Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • CapitaLand Limited
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • Bank of America Merrill Lynch
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek Holdings
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • China Ocean Shipping Group Company (COSCO)
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • Royal Ahold (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • Nishimura & Asahi (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Mannheimer Swartling (Stockholm)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Minority Stakes (Non-Control Positions)

U.S. UPDATE – 2017 Checklist for Successful Acquisitions in the United States

Editors’ Note: This submission updates a checklist co-authored by Messrs. Emmerich and Panovka, members of XBMA’s Legal Roundtable, with their colleagues at Wachtell Lipton David A. Katz, Scott K. Charles, Ilene Knable Gotts, Andrew J. Nussbaum, Joshua R. Cammaker, Mark Gordon, Eric M. Rosof, Joshua M. Holmes, T. Eiko Stange, Gordon S. Moodie, Edward J. Lee, Raaj S. Narayan and Carmen X.W. Lu.

Highlights:

  • Global M&A volume in 2016 continued to be robust, reaching $3.7 trillion, approximately 40% of which involved cross-border deals, as compared to one-third in 2015.  Five out of the ten largest deals of the year were cross-border transactions.  The pace of deals grew during the second half of the year, especially in the U.S., and there are many signals pointing to a continued strong pace of transactions.  The big wild card, of course, is the extent to which recent political upheaval both in the U.S. and around the world will translate into increased protectionism or other upheaval in taxation, regulation or finance.  So far, the deal market is largely unfazed, and rising U.S. equity valuations provide plenty of dry powder for stock deals.
  • U.S. targets accounted for approximately $1.7 trillion of last year’s deal volume, with approximately 30% of U.S. deals involving non-U.S. acquirors.
  • We would be surprised, even in the face of significant change and uncertainty, were robust levels of cross-border M&A not to continue to be a prominent feature of the international business landscape.  Both U.S. sellers and non-U.S. buyers will remain interested in the opportunities presented by investment in the U.S., and perhaps more so in a world where economic nationalism is on the rise.
  • This post updates our checklist of issues that should be carefully considered in advance of an acquisition or strategic investment in the U.S.

MAIN ARTICLE

Global M&A volume in 2016 continued to be robust, reaching $3.7 trillion, approximately 40% of which involved cross-border deals, as compared to one-third in 2015. Five out of the ten largest deals of the year were cross-border transactions. The pace of deals grew during the second half of the year, especially in the U.S., and there are many signals pointing to a continued strong pace of transactions. The big wild card, of course, is the extent to which recent political upheaval both in the U.S. and around the world will translate into increased protectionism or other upheaval in taxation, regulation or finance. So far, the deal market is largely unfazed, and rising U.S. equity valuations provide plenty of dry powder for stock deals.

U.S. targets accounted for approximately $1.7 trillion of last year’s deal volume, with approximately 30% of U.S. deals involving non-U.S. acquirors. German, French, Canadian, Japanese and U.K. buyers accounted for approximately 65% of the volume of cross-border acquisitions into the U.S., and acquirors from China, India and other emerging economies accounted for approximately 15%. Cross-border deals involving U.S. target companies included a number of noteworthy transactions, including Bayer AG’s $66 billion acquisition of Monsanto, the $28 billion merger between Enbridge and Spectra Energy, Danone S.A.’s $12.5 billion acquisition of Whitewave Foods, and Samsung’s $8 billion acquisition of Harman International.

Predictions – as has been famously and variously attributed to Niels Bohr, Yogi Berra and others – are tough, especially about the future. What we can expect in 2017, as a Trump administration takes up the reins of power in the U.S., the U.K. inches and lurches toward Brexit, Italy regroups, France and Germany hold elections, and Chinese signals on outbound investment (which surged more than 350% for 2016 U.S. deals as compared to 2015 levels) and outbound capital movement are both mixed and opaque, is beyond our powers of prediction, however ex-cited the U.S. equity markets may currently be.

That said, we would be surprised, even in the face of significant change and uncertainty, were robust levels of cross-border M&A not to continue to be a prominent feature of the international business landscape. Both U.S. sellers and non-U.S. buyers will remain interested in the opportunities presented by investment in the U.S., and perhaps more so in a world where economic nationalism is on the rise.

What won’t change is that advance preparation, strategic implementation and sophisticated deal structures that anticipate likely concerns will continue to be critical to successful acquisitions in the U.S. It will remain the case that cross-border deals involving investment into the U.S. are more likely to fail because of poor analysis, planning and execution than fundamental legal or political restrictions.

The following is our updated checklist of issues that should be carefully considered in advance of an acquisition or strategic investment in the U.S. Because each cross-border deal is unique, the relative significance of the issues discussed below will depend upon the specific facts, circumstances and dynamics of each particular situation.

  • Political and Regulatory Considerations. Even if investment into the U.S. remains mostly well-received and generally not politicized or made a pawn in broader global economic and other confrontations (an assumption that will be monitored very closely in M&A circles and more broadly), prospective non-U.S. acquirors of U.S. businesses or assets should undertake a thoughtful analysis of U.S. political and regulatory implications well in advance of any acquisition proposal or program, particularly if the target company operates in a sensitive industry, if post-transaction business plans contemplate major changes in investment, employment or business strategy, or if the acquiror is sponsored or financed by a foreign government, or organized in a jurisdiction where a high level of government involvement in business is generally understood to exist. It is imperative that the likely concerns of federal, state and local government agencies, employees, customers, suppliers, communities and other interested parties be thoroughly considered and, if possible, addressed prior to any acquisition or investment proposal becoming public. It is also essential that a comprehensive communications plan, focusing not only on public investors but also on all these core constituencies, be in place prior to the announcement of a transaction so that all of the relevant constituencies can be addressed with the appropriate messages. It will often be useful, if not essential, to involve experienced public relations firms at an early stage in the planning process. Similarly, potential regulatory hurdles require sophisticated advance planning. In addition to securities and antitrust regulations, acquisitions may be subject to CFIUS review (discussed below), and acquisitions in regulated industries (e.g., energy, public utilities, gaming, insurance, telecommunications and media, financial institutions, transportation and defense contracting) may be subject to an additional layer of regulatory approvals. Regulation in these areas is often complex, and political opponents, reluctant targets and competitors may seize on perceived weaknesses in an acquiror’s ability to clear regulatory obstacles. High-profile transactions may also result in political scrutiny by Congress, state and local officials.

    Finally, depending on the industry involved and the geographic distribution of the work-force, labor unions will continue to play an active role during the review process. Pre-announcement communications plans must take account of all of these interests.

  • Transaction Structures. Non-U.S. acquirors should be willing to consider a variety of potential transaction structures, especially in strategically or politically sensitive transactions. Structures that may be helpful in sensitive situations include no-governance and low-governance investments, minority positions or joint ventures, possibly with the right to increase ownership or governance over time; partnering with a U.S. company or management team or collaborating with a U.S. source of financing or co-investor (such as a private equity firm); utilizing a controlled or partly controlled U.S. acquisition vehicle, possibly with a board of directors having a substantial number of U.S. citizens and prominent U.S. citizens in high-profile roles; or implementing bespoke governance structures (such as a U.S. proxy board) with respect to specific sensitive subsidiaries or businesses of the target company. Use of debt or preferred securities (rather than ordinary common stock) should also be considered. Even more modest social issues, such as the name of the continuing enterprise and its corporate location or headquarters, or the choice of the nominal legal acquiror in a merger, can affect the perspective of government and labor officials.
  • CFIUS. Under current U.S. federal law, the Committee on Foreign Investment in the United States (CFIUS) – a multi-agency governmental body chaired by the Secretary of the Treasury, the recommendations of which the President of the United States has personal authority to accept or reject – has discretion to review transactions in which non-U.S. acquirors could obtain “control” of a U.S. business or in which a non-U.S. acquiror invests in U.S. infrastructure, technology or energy assets. That authority was notably used in 2016 to block the Aixtron and Lumileds transactions. Although filings with CFIUS are voluntary, CFIUS also has the ability to investigate transactions at its discretion, including after the transaction has closed. While it is not clear if and how CFIUS’s review of cross-border transactions will change in a Trump administration, we believe three useful rules of thumb in dealing with CFIUS will continue to be useful:
    • first, in general it is prudent to make a voluntary filing with CFIUS if the likelihood of an investigation is reasonably high or if competing bidders are likely to take advantage of the uncertainty of a potential investigation;
    • second, it is often best to take the initiative and suggest methods of mitigation early in the review process in order to help shape any remedial measures and avoid delay or potential disapproval; and
    • third, it is often a mistake to make a CFIUS filing prior to initiating discussions with the U.S. Department of the Treasury and other officials and relevant parties. In some cases, it may even be prudent to make the initial contact prior to the pub-lic announcement of the transaction. CFIUS is not as mysterious or unpredictable as some fear – consultation with Treasury and other officials (who – to date – have generally been supportive of investment in the U.S. economy) and CFIUS specialists will generally provide a good sense of what it will take to clear the process. Retaining advisors with significant CFIUS expertise and experience is often crucial to successful navigation of the CFIUS process. Transactions that may require a CFIUS filing should have a carefully crafted communications plan in place prior to any public announcement or disclosure. In addition, given that CFIUS will require a draft filing in advance of the official filing, building in sufficient lead time is essential.

    While still an evolving product, in the past year some insurers have begun offering insurance coverage for CFIUS-related non-consummation risk, covering payment of the re-verse break fee in the event a transaction does not close due to CFIUS review, at a cost of approximately 10-15% of the reverse break fee.

