Debevoise Discusses the UK’s Proposed National Security Review for M&A Deals

Many countries have been looking again at their ability to block acquisitions when they threaten national security. For example, we reported on a change to German law in July last year, and a European Commission proposal (which would cover all EU member states) in October. Most recently, a new law in the United States has increased the power of the Committee on Foreign Investment (CFIUS) to block deals. Such rule changes – often triggered by a controversial foreign acquisition – are understandable, but investors need to know the process and timeline. Vague tests, long clearance procedures or excessive look-back periods … Read more

Gibson Dunn Discusses How Brexit Will Affect Financing and Documentation

Since the result of the Brexit referendum was announced in June 2016, there has been significant commentary regarding the potential effects of the UK’s withdrawal from the EU on the financial services industry.

As long as the UK is negotiating its exit terms, a number of conceptual questions facing the sector still remain, such as market regulation and bank passporting. Many commentators have speculated from a ‘big picture’ perspective what the consequences will be if / when exit terms are agreed.  From a contractual perspective, the situation is nuanced.  This article will consider certain areas within English law financing documentation … Read more

Gibson Dunn on Why the UK Is Heading for a “Soft Brexit”

Our discussions with politicians, civil servants, journalists and other commentators lead us to believe that the most likely outcome of the Brexit negotiations is that a deal will be agreed at the “softer” end of the spectrum, that the Conservative Government will survive and that Theresa May will remain as Prime Minister at least until a Brexit deal is agreed (although perhaps not thereafter).  There is certainly a risk of a chaotic or “hard” Brexit.  On the EU side, September’s summit in Salzburg demonstrated the possibility of unexpected outcomes.  And in the UK, the splits in the ruling Conservative Party … Read more

Covington & Burling on the UK’s “No-Deal” Competition and Merger Guidance

The UK Government published its highly-anticipated technical guidance on merger review and anti-competitive activity on 13 September 2018 which will apply in the case of a ‘no-deal’ Brexit (the ‘Guidance’). Although brief, it provides market players with some form of practical advice and insights on what to expect, how cases are likely to be divided between the EU and UK regimes, how UK competition law will develop, and suggests in what ways post-Brexit competition damages actions in the UK Courts may change. This Guidance follows on from the previously released ‘no-deal’ state aid guidance – as was covered in our … Read more

Addleshaw Goddard Discusses a “Hard” Brexit’s Implications and Practical Solutions

At 11 pm on March 29, 2019, the United Kingdom will leave the European Union.  In the absence of a material change of trajectory in the Brexit negotiations, it is likely that the investment management industry will find itself grappling with the consequences of a “hard” Brexit.  But what does this mean in practice, what are the implications for investment managers and how can they mitigate them?

This Regulatory Spotlight discusses the consequences of a hard Brexit for alternative investment fund managers (although it will also be of relevance to investment managers more broadly).  It then explores some practical solutions … Read more

The Sky’s the Limit as Comcast and Fox Prepare for Battle at the Auction Block

For the last year, a heated ownership battle has been unfolding between Comcast and 20th Century Fox in their contest to acquire Sky PLC. Sky is Europe’s leading media company and the largest pay-TV broadcaster in the UK, with over 21 million subscribers and 30,000 employees (not to mention a mercilessly dominant professional cycling club). While many such battles are settled outside of the public eye, this one is destined for a different fate: Over the next two days, the Comcast/Fox contest will culminate in an old-school auction—one ordered by the UK Takeover Panel, which oversees and regulates all … Read more

How to Achieve Equivalence of Financial Regulation in the EU and UK Post-Brexit

As the March 29, 2019 deadline approaches, the United Kingdom prepares its withdrawal from the European Union amidst political turbulence that would suit a television drama.[1] Center stage is what to do about the financial services industry. For the UK as well as the European continent, it makes the most sense to keep Europe’s financial sector integrated with the UK and to be pragmatic in interpreting the EU Treaty on the Single Market freedoms.

