Cadwalader Discusses CFIUS and Foreign Investor Deals

The national security implications of corporate deals involving foreign investors continues to be a headline-grabbing topic. Last summer, President Trump signed into law the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which expanded the types of transactions subject to national security review by the Committee on Foreign Investment in the United States (“CFIUS”). As we approach the first anniversary of FIRRMA, it has – unsurprisingly – made it more critical than ever to identify and address whether a cross-border deal involving non-U.S. parties is subject to CFIUS review and approval, and if so, to … Read more

Paul Weiss Offers M&A at a Glance for June 2019

M&A activity in the U.S. and globally in June was mixed. While the number of deals decreased by 23.7% in the U.S., to 655 deals, and by 13.2% globally, to 2,487 deals, the total value of deals[1] increased significantly, by 122.3% in the U.S., to $313.89 billion, and by 63.2% globally, to $478.29 billion. The average value of deals increased in the U.S. by 191.2%, to $479.22 million, and globally by 10.2%, to $192.32 million. Figure 1.

Strategic vs. Sponsor Activity

The levels of strategic versus financial buyer activity were also mixed. The number of strategic deals decreased … Read more

Paul Weiss Offers M&A at a Glance for May 2019

M&A activity in the U.S. and globally for the month of May was generally consistent with April levels. The most notable changes in May were an increase in the number of sponsor-related deals by almost 75% to 187 in the U.S. and by almost 40% to 404 globally.  The number of U.S. deals increased by 2.7%, to 760, while the number of global deals decreased by 5.2%, to 2,644. The total value of U.S. deals[1] decreased slightly by 1.1%, to $138.88 billion, and the total value of global deals increased by 4.5%, to $287.57 billion. Average value of announced … Read more

Inside the Black Box of Private Merger Negotiations

Several authors (Boone and Mulherin, 2007[1]; Aktas, de Bodt, and Roll, 2010[2]) have noted a paradox in the mergers and acquisition (M&A) market since 1990. While there have been few competing public bidders, hostile offers, or public-offer price revisions, the average premiums paid to acquire target firms have been substantial. On the surface, the combination of friendly deals and high premiums seems puzzling, given that target management is more likely to negotiate private benefits at a cost to shareholders in friendly deals, while hostile offers are more likely to induce multiple-bidder auctions, which should theoretically yield … Read more

Deals, Activism, and SEC Regulation Get Lively Airing at M&A and Corporate Governance Conference

A host of top attorneys, judges, scholars, regulators, and advisers debated the latest issues in corporate and securities law on June 7 at a Columbia Law School conference in New York, offering cutting-edge thoughts on everything from cybersecurity to shareholder activism to the potential regulation of proxy advisers.

The day-long event featured a keynote conversation with U.S. Securities and Exchange Commissioner Robert J. Jackson, Jr., who among other topics discussed whether the SEC’s new Regulation Best Interest went far enough in protecting retail investors. Appearing on panels about M&A, Delaware law developments, and shareholder activism were the likes of Delaware … Read more

Debevoise Discusses When to Disclose a European Deal

In Europe, when negotiating a transaction which may affect the market price of listed instruments of the parties, a key question arises: when to disclose it to the market? The short answer is as soon as possible unless you have a legitimate interest in delaying the announcement, the delay will not mislead the market and the confidentiality remains protected. This note details what it means in practice.

Pursuant to MAR (Market Abuse Regulation—EU Regulation No. 596/2014 of 16 April 2014), effective throughout the European Economic Area, an issuer is required to inform the public as soon as possible of inside … Read more

Paul Weiss Offers M&A at a Glance for April 2019

M&A activity in the U.S. and globally generally fell in the month of April. The number of U.S. deals decreased by 15.6%, to 622, and the number of global deals decreased by 10.3%, to 2,530. However, the total value of U.S. deals[1] increased by 58.1%, to $186.69 billion, largely due to the announcement of a few megadeals. Similarly, the total value of global deals decreased by 7.0%, to $317.15 billion. In terms of the average value of announced public mergers, it increased in the U.S. by 87.4%, to $300.15 million, and globally by 3.6%, to $125.35 million. Figure 4Read more

Protecting Against Protectionism in EU M&A

In a recent paper, we explore EU law covering EU cross-border mergers. These are typically more difficult and costlier than purely national mergers. Additionally, political hurdles can exist. In a time of global political and institutional transformations away from open markets and towards protectionism, the opposition to takeovers and mergers based on public interest considerations, such as national security, sees a revival.