  • Acquisition Currency. While cash remains a common form of consideration in cross-border deals into the U.S., non-U.S. acquirors should think creatively about potential avenues for offering U.S. target shareholders a security that allows them to participate in the resulting global enterprise. For example, publicly listed acquirors may consider offering existing common stock or depositary receipts (e.g., ADRs) or special securities (e.g., contingent value rights). When U.S. target shareholders obtain a continuing interest in a surviving corporation that had not already been publicly listed in the U.S., expect heightened focus on the corporate governance and other ownership and structural arrangements of the non-U.S. acquiror, including as to the presence of any controlling or large shareholders, and heightened scrutiny placed on any de facto controllers or promoters. Creative structures, such as the issuance of non-voting stock or other special securities of a non-U.S. acquiror, may minimize or mitigate the issues raised by U.S. corporate governance concerns. As we have said previously, the world’s equity markets have never been more globalized, and the interest of investors in major capital markets to invest in non-local business never greater; equity consideration, or equity issuance to support a transaction, should be considered in appropriate circumstances.
  • M&A Practice. It is essential to understand the custom and practice of U.S. M&A trans-actions. For instance, understanding when to respect – and when to challenge – a target’s sale “process” may be critical. Knowing how and at what price level to enter the discussions will often determine the success or failure of a proposal; in some situations it is prudent to start with an offer on the low side, while in other situations offering a full price at the outset may be essential to achieving a negotiated deal and discouraging competitors, including those who might raise political or regulatory issues. In strategically or politically sensitive transactions, hostile maneuvers may be imprudent; in other cases, unsolicited pressure might be the only way to force a transaction. Takeover regulations in the U.S. differ in many significant respects from those in non-U.S. jurisdictions; for example, the mandatory bid concept common in Europe, India and other countries is not present in U.S. practice. Permissible deal protection structures, pricing requirements and defensive measures available to U.S. targets will also likely differ in meaningful ways from what non-U.S. acquirors are accustomed to in deals in their home countries. Sensitivity must also be given to the distinct contours of the target board’s fiduciary duties and decision-making obligations under state law. Finally, often overlooked in cross-border situations is how subtle differences in language, communication expectations and the role of different transaction participants can impact transactions and discussions; advance preparation and ongoing engagement during a transaction must take this into account.
  • U.S. Board Practice and Custom. Where the target is a U.S. public company, the customs and formalities surrounding board of director participation in the M&A process, including the participation of legal and financial advisors, the provision of customary fairness opinions and the inquiry and analysis surrounding the activities of the board and the financial advisors, can be unfamiliar and potentially confusing to non-U.S. transaction participants and can lead to misunderstandings that threaten to upset delicate transaction negotiations. Non-U.S. participants need to be well-advised as to the role of U.S. public company boards and the legal, regulatory and litigation framework and risks that can constrain or prescribe board action. These factors can impact both tactics and timing of M&A processes and the nature of communications with the target company.
  • Distressed Acquisitions. Distressed M&A is a well-developed specialty in the U.S., with its own subculture of sophisticated investors, lawyers and financial advisors. The U.S. continues to be a popular destination for restructurings of multinational corporations, including those with few assets or operations in the country, because of its debtor-friendly reorganization laws. Recently, this trend has been most evident in the bankruptcy filings of non-U.S. based companies in the energy and shipping sectors. Among other ad-vantages, the U.S. bankruptcy system has expansive jurisdiction (such as a world-wide stay of actions against a debtor’s property and liberal filing requirements), provides relative predictability in outcomes and allows for the imposition of debt restructurings on non-consenting creditors, making reorganizations more feasible. In recent years, court-supervised “Section 363” auctions of a debtor’s assets (as opposed to the more traditional Chapter 11 plan of reorganization) have become more common, in part because they can be completed comparatively quickly, efficiently and cheaply. Additionally, large foreign companies have increasingly turned to Chapter 15 of the U.S. Bankruptcy Code, which accords debtors that are already in foreign insolvency proceedings key protections from creditors in the U.S. and has facilitated restructurings and asset sales approved abroad. Firms evaluating a potential acquisition of a distressed target based in the U.S. should consider the full array of tools that the U.S. bankruptcy process makes available, including acquisition of the target’s fulcrum debt securities that are expected to be converted in-to equity through an out-of-court restructuring or plan of reorganization, acting as a plan investor or sponsor in connection with a plan of reorganization, backstopping a plan-related rights offering or participating as a bidder in a “Section 363” auction. Transaction certainty is of critical importance to success in a transaction in bankruptcy, and non-U.S. participants accordingly need to plan carefully (especially with respect to transactions that might be subject to CFIUS review, as discussed above) to ensure that they will be on a relatively level playing field with U.S. bidders. Acquirors also need to be aware that they will likely need to address the numerous constituencies involved in a bankruptcy case, each with its own interests and often conflicting agendas, including bank lenders, bondholders, distressed-focused hedge funds and holders of structured debt securities and credit default protection, as well as landlords and trade creditors.
  • Financing. Heading into 2017, recent trends that have influenced acquisition financing may be reversing. Rising interest rates deserve a moment of reflection, including in terms of the still-available opportunity to lock in long-term fixed rates to finance acquisitions, and in the challenges to de-lever post-acquisition so as to best position the company for future refinancings that may be in a higher-rate environment. On the other hand, the U.S. regulatory oversight of banks that led to leveraged lending constraints may be relaxed by the new administration, allowing banks more flexibility to finance acquisitions at higher leverage levels. Moreover, acquisition financing commitments that had been constrained, particularly for acquisitions requiring long regulatory approval periods be-tween signing and closing, may become less so. Additionally, if tax-related costs to repatriate offshore cash of U.S. corporations are reduced, the result may be new tax-efficient structures for financing deals. None of this is assured, of course, and therefore careful consideration of financing-related market trends and developments is more important than ever in planning acquisitions.

    Important questions to ask when considering a transaction that requires debt financing include: what is the appropriate leverage level for the resulting business; where financing with the most favorable costs, terms and conditions is available; what currencies the financing should be raised in; and how fluctuations in currency exchange rates can affect costs, repayment and covenant compliance; how committed the financing is or should be; which lenders have the best understanding of the acquiror’s and target’s businesses; whether there are transaction structures that can minimize financing and refinancing requirements; and how comfortable a target will feel with the terms and conditions of the financing.

  • Litigation. Stockholder litigation accompanies many transactions involving a U.S. public company but generally is not a cause for concern. Excluding situations involving competing bids – where litigation may play a direct role in the contest – and going-private or other “conflict” transactions initiated by controlling shareholders or management – which form a separate category requiring special care and planning – there are very few examples of major acquisitions of U.S. public companies being blocked or prevented due to shareholder litigation or of materially increased costs being imposed on arm’s-length acquirors. In most cases, where a transaction has been properly planned and implemented with the benefit of appropriate legal and investment banking advice on both sides, such litigation can be dismissed or settled for relatively small amounts or other concessions. Moreover, the rate of such litigation (and the average number of lawsuits per deal) declined in 2015 and 2016, due in part to a seminal case in a key jurisdiction for such litigation (Delaware) that reduced the incentives for the stockholder plaintiffs’ attorneys to bring such suits by signaling that disclosure-only settlements (and the attorneys’ fees they generated) would face significantly more scrutiny. Some, but not all, other courts have followed Delaware’s lead in this regard. In any event, sophisticated counsel can usually predict the likely range of litigation outcomes or settlement costs, which should be viewed as a cost of the deal.

    While well-advised parties can substantially reduce the risk of U.S. stockholder litigation, the reverse is also true – the conduct of the parties during negotiations can create “bad facts” that in turn may both encourage stockholder litigation and provoke judicial rebuke, including significant monetary judgments. Sophisticated litigation counsel should be included in key stages of the deal negotiation process. In all cases, the acquiror, its directors, shareholders and offshore reporters and regulators should be conditioned in advance (to the extent possible) to expect litigation and not to view it as a sign of trouble. In addition, it is important to understand the U.S. discovery process in litigation is significantly different than the process in other jurisdictions and, even in the context of a settlement, will require the acquiror to provide responsive information and documents (including emails) to the plaintiffs.

  • Tax Considerations. With Republicans in control of the White House, the Senate and the House of Representatives, comprehensive tax reform is likely to be enacted in 2017. It is anticipated that such reform will be based on the House GOP plan and the Trump plan which, despite their differences, are aligned on a number of key issues, including significant reduction in tax rates, deduction of capital expenditures, potential limitations on the deductibility of interest expense, and repatriation relief. While the specific outcome of this process remains to be seen, such tax reform is anticipated to increase the attractiveness of investing in the U.S.

    U.S. tax issues affecting target shareholders or the combined group may be critical to structuring a cross-border transaction. In transactions involving the receipt by U.S. target shareholders of non-U.S. acquiror stock, the potential application of so-called “anti-inversion” rules, which could render an otherwise tax-free transaction taxable to exchanging U.S. target shareholders and also result in potentially significant adverse U.S. tax consequences to the combined group, must be carefully evaluated. Non-U.S. acquirors frequently will need to consider whether to invest directly from their home jurisdiction or through U.S. or non-U.S. subsidiaries, the impact of the transaction on tax at-tributes of the U.S. target (e.g., loss carryforwards), the deductibility of interest expense incurred on acquisition indebtedness and eligibility for reduced rates of withholding on cross-border payments of interest, dividends and royalties under applicable U.S. tax treaties. In particular, non-U.S. acquirors should carefully review the impact of recently finalized debt/equity regulations on related-party financing transactions. Because the U.S. presently does not have a “participation exemption” regime that exempts dividend in-come from non-U.S. subsidiaries, a non-U.S. acquiror of a U.S. target with non-U.S. sub-sidiaries should analyze the tax cost of extracting such subsidiaries from the U.S. group. Parties to a potential transaction should carefully monitor how their transaction may be affected by U.S. tax reform.