UK Financial Services

The UK openly seeks an arrangement acceptable to the EU. The latest UK White Paper proposes to stay in the EU’s Single … Read more

Comparative Corporate Governance

By adopting a systematic cross-national comparative approach, my recent study provides an overview of corporate governance (CG) around the world. It takes stock of what we know about the two main CG models, the variations within and across these models, as well as the worldwide diffusion and possible convergence of CG practices.

Although there is a range of different regimes of CG in advanced economies, the literature on comparative CG focuses on two: the shareholder-oriented model (prevailing in Anglo-Saxon countries) and the stakeholder-oriented model (prevailing in Germany, Japan, and continental Europe, Aguilera & Jackson, 2003). While the former prioritizes a … Read more

Hidden Holdouts and the Puzzling Pricing of Collective Rights: An Analysis of the Venezuelan Debt Crisis

The emergence of “activist” investors across a range of markets has been one of the most interesting phenomena of the past few decades (see here, here and here). These investment funds seek to capture rents from their investments by “actively” enforcing their rights.  Activist investors pursue this strategy in markets in which the majority of investors are passive. Much of the discussion of this development in both the financial press and the academic literature has focused on activists acquiring equity positions in order to influence a firm’s management policies (see here and here). Our focus, however, is … Read more

Wachtell Lipton Discusses UK Corporate Governance Code

The Financial Reporting Council on July 16 issued a revised corporate governance code and announced that a revised investor stewardship code will be issued before year-end. The code and related materials are available at www.frc.org.uk.

The revised code contains two provisions that will be of great interest. They will undoubtedly be relied upon in efforts to update the various U.S. corporate governance codes. They will also be used to further the efforts to expand the sustainability and stakeholder concerns of U.S. boards.

First, the introduction to the code makes note that shareholder primacy needs to be moderated and that … Read more

Skadden Discusses Latest Legislation to Expand Foreign Investment Review

In large part as a response to China’s national industrial goals and subsequent Chinese acquisitions of U.S. and European companies that are technology leaders in key industries, the U.S. government and a number of European governments are seeking to expand the scope of their national security reviews of foreign investments. Below, we outline ongoing developments affecting U.S. national security reviews of inbound foreign investment.1

FIRRMA Moves Ahead

The Senate and House have recently passed their respective versions of the Foreign Investment Risk Review Modernization Act (FIRRMA) legislation that was origi­nally introduced in November 2017 with significant bipartisan support. FIRRMA … Read more

Kirkland & Ellis Discusses CFIUS Reform

On May 22, 2018, the Senate Committee on Banking, Housing, and Urban Affairs  held a hearing to mark up its draft proposed amendment to the Foreign Investment Risk Review Modernization Act (“FIRRMA”). Initially introduced on November 6, 2017, with strong bipartisan support, FIRRMA would — for the first time since 2007 — reform the process by which the Committee on Foreign Investment in the United States (“CFIUS”) assesses “covered transactions.” Proposed in response to a new and evolving macro security environment, FIRRMA would radically impact planning for long-term enterprise investment strategy as well as discrete transactions for U.S. and non-U.S. … Read more

Debevoise Discusses the U.S. CLOUD Act and Europe’s Response

Electronically stored data play a vital role in criminal investigations. The framework for the transfer of such data across national borders continues to be difficult to navigate. Recent legislative developments in the United States and the European Union signal a change in the approach to cross-border data transfer for law enforcement purposes on both sides of the Atlantic.

This Client Update sets out the main provisions of the recently adopted U.S. Clarifying Lawful Overseas Use of Data Act (“CLOUD Act”) and of the draft EU regulation on sharing electronic evidence (“e-Evidence Regulation”). It then considers their implications not only for … Read more

Telecom Italia Vote Shows How Activists and Passive Investors Can Work Together

It’s not every day that Italian capitalism can be heralded as a bastion of transparency. But the showdown on May 4 at Telecom Italia’s board meeting between U.S. activist fund Elliott Management and French conglomerate Groupe Bolloré proved to be one such opportunity.

