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Global M&A market is the focus of a new report by Eversheds Sutherland

  • Poland
  • Press_Releases

13-05-2019

Eversheds Sutherland has published its M&A Market Monitor, a guide to key M&A transaction terms as well as global trends in this area. The growing popularity of the “locked box” mechanism, significant growth in the use of W&I insurance, and the differing approaches to two-stage transactions in Europe and America are the most important conclusions flowing from the report. The publication covers the US, British, and Continental European markets.

Aim and process of research

The report was created on the basis of over 10 years of monitoring global trends in M&A transactions. The aim of the analysis was to compare and evaluate world trends that can be observed in transactions and to understand market practices in Europe and the US, which can help better assess the factors contributing to reaching agreement between the parties negotiating transactions and their advisers.

Eversheds Sutherland’s M&A Market Monitor Report was compiled and updated by our team of researchers. They have analysed deal information from the 500+ deals that we complete each year (including Poland) and balanced this with interviews with our Global Corporate Partnership and third party research of market trends to provide the most accurate position possible. Our sector-focused teams have also built detailed narrative of where and why specific sectors deviate from market norms.

The report also presents case studies from the international practice of Eversheds Sutherland, often very instructive, addressing concrete situations that required further resolution by courts and regulators.

A better understanding of M&A transactions

For professionals less involved in M&A, the report provides an excellent introduction to the key elements used to structure M&A transactions and a better understanding of these complex projects, for example the issue of determining whether and how a transaction should be spread out over time. Interestingly, two-stage transactions are much more common in the United States (where signing and closing were conducted separately in 85% of transactions) than in Continental Europe and the UK (where simultaneous signing and closing is the more common practice).

Another key element is the price and how it is calculated. There are numerous options in this regard, but certain standards are developed in transactional practice. Agreements may include a mechanisms for adjustment of the price based on financial data verified after the closing (known as “completion accounts”), but in Europe the “locked box” construction is more common, where the price is fixed prior to closing by reference to the items on the balance sheet of the target at an agreed point in the past, with only limited possibilities for price adjustments based on a “leakage” mechanism. This is the mechanism preferred also by financial investors, such as private-equity funds. There are many examples of other elements, and these can also be found in the report.

The report also includes an analysis of tax issues, which are addressed in transaction agreements in a range of ways. Although tax issues are peculiar to each jurisdiction, certain similarities in approach can be identified through comparison, which can help in negotiating and drafting the terms of the transaction.

The report also discusses trends in the market for transaction insurance (warranties and indemnities coverage). In the last 20 years there has been an observable increase in interest in these products in Poland as well. They are gaining in popularity, which is also driving down the cost of W&I insurance. On the other hand, the market is changing and insurance companies are offering increasingly flexible, varied and refined products. W&I policies have ceased to be an imperfect tool of last resort, and now constitute an integral part of many transactions from the very beginning, and this can also be seen on the Polish market. In the report we also present key terms, including a comparison of costs and other elements of this insurance.

Who will find the report useful?

The report should be particularly interesting for entities planning an acquisition—not only private-equity funds, but anyone considering acquiring a company in Poland or abroad.

 

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Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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