This trend towards protectionism, together with a focus on industrial policy, has different facets. For example, recently France and Germany seemed to defend the idea of European champions, corporations that can compete on the global financial and … Read more

Davis Polk Discusses Investing in Blockchain Technology

Blockchain technology continues to be a lively topic of conversation in legal, business and technology circles. This includes heated debates about whether and when the technology will deliver on its many promises and how the most common applications employing blockchain—that is, cryptocurrencies and other types of digital tokens—should be regulated in the United States and globally. Despite having experienced “crypto winter”—including a precipitous drop in cryptocurrency values, persistent skepticism about blockchain applications and a growing regulatory focus on the technology—many are convinced that the technologies underlying the blockchain are here to stay, and may hold great promise as a solution … Read more

Cleary Gottlieb Discusses CFIUS and the Unwinding of Kunlun’s Acquisition of Grindr

On March 27, 2019, journalists affiliated with Reuters reported that the Kunlun Group (“Kunlun”), a China-based tech firm, was preparing to sell its wholly owned subsidiary, Grindr, after the Committee on Foreign Investment in the United States (“CFIUS”) informed the group that Kunlun’s continued ownership of Grindr constituted a national security risk.  This forced divestiture of Grindr is a pointed reminder that CFIUS remains focused on protecting the sensitive personal data of U.S. citizens, has the power to upend closed deals that have not been cleared by the committee, and is dedicating increased resources to the review of transactions that … Read more

Mergers and the Role of Earnings-Per-Share

Lawyers and investors pay close attention to how stock-based deals affect the acquirer’s short-term earnings per share (EPS). Merger announcements are regularly accompanied by discussions of whether the deal will be accretive or dilutive for the acquirer’s EPS, and if immediately dilutive, how quickly the deal would turn accretive.  Finance theory, however, does not imply any particular benefit of an EPS-accretive deal (in which the post-merger EPS is higher than the acquirer’s pre-merger EPS), focusing instead on whether the deal creates value. The over-emphasis on the EPS impact may suggest a myopic focus on short-term stock price and a neglect … Read more

Arnold & Porter Discusses Significant 2018 Decisions Affecting Private Company M&A

The following compilation is our fifth annual review of significant state court decisions relevant for private company M&A transactions and related governance matters and disputes. The summary includes the landmark Akorn v. Fresenius decision, which is the first Delaware M&A decision to uphold a buyer’s termination right on the basis of an MAE. A few of the decisions concern drafting points, a few concern overall deal process and planning points, and two of the decisions concerned fiduciary duty breaches in contested situations (one was a public company decision that has relevance to the private M&A context).

Akorn, Inc. v.

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Ropes & Gray Discusses How Notices and Deadlines Matter in Delaware

The recent Delaware Court of Chancery decision by Vice Chancellor Glasscock in Vintage Rodeo Parent, LLC v. Rent-A-Center, Inc.1 is illustrative of the principle that merger partners should not assume that anything less than strict compliance with notice requirements (particularly when they relate to termination rights) and deadlines in a merger agreement will be enforced.

In Rent-A-Center, the merger partners had extensive negotiations over the “end date” in the merger agreement, and under what circumstances it could be extended. The deal involved the $1 billion-plus acquisition by Vintage Capital of Rent-A-Center, a publicly traded company. Because the parties … Read more

Paul Weiss Offers M&A at a Glance for February 2019

M&A activity in February 2019 generally slowed in the U.S. and globally. Deal volume by dollar value[1] decreased by 25.6% to $152.24 billion in the U.S., and by 30.3% to $248.57 billion globally. Further, the number of deals decreased by 47.0% to 367 in the U.S. and by 28.0% to 1,858 globally, representing the lowest monthly values recorded in the history of this publication. The average value of announced public mergers increased by 40.3% to $414.82 million in the U.S., but decreased by 3.2% to $133.78 million globally.  Figure 4.

