Herbert Smith Freehills' 2019 global M&A report considers how to prepare for the challenges to M&A execution.
Disruption from third parties to the M&A process, a trend seen throughout 2018, is expected to continue in 2019. Dealmakers need to pay more attention than ever to the other possible constituencies in an M&A deal, beyond the buyer and seller.
Herbert Smith Freehills' M&A in 2019: Succeeding in a Climate of Disruption report considers the potential for disruptive influence in the M&A process of third parties including politicians, regulators, activist and active shareholders, and interlopers. It also considers retention issues – the need to retain those individuals who may be central to the importance of the acquisition.
"There are increasing notes of caution being sounded for the prospects of the global M&A market in 2019. The situation in China, the threat of trade wars, and the continued uncertainty of Brexit are some indicators that the market may be more subdued than in 2018," said Gavin Davies, Head of Global M&A at Herbert Smith Freehills.
"That said, there is also a positive narrative that includes technological disruption driving vigorous activity. Whichever is right, planning for the impact of politicians, regulators and shareholders on M&A ambitions, and protecting talent through the process, will be ever more important. Failing to prepare for the challenges means preparing to fail," added Gavin.
In the report, lawyers from around Herbert Smith Freehills' offices consider how:
- Politicians with new foreign direct investment powers are increasingly turning towards protectionism, even where national security is not an obvious concern.
- Antitrust regulators have greater powers and confidence, and are willing to take bold and sometimes unpredictable decisions that can derail or delay transactions.
- Shareholders are more willing than ever to assert their views and are not afraid to interfere with an M&A process or agitate to create one.
- Talent is an increasingly vital asset on an acquisition and, on technology-related acquisitions, the retention of individuals behind the technology can be key to a successful deal.
- Interlopers are taking advantage of the longer deal timetables to disrupt M&A transactions, either by making a competing offer for the target or by targeting the buyer itself.
The report also provides insights from Herbert Smith Freehills' lawyers around Asia, Australia, Europe and the UK on regional activity, and the outlook for activity for 2019.
M&A in 2019: Succeeding in a Climate of Disruption is available here.