6 October 2020
With virtual communication having become the norm for the majority of us following the pandemic, cross-border opportunities are bought closer to home. Since the start of lockdown, I have been in conversations with lawyers and clients in America, Austria, The Netherlands and Germany – all from the comfort of my dining room!
While governments across the world have responded to the pandemic in different ways, there are some common trends emerging in the global mergers and acquisitions market. For example:
- Certain sectors, such as technology, pharmaceuticals and life sciences are prospering at an accelerated rate, as a result of which there is increased cross-border investment, joint venture and merger activity in these fields.
- Increased frequency in the use of warranty and indemnity insurance in transaction structures, particularly in those deals involving private equity.
- Buyers are seeking to defer payment of part of the purchase price, even where payment is not conditional on anything other than the passage of time. As a result, thought will need to be given to the impact of future currency conversions rates on overseas transactions.
- Buyers are looking for a larger element of the purchase price to be ‘earn-out’ – in other words, calculated by reference to the performance of the business post-completion.
- Sellers are more likely to seek security from Buyer for its post-completion payment obligations. Such security could take the form of an overseas parent company guarantee.
These are not new issues, and we are well equipped to advise clients (UK or international) on these issues and lead, or otherwise assist, overseas transactions and transactions with overseas elements.
Recent international work examples include:
- Advising a leading health technology provider in Austria on its acquisition of a majority share in a UK health IT consultancy, involving negotiation of a Share Purchase Agreement, Shareholders’ Agreement and Articles of Association for the target.
- Advising on the sale of a UK group of companies to a French buyer together with a further option for the French buyer’s parent company to acquire another group entity in South Africa. The transaction was structured with a split exchange and completion to allow a listed bond to be issued by the French buyer parent company. Part of the consideration was reinvested in shares of the French buyer’s parent company requiring an Investment Agreement and Shareholders’ Agreement to be negotiated and agreed.
- Advising the shareholders of a privately held UK proteomics company on its merger with a German-Spanish stock-listed company that specialises in molecular biology. The listed buyer funded the deal with the proceeds of a planned offering of up to 20.5 million shares with any new shares not subscribed in the rights offering being offered to the selling shareholders as a contribution in-kind for their shares.
- Advising the shareholders of Medisafe UK, a manufacturer and distributor of cleaning and disinfecting equipment for surgical and medical instruments, on the sale of the company to Steris Corporation for £27m. The transaction involved the pre-closing carve out of Medisafe’s German subsidiary pursuant to a complex demerger programme. A key feature of the transaction was the assurance of continued regulatory licences for the business in the UK and the US.
What other issues are common in overseas transactions?
One of the most common, but easily overlooked elements, of an overseas transaction is obtaining a legal opinion in respect of an overseas party. This will need to be issued by a lawyer practising the law of the country in which the overseas party is incorporated. The legal opinion will usually confirm the valid incorporation of the overseas party and that the overseas party has the capacity and authority to enter into the transaction documents to which it is party in accordance with (i) the law of the country in which the overseas party is incorporated and (ii) in accordance with the overseas party’s constitutional documents. The legal opinion will also confirm either that the overseas party has duly executed such documents or it will set out the methods for due execution. The legal opinion may also extend to other matters such as enforceability, conflicts, consents and registrations. Enforceability is becoming of increasing significance in English legal opinions following Brexit, particularly in the insurance sector.
We can provide legal opinions in respect of entities incorporated in England and Wales and we are able to call upon overseas counsel in our international networks to prepare legal opinions in respect of entities incorporated in many other countries in the world. The relationships we have with overseas counsel are tried and tested and allow us to manage international transactions cost effectively.
What if my UK entity just wants to open a bank account overseas?
Overseas banks often require, amongst other things, a notarial certificate before opening corporate accounts. We have in-house notary publics and relationships with external notary publics who can prepare and issue notarial certificates, and arrange for the necessary apostille to be applied by the Foreign & Commonwealth Office.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at October 2020.