Published: June 2017Contents
i) What are the hot topics?
In North America, private equity firms have taken advantage of a strong M&A market to monetise investments, often through sales to strategic buyers. However, high valuation expectations and competition from strategic buyers have somewhat slowed acquisition activity.
Another significant development has been the growth of inbound investment from China into markets across the globe. Sellers attracted by the high prices offered by Chinese buyers have been forced to grapple with the regulatory hurdles and resulting process uncertainty that often characterise such transactions.
Representation and warranty insurance continued to capture a greater share of the private-target M&A market, especially in the United States but also in Europe, as more buyers and sellers recognise its utility as a deal facilitator.
Political uncertainty in major markets like the US, the UK and Brazil has caused headwinds, but these forces have not yet had a significantly adverse impact on private equity activity.
ii) Tell us about any key legal developments – recent or pending – and their international impact.
How (and when) the UK manages its exit from the European Union is the biggest looming, and highly uncertain, legal development. Brexit will affect not only the flow of goods and people between the UK and continental Europe, but it will also affect the City of London's outsized influence on capital flows. For example, most non-dollar denominated finance agreements are governed by English law. It is very difficult to predict how Brexit will affect existing and future finance agreements.
In addition, over the past year antitrust regulators in almost every jurisdiction have become more assertive. Even when antitrust regulators do not impose restrictions or demand a remedy for perceived anticompetitive effects of a transaction, their increased scrutiny has led to delays and higher transaction costs.
iii) What are the biggest opportunities and challenges for practitioners and clients?
Private equity's biggest challenges also present its biggest opportunities. Political uncertainty, increased regulation and new market participants will cause friction and upset established norms, but private equity professionals who remain flexible and engaged will be well-positioned to take advantage of the inevitable market disruptions caused by these forces.
Hengeler Mueller London
Hengeler Mueller Frankfurt