  • Disclosure Obligations. How and when an acquiror’s interest in the target is publicly disclosed should be carefully controlled and considered, keeping in mind the various ownership thresholds that trigger mandatory disclosure on a Schedule 13D under the federal securities laws and under regulatory agency rules such as those of the Federal Re-serve Board, the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC). While the Hart-Scott-Rodino Antitrust Improvements Act (HSR) does not require disclosure to the general public, the HSR rules do require disclosure to the target before relatively low ownership thresholds can be crossed. Non-U.S. acquirors have to be mindful of disclosure norms and timing requirements relating to home country requirements with respect to cross-border investment and acquisition activity. In many cases, the U.S. disclosure regime is subject to greater judgment and analysis than the strict requirements of other jurisdictions. Treatment of derivative securities and other pecuniary interests in a target other than common stock holdings can also vary by jurisdiction.
  • Shareholder Approval. Because few U.S. public companies have one or more controlling shareholders, obtaining public shareholder approval is typically a key consideration in U.S. transactions. Understanding in advance the roles of arbitrageurs, hedge funds, institutional investors, private equity funds, proxy voting advisors and other market players – and their likely views of the anticipated acquisition attempt as well as when they appear and disappear from the scene – can be pivotal to the success or failure of the transaction. It is advisable to retain an experienced proxy solicitation firm well in advance of the shareholder meeting to vote on the transaction (and sometimes prior to the announcement of a deal) to implement an effective strategy to obtain shareholder approval.
  • Integration Planning. One of the reasons deals sometimes fail is poor post-acquisition integration, particularly in cross-border deals where multiple cultures, languages and historic business methods may create friction. If possible, the executives and consultants who will be responsible for integration should be involved in the early stages of the deal so that they can help formulate and “own” the plans that they will be expected to execute. Too often, a separation between the deal team and the integration/execution teams invites slippage in execution of a plan that in hindsight is labeled by the new team as unrealistic or overly ambitious. However, integration planning needs to be carefully phased in as implementation cannot occur prior to the receipt of certain regulatory approvals.
  • Corporate Governance and Securities Law. Current U.S. securities and corporate governance rules can be troublesome for non-U.S. acquirors who will be issuing securities that will become publicly traded in the U.S. as a result of an acquisition. SEC rules, the Sarbanes-Oxley and Dodd-Frank Acts and stock exchange requirements should be evaluated to ensure compatibility with home country rules and to be certain that the non-U.S. acquiror will be able to comply. Rules relating to director independence, internal control reports and loans to officers and directors, among others, can frequently raise issues for non-U.S. companies listing in the U.S. Non-U.S. acquirors should also be mindful that U.S. securities regulations may apply to acquisitions and other business combination activities involving non-U.S. target companies with U.S. security holders. Whether the Trump administration, Congress and a new chairman of the U.S. Securities and Exchange Commission will significantly alter the regulatory landscape for public companies and transactions will be a subject of keen interest not only to non-U.S. acquirors, but to all public companies, acquirors and investors. Sweeping change has been promised and may be delivered.
  • Antitrust Issues. To the extent that a non-U.S. acquiror directly or indirectly competes or holds an interest in a company that competes in the same industry as the target company, antitrust concerns may arise either at the federal agency or state attorneys general level. Although less typical, concerns can also arise if the foreign acquiror competes either in an upstream or downstream market of the target. As noted above, pre-closing integration efforts should also be conducted with sensitivity to antitrust requirements that can be limiting. Home country or other foreign competition laws may raise their own sets of issues that should be carefully analyzed with counsel. The administration of the antitrust laws in the U.S. is carried out by highly professional agencies relying on well-established analytical frameworks. The outcomes of the vast majority of transactions can be easily predicted. In borderline cases, while the outcome of any particular proposed transaction cannot be known with certainty, the likelihood of a proposed transaction being viewed by the agencies as raising substantive antitrust concerns and the degree of difficulty in over-coming those concerns can be. In situations presenting actual or potential substantive is-sues, careful planning is imperative and a proactive approach to engagement with the agencies is generally advisable.
  • Due Diligence. Wholesale application of the acquiror’s domestic due diligence standards to the target’s jurisdiction can cause delay, waste time and resources or result in missing a problem. Due diligence methods must take account of the target jurisdiction’s legal re-gime and, particularly important in a competitive auction situation, local norms. Many due diligence requests are best channeled through legal or financial intermediaries as op-posed to being made directly to the target company. Making due diligence requests that appear to the target as particularly unusual or unreasonable (not uncommon in cross-border deals) can easily create friction or cause a bidder to lose credibility. Similarly, missing a significant local issue for lack of local knowledge can be highly problematic and costly. Prospective acquirors should also be familiar with the legal and regulatory context in the U.S. for diligence areas of increasing focus, including cybersecurity, data privacy and protection, Foreign Corrupt Practices Act (FCPA) compliance and other matters. In some cases, a potential acquiror may wish to investigate obtaining representation and warranty insurance in connection with a potential transaction, which has been used with increasing frequency as a tool to offset losses resulting from certain breaches of representations and warranties.
  • Collaboration. More so than ever in the face of the current U.S. and global uncertainties, most obstacles to a deal are best addressed in partnership with local players whose interests are aligned with those of the acquiror. If possible, relationships with the target company’s management and other local forces should be established well in advance so that political and other concerns can be addressed together, and so that all politicians, regulators and other stakeholders can be approached by the whole group in a consistent, collaborative and cooperative fashion.

*  *  *  *  *

As always in global M&A, results, highpoints and lowpoints for 2017 are likely to include many surprises, and sophisticated market participants will need to continually refine their strategies and tactics as the global and local environment develops. However, the rules of the road for successful M&A transactions in the U.S. remain well understood and eminently capable of being mastered by well-prepared and well-advised acquirors from all parts of the globe.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

U.S. UPDATE – 2015 Checklist for Successful Acquisitions in the U.S.

Editors’ Note:  This submission updates a checklist co-authored by Messrs. Emmerich and Panovka, members of XBMA’s Legal Roundtable, with their colleagues at Wachtell Lipton David A. Katz, Scott K. Charles, Ilene Knable Gotts, Andrew J. Nussbaum, Joshua R. Cammaker, Mark Gordon, Eric M. Rosof, Joshua M. Holmes, T. Eiko Stange, Gordon S. Moodie, Raaj Narayan and Francis J. Stapleton.

Highlights:

  • M&A was robust in 2014, hitting several noteworthy post-crisis high-water marks: total global volume reached US$3.5 trillion, cross-border volume reached US$1.3 trillion (37% of the total) and cross-border M&A involving U.S. companies reached US$770 billion (45% of which was incoming).
  • We expect current trends to continue in 2015, driven, in several key regions, by strong corporate earnings, large corporate cash balances in search of yield, continued availability of highly attractive financing to well-capitalized borrowers and generally high stock prices. A focus on industry consolidation in a number of sectors and a thirst for technology and brands in growing economies similarly are expected to continue to motivate cross-border deals.
  • Even in a world that is increasingly fractured by international tensions and profound disagreements on politics and policy, U.S. deal markets continue to be relatively hospitable to offshore acquirors and investors.
  • This post updates our checklist of issues that should be considered in advance of an acquisition or strategic investment in the U.S.

MAIN ARTICLE

M&A was robust in 2014, hitting several noteworthy post-crisis high-water marks: total global volume reached US$3.5 trillion, cross-border volume reached US$1.3 trillion (37% of the total) and cross-border M&A involving U.S. companies reached US$770 billion (45% of which was incoming).  Acquirors from Germany, France, Canada, Japan and the United Kingdom accounted for 67% of the incoming acquisitions into the U.S., and acquirors from China, India and other emerging economies accounted for approximately 7%.  Cross-border deals announced in 2014 included some of the year’s largest, including many above US$10 billion and a number of real blockbusters.

We expect current trends to continue into 2015, driven, in several key regions, by strong corporate earnings, large corporate cash balances in search of yield, continued availability of highly attractive financing to well-capitalized borrowers and generally high stock prices.  A focus on industry consolidation in a number of sectors and a thirst for technology and brands in growing economies similarly are expected to continue to motivate cross-border deals.

Even in a world that is increasingly fractured by international tensions and profound disagreements on politics and policy, often violently so, U.S. deal markets continue to be relatively hospitable to offshore acquirors and investors.  With careful advance preparation, strategic implementation and sophisticated deal structures that anticipate likely concerns, most acquisitions in the U.S. can be successfully achieved.  Cross-border deals involving investment into the U.S. are more likely to fail because of poor planning and execution than fundamental legal or political restrictions.

The following is our updated checklist of issues that should be carefully considered in advance of an acquisition or strategic investment in the U.S.  Because each cross-border deal is unique, the relative significance of the issues discussed below will depend upon the specific facts, circumstances and dynamics of each particular situation:

