This document discusses trends in cross-border M&A and key issues based on Eversheds LLP's experience advising clients. It notes an increase in European deal volume and prevalence of deals in certain countries. It outlines common challenges including cultural integration, managing carve-outs, and ensuring thorough due diligence. It provides tips and analyzes case studies that illustrate lessons around properly investigating issues, planning integrations, and addressing cultural differences in acquisitions.
1. A 2015 Perspective
Robin Johnson – Partner, Eversheds LLP
Marc Nufer - Partner, Eversheds Switzerland
Cross Border M&A
2. 1. Market Overview
2. Trends
3. Key Issues
4. Integration
5. Tips
Introduction
6. Process
7. Dealmaster
8. Case Studies
9. Eversheds
Information
3. The Mid-Market View
• 30% up in volume in Europe year-on-year
2013 to 2014
• Median EBITDA 8x with an average of 7x
for deals below 100 million in value
• 60% of all European deals are in UK and
Germany followed by France, Spain, Italy,
Netherlands, Ireland, Belgium, Sweden
and Switzerland
• North America still is the key big strategic inward
investor in Europe. The Asian Tiger has yet to
roar though in 2015 we are already seeing some
increased activity.
4. 1. Appetite for risk – is there are a difference
between strategics and financial sponsors?
2. Do low interest rates create an opportunity
for financial sponsors or strategics?
3. PE Exits IPO? Is there a preference for
secondaries due to appetite of risk?
Triple track process
4. The PE/strategic issue. A clean exit against
corporate risk – what does this mean in practice?
5. Warranty and indemnity insurance,
lockbox and leakage
Non-Financial Trends
5. 6. Role of VDD and approach to due diligence.
7. Auction processes, issues with data room,
redaction and content and process, markups
and liability caps and costs pre “exclusivity”.
8. How to avoid an auction if at all possible.
Fair market opinions.
9. General against specific disclosures.
10.Indemnity basis against common law basis
of damage.
11.Non-compete and carve-outs.
12.Conditionality, anti trust, financing,
MAC, regulatory consents (local).
13.Governing law clauses and arbitration.
Non-Financial Trends
6. 1. Centralised project management
2. Commitments: time, quality, fees
3. Levels and materiality both in terms of due
diligence and transactional
4. Understanding local nuances
(eg. notary, language, documentation,
consultation, authorities etc.)
5. Time and expectations: meaningful and
achievable timetable. Assume 50% longer
on a cross-border deal and 75% more time.
Because deals will never go as planned!
Key issues on multi-jurisdictional deals
7. • Eversheds Blueprint Report
• Unsuccessful deals because of
– lack of connection between planning,
execution and integration of a
transaction
– Cultural differences
– Poor project management
• Core team throughout the transaction.
• Getting buy-in from local management
(communication, setting out rationale for the
transaction).
• Local compliance training in local language.
Integration
8. • Obtaining corporate, real estate and
other records as soon as possible.
• Talking to suppliers and customers.
Understanding local permits and local
regulatory requirements.
• Time and cost.
Talking rather than e-mailing.
Integration (cont…)
9. • Identify targets
• Following targets
• Getting to know targets
• Avoiding a process
• Standard confidentiality agreement
• Reviewing information memoranda
• Standard bid letters
• Process, plan, team, methodology
Some tips to an M&A process
10. Initial work in place before transaction:
1. Confidentiality undertaking
2. Review terms of engagement to advisors
3. Review transaction structure, identify key issues
and list of documents
4. Heads of terms, scope,
lockout, exclusivity
5. Competition issues, have
processes in place,
internal information to hand
Process
11. 8. Due diligence questionnaire and data room
rules
9. Approach to redaction and lack of information
10.Standard due diligence report:
using report going forward as a
live document for use of
SPA value discussion,
review of disclosures
and integration.
Process (cont…)
12. Polling Question:
• Do you think your business would benefit from
having standardised bespoke documents of the
types we discussed?
14. Preparation for Disposal - Solutions
Preparation
Sourcing
Documentation
Processing
Information
Preliminary
Transaction
Structure
• Getting to know one
another – kick-off
calls and briefing
• Bespoke information
request list
• Establishing a
transaction timeline
– carve-out and
disposal
• Experienced
project
management team
• Clear and focused
parameters for
documentation
required
• Building a well
structured virtual
data room
• Commercial
considerations
(translation
/redaction/stages
for release of
confidential
information)
• Analysing
documentation and
obtaining further
information
• DealMaster –
customisable
• Local lawyer input
• Running the legal
Q&A
• Disposal: umbrella
sale agreement
together with
template
mechanical sale
agreements
• Clear and concise
reporting in a
format which suits
you
• Identifying
timetable issues and
providing solutions
15. Project Dealmaster
This document has been prepared in relation to the proposed sale of ●.
