Mergers and Acquisitions Update Global Alignment and Integration Overview

Transcription

1 Mergers and Acquisitions Update 2015 Global Alignment and Integration Overview Kathleen Smith Ruhland, Partner, DLA Piper, Minneapolis Ute Krudewagen, Partner, DLA Piper, Silicon Valley *This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

2 The global economy in transition GDP growth rates forecast 2015 (Source: World Bank) Low commodity prices; tightening US monetary conditions Global economy 2.8% Developing countries 4.4% China 7.1% India 7.5% Brazil -1.3% US 2.7% Europe 1.5% Russia -2.7% Sub-Saharan Africa 4.2% 2

3 2015 M&A YTD in review M&A activity for 2015 year to date is $3.3 trillion, marking the highest year to date total since 2007 (source: Dealogic Sept. 28) Strategic M&A activity continued to be the key driver of M&A volume. 82% of total announced M&A activity was corporate driven Key trends driving M&A: global scale, synergies, low financing costs, strong balance sheets - continue to drive M&A activity into 2016 China: Merger and acquisition deals worth a record $352 billion were completed in the first half of 2015; number of deals up 10%; deals worth 60% more (source: PwC) "China's economic slowdown is not curbing enthusiasm for deal making, quite the contrary. It pushes people to do deals to offset subdued growth" (source: UBS) 3

4 2015 YTD in review Middle East: Despite a rosy outlook, the Middle East adopts cautious approach given the new low in oil prices. The oil price drop, a coupled with short-term volatility in global markets, a feared slowdown in the Chinese economy and continued uncertainty in Europe, will force investors to review their priorities (source: KPMG) Large transactions have been the biggest driver of M&A volume; significant components of stock Active industries: energy, technology and healthcare So far this year, activity in the natural resources and the technology, media & telecom (TMT) sectors have driven M&A volume; TMT was the biggest contributor on a number of deals basis. Seven of the 20 largest transactions this year have been in the healthcare sector 4

5 2015 YTD M&A activity has been robust (US$ in billions) 5

6 Nearly one-third of M&As have been driven by strategic cross-border activity 6

7 While other indicators continue to point to continued M&A activity 7

8 Global merger control More than 120 countries have merger control regimes, list continues to grow Philippines Challenge to assess filing requirements; notification requirements in emerging markets often unclear (e.g. Common Market for Eastern and Southern Africa, Comesa ) Challenge to coordinate timelines and approvals globally Increased communication between countries Intragroup reorganizations may not be exempted (e.g. Korea, Russia) Need to be clear regarding time and cost expectations as part of deal Sanctions for failure to file (e.g. India) 8

9 Gun jumping and integration planning Key rule: Parties must continue to act as independent competitors until closing Gun jumping concerns arise when, prior to closing, the buyer exercises control over the ordinary-course activities of the seller Information sharing concerns arise from the sharing of competitively sensitive information that would allow the parties, either unilaterally or in coordination, to reduce competition Use of clean teams to manage risk 9

10 Examples of challenged gun jumping conduct Buyer takes control of a seller s factory or business unit before closing Merger agreement requires buyer approval for seller s ordinary course business decisions related to: Customer contracts Typical industry discounts Hiring Supplier contracts Buyer and seller allocate customers or buyer directs seller to slow negotiations with its customers Buyer directs seller to sell an asset before closing 10

11 GAIN Global Alignment and Integration Practice Gaining Value through Transformation and Integration

12 The DLA Piper approach Experienced leadership team of global DLA Piper advisors Kathleen Ruhland (Corporate) Jonathan Klein (Corporate) Alex Tamlyn (Corporate) Sander Wiggers (Corporate and Finance) Dan Cooperman (Corporate and Finance) Tim Marshall (Employment) Ute Krudewagen (Employment) Michael Hardgrove (Tax) Paul Rutherford (Tax) Assist in the formulation of a global structure plan Identify major integration and restructuring issues 12

13 Maximizing value throughout the entire deal process Pre- AcquisiJon: Structure and Planning Deal Process: Nego1a1on and Closing Post- AcquisiJon: Execu1on of Integra1on Plan Integration planning throughout the deal process ensures that your organization is able to maximize stakeholder value 13

14 Value creation from integration planning Revenue Enhancement Strategic Integration Planning Efficient & Effective Integration Execution Synergies Realized Cost Reductions Create acquisition synergies for the business Realize transformation value Streamline corporate structure Facilitate workforce alignment Position for sales of unwanted entities/assets Minimize business disruption 14

15 Critical integration success factors Speed especially important where the deal is based on cost savings Minimize business disruption Capture opportunities to improve overall structure Minimize integration costs including legal and tax costs Example: Risk Factors: The benefits that are expected to result from the merger will depend, in part, on our ability to realize the an1cipated growth opportuni1es and cost synergies as a result of the merger. Our success in realizing these growth opportuni1es and cost synergies, and the 1ming of this realiza1on, depends on the successful integra1on of the XXX and XXX businesses. 15