  • Political and Regulatory Considerations. Even though non-U.S. investment in the U.S. remains generally well-received and is generally not politicized, prospective non-U.S. acquirors of U.S. businesses or assets should undertake a thoughtful analysis of U.S. political and regulatory implications well in advance of any acquisition proposal or program, particularly if the target company operates in a sensitive industry or if the acquiror is sponsored or financed by a foreign government, or organized in a jurisdiction where a high level of government involvement in business is generally understood to exist.  It is imperative that the likely concerns of federal, state and local government agencies, employees, customers, suppliers, communities and other interested parties be thoroughly considered and, if possible, addressed prior to any acquisition or investment proposal becoming public.  It is also essential that a comprehensive communications plan be in place prior to the announcement of a transaction so that all of the relevant constituencies can be addressed with the appropriate messages.  It will often be useful, if not essential, to involve local public relations firms at an early stage in the planning process.  Similarly, potential regulatory hurdles require sophisticated advance planning.  In addition to securities and antitrust regulations, acquisitions may be subject to CFIUS review (discussed below), and acquisitions in regulated industries (g., energy, public utilities, gaming, insurance, telecommunications and media, financial institutions, transportation and defense contracting) may be subject to an additional layer of regulatory approvals.  Regulation in these areas is often complex, and political opponents, reluctant targets and competitors may seize on perceived weaknesses in an acquiror’s ability to clear regulatory obstacles.  While we expect to see continuity in the enforcement policies at the federal level for the foreseeable future, it will be particularly important during the final phase of the Obama administration to pay careful attention to the perspectives of both parties and the political dynamics at work in Washington.  Finally, depending on the industry involved and the geographic distribution of the workforce, labor unions will continue to play an active role during the review process.
  • Transaction Structures. Non-U.S. acquirors should be willing to consider a variety of potential transaction structures, especially in strategically or politically sensitive transactions.  Structures that may be helpful in sensitive situations include no-governance and low-governance investments, minority positions or joint ventures, possibly with the right to increase ownership or governance over time; partnering with a U.S. company or management or collaborating with a U.S. source of financing or co-investor (such as a private equity firm); or utilizing a controlled or partly controlled U.S. acquisition vehicle, possibly with a board of directors having a substantial number of U.S. citizens and a prominent U.S. citizen as a non-executive chairman.  Use of preferred securities (rather than ordinary common stock) or structured debt securities should also be considered.  Even more modest social issues, such as the name of the continuing enterprise and its corporate location or headquarters, or the choice of the nominal acquiror in a merger, can affect the perspective of government and labor officials.
  • CFIUS. Under current U.S. federal law, the Committee on Foreign Investment in the United States (CFIUS) — a multi-agency governmental body chaired by the Secretary of the Treasury, and the recommendations of which the President of the United States has personal authority to accept or reject — has discretion to review transactions in which non-U.S. acquirors could obtain “control” of a U.S. business or in which a non-U.S. acquiror invests in U.S. infrastructure, technology or energy assets.  Although filings with CFIUS are voluntary, CFIUS also has the ability to investigate transactions at its discretion, including after the transaction has closed.  Three useful rules of thumb in dealing with CFIUS are:
    • first, in general it is prudent to make a voluntary filing with CFIUS if the likelihood of an investigation is reasonably high or if competing bidders are likely to take advantage of the uncertainty of a potential investigation;
    • second, it is often best to take the initiative and suggest methods of mitigation early in the review process in order to help shape any remedial measures and avoid delay or potential disapproval; and
    • third, it is often a mistake to make a CFIUS filing prior to initiating discussions with the U.S. Department of the Treasury and other officials and relevant parties. In some cases, it may even be prudent to make the initial contact prior to the public announcement of the transaction.  CFIUS is not as mysterious or unpredictable as some fear — consultation with Treasury and other officials (who generally want to be supportive and promote investment in the U.S. economy) and CFIUS specialists will generally provide a good sense of what it will take to clear the process.  Retaining advisors with significant CFIUS expertise and experience is often crucial to successful navigation of the CFIUS process.  Transactions that may require a CFIUS filing should have a carefully crafted communications plan in place prior to any public announcement or disclosure of the pending transactions.
  • Acquisition Currency. While cash remains the predominant (although not exclusive) form of consideration in cross-border deals, non-U.S. acquirors should think creatively about potential avenues for offering U.S. target shareholders a security that allows them to participate in the resulting global enterprise.  For example, publicly listed acquirors may consider offering existing common stock or depositary receipts (g., ADRs) or special securities (e.g., contingent value rights).  When U.S. target shareholders obtain a continuing interest in a surviving corporation that had not already been publicly listed in the U.S., expect heightened focus on the corporate governance and other ownership and structural arrangements of the non-U.S. acquiror, including as to the presence of any controlling or large shareholders, and heightened scrutiny placed on any de facto controllers or promoters.  Creative structures, such as the issuance of non-voting stock or other special securities of a non-U.S. acquiror, may minimize or mitigate the issues raised by U.S. corporate governance concerns.  However, the world’s equity markets have never been more globalized, and the interest of investors in major capital markets to invest in non-local business never greater, and equity consideration, or equity issuance to support a transaction, should be carefully considered in appropriate circumstances.
  • M&A Practice. It is essential to understand the custom and practice of U.S. M&A transactions.  For instance, understanding when to respect — and when to challenge — a target’s sale “process” may be critical.  Knowing how and at what price level to enter the discussions will often determine the success or failure of a proposal; in some situations it is prudent to start with an offer on the low side, while in other situations offering a full price at the outset may be essential to achieving a negotiated deal and discouraging competitors, including those who might raise political or regulatory issues.  In strategically or politically sensitive transactions, hostile maneuvers may be imprudent; in other cases, unsolicited pressure might be the only way to force a transaction.  Takeover regulations in the U.S. differ in many significant respects from those in non-U.S. jurisdictions; for example, the mandatory bid concept common in Europe, India and other countries is not present in U.S. practice.  Permissible deal protection structures, pricing requirements and defensive measures available to U.S. targets also may differ from what non-U.S. acquirors are accustomed to in deals in their home countries.  Sensitivity must also be given to the distinct contours of the target board’s fiduciary duties and decision-making obligations under U.S. law.
  • U.S. Board Practice and Custom. Where the target is a U.S. public company, the customs and formalities surrounding board of director participation in the M&A process, including the participation of legal and financial advisors, the provision of customary fairness opinions and the inquiry and analysis surrounding the activities of the board and the financial advisors, can be unfamiliar and potentially confusing to non-U.S. transaction participants and can lead to misunderstandings that threaten to upset delicate transaction negotiations.  Non-U.S. participants need to be well-advised as to the role of U.S. public company boards and the legal, regulatory and litigation framework and risks that can constrain or prescribe board action.  These factors can impact both tactics and timing of M&A processes and the nature of communications with the target company.
  • Distressed Acquisitions. Distressed M&A is a well-developed specialty in the U.S., with its own subculture of sophisticated investors, lawyers and financial advisors.  The U.S. continues to be a popular destination for restructurings of multinational corporations, including those with few assets or operations in the country, because of its debtor-friendly reorganization laws, expansive bankruptcy jurisdiction and relative predictability.  In addition, large foreign companies that file insolvency proceedings outside of the U.S. have increasingly turned to Chapter 15 of the United States Bankruptcy Code, which accords foreign debtors key protections from creditors in the U.S. and has facilitated restructurings and asset sales approved abroad.  Firms evaluating a potential acquisition of a distressed target in a U.S. bankruptcy should consider the full array of tools that may be available, including acquisition of the target’s fulcrum debt securities that are expected to become the equity through an out-of-court restructuring or plan of reorganization, acting as a plan investor or sponsor in connection with a plan, backstopping a plan-related rights offering or participating as a bidder in a court-supervised “Section 363” auction process, among others.  Transaction certainty is of critical importance to success in a “Section 363” sale process or confirmation of a Chapter 11 plan, and non-U.S. participants accordingly need to plan carefully (especially with respect to transactions that might be subject to CFIUS review, as discussed above) for transaction structures that will result in a relatively level playing field with U.S. participants.  Acquirors also need to consider the differing interests and sometimes conflicting agendas of the various constituencies, including bank lenders, bondholders, distressed-focused hedge funds and holders of structured debt securities and credit default protection.
  • Financing. Volatility in the global credit markets in 2014 was more pronounced than in the immediate past, which resulted in more frequent closings of the “windows” in which particular sorts of financing are available, particularly for non-investment grade issuers.  While the volume of financing and the rates at which financing has been available for investment grade issuers continues to be favorable and has facilitated acquisitions, a divergence has emerged for high-yield issuers looking for acquisition financing, where the availability of committed financing, particularly for deals requiring a long closing period or a substantial amount of financing, has become constrained and more costly.  This has resulted in part from activities of regulators worldwide, and particularly in the U.S., to reduce financing activity for highly leveraged deals – a trend that may continue for some time.  Important questions to consider when financing a transaction include where financing with the most favorable terms and conditions is available; how committed the financing is; which lenders have the best understanding of the acquiror’s and target’s businesses; whether to explore alternative, non-traditional financing sources and structures, including seller paper; whether there are transaction structures that can minimize refinancing requirements; and how comfortable the target will feel with the terms and conditions of the financing.
  • Litigation. Shareholder litigation accompanies virtually every transaction involving a U.S. public company but is generally not a cause for concern.  Excluding the context of competing bids in which litigation plays a role in the contest, and of going-private transactions initiated by controlling shareholders or management, which form a separate category requiring special care and planning, there are virtually no examples of major acquisitions of U.S. public companies being blocked or prevented due to shareholder litigation, nor of materially increased costs being imposed on acquirors.  In most cases, where a transaction has been properly planned and implemented with the benefit of appropriate legal and investment banking advice on both sides, such litigation can be dismissed or settled for relatively small amounts or other concessions, with the positive effect of foreclosing future claims and insulating the company from future liability.  Sophisticated counsel can usually predict the likely range of litigation outcomes or settlement costs, which should be viewed as a cost of the deal.  In all cases, the acquiror, its directors, shareholders and offshore reporters and regulators should be conditioned in advance (to the extent possible) to expect litigation and not to view it as a sign of trouble.  In addition, it is important to understand the U.S. discovery process in litigation as it is significantly different than the process in other jurisdictions and, even in the context of a settlement, will require the acquiror to provide responsive information and documents (including emails) to the plaintiffs.
  • Tax Considerations. U.S. tax issues affecting target shareholders or the combined group may be critical to structuring the transaction. In transactions involving the receipt by U.S. target shareholders of non-U.S. acquiror stock, the potential application of so-called “anti-inversion” rules, which could render an otherwise tax-free transaction taxable to exchanging U.S. target shareholders and result in potentially significant adverse U.S. tax consequences to the combined group, must be carefully evaluated.  Non-U.S. acquirors frequently will need to consider whether to invest directly from their home jurisdiction or through U.S. or non-U.S. subsidiaries, the impact of the transaction on tax attributes of the U.S. target (e.g., loss carryforwards), the deductibility of interest expense incurred on acquisition indebtedness, and eligibility for reduced rates of withholding on cross-border payments of interest, dividends and royalties under applicable U.S. tax treaties.  Because the U.S. does not have a “participation exemption” regime that exempts dividend income from non-U.S. subsidiaries, a non-U.S. acquiror of a U.S. target with non-U.S. subsidiaries may wish to analyze the tax cost of extracting such subsidiaries from the U.S. group.
  • Disclosure Obligations. How and when an acquiror’s interest in the target is publicly disclosed should be carefully controlled and considered, keeping in mind the various ownership thresholds that trigger mandatory disclosure on a Schedule 13D under the federal securities laws and under regulatory agency rules such as those of the Federal Reserve Board, the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC).  While the Hart-Scott-Rodino Antitrust Improvements Act (HSR) does not require disclosure to the general public, the HSR rules do require disclosure to the target’s management before relatively low ownership thresholds can be crossed.  Non-U.S. acquirors have to be mindful of disclosure norms and timing requirements relating to home country requirements with respect to cross-border investment and acquisition activity.  In many cases, the U.S. disclosure regime is subject to greater judgment and analysis than the strict requirements of other jurisdictions.  Treatment of derivative securities and other pecuniary interests in a target other than common stock holdings also varies by jurisdiction and such investments have received heightened regulatory focus in recent periods.
  • Shareholder Approval. Because few U.S. public companies have one or more controlling shareholders, obtaining public shareholder approval is typically a key consideration in U.S. transactions.  Understanding in advance the roles of arbitrageurs, hedge funds, institutional investors, private equity funds, proxy voting advisors and other important market players — and their likely views of the anticipated acquisition attempt as well as when they appear and disappear from the scene — can be pivotal to the success or failure of the transaction.  It is advisable to retain a proxy solicitation firm to provide advice prior to the announcement of a transaction so that an effective strategy to obtain shareholder approval can be implemented.
  • Integration Planning. One of the reasons deals sometimes fail is poor post-acquisition integration, particularly in cross-border deals where multiple cultures, languages and historic business methods may create friction.  If possible, the executives and consultants who will be responsible for integration should be involved in the early stages of the deal so that they can help formulate and “own” the plans that they will be expected to execute.  Too often, a separation between the deal team and the integration/execution teams invites slippage in execution of a plan that in hindsight is labeled by the new team as unrealistic or overly ambitious.  However, integration planning needs to be carefully phased in as implementation cannot occur prior to the receipt of certain regulatory approvals.
  • Corporate Governance and Securities Law. U.S. securities and corporate governance rules can be troublesome for non-U.S. acquirors who will be issuing securities that will become publicly traded in the U.S. as a result of an acquisition.  SEC rules, the Sarbanes-Oxley and Dodd-Frank Acts and stock exchange requirements should be evaluated to ensure compatibility with home country rules and to be certain that the non-U.S. acquiror will be able to comply.  Rules relating to director independence, internal control reports and loans to officers and directors, among others, can frequently raise issues for non-U.S. companies listing in the U.S.  Non-U.S. acquirors should also be mindful that U.S. securities regulations may apply to acquisitions and other business combination activities involving non-U.S. companies with U.S. security holders.
  • Antitrust Issues. To the extent that a non-U.S. acquiror directly or indirectly competes or holds an interest in a company that competes in the same industry as the target company, antitrust concerns may arise either at the federal agency or state attorneys general level.  Although less typical, concerns can also arise if the foreign acquiror competes either in an upstream or downstream market of the target.  As noted above, pre-closing integration efforts should also be conducted with sensitivity to antitrust requirements that can be limiting.  Home country competition laws may raise their own sets of issues that should be carefully analyzed with counsel.  The administration of the antitrust laws in the U.S. is carried out by highly professional agencies relying on well-established analytical frameworks.  The outcomes of the vast majority of transactions can be easily predicted.  In borderline cases, while the outcome of any particular proposed transaction cannot be known with certainty, the likelihood of a proposed transaction being viewed by the agencies as raising substantive antitrust concerns and the degree of difficulty in overcoming those concerns can be.  In situations presenting actual or potential substantive issues, careful planning is imperative and a proactive approach to engagement with the agencies is generally advisable.
  • Due Diligence. Wholesale application of the acquiror’s domestic due diligence standards to the target’s jurisdiction can cause delay, waste time and resources or result in missing a problem.  Due diligence methods must take account of the target jurisdiction’s legal regime and, particularly important in a competitive auction situation, local norms.  Many due diligence requests are best channeled through legal or financial intermediaries as opposed to being made directly to the target company.  Making due diligence requests that appear to the target as particularly unusual or unreasonable (not uncommon in cross-border deals) can easily cause a bidder to lose credibility.  Similarly, missing a significant local issue for lack of local knowledge can be highly problematic and costly.
  • Collaboration. Most obstacles to a deal are best addressed in partnership with local players whose interests are aligned with those of the acquiror.  If possible, relationships with the target company’s management and other local forces should be established well in advance so that political and other concerns can be addressed together, and so that all politicians, regulators and other stakeholders can be approached by the whole group in a consistent, collaborative and cooperative fashion.