Specifically this document is intended to:
1.constitute a reference document for each internal and external legal
counsel to access in order to understand the applicable jurisdiction-specific
transfer requirements in each of the relevant jurisdictions (the “Local
Transfer Protocol”); and
2. assist management in reviewing assets and determining which are to
be transferred to the purchaser (“Jurisdiction-Specific Asset Lists”).
Managing the Disposal - DealMaster
• Intelligent and customisable
project management tool
for multi-jurisdictional
transactions
• Time saving – easy
identification of assets
relevant to each jurisdiction
• Cost saving - Quick/easy
ready built reference guide
for understanding transfer
mechanics in relation to
assets
• Real-time map of the
business throughout the
transaction
16. • Easy to use format –
suitable for use by
management as well
as external advisers
• Simple user guide,
showing the link
between asset lists
for each
jurisdiction/entity
and the
local transfer
requirements
in relation to
those assets
• Navigating around
the tool is
straightforward –
it is all interlinked
DealMaster - User Guide overview
19. • Asset lists can be uploaded and updated throughout the transaction
or on an ongoing basis
• Customisable e.g. can list contracts or use this tool to capture key terms
for all contracts in an easily ‘searchable/filterable’ format
• Enables management to:
• assess what is owned/used in each jurisdiction
• easily identify which assets will be carved-out of the transaction
• effectively evaluate bids
DealMaster - Asset Lists
20. • Large multi-national corporate acquiring
a company from private ownership
• Due diligence undertaken
– not focused enough
• Pension letters disclosed
– technical issues would have been understood
by an actuary
• Post completion: scheme underfunded
at time of acquisition by €3m. If properly
invested €21m (loss to fund)
Case Study One
21. • Court case. No breach of
warranty, no recovery.
Reasonable purchaser would
have sought expert actuarial,
advice on meaning of letters.
• Onus on purchaser to
comprehend the disclosures,
and if unclear, raise further
queries.
Case Study One (cont…)
22. • Lack of focus to due diligence
or maybe too focused on
the “wrong issues”
• Did not understand significance
of the matters disclosed
• Relied on own assessment without fully
understanding the risk [Court: The fact
significance of disclosure would only be
apparent to an actuary was irrelevant.]
• Post deal issues that came out of this approach
Issues coming out of Case Study One
23. (cont…)
• Lack of understanding of
technical issue disclosed
Key Lesson Learnt:
Do not underestimate the importance of
due diligence and having the
correct people review the
relevant documentation!
Issues coming out of Case Study One
24. • A large business acquiring
a division of another large
business
• Thorough due diligence
done but the pitfalls of
buying out of a large business
Case Study Two
25. • Transitional services issues –
how long should it take
• Tax and legal structuring issues –
opposing views – but control tax!!
• Hidden costs eg software licences, “rental” cash
• Stock options and other labour law issues
• Ownership of assets
Key Lesson Learnt: Importance of deal
planning and realistic bid timetable.
Focus on the carve out with the right team
Issues coming out of Case Study Two
26. • Acquisition by a large
corporate of an
entrepreneurial private
business
Case Study Three
27. • Cultural
• Understanding what made
the target business “click”
• The original owners role post deal
• Employees view of becoming part of
a large corporate and the organisational
changes that resulted
• Relationship with third party vendors
Key Lesson Learnt: Integrating culture
and incentivisation package
Issues coming out of Case Study Three
28. • Fixing the valuation
“gap” on a technology
Case Study Four
29. • Earn out arrangements
• Issues associated with earn out arrangements
including short term focus of vendors against
long term focus of buyers and what happens if
the buyer changes their mind.
• What happens when the synergies aren’t there
Issues Coming out of Case Study Four
30. Committed locally, connected globally
• Our team of international M&A lawyers comprises 350+ M&A lawyers across our global network
• We are one of the leading European midmarket corporate transactional teams,
extending beyond to the Middle East, Asia and Africa.
