Global M&A hot topics (2024)

A session report from the IBA’s 21st Annual International Mergers & Acquisitions Conference in New York

Wednesday 5 June 2024, 10:30 – 11:30

Co-chairs

Ting S Chen Cravath, Swaine & Moore, New York

Richard Smith, Slaughter and May, London

Speakers

Olivier Assant, Bredin Prat, Paris

Jan Balssen, Gleiss Lutz, Munich

Takeshi Fukuda, Mori Hamada & Matsumoto, Tokyo

Deirdre Geraghty, A&L Goodbody, New York

Reporter

Camila Goldberg, BMA Advogados, Sao Paulo

Introduction

The IBA panel discussion on global mergers and acquisitions (M&A) hot topics involved a comprehensive examination of the current trends and future predictions in this dynamic field. Moderated by Ting S Chen and Richard Smith, the panel featured a diverse group of experts who shared their insights on the evolving landscape of international M&A. The conversation covered a wide range of subjects, from regulatory changes and geopolitical developments to the growing importance of environmental, social and governance (ESG) factors in deal-making. The panel began by reviewing M&A activity levels so far in 2024 and sharing their expectations on future trends. This provided a foundation for a detailed examination of key topics, including the current regulatory environment, the impact of geopolitical events on M&A and the increasing role of ESG considerations.

The regulatory environment

One of the primary hot topics discussed was the evolving regulatory environment for M&A transactions. The panelists highlighted the increasingly stringent and multifaceted nature of regulatory scrutiny across various jurisdictions. For instance, in the case of the takeover bid for the owner of Royal Mail by Czech billionaire Daniel Křetínský, extensive conditions were set by the British government and upfront commitments had to be negotiated, including protections for union recognition, employee rights and financial restrictions to prevent value extraction from the company for a specified period. In Germany, regulatory expectations have shifted towards requiring more detailed memos and comprehensive information about investors and shareholders, placing a significant upfront burden on bidders. This trend necessitates thorough preparations to address potential foreign direct investment (FDI) concerns. Additionally, ‘hell or high water’ clauses, which obligate buyers to adhere to any conditions in order to secure regulatory approval, have become more prevalent. These clauses present substantial challenges due to the unpredictability of the regulatory demands that can be imposed. In the United States, the growing requirement for break-up fees to mitigate risks associated with regulatory uncertainties was noted. This heightened regulatory scrutiny can lead to prolonged deal timelines and increased costs for completing transactions, although outright deal blockages remain relatively rare. The panelists emphasised the need for companies to stay informed about the regulatory changes taking place and the need to engage with legal experts to navigate these complexities effectively.

The geopolitical context

Geopolitical developments were another significant topic of discussion. The panelists noted the impact of factors such as trade tensions and evolving FDI regimes on global M&A activities. These geopolitical dynamics can influence market conditions, regulatory landscapes and overall deal feasibility. Countries such as Japan and Germany have expanded their FDI screening processes, particularly concerning the national security and critical infrastructure sectors. This heightened scrutiny is partly driven by geopolitical tensions and concerns about strategic assets falling under foreign control, especially related to countries such as China. The increased complexity and extended timelines of these FDI reviews have significant implications for the M&A landscape, making it more challenging for companies to secure timely approvals. The panelists emphasised the importance of early and thorough planning to navigate these regimes effectively, advising companies to engage with regulators early in the process and to develop comprehensive strategies that address potential national security concerns. Companies need to conduct thorough due diligence and develop strategies to mitigate potential geopolitical risks, which could include diversifying their investment portfolios or securing legal and political risk insurance.

ESG considerations

The increasing importance of ESG factors in M&A was another critical topic discussed by the panel. The panelists emphasised that investors and stakeholders are placing greater emphasis on a company’s ESG performance, influencing deal valuations and the overall attractiveness of potential acquisitions. ESG considerations are becoming integral to due diligence processes, with companies being assessed according to their sustainability practices, social impact and governance structures. Specifically, companies are now expected to have robust policies and practices in place to manage environmental risks, demonstrate social responsibility and ensure strong governance frameworks. This shift is driven by the growing recognition that ESG factors can significantly impact a company’s long-term financial performance and risk management. Incorporating ESG factors into M&A strategies is essential to align stakeholder expectations and enhance long-term value. Companies should invest in improving their ESG performance and transparently communicate their efforts to attract potential investors and partners.

Conclusion

The IBA’s panel session on global M&A hot topics provided a thorough analysis of the current trends and challenges shaping the M&A landscape. The discussion underscored the importance of staying informed about regulatory changes, understanding the impact of geopolitical developments and integrating ESG considerations into deal-making strategies. By proactively addressing these factors, companies can navigate the complex M&A environment more effectively and capitalise on emerging opportunities.