*            *            *            *            *

As always in global M&A, results, highpoints and lowpoints for 2015 are likely to include many surprises, and sophisticated market participants will need to continually refine their strategies and tactics as the global and local environment develops.  However, the rules of the road for successful M&A transactions in the U.S. remain well understood and eminently capable of being mastered by well-prepared and well-advised acquirors from all parts of the globe.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

FRENCH UPDATE – Activist Strategies and Defenses in France

Editors’ Note: Alain Maillot and Bertrand Cardi are partners of Darrois Villey Maillot Brochier and members of XBMA’s Legal Roundtable.  Bertrand Cardi, Benjamin Burman and Forrest Alogna, partners of Darrois Villey Maillot Brochier, authored the following article.  Darrois Villey Maillot Brochier is the leading firm in France in the practice of M&A and Takeovers.

Executive Summary:  Many of the fundamentals driving increased shareholder activism in the United States and elsewhere are also relevant in France.  The disclosure regime under French securities law should permit companies to identify activist investors, their concert parties and their economic exposure, however, French law and regulation potentially provide both sides in an activist campaign with significant tools.

For the attacking activist: French law provides a holder of as little as 0.5% of a company’s shares with the right to add matters to the agenda of a shareholder meeting and include proposed resolutions in the “proxy” materials circulated by the company to shareholders; directors may be removed and replaced by a simple majority of any shareholder meeting, even if the matter is not formally on the agenda; and French shareholders now have a “say-on-pay”. For the defending company, French law provides stringent disclosure requirements on stake-building, with significant penalties for failure to comply (and a company’s bylaws may provide for still more stringent disclosure thresholds); and importantly, French law’s expansive concept of a company’s intérêt social (a nexus of constituencies, which includes not only the company and its shareholders, but also employees, creditors, customers and suppliers and other stakeholders) provides a strong basis for a French board of directors and management to resist an activist’s purely short-term financial strategy when appropriate.

It is prudent for even French companies to plan for the eventuality of an activist attack.  This article surveys the major legal tools that are most relevant in engagements between French listed companies and activist investors.

Click here to read Activist Strategies and Defenses in France.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

U.S. UPDATE – 2014 Checklist for Successful Acquisitions in the U.S.

Editors’ Note: This submission updates a checklist co-authored by Messrs. Emmerich and Panovka, members of XBMA’s Legal Roundtable, with their colleagues at Wachtell Lipton David A. Katz, Scott K. Charles, Ilene Knable Gotts, Andrew J. Nussbaum, Joshua R. Cammaker, Mark Gordon, Eric M. Rosof, Joshua M. Holmes, T. Eiko Stange, Gordon S. Moodie, Raaj Narayan and Francis J. Stapleton.

Highlights:

  • More than 30% of global M&A in 2013 involved acquirors and targets in different countries, including $134.5 billion of acquisitions in the U.S. by non-U.S. acquirors (a growing 15% of which involved acquirors from emerging economies).
  • Noteworthy cross-border deals in 2013 included Verizon’s $130 billion acquisition of the remaining interest in Verizon Wireless from Vodafone, the second largest cross-border transaction in history, Applied Materials’ $9 billion acquisition of Tokyo Electron, and Shuanghui International’s $7 billion acquisition of Smithfield Foods.
  • U.S. deal markets continue to be relatively hospitable to off-shore acquirors and investors.
  • The checklist included in the Main Article below covers issues that should be carefully considered in advance of any acquisition or strategic investment in the U.S.

MAIN ARTICLE

More than 30% of global M&A in 2013 involved acquirors and targets in different countries, including $134.5 billion of acquisitions in the U.S. by non-U.S. acquirors.  Noteworthy cross-border deals in 2013 included Verizon’s $130 billion acquisition of the remaining interest in Verizon Wireless from Vodafone, the second largest cross-border transaction in history, Applied Materials’ $9 billion acquisition of Tokyo Electron and Shuanghui International’s $7 billion acquisition of Smithfield Foods.  Notably, 15.1% percent of the acquisitions in the U.S. by non-U.S. acquirors in 2013 were made by companies from emerging economies, up from 8.4% in 2012.  We expect this trend to continue.

U.S. deal markets continue to be relatively hospitable to off-shore acquirors and investors.  With careful advance preparation, strategic implementation and sophisticated deal structures that anticipate likely concerns, most acquisitions in the U.S. can be successfully achieved.  Cross-border deals involving investment into the U.S. are more likely to fail because of poor planning and execution than fundamental legal or political restrictions.

The following is our updated checklist of issues that should be carefully considered in advance of an acquisition or strategic investment in the U.S.  Because each cross-border deal is unique, the relative significance of the issues discussed below will depend upon the specific facts, circumstances and dynamics of each particular situation:

