Jonathan Williamson, partner in Blandy & Blandy LLP’s leading corporate team and cross border M&A specialist, gives his insight into recent cross border M&A trends, a 2017 outlook and his practical advice for getting cross-border deals over the line.
Trends and outlook
With the political and economic landscape shifting seemingly on a weekly basis and uncertainty surrounding the global trading landscape following the EU referendum and US presidential elections, M&A activity has been less consistent throughout 2016 and into 2017.
The volume of global M&A deals was down around 6% on 2015 with deal value down around 20% although it is worth noting that the back end of 2016 was stronger and 2015 was an exceptionally strong year. UK M&A fell by 55% within a struggling European market as a result of European businesses in general reacting with caution to the political and economic events of 2016.
The positives for the UK market are that acquisitive companies and investors have increased their overseas M&A activity with Europe and the UK benefiting from this trend. Inbound M&A was up over 30% with Chinese buyers are leading the charge in sectors such as energy and tech.
As events continue to unfold in 2017, some businesses will continue to proceed with caution whilst others will take advantage of the market conditions. These fluctuating market conditions have created far more opportunity for disruptive M&A strategy which should lead to a healthy deal flow throughout the year.
In 2016, the corporate team at Blandy & Blandy LLP advised on UK M&A transactions involving buyers or sellers in Taiwan, China, US, Australia, Singapore, Channel Islands and mainland Europe with a total value of circa £30 million. We have also helped various overseas businesses invest in the UK by way of set up, group restructuring or acquisition. We see no reason why this trend will slow and as We have invested heavily in our membership of the Law Firm Network which is a global network of independent law firms now covering over 50 jurisdictions. We have subsequently developed a strong and consistent referral network across over at least 10 of those countries and are seeing very positive activity from US, Australia, Germany, Singapore, Poland and Ireland.
Tips
Structuring and executing multi-jurisdictional deals is complex and the parties and advisors need to be prepared to apply a tailored approach depending on the jurisdictions involved to ensure success. In our experience, the following should be considered:
Visibility
To even attract overseas buyers, UK businesses need to be on the global radar whether it be by way of strong export presence, PR in overseas territories or formal partnerships with overseas businesses. Equally, unless you are operating in a niche sector or have a specifically valuable asset such as IP then overseas buyers like big sales figures. Sales of more than £10m will show potential for a global audience
Transaction Management
While it is often reported that overseas buyers will pay more than domestic buyers, there are other considerations which can eat into that deal value:
In addition, video conferencing and web-based live meeting software can allow groups of people who are based in numerous dispersed locations to come together and collaborate in real time, while also allowing them to review and mark up documents in a manner that all participants are able to see and discuss contemporaneously. As this would not be possible physically without incurring considerable time and expense, the benefits of using virtual meeting technology should not be underestimated.
Legal
Regional variances in the way M&A transactions are commonly conducted should also be taken into account. Examples include:
Summary
Cross-border acquisitions continue to form an important part of the growth strategy of many corporate entities. In an increasingly regulated world, these transactions often present a broader range of challenges than those which a buyer might encounter on smaller transactions within their domestic market. They therefore require careful planning to ensure smooth execution.
Having the right team in place from the outset can help to ensure an efficient and smooth process. With its experience of international transactions and its global network of contacts, our Corporate team is perfectly positioned to advise clients who are either considering making an overseas acquisition or selling to an overseas buyer.
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