, they require meticulous and timely planning to ensure a successful outcome.

What constitutes a corporate reorganisation and why reorganise?

A corporate reorganisation typically involves the transfer of assets, whole businesses, or shares between entities forming part of the same corporate group, on a solvent basis. Businesses undertake corporate reorganisations for several reasons, and M&A is currently a large driver.

The FCA has recently announced that it will begin a review of how firms have implemented the unbundling rules “within weeks”.

By Beatrice Lo and Jonathan Ritson-Candler

At its recent asset management conference, the FCA announced that it will imminently launch a review of how asset managers have implemented the new MiFID II obligation to pay for the research they receive from sell-side firms separately from execution costs (the so-called “unbundling rules”). This is the first FCA-initiated MiFID II review, and comes only six months after the implementation of MiFID II. This is indicative of the regulator’s focus in this area.

The unbundling rules, as part of MiFID II, came into effect on 3 January 2018. The rules represent one of the most significant implementation challenges for the industry given that previously, research had not been separately priced and the new rules are silent on how sell-side firms should negotiate and price their research services (and what buy-side firms could accept). This meant that firms were still developing their pricing models and were still engaged in negotiations post the 3 January 2018 deadline. In recognition of this, towards the end of 2017, the FCA and ESMA permitted “trial periods”. During these periods, sell-side firms can provide, and buy-side firms can receive, free research for a maximum of three months (within any 12 month period). The regulator is keen not only to ensure that firms are compliant with the new rules, but also to understand the broader impact of the unbundling rules on the market.

By William Lu and Jiyeon Lee-Lim

The fundamental US tax reforms brought in this year by the Tax Cuts and Jobs Act (TCJA) have changed the tax landscape for M&A more significantly than any other legislation in the modern era. Businesses and tax advisors will be considering the various opportunities created and threats posed by the TCJA for quite some time. This article looks at the tax drivers behind the current surge in US corporate M&A.

Federal corporate income tax rate reduced to 21%

From 1 January 2018, the TCJA reduces the federal corporate income tax rate from 35% to 21% (although the effective differential will often be less than 14% as a result of new deduction limitations and the addition of new taxes, as discussed below).

This tax rate reduction could increase the cash on balance sheets and overall value of US target corporations and by doing so increase their outbound M&A capabilities.

Buyers of businesses that produce military or dual-use goods, certain aspects of computing hardware, or quantum technology for supply in the UK should carefully assess the risk of governmental intervention if their targets fall within the scope of the new regime.

By Jonathan D. Parker and Calum M. Warren

On 11 June 2018, the UK government will gain new powers to review transactions raising potential national security issues if the target business is active in the production of military or dual-use goods, computing hardware, or quantum technology for supply in the UK. The government may intervene if the target business’ UK turnover is as low as £1 million, or if the target business has a share of supply of goods or services within the relevant areas of at least 25%. While these powers will apply to only a limited subset of transactions and do not give rise to mandatory notification requirements, the application of the new powers will require careful scrutiny during the due diligence phase of transactions that are potentially within scope. The new thresholds are the result of the government’s ongoing review of its foreign investment review powers, which may result in a further expansion of governmental powers in the longer-term.

By Jonathan Parker and Anuj Ghai


The Competition & Markets Authority (CMA) has imposed a £20,000 fixed penalty on Hungryhouse Holdings Limited (Hungryhouse). The CMA imposed the penalty under Section 110 of the Enterprise Act 2002 (EA02) for failure to comply, without reasonable excuse, with a requirement the CMA issued in a notice pursuant to section 109 EA02 dated 31 May 2017 (the First s.109 Notice). The CMA imposed the penalty on Hungryhouse on 22 November 2017, following the CMA’s unconditional clearance of its acquisition of Just Eat plc (Just Eat) on 16 November 2017 (the Transaction). This is the first time that the CMA has imposed a fine on a merging party for failure to comply with an information request.

Factual Background

As part of its inquiry into the Transaction, the CMA issued Section 109 notices to the parties requiring them to produce specified documents and supply specified information to the CMA. On 26 May 2017, the CMA provided Hungryhouse with a draft of the First s109 Notice. The CMA offered Hungryhouse the opportunity to raise any questions relating to the content of the draft, including the availability of the documents, information, or data requested. On 30 May 2017, Hungryhouse responded to the CMA, noting that some of the questions would be difficult to respond to in full within the relevant timeframe, as responses to particular questions would involve access to senior management emails. However, Hungryhouse added that that they would “endeavour to provide all information by the stated deadlines”.

By Jana K. Dammann de Chapto and Joachim Grittmann

The German government has tightened the rules for its review proceedings for M&A involving non-EU investors, with changes to its German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung) that significantly increase foreign investment oversight.

The new rules, which came into force on 18 July 2017, introduce a new notification requirement for non-EU investment in critical infrastructure and security-related technologies, and extend the review periods, potentially causing delays to closings.

Previously, non-EU investors were not required to notify the German government of the direct or indirect acquisition of a German company, unless the company was active in developing or manufacturing defence and encryption technology. Now, the industry sectors subject to a notification obligation have been expanded to cover critical infrastructure and security-related technologies, with the government explicitly identifying energy, water, nutrition, information technology, healthcare, financial services and insurance, and transport and traffic for closer inspection.