That is because in Italy, unlike in the United States and other advanced economies, shareholder votes are part of the public record. As such, the vote in Milan was the perfect arena to observe some of the most important fault lines in shareholder capitalism today.

Ultimately, the case turned on the votes of large passive institutional investors, … Read more

Legal Insider Trading in Europe Makes the Case for Enforcement

Evidence about the relative importance of private and public enforcement of securities laws for financial markets is inconclusive. The recently introduced Market Abuse Directive (MAD) (2003/6/EC) sets a European Union (EU) standard for regulation of insider dealing and market manipulation. Under Article 18 of the MAD, EU member states had to implement by October 12, 2004, local regulations that require the disclosure of corporate insider trading. The regulation represents a unique natural experiment that was introduced not in response to a specific case but as a mandate (exogenously) to EU countries (and Switzerland) simultaneously. This experiment allows us to examine … Read more

Cleary Gottlieb on Latest Developments in European Leveraged Finance

EVOLUTION OF THE TRANSFERABILITY CLAUSE

Early 2000s

  • Lenders’ freedom to transfer their participations in large leveraged loans has been gradually eroded by developments introduced through the last few credit cycles.
  • By the time of the pre-crisis peak in 2007/2008, the provisions governing freedom to transfer had settled on the following:
    • Transfers had to be to “another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets”.
    • Borrower consent to any transfer was required (which

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Corporate Governance and Human Capital: Evidence from SMBO Boards

Consistent with predictions made in the late 1980s, the buyout market has grown tremendously and, together with the private equity (PE) model, has become a global phenomenon. One consequence of the maturity of the market is substantial secondary management buyout (SMBO) activity. In an SMBO, the ownership structure and governance mechanism are retained as the initial (primary) buyout is acquired by new PE financiers. The popularity of SMBOs has created some controversy, especially regarding whether the benefits for PE funds come at the expense of the longer term health of portfolio companies.

In our recent paper we examine reasons for … Read more

Davis Polk Discusses the Impact of European Data Protection Regulation on U.S. M&A

The winds of change will shortly sweep across the data privacy landscape in the European Union (“E.U.”) and the gale will be felt worldwide.  The European General Data Protection Regulation (“GDPR”) will come into force on May 25, 2018.[1]  Currently, some U.S. M&A practitioners prioritize U.S. law, absent a target with a strong business nexus with the E.U., but the GDPR’s extraterritorial scope, together with increased fines for non-compliance (up to the greater of 20,000,000 Euros or four percent of annual global revenue), will force its consideration into U.S. M&A activity.

We discuss below the … Read more

Kirkland & Ellis Discusses Trump Administration’s Ban on Dealings in Venezuelan Cryptocurrency

On March 19, 2018, President Trump issued an Executive Order “Taking Additional Steps to Address the Situation in Venezuela” (“Executive Order”) that prohibits U.S. persons from engaging in dealings in any digital currency, digital coin, or digital token issued by, for, or on behalf of the government of Venezuela.[i] The same day, the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) issued corresponding guidance that lays the groundwork for potential sanctions related to digital currency transactions more generally. Taken together, these actions reflect tightening sanctions on Venezuela, and may foreshadow OFAC asserting jurisdiction over cryptocurrency in … Read more

Davis Polk Discusses Greater Risk of Scrutiny for More UK Deals

The UK’s Competition and Markets Authority (CMA) has announced proposals to tighten its jurisdiction over mergers in the military, quantum technology and computing hardware industries. The changes, which are subject to a consultation period through April 12, 2018, would lower the thresholds at which the CMA and the Secretary of State can exercise their powers of review and intervention.

Specifically, the CMA is proposing to:

  • reduce the ‘target turnover threshold’ from £70 million to £1 million, and
  • broaden the ‘share of supply threshold’ to catch targets with 25% or more share of supply in the UK, even if the acquirer

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