16 Country-specific integration issues Form of integration transaction Mergers and liquidations are often more time consuming that asset sales Taxation of integration transaction Antitrust approvals Country-level financial statements Timing of closing may necessitate preparation of local financial statements Necessary updates to transfer pricing policies 16

17 Country-specific integration issues employment focus deal structures US Americas APAC Share deal (Forward) merger Asset deal No change of employer No change of employer No change of employer Automatic transfer Automatic transfer Automatic transfer (Informal) Termination and rehire Generally employer substitution (except automatic transfer in quebec) (Formal) termination/ resignation and rehire* Europe Middle East No change of employer No change of employer Automatic transfer Automatic transfer / ARD / TUPE Automatic transfer Termination and rehire *Some exceptions, e.g., Singapore EA employees 17

18 Country-specific integration issues: employment focus deal structures Automatic Transfer Employer Substitution Termination and Rehire Resignation or Mutual Termination and Rehire 18

19 Country-specific integration issues: employment focus consultations Required? Share deal: sometimes (e.g., France if parent) Asset deal: usually With whom? Unions Works councils, employee representatives When? Early enough to influence deal Pre-signing? Condition of closing? What does it mean? France: Need opinion (yes/no) Germany: May need social plan/equalization of interest agreement UK: Consult with elected representatives about measures 19

20 Country-specific integration issues: employment focus global pitfalls Non-compete /non-solicits Lack of ability to hire Global benefits and pensions Comparability of offers Lack of ability to cherry-pick Global equity Data privacy Key employee agreements Transition services 20

21 Global cross-functional practice areas Corporate / Commercial Global Tax Real Estate Global Alignment and IntegraJon Employment and Benefits Intellectual Property / Informa1on Technology Finance 21

22 Practice description Our Global Alignment and Integration offering includes: Ø Pre-transaction restructurings, among them multinational spinoffs or separation of a business line into a new corporate structure Ø Post-acquisition integration of the target group into acquirer's operations Ø Realignment of divisional structures Ø Employee transfers or workforce reductions Ø Supply chain restructuring: trade between companies to maximize commercial and tax efficiencies Ø Harmonization of employee compensation and benefits Ø Global intellectual property planning to maximize after tax income from the exploitation of IP Ø Global holding company structures to maximize commercial and tax efficiencies Ø Identification of and elimination of duplicate entities Ø Maximizing the tax efficiency of debt funding and losses Ø Return of capital and liquidation of companies Ø Effective tax utilization of operating losses 22

23 Contact Kathleen Smith Ruhland Partner, Corporate T: South Eighth Street Suite 2800 Minneapolis, MN, Kathy Ruhland advises clients on cross-border transactions, including global M&A, restructuring and joint ventures, in established and emerging markets throughout the world. Recognized by third parties for providing superior client service, Kathy advises a number of world-leading corporations. Her recent work includes transactions in the Middle East and Europe, as well as India, Hong Kong and China. Advises companies in various industries in global M&A transactions which often involve multiple jurisdictions. Effective in directing large teams of lawyers and accountants to assist clients in structuring, negotiating, implementing and closing international transactions. Advises companies in negotiating, structuring, operating and exiting international equity joint venture arrangements, licensing, distribution and manufacturing agreements, collaborative marketing arrangements and other strategic alliances. Advises companies on global post-acquisition integration and restructurings including significant experience in global supply chain structures, complex reorganizations involving multiple jurisdictions and other group restructurings. 23

24 Contact Ute Krudewagen Partner, Employment T: University Avenue East Palo Alto, CA Ute Krudewagen focuses on providing multinational companies with solutions to the challenges presented in managing a global workforce. In addition, she counsels companies on employment issues triggered by cross-border transactions. Ute advises international and cross-border clients on a broad range of complex global employment matters, serving as trusted advisor and managing international counsel for a broad range of multijurisdictional and multidisciplinary projects. Her vast experience includes advising on global background checks, employment and independent contractor agreements, discrimination and harassment claims, social media issues, global policies and procedures, non-compete and proprietary information agreements, works council and union issues, codes of conduct and social responsibility, workplace privacy, employee assignments and global mobility programs, global reductions in force, restructurings and severance and retention plans. Ute also counsels global employers on the issues associated with transactions, including cross-border mergers and acquisitions, outsourcing, post-acquisition integrations and tax restructurings. She has successfully addressed employment issues in transactions with workforces in more than 60 jurisdictions in one transaction, with deal values ranging from US$2 million to US$8 billion, including negotiation and drafting of the deal agreement, employee transfers, consultations with unions and works councils, benefits harmonization, interim operating models and acquisitionrelated downsizings. Her experience includes advising both emerging growth companies and Fortune 500 companies across a wide spectrum of industries and jurisdictions across the globe, including technology/software, fashion/retail, pharmaceuticals, life sciences, energy, manufacturing and distribution and energy, as well as banking and finance. 24