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Successfully executing an acquisition from stress, distress, or insolvency requires a creative approach to reconcile competing interests.

By Simon Baskerville, Jack Isaacs, Hyo Joo Kim, Catherine Campbell, Tom Evans, and David Walker

The COVID-19 pandemic has brought a heightened risk of financial difficulty and insolvency for companies. Whilst there have been relatively few formal insolvencies so far, in our view troubled businesses may be forced to pursue accelerated asset disposals, creating opportunities for PE firms. However, successfully executing an acquisition from stress, distress, or insolvency requires skillful navigation of competing interests in a complex legal landscape.

European PIPEs — which have experienced an uptick due to COVID-19-related market volatility — present unique structural, informational, and governance considerations for private equity investors.

By Richard Butterwick, Chris Horton, Tobias Larisch, Harald Selzner, Anna Ngo, Hector Sants, Catherine Campbell, Tom Evans, and David Walker

European private investments in public equity (PIPEs) have historically been rare, particularly compared with the US. However, since the onset of the COVID-19 pandemic, companies have sought to access additional sources of liquidity to repair their balance sheets. For example, in May 2020, Clayton, Dubilier & Rice invested £85 million in UK-listed building supplier SIG for a 25% stake and two board seats, as part of a £165 million fundraising process to rebuild the company’s capital base — underlining the demand for private capital in the present environment and the willingness of PE to pursue PIPEs.

Amid FDI screening regime expansion, deal teams have opportunities to capitalise on newly available exemptions, but must beware novel complexities.

By Jonathan Parker, Rachel K. Alpert, Stephanie Adams, Gillian Bourke, Zachary N. Eddington, Catherine Campbell, Tom Evans, and David Walker

US intervention in the proposed acquisition of hotel-software company StayNTouch by a Chinese investor and UK intervention in the acquisition of satellite telecommunications company Inmarsat plc by a private equity-led consortium reiterate the range of foreign direct investments (FDIs) that can draw government attention, and the disruptive impact that such attention can bring to sensitive deals.

A desire by governments to control investments by businesses from states perceived as hostile in key sectors (such as defence, critical infrastructure, and advanced technologies) has fuelled a widening of the range of investments being caught. Recent moves by governments to further tighten FDI screening rules in response to the COVID-19 crisis will only accelerate this trend.

Buyout firms must beware the unique legal, regulatory, and commercial issues that can complicate sports transactions and impact returns.

By Patrick Mitchell, Alex McCarney, Stewart Robinson, Catherine Campbell, Tom Evans, and David Walker

Private equity interest in sports assets has grown over the last few years, with investments in teams, leagues, and other members of the sports ecosystem. Sports investments by sponsors, including CVC’s US$8 billion sale of Formula One racing in 2017, have underlined the strong returns available.

Today, the COVID-19 crisis, with the stresses that it has placed on sports media, sponsorship, and match-day revenue streams, has created new opportunities for investors — and interest is accelerating. Financial sponsors are continuing to seek out opportunities. Firms have invested in, or are in the process of investing in, a range of sports, from martial arts to football, and rights holders are signalling that they would welcome investment to see them through and beyond the current crisis.

Digital due diligence becomes increasingly important when buying digitally native beauty brands.

By Deborah J. Kirk, Linzi Thomas, Camilla J. Dutton, Laura Kichenside, Catherine Campbell, Tom Evans, and David Walker

Recent high-profile beauty M&A deals, coupled with current economic uncertainty, have brought renewed interest in the “lipstick effect”. Much cited in the aftermath of the 2008/09 downturn, it describes how consumer demand for relatively affordable luxuries, such as lipstick, continues or even increases during challenging economic times. There are signs that the global beauty industry may once again prove resilient, with nail care being coined the “COVID-19 lipstick effect”, following double digit growth.

Attractive Opportunities

The global beauty industry, worth around US$532 billion prior to the COVID-19 outbreak, is expected to be worth US$805 billion by the end of 2024, according to Euromonitor data. The industry has demonstrated recession-resilience with continued growth (including during 2008/09), driven by digitalisation, social media and increasing demand from emerging economies. Investors are taking note — beauty deals offer attractive opportunities in growing companies with potential to generate significant margins at scale. PE accounted for 47% of 2019 beauty M&A deals.

Drawing on Latham’s Sixth Private M&A Market Study, we explore trends and developments in consideration mechanics and deal conditionality.