Strategic vs. Sponsor Activity

Strategic deal volume as … Read more

The Effect of SEC Comment Letters on M&A Outcomes

Recent research on the effectiveness of the SEC’s filing review and comment letter process has focused almost exclusively on reviews of Forms 10-K and other periodic filings. Reviews of filings involving transactions such as mergers and acquisitions (M&A) have received little attention, even though (1) they are a top priority of the SEC and the executives and officers of the filing companies and (2) the SEC scrutinizes every transactional filing of this nature, in contrast to periodic filings, which are reviewed selectively. In our paper, SEC Comment Letters and M&A Outcomes, we examine the impact of one transaction-specific type … Read more

Listing Gaps, Merger Waves, and the Privatization of U.S. Equity Finance

The number of U.S. listed companies declined by almost half between 1996 and 2012, from 8,090 to 4,102, and had risen only slightly, to 4,336, by year-end 2017. However, the real market valuation of these listed companies tripled over the same period, from $10.2 trillion in 1996 to $32.1 trillion in 2017[1], implying that the average market valuation of a U.S. listed firm has increased six-fold over the past two decades. In other words, the U.S. public stock market has become populated exclusively by behemoths. Over the same period, the U.S. has experienced historically high levels of merger … Read more

Skadden Discusses Delaware Trends Affecting M&A and Corporate Litigation

On February 20, 2019, Skadden held a webinar focused on a number of important developments in Delaware corporate law in 2018 and how such developments might affect M&A litigation in 2019. Specifically, the discussion focused on (i) the increasing importance of books and records demands and litigation under 8 Del. C. § 220, (ii) current trends in the stockholder ratification doctrines of Corwin1 and MFW,2 (iii) recent trends in appraisal litigation and (iv) a recent decision regarding forum selection clauses.

Below are high-level takeaways on each topic.

Books and Records Demands

Books and records demands are increasingly being … Read more

Debevoise & Plimpton Discusses the Rise of Secured Bonds in M&A Deals

Early 2019 has seen a wave of issuances of secured bonds to finance large acquisitions. The likelihood of slower rate increases by the Fed has led to an uptick in investor demand for secured bonds while making the pricing on such bonds more attractive for issuers. While issuers in recent years generally preferred term loans to bonds, last month, Dun & Bradstreet, TransDigm and CommScope increased the size of their secured bond tranches in response to investor demand. This update reviews some key considerations when issuing secured bonds in lieu of term loans or unsecured bonds.

Key Considerations

Call ProtectionRead more

Shearman & Sterling Reviews How CFIUS Changes Affect Technology Transactions and Investments

When it was enacted in August 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) overhauled the US law governing CFIUS national security reviews for the first time in 11 years. Many of FIRRMA’s most significant changes, however, await implementing regulations or other action by the Trump Administration before going into force, a process that likely has been stalled due to the US Government shutdown. This CFIUS update focuses on what has been done to date.

In October 2018 regulations, CFIUS took the first step in implementing some of those FIRRMA provisions that were not effective immediately on … Read more

Deal Initiation in Mergers and Acquisitions

Contrary to common belief, M&A transactions are not overwhelmingly initiated by acquirers. Target managers frequently put their firms up for sale before receiving any unsolicited bids. In fact, in our sample of U.S. domestic M&A deals completed between 1997 and 2012, target firms approached potential bidders more than one third of the time. One well known example of this is the transaction involved in the landmark decision of the Delaware Supreme Court in Smith v. Van Gorkom, where the boundaries of corporate-director protections under the Business Judgement Rule were re-drawn.  Given the large proportion of target-initiated deals, we decided to … Read more