New EU rules, more complex transactions and the evolution of artificial intelligence are high on the agenda for in-house teams in an M&A context. In-House Perspective reports on a session at the IBA 6th Mergers and Acquisitions in the Technology Sector Conference in Berlin.

Artificial intelligence (AI) – particularly generative AI (GenAI) – and an array of new EU rules are some of the key issues facing in-house counsel in the context of M&A today. Specifically, the revised EU Foreign Direct Investment Screening Regulation and the bloc’s Foreign Subsidies Regulation are high on the agenda for many in-house counsel.  

In March, the IBA’s 6th Mergers and Acquisitions in the Technology Sector Conference in Berlin hosted a session entitled ‘In-house Counsel forum: a discussion of current and cutting-edge issues faced by in-house counsel’, during which a variety of subjects were discussed. Among them were the opportunities and risks presented by AI; ways to legally manage the disruptive business models of startups; and a look at recent regulatory developments, including on environmental, social and governance (ESG) reporting and e-commerce.

Eduardo Bagaría, a partner at Uría Menéndez in Barcelona, chaired the panel session and is keen to highlight that ‘the role of the in-house legal team has become increasingly relevant to organisations and, therefore, the problems in-house legal teams have to manage are increasingly relevant. European companies are evolving towards the US model in which the in-house legal team has extraordinary importance, and the general counsel is one of the main roles in the company’s organisational chart, typically assisting the CEO [Chief Executive Officer] on a continuous basis’.

In regards to the specific issues discussed during the session, ‘GenAI has the potential to be quite transformative for M&A. This is evidenced by the role machine learning and AI tools are already having on the early stages of the process,’ by supporting due diligence, for example, says Simon Branigan, Global Head of Linklaters’ Corporate Division in London. ‘There is, however, a long way to go. The technology still presents too many inaccuracies and M&A specific tools need to be created.’

For Branigan, the dealmaking landscape is growing increasingly more complex and the need for cross-practice teams and collaboration between in-house and private practice has never been more necessary. ‘While technology might help speed up some aspects of the process, you’ll always need the best minds on the job to develop new solutions and opportunities’, he says.

The impending wave of EU regulations is also a key focus of in-house legal teams, with some new rules requiring dramatic changes to how businesses are operating. As such, these changes can’t be implemented overnight and require a substantial amount of preparation. Such areas include requirements on ESG reporting as well as the EU’s Digital Operational Resilience Act, which creates a regulatory framework on digital operational resilience. Under this regime, all companies need to ensure they can withstand, respond to and recover from all types of information and communications technology-related disruptions and threats.

Additionally, competition regulators globally are taking a more interventionist approach, making deals more complex and increasing the time required to close. This creates a need for in-house teams to incorporate antitrust expertise from the start of a transaction in order to understand the likelihood of a deal obtaining the relevant regulatory approvals.

More generally, Bagaría identifies that, increasingly, there’s a greater need for external advice within the framework of M&A transactions, including in relation to obtaining regulatory authorisations. He doesn’t expect this to change in the near future. ‘As a general rule, it will continue to be necessary to have external advice for M&A transactions of a certain complexity, among other issues,’ he says.

Reflecting on the panel session, Bagaría says that despite the many similarities in the experiences shared by in-house legal teams, he was surprised to hear just how specific the concerns of general counsel are. ‘The “one size fits all” principle does not work, not even remotely, in regard to in-house legal teams,’ he says. ‘The particularities of the company, the sector, the practice, the applicable regulations and the culture, among other elements, make the functions of general counsel and what concerns them vary substantially from company to company.’

The first quarter of 2024 has seen a surge in blockbuster M&A deals compared to the previous year, in part due to interest rates falling in most jurisdictions and financing options becoming more favourable. ‘The public M&A market has shown resilience, with nine UK takeovers with offer values in excess of £1bn in 2024 so far, when there were only three such takeovers in the whole of 2023,’ explains Branigan. ‘Many companies paused processes last year, but we are seeing in-house teams make strategic moves and get the most out of the opportunities available.’

From a private practice perspective, Branigan is optimistic about the M&A market during the rest of 2024 and into 2025. ‘We have announced a significant number of M&A deals over the last few weeks and months and have a number of new instructions which, if they happen, will be high profile,’ explains Branigan. ‘For dealmakers, investors and companies, the ability to forecast the future valuation of the businesses, to navigate the regulatory environment, to face political uncertainty as general elections draw closer, and to anticipate shareholder reaction to any transaction will be key to successfully exploiting the current wave of M&A activity and delivering strategic value to stakeholders.’

Branigan predicts that in the next 12 months certain sectors will probably be particularly active. ‘Tech M&A was at its lowest level for a very long time, it was hit hard but we are seeing it rebounding,’ he says. ‘Infrastructure – particularly digital infrastructure – is a sector that is incredibly busy at the moment and has gained momentum and traction which will see the activity continue throughout the next year. It’s a similar story for energy and healthcare.’