Richard Butterwick, Martin Saywell, Simon J. Tysoe, Catherine Campbell, and Richard George

Uncertainty has been a significant market factor in 2019. The UK’s decision to leave the European Union, protectionist responses to China as a global investor, market volatility, and trade tensions have all given dealmakers pause for thought. With these growing pressures on international M&A, deal teams and in-house counsel are increasingly required to work with advisors to find strategies and solutions to get deals done — a task that requires an intimate knowledge of deal terms and current market trends. In our view, geopolitical factors can impact how parties approach deal architecture and key provisions of transaction documents.

Drawing on data from Latham & Watkins’ sixth Private M&A Market Study, we will examine how consideration mechanics and conditionality deal terms are responding to the current M&A market.

As management terms converge, deal teams must still navigate cross-border differences in ratchets, put and call options, and management warranties.

By Alexander Benedetti, Tom Evans, David Walker, Neil Campbell, Catherine Campbell, and Eric Loubet

French and UK private equity firms are increasingly looking across the Channel for attractive buyout opportunities. Cross-border transactions involving French and UK sponsors have grown steadily since the global financial crisis, with an uptick in activity in recent years. According to PitchBook, French sponsors bought 33 UK-headquartered companies last year, the highest volume at any point in the past decade. Meanwhile, UK sponsors acquired 56 French-headquartered companies in 2018, up from 34 companies 10 years ago. The long history between the two nations continues to facilitate a strong level of deal flow.

Given the prevalence of pan-European management advisors and the increased number of cross-border deals, cross-pollination of deal terms is occurring. While we expect management equity terms in France and the UK to continue to converge, specific conditions under local tax regimes mean that there are still key areas of distinction. In our view, sponsors considering a buyout across the Channel must carefully navigate differences in the treatment of management equity terms in each jurisdiction. In a sellers’ market, appealing to management can help to win a deal. However, sponsors should proceed cautiously and avoid a one-size-fits-all approach, taking note of the following key developments.

Adherence to secrecy, pre-announcement preparations, realistic expectations-setting, and strategic plans for taking control are keys to P2P deal success.

By Richard Butterwick, Pierre-Louis Clero, Manuel Deo, Tom D. Evans, Tobias Larisch, David J. Walker, Suneel Basson-Bhatoa, Phillippe Tesson, Connor Cahalane, and Catherine Campbell

The deal market has seen a resurgence in public to private (P2P) transactions — global P2P volumes exceeded €115 billion in 2018, and have already surpassed €88 billion as of September 2019. As PE firms increasingly target complex and ambitious European P2P deals, deal teams need to consider tactics and understand local requirements. In our view, buyout firms can maximise the likelihood of successfully closing a P2P deal by considering these key issues.

Manage Your Information Expectations — Public Diligence Is Different

Public deals can falter over diligence, particularly if information requests are sizeable or require significant management time. Additional diligence will likely be carried out post agreement of headline terms — e.g., review of key legal documents, management presentations, etc. — but this is typically more limited than on a private deal, particularly with respect to time. In the UK, France, and Spain, equal information must be provided to bidders — target boards will be conscious that information shared with a bidder may need to be more widely distributed in due course. In Germany, while bidders do not need to be treated equally, access to information will only be granted by the target if it considers this to be in the best interests of the shareholders and the company. In all cases, buyers need to act quickly, with clear and realistic expectations of the public diligence process, in order to keep the board onside.

How can private equity firms identify and mitigate inherited liability risk from vulnerable portfolio companies?

By Tom Evans, Gail Crawford, Fiona Maclean, David Walker, Katie Peek, Catherine Campbell, and Amy Smyth

Ongoing big ticket regulatory fines coupled with high profile corporate veil cases indicate that private equity deal teams must remain alert to the risk of buyout firms inheriting liabilities from vulnerable portfolio companies. Increasing GDPR fine activity, including the UK Information Commissioners’ intention to fine British Airways £183 million and an international hotel group £99 million for GDPR failings, is of particular concern. In parallel, the UK Supreme Court recently examined the circumstances in which a parent company can be held accountable for its subsidiary’s actions. In our view, private equity firms should take careful but active steps to identify and mitigate this inherited liability risk; there is no doubt that PE funds are increasingly in the firing line.


Firms targeting assets divested by conglomerates still face obstacles, though barriers to PE investment in Japan are gradually falling.

By Stuart Beraha, Noah Carr, Tom Evans, Hiroki Kobayashi, Ivan Smallwood, David Walker, and Catherine Campbell 

Many hurdles that traditionally challenged private equity firms looking to invest in Japan have been lowered in recent years. The Japanese government is increasingly supportive of overseas buyers, addressing legal, structural, and cultural obstacles and creating renewed interest in the country’s conglomerates, many of which house non-core assets ripe for acquisition. While the environment for foreign private equity buyers has improved considerably, deal teams should be aware that significant general and target-specific challenges remain.