  • Political and Regulatory Considerations.  Even though non-U.S. investment in the U.S. remains generally well-received and is rarely politicized, in the context of specific transactions, prospective non-U.S. acquirors of U.S. businesses or assets should undertake a comprehensive analysis of U.S. political and regulatory implications well in advance of any acquisition proposal or program, particularly if the target company operates in a sensitive industry or if the acquiror is sponsored or financed by a foreign government, or organized in a jurisdiction where a high level of government involvement in business is generally understood to exist.  It is imperative that the likely concerns of federal, state and local government agencies, employees, customers, suppliers, communities and other interested parties be thoroughly considered and, if possible, addressed prior to any acquisition or investment proposal becoming public.  It is also essential that a comprehensive communications plan be in place prior to the announcement of a transaction so that all of the relevant constituencies can be addressed with the appropriate messages.  It may be useful to involve local public relations firms at an early stage in the planning process.  Similarly, potential regulatory hurdles require sophisticated advance planning.  In addition to securities and antitrust regulations, acquisitions may be subject to CFIUS review (discussed below), and acquisitions in regulated industries (e.g., energy, public utilities, gaming, insurance, telecommunications and media, financial institutions, transportation and defense contracting) may be subject to an additional layer of regulatory approvals.  Regulation in these areas is often complex, and political opponents, reluctant targets and competitors may seize on any perceived weaknesses in an acquiror’s ability to clear regulatory obstacles.  We expect to see continuity in the enforcement policies at the federal level for the foreseeable future.  Finally, depending on the industry involved and the geographic distribution of the workforce, labor unions will continue to play an active role during the review process.
  • Transaction Structures.  Non-U.S. acquirors should be willing to consider a variety of potential transaction structures, especially in strategically or politically sensitive transactions.  Structures that may be helpful in particular circumstances include no-governance and low-governance investments, minority positions or joint ventures, possibly with the right to increase ownership or governance over time; partnering with a U.S. company or management or collaborating with a U.S. source of financing or co-investor (such as a private equity firm); or utilizing a controlled or partly controlled U.S. acquisition vehicle, possibly with a board of directors having a substantial number of U.S. citizens and a prominent U.S. citizen as a non-executive chairman.  Use of preferred securities (rather than ordinary common stock) or structured debt securities should also be considered.  Even more modest social issues, such as the name of the continuing enterprise and its corporate location or headquarters, or the choice of the nominal acquiror in a merger, can affect the perspective of government and labor officials.
  • CFIUS.  Under current U.S. federal law, the Committee on Foreign Investment in the United States (CFIUS) — a multi-agency governmental body chaired by the Secretary of the Treasury, and the recommendations of which the President of the United States has personal authority to accept or reject — has discretion to review transactions in which non-U.S. acquirors could obtain “control” of a U.S. business or in which a non-U.S. acquiror invests in U.S. infrastructure, technology or energy assets.  Although filings with CFIUS are voluntary, CFIUS also has the ability to investigate transactions at its discretion, including after the transaction has closed.  Three useful rules of thumb in dealing with CFIUS are:
    • first, in general it is prudent to make a voluntary filing with CFIUS if the likelihood of an investigation is reasonably high or if competing bidders are likely to take advantage of the uncertainty of a potential investigation;
    • second, it is often best to take the initiative and suggest methods of mitigation early in the review process in order to help shape any remedial measures and avoid delay or potential disapproval; and
    • third, it is often a mistake to make a CFIUS filing prior to initiating discussions with the U.S. Department of the Treasury and other officials and relevant parties.  In some cases, it may even be prudent to make the initial contact prior to the public announcement of the transaction.  CFIUS is not as mysterious or unpredictable as some fear — consultation with Treasury and other officials (who generally want to be supportive and promote investment in the U.S. economy) and CFIUS specialists will generally provide a good sense of what it will take to clear the process.  Retaining advisors with significant CFIUS expertise and experience is often crucial to successful navigation of the CFIUS process.  Transactions that may require a CFIUS filing should have a carefully crafted communications plan in place prior to any public announcement or disclosure of the pending transactions.
  • Acquisition Currency.  While cash remains the predominant (although not exclusive) form of consideration in cross-border deals, non-U.S. acquirors should think creatively about potential avenues for offering U.S. target shareholders a security that allows them to participate in the resulting global enterprise.  For example, publicly listed acquirors may consider offering existing common stock or depositary receipts (e.g., ADRs) or special securities (e.g., contingent value rights).  When U.S. target shareholders obtain a continuing interest in a surviving corporation that had not already been publicly listed in the U.S., expect heightened focus on the corporate governance and other ownership and structural arrangements of the non-U.S. acquiror, including as to the presence of any controlling or large shareholders, and heightened scrutiny placed on any de facto controllers or promoters.  Creative structures, such as the issuance of non-voting stock or other special securities of a non-U.S. acquiror, may minimize or mitigate the issues raised by U.S. corporate governance concerns.
  • M&A Practice.  It is essential to understand the custom and practice of U.S. M&A transactions.  For instance, understanding when to respect — and when to challenge — a target’s sale “process” may be critical.  Knowing how and at what price level to enter the discussions will often determine the success or failure of a proposal; in some situations it is prudent to start with an offer on the low side, while in other situations offering a full price at the outset may be essential to achieving a negotiated deal and discouraging competitors, including those who might raise political or regulatory issues.  In strategically or politically sensitive transactions, hostile maneuvers may be imprudent; in other cases, unsolicited pressure might be the only way to force a transaction.  U.S. takeover regulations differ in many significant respects from those in non-U.S. jurisdictions; for example, the mandatory bid concept common in Europe, India and other countries is not present in U.S. practice.  Permissible deal protection structures, pricing requirements and defensive measures available to U.S. targets also may differ from what non-U.S. acquirors are accustomed to in deals in their home countries.  Sensitivity must also be given to the distinct contours of the target board’s fiduciary duties and decision-making obligations under U.S. law.
  • U.S. Board Practice and Custom.  Where the target is a U.S. public company, the customs and formalities surrounding board of director participation in the M&A process, including the participation of legal and financial advisors, the provision of customary fairness opinions and the inquiry and analysis surrounding the activities of the board and the financial advisors, can be unfamiliar and potentially confusing to non-U.S. transaction participants and can lead to misunderstandings that threaten to upset delicate transaction negotiations.  Non-U.S. participants need to be well-advised as to the role of U.S. public company boards and the legal, regulatory and litigation framework and risks that can constrain or prescribe board action.  These factors can impact both tactics and timing of M&A processes and the nature of communications with the target company.
  • Distressed Acquisitions.  Distressed M&A is a well-developed specialty in the U.S., with its own sub-culture of sophisticated investors, lawyers and financial advisors.  When evaluating a distressed target, acquirors should consider the full array of tools that may be available, including acquisition of the target’s fulcrum debt securities that are expected to become the equity through an out-of-court restructuring or plan of reorganization, acting as a plan investor or sponsor in connection with a plan, backstopping a plan-related rights offering or participating as a bidder in a court-supervised “Section 363” auction process, among others.  Transaction certainty is of critical importance  to success in a “Section 363” sale process or confirmation of a Chapter 11 plan, and non-U.S. participants accordingly need to plan carefully (especially with respect to transactions that might be subject to CFIUS review, as discussed above) for transaction structures that will result in a relatively even playing field with U.S. participants.  Acquirors also need to consider the differing interests and sometimes conflicting agendas of the various constituencies, including bank lenders, bondholders, distressed-focused hedge funds and holders of structured debt securities and credit default protection.
  • Financing.  There has been less volatility in the global credit markets this year than in the immediate past, which resulted in fewer closings of the “windows” in which particular sorts of financing are available.  Overall, the recent volume of financing and the rates at which financing has been available is unprecedented and has facilitated acquisitions, particularly by larger, well-established corporates and sovereign-affiliated borrowers.  Important questions to consider when financing a transaction include where financing with the most favorable terms and conditions is available; how committed the financing is; which lenders have the best understanding of the acquiror’s and target’s businesses; whether to explore alternative, non-traditional financing sources and structures, including seller paper; whether there are transaction structures that can minimize refinancing requirements; and how comfortable the target will feel with the terms and conditions of the financing.  Note that under U.S. law, unlike the laws of some other jurisdictions, non-U.S. acquirors are not prohibited from borrowing from U.S. lenders, and they generally may use the assets of U.S. targets as collateral.  There may be adverse tax consequences for U.S. borrowers on using property of non-U.S. entities to secure their loans and that would include pledging stock of a non-U.S. entity to secure U.S. borrowings.  Likewise, the relative ease of structured financing in the U.S. market should benefit an offshore acquiror, with both asset-based and other sophisticated securitized lending strategies relatively easy to implement and available in the market.
  • LitigationShareholder litigation accompanies virtually every transaction involving a U.S. public company but is generally not a cause for concern.  Excluding the context of competing bids in which litigation plays a role in the contest, and of going-private transactions initiated by controlling shareholders or management, which form a separate category requiring special care and planning, there are virtually no examples of major acquisitions of U.S. public companies being blocked or prevented due to shareholder litigation, nor of materially increased costs being imposed on acquirors.  In most cases, where a transaction has been properly planned and implemented with the benefit of appropriate legal and investment banking advice on both sides, such litigation can be dismissed or settled for relatively small amounts or other concessions, with the positive effect of foreclosing future claims and insulating the company from future liability.  Sophisticated counsel can usually predict the likely range of litigation outcomes or settlement costs, which should be viewed as a cost of the deal.  In all cases, the acquiror, its directors, shareholders and offshore reporters and regulators should be conditioned in advance (to the extent possible) to expect litigation and not to view it as a sign of trouble.  In addition, it is important to understand the U.S. discovery process in litigation as it is significantly different than the process in other jurisdictions and, even in the context of a settlement, will require the acquiror to provide responsive information and documents (including emails) to the plaintiffs.
  • Tax Considerations.  U.S. tax issues affecting target shareholders or the combined group may be critical to structuring the transaction.  The receipt by U.S. target shareholders of non-U.S. acquiror stock generally will be tax-free only if the transaction satisfies the U.S. requirements that apply to tax-free transactions generally as well as special rules intended to combat “inversion” transactions.  Non-U.S. acquirors frequently will need to consider whether to invest directly from their home jurisdiction or through U.S. or non-U.S. subsidiaries, the impact of the transaction on tax attributes of the U.S. target (e.g., loss carryforwards), the deductibility of interest expense incurred on acquisition indebtedness, and eligibility for reduced rates of withholding on cross-border payments of interest, dividends and royalties under applicable U.S. tax treaties.  Because the U.S. does not have a “participation exemption” regime that exempts dividend income from non-U.S. subsidiaries, a non-U.S. acquiror of a U.S. target with non-U.S. subsidiaries may wish to analyze the tax cost of extracting such subsidiaries from the U.S. group.
  • Disclosure Obligations.  How and when an acquiror’s interest in the target is publicly disclosed should be carefully controlled and considered, keeping in mind the various ownership thresholds that trigger mandatory disclosure on a Schedule 13D under the federal securities laws and under regulatory agency rules such as those of the Federal Reserve Board, the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC).  While the Hart-Scott-Rodino Antitrust Improvements Act (HSR) does not require disclosure to the general public, the HSR rules do require disclosure to the target’s management before relatively low ownership thresholds can be crossed.  Non-U.S. acquirors have to be mindful of disclosure norms and timing requirements relating to home country requirements with respect to cross-border investment and acquisition activity.  In many cases, the U.S. disclosure regime is subject to greater judgment and analysis than the strict requirements of other jurisdictions.  Treatment of derivative securities and other pecuniary interests in a target other than common stock holdings also varies by jurisdiction and such investments have received heightened regulatory focus in recent periods.
  • Shareholder Approval.  Because few U.S. public companies have one or more controlling shareholders, obtaining public shareholder approval is typically a key consideration in U.S. transactions.  Understanding in advance the roles of arbitrageurs, hedge funds, institutional investors, private equity funds, proxy voting advisors and other important market players — and their likely views of the anticipated acquisition attempt as well as when they appear and disappear from the scene — can be pivotal to the success or failure of the transaction.  It is advisable to retain a proxy solicitation firm to provide advice prior to the announcement of a transaction so that an effective strategy to obtain shareholder approval can be implemented.
  • Integration Planning.  One of the reasons deals sometimes fail is poor post-acquisition integration, particularly in cross-border deals where multiple cultures, languages and historic business methods may create friction.  If possible, the executives and consultants that will be responsible for integration should be involved in the early stages of the deal so that they can help formulate and “own” the plans that they will be expected to execute.  Too often, a separation between the deal team and the integration/execution teams invites slippage in execution of a plan that in hindsight is labeled by the new team as unrealistic or overly ambitious.  However, integration planning needs to be carefully phased in as implementation cannot occur prior to the receipt of certain regulatory approvals.
  • Corporate Governance and Securities Law.  U.S. securities and corporate governance rules can be troublesome for non-U.S. acquirors who will be issuing securities that will become publicly traded in the U.S. as a result of an acquisition.  SEC rules, the Sarbanes-Oxley and Dodd-Frank Acts and stock exchange requirements should be evaluated to ensure compatibility with home country rules and to be certain that the non-U.S. acquiror will be able to comply.  Rules relating to director independence, internal control reports and loans to officers and directors, among others, can frequently raise issues for non-U.S. companies listing in the U.S.  Non-U.S. acquirors should also be mindful that U.S. securities regulations may apply to acquisitions and other business combination activities involving non-U.S. companies with U.S. security holders.
  • Antitrust Issues.  To the extent that a non-U.S. acquiror directly or indirectly competes or holds an interest in a company that competes in the same industry as the target company, antitrust concerns may arise either at the federal agency or state attorneys general level.  Although less typical, concerns can also arise if the foreign acquiror competes either in an upstream or downstream market of the target.  As noted above, pre-closing integration efforts should also be conducted with sensitivity to antitrust requirements that can be limiting.  Home country competition laws may raise their own sets of issues that should be carefully analyzed with counsel.  The administration of the antitrust laws in the U.S. is carried out by highly professional agencies relying on well-established analytical frameworks.  The outcomes of the vast majority of transactions can be easily predicted.  In borderline cases, while the outcome of any particular proposed transaction cannot be known with certainty, the likelihood of a proposed transaction being viewed by the agencies as raising substantive antitrust concerns and the degree of difficulty in overcoming those concerns can be.  In situations presenting actual or potential substantive issues, careful planning is imperative and a proactive approach to engagement with the agencies is generally advisable.
  • Due Diligence.  Wholesale application of the acquiror’s domestic due diligence standards to the target’s jurisdiction can cause delay, waste time and resources or result in missing a problem.  Due diligence methods must take account of the target jurisdiction’s legal regime and, particularly important in a competitive auction situation, local norms.  Many due diligence requests are best channeled through legal or financial intermediaries as opposed to being made directly to the target company.  Making due diligence requests that appear to the target as particularly unusual or unreasonable (not uncommon in cross-border deals) can easily cause a bidder to lose credibility.  Similarly, missing a significant local issue for lack of local knowledge can be highly problematic and costly.
  • Collaboration.  Most obstacles to a deal are best addressed in partnership with local players whose interests are aligned with those of the acquiror.  If possible, relationships with the target company’s management and other local forces should be established well in advance so that political and other concerns can be addressed together, and so that all politicians, regulators and other stakeholders can be approached by the whole group in a consistent, collaborative and cooperative fashion.

