This discussion at Transaction Advisors M&A Conference at the University of Chicago explored the unique issues associated with cross-border acquisitions and minority investments; from variations in deal structures to the merits of cash or stock offers; and methods for balancing U.S. securities laws with changing and conflicting requirements in other jurisdictions.
To begin, moderator George Casey, Global Co-Managing Partner of Shearman & Sterling, who also serves as Global Head of the M&A Group and of the Corporate Business Unit, asked about general market conditions.
Brian Cook, Vice President, Corporate Development and Global Head of M&A for Honeywell International, Inc., noted that while we continue to see record multiples in many market segments, there is as much as $1 trillion of “dry powder” competing for transactions right now.
To counterbalance the strong sentiments in some jurisdictions to favor local entrants, Alan Konevsky, Senior Vice President and Strategic Initiatives and Technology Counsel at Mastercard, noted that entities may find themselves drawn to joint ventures as a way of accessing a market.
“My gut reaction on JVs, don’t do them; they are harder to structure and run. But you might not have a choice when there are impediments to foreign entry,” Konevsky said.
The panel also highlighted some of the cultural and political issues currently impacting cross-border acquisitions.
Andrew Gratz, Associate General Counsel for Commercial and Strategic Transactions of LyondellBasell, noted that boards outside the United States consider more than shareholder value. This holistic view may include labor groups or vendor relationships.
Gratz further noted a trend towards “economic nationalism” that can impact areas like risk, litigation, environmental issues and employment.
“Understanding cultural issues will help at the negotiating table,” Gratz said, adding “governing law and dispute resolution are keys in cross-border transactions. … Every right needs a remedy.”
The panel also discussed disclosure rules in nations outside the U.S. when engaging or making a minority investment in a public company and the practice of “lock boxes” in some jurisdictions, as well as the sensitive issue of countries discouraging foreign investment through procedural tactics.
“We are seeing more delays and requests for documentation,” Gratz said, “Boards must understand that we are in a different era.”
Konevsky concurred, “Anti-trust and regulation are increasingly an instrument of policy, even where you didn’t expect it to be; … not just in places with managed economies.”
Regardless, cross-deals must satisfy acquisition fundamentals.
“Find the right assets; pay a fair price; and have a thoughtful integration plan … that includes employees and customers,” Cook concluded.
By, George Casey, Esq., Global Co-Managing Partner of Shearman & Sterling and also serves as Global Head of the Mergers & Acquisitions Group and of the Corporate Business Unit; Brian Cook, Vice President, Corporate Development and Global Head of M&A for Honeywell International, Inc.; Alan Konevsky, Esq., Senior Vice President and Strategic Initiatives and Technology Counsel at Mastercard; and Andrew Gratz, Associate General Counsel for Commercial and Strategic Transactions of LyondellBasell.
Content originally from Transaction Advisors
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