Internationally big ticket M&A deals get a lot of media attention. Everyone seems to talk about mega-deals. Mega-deals certainly have some special features that need to be taken into account. Still, the issues involved in mega-deals are largely the same as in any sizeable M&A transaction. Thinking ahead and being prepared are key success factors regardless of deal size. D&I’s Transaction Powerhouse lists issues to take into account when planning and executing a deal which is big from your perspective:
1Focus on the big picture
In the current regulatory environment structuring is not only about identifying and creating tax efficient structures, but rather about facilitating business opportunities while meaningfully managing operational and business risks. In addition to tax, e.g. the allocation of data or IPRs may be a key driver in structuring transactions.
2Tried and tested structures may no longer work
The competition for tax revenues between countries and the turbulent political landscape has led to tighter and more extensive regulation and decreased the threshold of regulatory interventions. Tax structures that were applicable in the past may not be viable today or in the near future.
3Maintain long perspective and flexibility
Your tax structure should be made with a long perspective. Flexibility is key in the different stages of a company’s life cycle, and a potential exit should also be taken into account in the structuring phase.
4Obtain advance comfort
Taxation is uncertain like never before. Foreseeable risks may be mitigated in advance through sensible structuring and e.g. preliminary rulings from tax authorities.
5Social responsibility pays off
Consider how the contemplated tax structure presents itself to the public. Companies can show a sense of social responsibility by paying a certain amount of tax in the country of establishment without making the structure substantially less effective.
It has been said that in order for negotiations to be successful, 50-80 % of the time spent on the negotiations should be spent on preparation. When negotiating a mega-deal or any other transaction of great significance, it is paramount to ensure that the parties understand each other and play by the same rules. Additional value can be created for all parties involved if the negotiation process allows the parties to focus on the essentials.
1Understand who’s involved and when to talk to them
Multiple parties are directly or indirectly involved in big transactions, many of the parties not so apparent at the first glance. Mapping them all out, trying to understand their interests, and planning the sequence in which the parties (or potential parties) are to be involved in the negotiation process can make all the difference.
2Understand the other side
Do whatever you can to get an in-depth understanding of the other side, both on substance, such as their interests and best alternative to a negotiated agreement, and on their negotiating style and culture.
3Build the best negotiation team
Consider what you really need in the negotiation and who could deliver that. If you do not know the market, bring in someone who does. Often, the decision makers and negotiators should not be the same. However, do understand who calls the shots on the other side of the table.
4Negotiate the process
Before negotiating the deal itself, take time to negotiate the process. Agree on the overall schedule, when and where to meet, the agenda and how to handle the drafting process.
5Be prepared for the unknown
International negotiations are complex and are often full of surprises. Cultural differences may accentuate the challenges. Take this into account when planning the negotiation schedule and your resources.
Simply assessing where global M&A transactions require clearance presents considerable challenges given the number and nature of the jurisdictions involved. In many emerging regimes, notification tests are unclear, with even local advisors having trouble providing definitive guidance. In more established regimes, the administrative burden of the review process may be considerable and the authorities’ requests for information remarkably extensive.
1Political interests vs. written legislation
In some jurisdictions, the tendency is that the competition and other regulatory authorities take into account public interest factors when deciding on clearance. To successfully navigate such challenges, you need to be familiar not only with the legislative framework but also the local political atmosphere and engage in discussions with relevant parties.
2Different outcomes in different jurisdictions
In multi-jurisdictional cases, the parties should prepare for the possibility that the authority in one jurisdiction approves the transaction, but a second jurisdiction subsequently disapproves it. This may happen even in jurisdictions where the authorities typically have a functioning co-operation. Concurrent filing obligations in all relevant jurisdictions need to be taken into account when planning and implementing cross-border transactions.
3Creative and innovative solutions
In many jurisdictions, authorities have become more willing to accept behavioral remedies, i.e. commitments relating to the future conduct of the parties, either standalone or together with structural remedies. To facilitate clearance, be prepared and seek to find creative solutions that satisfy the requirements under applicable laws but also the interests of the company and the public.
4Timing and preparation
The waiting times for a competition clearance vary significantly between jurisdictions and cases, and, depending on the situation, can be considerably long. The key is to initiate the clearance procedures as early as possible and be well prepared.
5Tougher sanctions for illegal early implementation
Especially as waiting times for a competition clearance can be long, the importance of proper procedures, like joint defence and clean teams, to avoid illegal pre-closing information exchange or gun jumping, should not be underestimated. Significant fines have been imposed for premature implementation of a transaction in several jurisdictions.
D&I’s Recent Mega-Deals and Large Transactions
1The largest corporate transaction ever involving a Finnish company
D&I advised Alcatel-Lucent in its combination with Nokia in a deal valued at 15,6 billion.
2The largest corporate split-up ever
D&I advised Hewlett-Packard on the Finnish law and tax aspects of its separation into HP Inc. and Hewlett Packard Enterprise Company, the largest corporate split-up globally ever.
3The largest energy related deals on the Finnish market
D&I has been involved in all the largest energy related deals on the Finnish market in recent years including advising AMP Capital, a leading global infrastructure manager, and Infracapital, a leading European infrastructure investor, in their acquisition and related financing of Adven Group, a provider of critical energy infrastructure and services in Finland, Estonia and Sweden; and advising SL Capital Partners in its acquisition of Gasum’s local gas distribution network, the largest gas DSO in Finland.
4The largest circular economy transaction on the Finnish market
D&I advised the Association of Finnish Local and Regional Authorities, the second largest shareholder of Ekokem Corporation, a leading Nordic circular economy company, in connection with Fortum’s acquisition of Ekokem at EUR 700 million on a debt and cash free basis.
5Leading cinema operator in the Nordic and the Baltic regions
D&I advised Bonnier and Ratos in the sale of a majority stake in Nordic Cinema Group, the leading cinema operator in the Nordic and Baltic regions, to Bridgepoint in a transaction with an enterprise value of SEK 4.7 billion.