*            *            *            *            *

As always in global M&A, results, highpoints and lowpoints for 2014 are likely to include many surprises, and sophisticated market participants will need to continually refine their strategies and tactics as the global and local environment develops.  However, the rules of the road for successful M&A transactions in the U.S. remain well understood and eminently capable of being mastered by well-prepared and well-advised acquirors from all parts of the globe.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

U.S. UPDATE – Checklist for Successful Acquisitions in the U.S.

Editors’ Note: This is a Chinese version of a checklist published in English on this Forum on February 20, 2013. This version was prepared jointly by King & Wood Mallesons and Wachtell Lipton.

2012年的全球并购有超过40%的交易涉及不同国家的收购方和目标公司,其中境外收购方在美国进行的并购交易总额达到1700亿美元。由于新兴经济体持续累积美元,很多人预计该趋势将继续保持,因为这些美元将会重新投资于美国本土。自然资源仍将是并购大潮的重要部分,这包括美国,来自境外的大量投资已成为美国并购市场的一个重要趋势,也包括加拿大和澳大利亚这样资源丰富的发达国家,近期来自境外的投资在这些国家备受争议。

尽管美国去年选举年充斥着贸易保护主义论调,社会各方面对境外企业获取本土资源和技术也一直存在担忧,对境外收购方和投资者而言,美国交易市场仍然是全球最友好的市场之一。通过细致的事先准备、周到的战略实施以及对可能出现的各种问题经过深思熟虑的交易结构,在美国的多数并购交易都能够成功完成。导致投资美国的跨境交易失败的原因更多是因为计划不足和执行不力,而并非存在原则性的法律限制或政治限制。

以下是我们更新的在美国进行收购或战略投资之前应认真考虑的要点清单。由于每项跨境交易各不相同,以下所讨论的每个要点的重要性,应根据每个具体项目的特定事实、情况和动态发展而定:

