Private equity’s growing appetite for UK-listed targets comes with the need for Takeover Code-savvy dealmakers.

By Doug Abernethy, Richard Butterwick, Tom Evans, David J. Walker, and Catherine Campbell

Amid stiff competition for attractive private targets, PE firms are competing more regularly against corporates and rival sponsors for listed targets, requiring skillful navigation of the dynamics of a contested UK take-private within the tight confines of the Takeover Code.

Several deals underline appetite for listed targets at mid-market and large-cap levels, including Towerbrook and Warburg Pincus’ £219 million takeover of The AA, CD&R’s £7 billion acquisition of W M Morrison, and Blackstone’s £3.5 billion acquisition of Signature Aviation, with PE bidders also recently involved in high-profile competitive situations around Sanne Group and Vectura. Once a rarity, Takeover Panel formal auction procedures have become more frequent in recent years, highlighted by the multibillion-pound Morrisons deal.

Considerations for non-US acquirers looking to buy a publicly traded US-based company in a negotiated (i.e., friendly) transaction.

By Thomas W. Christopher, Bradley C. Faris, Alexander B. Johnson, Amanda P. Reeves, Les P. Carnegie, Kristin N. Murphy, and Kaitlin Verber

In 2019, the public M&A market in the US continued at a strong level. A total of 198 M&A deals with equity values over US$100 million were announced with US public company targets in 2019, worth a combined total of more than US$909.7 billion[1]. Non-US acquirers continued to represent a meaningful portion of US public company acquirers, accounting for approximately 25% of public company buyers since 2017[2].

The acquisition of a US public company by a non-US acquirer is a transformational transaction for the target and likely a significant transaction for the acquirer. There is no standard formula for such a transaction, and the legal considerations that arise require careful analysis on a case-by-case basis. Latham’s guide, Acquiring a US Public Company, summarizes such considerations for acquirers contemplating such a transaction.

By Richard Butterwick, Stuart Alford and Katie Campbell

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Dealmakers’ appetite for transactions involving publicly listed companies remains strong — 2016 saw an increase in deal volume, a trend which continues into 2017. However, deals remain challenging, partly due to limitations on bidder deal protections and financing requirements. In response, innovative products have been developed by the insurance industry of provide solutions. In our view, these insurance products will help some bidders or public companies overcome perceived barriers to success in the UK market.

Takeover Code Requirements

Concern over Kraft’s 2009/2010 acquisition of Cadbury prompted a strengthening of deal requirements from bidders by the Takeover panel. This new approach — which the UK Takeover Code (the Code) enshrines — includes a general prohibition on certain deal protection measures on public acquisitions, such as “break fees”. A break fee is a fee that a seller or target company agrees to pay to another party (typically the bidder), if a specified event causes the transaction to fail. Further, Code cash confirmation rules require bidders to launch offers for public companies with “certain funds” financing in place, that a financial adviser has publicly confirmed to exist.

Combined, these factors influence how prospective bidders approach takeovers. Insurance market innovation has begun to address these issues, developing new products to help de-risk deals and navigate Code requirements.