• Over 50% of our transactions involve more than 3 jurisdictions
• Advised on over US$95 billion of deals in 2012/13
• Our commitment to project management ensures we deliver consistent high quality across
our international network and control when it comes to timing and costs. We aim to provide
the most transparent and predictable international corporate legal offering available
• We have invested millions of Euros in internal training
• We adopt a multidisciplinary approach – no silo mentality
• Extensive use of technology
• Cost budgeting, transparency and certainty
The Eversheds’ M&A Group
31. • Chemtura on the $1bn sale of its agrochemicals business
across 36 jurisdictions
• China National Nuclear Corporation (CNNC) on its
investment in the £16bn Hinkley Point C nuclear power station
• DuPont on the European aspects of the US$4.9 billion disposal
of its performance coatings business across 18 jurisdictions
• Cisco in connection with its $5bn acquisition of NDS
• AID Partners Capital on the acquisition of the HMV business
in Hong Kong and Singapore
• May Gurney on the £221m takeover by Kier
• Anglo American on the sale of a portfolio of UK assets for £285m
• Dairy Crest on the sale of its French spreads business
for £344 million.
Highlight recent deals
We provide strategic advice to international leaders
and household names
32. Electra Partners on its
£160m acquisition of UBM's
Data Services businesses
across 28 jurisdictions
AID Partners Capital
Limited on its acquisition of
the entire stake in HMV
Hong Kong, Singapore and
Greater China
DuPont on the European
aspects of its US$4.9bn
disposal of its performance
coatings business across 18
jurisdictions
Oaktree Capital on its
€175m acquisition of
Milpro and Evac from
Zodiac Marine &
Pool across 11
jurisdictions
Sunrise Senior Living,
leading care home
operator, on its
acquisition by US group
Health Care REIT in a
deal valued at $4.3bn
(£2.7bn)
Cisco on the $5bn
acquisition of NDS
Flybe in connection with
its €150m (£128m)
acquisition of 43 short-
haul routes operated
by Aer Lingus
AID Partners Capital Ltd
on a US$10m investment
in Prime Focus World
N.V.
Tech Data Corporation
on the strategic £220m
purchase of several
distribution companies
from Specialist Computer
Holdings in the UK
Rutland Partners on the
sale of Advantage
Healthcare and the
acquisition of Timbmet
Door Solutions
M&A track record
Experience you can trust
33. The management team
of Metronet UK in
relation to the MBO of
Metronet backed by LDC
The management team
of Four Seasons
Healthcare in relation to
Terra Firma’s £825m
acquisition of Four
Seasons
Rhapsody on its
acquisition of Napster
Europe
Isis Equity Partners and
management on the sale
and secondary buy-out
of online retailer Wiggle
for £180m
3M on its acquisition of
the DIY and professional
division of French group
Gergonne/GPI
Hampson Industries on
the USD84m sale of its
shims business
Jardine Lloyd Thompson
Group plc on the partial
offer from Jardine
Matheson to take its
shareholding to approx
40%
ECI Partners LLP on the
£50m secondary
management buy out of
rail travel company
Amber Travel from
Primary Capital
ghd management team
on its sale from Montagu
Private Equity to Lion
Capital
May Gurney on the
£221m takeover offer
from Kier
M&A track record
Experience you can trust
34. • We are able to develop and add value to our client relationships
through our collaborative approach and range of innovative tools,
reports and training
Innovative thought leaders
Expertise and insight for clients
35. • Designed to emphasise the global
capability of the Eversheds M&A
offering
• One document to showcase our
international team, cross border
work and high profile projects
• Includes a front end commentary –
“our take” – on the current market
• Excellent firm and client feedback
• Second edition being planned for
Q1 2015
Corporate marketing and BD tools
International M&A Dealbook
36. Robin Johnson
Client Partner, Corporate
International Lead (UK)
robinjohnson@eversheds.com
+44 207 919 4754
+44 783 141 4079
Marc Nufer
Partner, Corporate (Switzerland)
Marc.nufer@eversheds.ch
+41 31 32 87 58 0
David Williams
Partner, Corporate (Spain)
dwilliams@evershedsnicea.com
+34 60 80 98 44 4
Paul Cotton
Partner, Labour Law
International Lead (UK)
paulcotton@eversheds.com
+44 113 200 4745
+44 777 558 6259
International M&A Team
37. Tom Bridgford
Partner, International Commercial
Lead (UK)
tombridgford@eversheds.com
+44 161 831 8231
+44 776 651 1501
Charlotte Chambers
Project Manager , Corporate (UK)
charlottechambers@eversheds.com
+44 207 919 4964
+44 755 701 4315
International M&A Team
38. For further information, please
contact:
Robin Johnson
robinjohnson@Eversheds.com
+ 44 20 7919 4754
Marc Nufer
marc.nufer@Eversheds.ch
+ 41 31 32 87 58 0