  • 政治和监管因素。尽管境外投资进入美国普遍得到认可,也很少成为一个政治问题,但在具体交易中,收购美国企业或资产的潜在境外并购方应在启动任何收购计划或者项目之前,对美国的政治和监管影响做一个综合分析,特别是目标公司属于敏感行业,或并购方由外国政府设立或出资或设立在普遍认为存在政府强烈干预商业经营的司法辖区。在公开任何收购或投资计划之前,充分考虑并应对(如可能)联邦、州和当地政府机关、员工、客户、供应商、社区和其他利益方可能的担心是非常必要的。在公布一项交易之前,制定全面的沟通计划也至关重要,以便向所有利益相关方传递适当的信息。在策划过程初期引入当地公关公司也可能很有帮助。与政治方面的情况类似,潜在的监管障碍也需要周详的预先计划。除了证券和反垄断监管,并购可能还需经美国外国投资委员会(CFIUS)审查(见下文所述);如果所并购产业受到监管(例如能源、公用事业、博彩、保险、电信和媒体、金融机构、交通运输和国防承包),可能还需经行业监管部门的审批。这些领域的法规通常很复杂,政治对手、不太情愿的目标公司和竞争者可能会利用并购方在消除监管障碍过程中所暴露的任何弱点。随着奥巴马总统连任,预计在可预测的未来,监管机构的领导层可能发生变化,但联邦层面的政策执行仍将保持一定的连续性。此外,根据所涉及产业和劳工的地理分布,工会也将在审查过程中继续扮演重要的角色。
  • 交易结构。境外收购方应考虑各种各样的潜在交易结构,尤其一些战略上或政治上敏感的交易。在特定环境下可能会有帮助的交易结构包括不取得公司控制权的投资、少数股权投资或合资,但可能拥有日后增持更多股权或公司控制权的权利;与美国公司或管理层联手或与美国融资方或共同投资人(例如私募股权)合作进行收购;使用控股或部分控股的在美国设立的专门用于并购的公司,同时其董事会上有几名美国公民并且由一名有影响力的美国公民担任非执行董事长。也可以考虑使用优先股(而非普通股)或结构性债务证券。此外,即使很小的社会问题,例如存续企业的名称及其公司或总部选址,或在并购中的名义并购方,都可能会影响政府和劳工部门官员的观点。
  • CFIUS。根据现行美国联邦法律,美国外国投资委员会(CFIUS)——一个由财政部长担任主席的跨部门政府组织,美国总统有权接受或拒绝其提出的建议——享有自由裁量权来审查境外并购方将取得美国企业“控制权”的交易或境外并购方投资美国基础设施、技术或能源资产的交易。向CFIUS申报是自愿的,CFIUS也有权自行决定是否调查交易,包括已完成交割的交易。对于CFIUS的审查可参考以下三条法则:
    • 首先,如果审查的可能性很高或竞争投标方可能利用潜在调查的不确定性,则一般情况下向CFIUS提起自愿申报是更为审慎的做法;
    • 其次,通常最好在审查过程初期主动建议救济措施,以协助形成最终的救济措施,并避免交易拖延或被否决;以及
    • 第三,在与财政部和其他部门官员以及相关方讨论之前就进行CFIUS申报往往是个错误。在有些情况下,更为谨慎的做法是,在公开发布交易信息之前,即应展开初步联络。CFIUS并非如一些人所担心的那么神秘或不可预测——与美国财政部和其他部门官员(这些官员一般愿意支持并促进对美国经济进行投资)和CFIUS专家进行协商一般会有助于收购方了解如何进行以顺利通过该审查程序。聘请对CFIUS富有研究和经验的顾问通常是成功通过CFIUS审查的关键。对于可能需要进行CFIUS申报的交易,应在潜在交易公开发布或披露之前精心制定一套沟通计划。
  • 并购货币。虽然现金仍然是跨境交易对价的主要(尽管并非唯一)形式,境外并购方应创造性地思考向美国目标公司的股东发行证券的各种途径,以使他们参与并购后形成的跨国企业。例如,公开上市的并购方可以考虑提供现有的普通股或存托凭证(如美国存托凭证(ADR))或特殊证券(比如,或有价值认购权)。如果美国目标公司股东在一家此前未在美国公开上市的存续公司中继续获得权益,其对境外并购方的公司治理和其他所有权和结构安排(包括是否拥有任何控股股东或大股东)的关注度将大为提高,同时也会对任何实际控制人或发起人进行更为严格的审查。创造性的结构,比如境外收购方发行无表决权股份或其他特别证券可能会最小化或减少美国公司治理所可能产生的问题。
  • 并购惯例。理解美国并购交易的习惯和惯例至关重要。例如,理解何时应遵循——以及何时应当挑战——目标公司的出售“程序”会非常关键。了解如何开始磋商以及以何种价格开始磋商通常将决定一项投资意向的成败;在某些情况下,以较低的价格提出要约是明智的;然而在其他情况下,从一开始就报出最高价格也许会达成交易并挫败竞争对手,包括那些可能会提出政治或监管难题的竞争者。在具有战略或政治敏感性的交易中,敌意的策略手段或许是不明智的;然而在其他情况下,外界不请自来的压力却可能成为迫使交易成功的唯一出路。美国并购法规与境外法域的并购法规在很多重大方面存在差异;例如,强制要约收购这样一个在欧洲、印度和其他国家非常普通的概念,在美国实践之中并不存在。美国目标公司可以使用的交易保护结构、定价要求和防御措施与境外并购方在其国内交易中所习惯的那些或许也会存在差异。同时,还需要对美国法下目标公司董事会的诚信义务和决策义务的不同标准予以关注。
  • 美国董事会的惯例。如果目标公司是一家美国公众公司,董事会参与并购过程的习惯和程序,包括法律和财务顾问的参与、提供常规的公平意见以及围绕董事会及财务顾问的活动进行的质询和分析,对于境外交易参与方来说,可能是陌生和令人困惑的,并且可能导致误解并进而扰乱本就微妙的交易谈判过程。境外交易参与方需要充分了解美国公众公司董事会的作用以及能够限制或规制董事会行动的法律、监管和诉讼的框架及风险。这些因素将影响并购程序的策略和时间安排以及与目标公司沟通的方式和内容。
  • 困境企业并购。困境企业并购是一项在美国获得了充分发展的特殊领域,该领域经验丰富的投资者、律师和财务顾问已经形成自己的子文化。在评估陷入困境中的目标公司时,并购者需要考虑各项投资工具,包括但不限于购买预期将通过庭外重组或重整计划变更为公司股权的目标公司支点债券、作为重整计划投资者或发起人、支持发行与重整计划相关的认购权、或作为竞标者参与法庭主持的“363条”拍卖程序。交易确定性对于在“363条”拍卖程序中胜出非常重要,境外交易方因而需要仔细筹划交易结构(尤其是对于如前文所述可能受到CFIUS审查的交易来说),这将为其提供一个与美国参与者之间相对公平的竞争平台。并购者还需要考虑包括银行贷款人、债券持有人、关注困境企业的对冲基金以及结构债券持有人和信用违约保护证券持有人在内的不同利益相关方的利益差别和时而冲突的议程。
  • 融资。当全球信贷市场持续变化使得特定种类的融资“窗口”不断开启又关闭时,总体而言,可用的融资量和融资利率史无前例,并且促进了并购交易,尤其是大型、成熟企业和附属于国家主权的借款人实施的并购交易。需要考虑的重要问题包括哪里能够提供最优惠的融资条款和条件;融资的确定性有多大;哪个贷款人最能理解并购者和目标公司的业务;是否要寻求替代的、非传统的融资渠道和结构,包括卖方票据;是否存在能够实现再融资需求最小化的交易结构;以及融资的条款和条件是否令目标公司感到满意。需要注意的是在美国法下,与其他某些法域下的法律不同,境外并购方并未被禁止向美国贷款人借款,并且他们通常可以使用美国目标公司的资产作为担保(尽管对于使用美国目标公司的股票作为担保存在一些重要的限制)。同样,美国市场上相对宽松的结构性融资应该会有利于境外并购方,在这个市场上资产证券化和其他设计精妙的证券化贷款策略可以相对容易的得以实施,而且也是现成的。
  • 诉讼。每一个涉及美国公众公司的交易都会遇到股东诉讼,但是股东诉讼通常并不需要太过担忧。事实上几乎没有哪个并购美国公众公司的大型交易是因股东诉讼而受到阻碍或被阻止,也不会因此而实质上增加并购方的交易成本(例外是竞争性投标,在这种情况下,诉讼将会在对抗中扮演重要角色;还有由控股股东或管理层发起的私有化交易,这类交易属于一个单独的门类,需要特别的考量和规划)。在大多数情况下,如果交易在依赖双方律师和投行建议的前提下进行了妥善规划和执行,诉讼会被驳回或者以相对较小的金额或其他让步获得和解,并且会给公司带来消除未来索赔以及避免未来责任的正面效应。有经验的顾问通常能够大致预测诉讼的结果或和解成本的范围,这些应视为交易成本的一部分。在任何情形下,并购方及其董事、股东和境外媒体及监管者应当(尽可能的)预料到会出现诉讼,并且不要将其视为麻烦的信号。此外,理解美国的证据交换程序非常重要,该程序与其他司法辖区的程序非常不同,即使在和解程序中,美国证据交换程序仍要求收购方向原告提供应对信息和文件(包括电子邮件)。
  • 税务因素。在美国,影响目标公司股东或集团的税务问题对设计交易结构来说非常重要。美国目标公司的股东在获得境外并购方的股份时通常是免税的,但前提是需满足美国法下对免税交易的要求和反“反向交易”的特殊规则。境外并购方经常需要考虑:是直接从其司法辖区进行投资还是通过其在美国或美国境外的子公司进行投资、交易对美国目标公司税务事项的影响(例如亏损递延)、并购债务产生的利息支出的可抵扣程度、以及在美国相关税务条约下对跨境支付的利息、分红和费用进行预提时是否适用较低的税率。由于美国并没有一个“参与免税”制度来豁免美国境外的子公司的分红收入的税金,并购一个有境外子公司的美国目标公司时,境外并购方可能会分析从美国目标公司中剥离这些境外子公司的税务成本。
  • 披露义务。并购方应谨慎控制并考虑如何以及何时公开披露并购方在目标公司中的权益,随时关注在联邦证券法第13D条项下以及监管机关规则(如美国联邦储备委员会、联邦能源管理委员会(FERC)和联邦通信委员会(FCC)的规则)项下对各类股东权益达到一定门槛时的强制性披露要求。虽然罗迪诺反垄断改进法案(Hart-Scott-Rodino Antitrust Improvements Act)并没有向公众披露的要求,但是该法案要求在达到相对较低的股东权益之前应向目标公司的管理层披露。境外并购方也应考虑其本国关于跨境投资和并购交易的披露规范和时间要求。在很多情况下,与其他司法辖区中严格的披露要求相比,美国披露制度存在更多的人为判断和分析。对于证券衍生物和其他目标公司中的金钱类权益(普通股除外)是否需要披露,在不同的司法辖区可能不同;该类型的投资最近受到监管机构的广泛关注。
  • 股东批准。因为美国上市公司很少存在一个或多个控股股东,如何获得公众股东的批准就成为美国交易中的一个关键问题。事先了解套利者、对冲基金、机构投资者、私募基金、代理表决顾问和其他重要的市场参与者所分别扮演的角色,他们对于拟议并购的态度以及他们出现和退出的时间对于交易的成败非常重要。建议聘用一个代理权征集公司在交易公告前提供建议,这样可有助于实施有效策略以期获得股东批准。
  • 整合计划。有时交易失败的一个原因是并购后的整合不利,特别是在跨境交易中,不同的文化、语言和历史商业模式可能导致摩擦。若有可能,负责整合的高管人员和顾问应在交易早期就参与交易,这样他们可以协助起草和“量身订做”将要执行的整合方案。经常出现的情况是,交易团队和整合/执行团队的分离造成计划执行力度不足,而新的团队事后认为计划不切实际或过于激进。但是,整合计划也需要把握时间节点,因为其只能在取得监管机关的事先批准后方可实施。
  • 公司治理和证券法。美国证券和公司治理规则对准备在并购后发行在美国公开交易的证券的境外并购方来说比较麻烦。应审慎评估美国证监会规则、萨班-奥西利和多德-弗兰克法案(Sarbanes-Oxley and Dodd-Frank Acts)以及证券交易所要求来确保其与本国规则的兼容性,以及境外并购方遵守相关规定的能力。其中,在董事独立性、内控报告和董事/高管贷款的规则方面,在美国上市的境外公司可能会遇到重重问题。此外,境外并购方应注意,如果美国人持有境外公司的证券,美国证券规则也可能适用于涉及这类境外公司的并购和其他企业合并行为。
  • 反垄断问题。如果境外并购方直接或间接与目标公司竞争、或者在与目标公司有同业竞争关系的公司中持有股权,联邦政府机构或州检察官层面可能会提出反垄断问题。尽管并不常见,但是有时境外并购者在目标公司的上游或下游市场有竞争关系,这也可能会导致反垄断问题。如上所述,交割前的整合工作也应考虑到反垄断要求,因为反垄断要求会限制整合工作。并购方本国的竞争法也可能会有一系列的要求,因此有必要与律师一起对此做仔细分析。美国反垄断法由高度专业的机构在体例完善的分析框架基础上施行。绝大部分交易的结果都可以得到准确度较高的预计。对于有争议的案例,虽不能确切预计此类交易的结果,但仍可以预计其是否会被反垄断审查机构视为产生实质性的反垄断问题的可能性以及解决争议点的难易程度。在涉及真正或潜在的实质问题时,详细的计划非常必要,并且应积极与反垄断审查政府机构沟通。
  • 尽职调查。将并购方所在地尽职调查的标准整套搬用于目标公司所在司法辖区将可能会延迟交易、浪费时间和资源或遗漏问题。尽职调查的方法必须考虑目标公司所在司法辖区的法律制度,尤其在竞价收购的情况下,当地规范显得更为重要。与直接向目标公司提出尽职调查要求相比,通过法律或财务中介进行尽职调查的渠道会更为畅通。如果在尽职调查中提出在目标公司看来非同寻常或不合理的尽职调查要求(在跨境交易中这种情况并不少见)可能很容易使得收购方失去信誉。同样,因为不具备当地的法律知识而遗漏重大问题可能会导致重大的麻烦和损失。
  • 协作。并购者与当地的利益一致者进行合作是解决交易中许多障碍的最好办法。若有可能,应在交易前与目标公司的管理层和当地其他有关机构建立良好关系,以便共同解决政治和其他方面的问题,并且可以以持续稳定的合作方式与所有政治人物、决策者和其他利益相关方沟通。

全球并购市场将在2013年一如既往包含不少意外。富有经验的市场参与者需要根据全球和当地投资环境的发展,不断调整他们的战略和策略。但是,尽管全球政治经济环境仍处在动荡之中,在美国成功进行并购交易的规则仍是清晰明了,全球各地的并购者们在认真准备和审慎咨询的情况下仍然可以很快掌握其精髓。

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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