How can deal teams capitalise on the latest trend in the deal insurance market to improve bid success?

By Tom Evans, Paul Davies, David Walker, Michael GreenAoife McCabe, Harry Redford, Catherine Campbell, and Amy Watkins

The emergence of contingent risk insurance policies, which address known risks that would otherwise be excluded from coverage under traditional W&I insurance, is an exciting recent trend in the deal insurance market. PE funds that identify previously uninsurable risks through due diligence now have the possibility of transferring such risks to insurers, rather than seeking either a price reduction or escrow retention from the purchase price. Therefore, the use of contingent risk insurance can make a PE fund’s bid more competitive and, as a result, more likely to succeed.

The Court’s decision rested on whether the patents provided outstanding benefit to the employer’s undertaking. 

By Deborah J. Kirk and Catherine Marie Hughes

On 23 October, the UK Supreme Court (UKSC) handed down its highly anticipated ruling in Shanks v Unilever [2019] UKSC 45 — the conclusion to an extensive campaign by Professor Shanks to obtain compensation for an invention he created in 1982, during the course of his employment with Unilever. The UKSC upheld Shanks’ appeal from the lower courts and in a unanimous decision ruled that Shanks was entitled to £2 million compensation from Unilever.

Section 40 of the Patents Act 1977 (the Act) makes provision for the payment of compensation to employee inventors in certain circumstances. Namely, where the employee makes an invention for which a patent has been granted and that patent is considered to be of outstanding benefit to the employer (taking into account things such as the size and nature of the employer’s undertaking), the court may award the employee compensation in the form of a fair share of the benefit received by the employer from the patents, with the amount determined under Section 41 of the Act.

Federal Ministry of Finance publishes draft tax bill outlining new measures effective 1 January 2020.

By Tobias Klass

The Federal Ministry of Finance has released its first draft tax bill on the contemplated real estate transfer tax (RETT) reform, setting out the general framework to which market participants must conform. German political debate has focused on strengthening German RETT laws for some time. The Conference of the German Ministers of Finance added weight to this political debate in June 2018, requesting that tax department heads of the federal and state ministries of finance transfer the resolution into a draft bill. Consequently, market participants have structured transactions to account for considerable uncertainties as regards RETT consequences.

The proposed draft measures are consistent with those outlined in June 2018, however, for the first time, market participants are gaining more clarity about when the new rules likely will apply. Generally speaking, the new rules will only apply to transactions as of 1 January 2020.

The Conference of the German Ministers of Finance has announced measures against so-called share deal structures following the conclusion of the respective technical federal-state working group.

By Tobias Klass


So-called share deal structures have been the focus of German political debate about real estate transfer tax (RETT) for some time. The coalition agreement already contains the governing parties’ political letter of intent to end allegedly fraudulent tax structurings regarding RETT through share deals. The background of said structures are transactions in which land or real estate is not sold directly, but indirectly, by selling the shares of the property holding company. Provided that a purchaser acquires less than 95% of the shares, RETT is not triggered under current law. If a corporation is involved in these structures, a co-investor typically will acquire the remaining shares of more than 5%. Alternatively, if a partnership is involved, the shares remain with the seller, as the mere change of shareholders in the amount of at least 95% of the partnership interests would already trigger RETT. As market participants have merely adapted to the current legal situation, referring to fraudulent structures is generally inaccurate. However, these structures became the focus of tax authorities, rendering them politically targeted.

As a first step, the current resolution of the Conference of the Ministers of Finance dated June 21, 2018 has substantiated the political discussion. The Conference asked tax department heads of the federal and state ministries of finance to transfer the resolution into a draft bill that the federal government will submit to the legislative procedure.

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.

By Matthias Rubner, Denis Criton, Olivia Rauch-Ravise and Bénédicte Bremond

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President Macron recently unveiled employment and tax reforms to increase France’s appeal for deal makers. While France ranks highly as an investment destination for private equity firms, complex and inflexible French employment laws have been perceived as a hindrance — perpetuating the belief that France can be an unfriendly jurisdiction for businesses and investors. In our view, these reforms — which focus on employee termination, collective bargaining, and employee consultative bodies — will make doing business in France easier and, coupled with proposed tax reforms, should facilitate an even stronger French dealmaking environment.

France ranks just 31st in the World Bank’s 2017 Ease of Doing Business index — the Macron reforms aim to improve this.

Collective Bargaining and Employee Termination – Developments and Implications for Private Equity

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Rules on collective bargaining agreements, a key feature of the French labour market, are changing. Previously, French companies could not change employment terms with workers if such changes were less favourable to employees than the rules set by industry-level agreements. Under the reforms, employers can now agree to company-level deals with unions that will supersede industry-level rules. This allows PE owners more flexibility to tailor agreements that better align with their actual business needs.

By Karl Mah and Sean Finn

Against a stormy backdrop of government instability and Brexit uncertainty, the 2017 Budget was always unlikely to rock the boat. The Chancellor chose not to launch a sweeping attack on “tax avoiders” in light of the public outrage over the Paradise Papers, instead targeting announcements in this area at specific perceived abuses.

The Budget contained some welcome developments around the key areas of real estate taxation and the digital economy, though there is clearly

By Nick Cline, Robbie McLaren, Katie Campbell

Britain’s decision to leave the European Union in June 2016, coupled with the election of Donald Trump as US president in November 2016, gave dealmakers plenty of pause for thought last year – but ultimately did little to derail strategic M&A. Encouraged by the post-Brexit decline in the value of sterling and supported by the continuing availability of transaction financing at attractive rates, the number of acquisitions of UK companies by US acquirers reached the highest level in 10 years, with 262 deals valued at US$48 billion closing in 2016.
Interesting reflection and lines formed by two modern glass architecture.With attractively priced credit predicted to continue to finance M&A transactions throughout 2017 and foreign buyers continuing to regard the UK and Europe as an attractive investment opportunity, there are strong indications that inbound UK and European M&A activity from the US will continue. In our view, transatlantic deal makers will increasingly encounter the following key deal term differences between the US and UK M&A markets. 

Transaction Accounts: Completion v Locked Box

In the Latham & Watkins 2016 European Private M&A Market Study (which examined over 170 deals signed between July 2014 and June 2016) as much as 46% of European deals included a locked box mechanism. 33% of deals included a completion accounts mechanism and 21% of deals did not provide for price adjustment. In contrast, locked box mechanisms are significantly less common in the US, where the majority of deals use completion accounts. Locked box mechanisms fix the deal price at an agreed date based on a set of accounts, with the seller giving undertakings that value will not be extracted, or leak, from the target before completion. In contrast, a completion accounts mechanism calculates the final deal price after completion, by reference to accounts relating to the target, drawn up to the date of completion. This allows the buyer to test and adjust its valuation by reference to the actual financials of the target. 

By Karl Mah

This year’s Autumn Statement proved to be rather quiet on the corporate tax front, contrasting with the recent OECD/BEPS led activity in the international arena. Perhaps this was in part due to the relatively recent Summer Budget and the fact that the Chancellor had benefitted from an unexpected revenue windfall driven by higher than expected receipts and an improving UK economy. As is typical in the current climate, the announcements covered a number of targeted anti-avoidance measures