‘The personality types attracted to law often highly value accuracy and delivering the “perfect” answer, but that single-minded goal can be almost impossible in our business – it’s something that can be detrimental to your health and your relationships with your team and family.’
Continue reading “Stress test – partners on how they deal with a life under pressure”
The Argentine Civil and Commercial Code, the Companies Act and the Securities Act (when dealing with public companies), govern the main aspects of M&A transactions in Argentina. It is important to note that parties are free to choose a foreign governing law and agree on international arbitration or jurisdiction, provided there is a reasonable point of contact.
Continue reading “Understanding mergers and acquisitions in Argentina”
Why did you decide to become an M&A lawyer, and has it lived up to expectations?
My great grandfather was a lawyer, my grandfather was a lawyer, my father is a lawyer. I told my parents when I finished high school that I was considering a career as a doctor… you can imagine the reaction…
What’s been your most memorable deal and why?
Mittal Steel’s hostile takeover offer for and subsequent business combination and merger with Arcelor (we acted for Arcelor). I was involved in the transaction from the first to the last day, 18 months later.
The deal was the most complete learning experience I could have ever hoped for at that stage in my career. You had everything: a board willing to put up a vigorous defence; a legal knight/squire (actually, at some point we had nine knights/squires lined up in six different jurisdictions); interaction with six securities regulators; a crown jewel/antitrust defence; intense media coverage; and also navigating regulatory and commercial issues that seemed to mushroom every day.
The bidder had to raise its price three times. Mittal’s last offer valued Arcelor at €26.9bn – it paid a 100% premium to Arcelor shareholders on Arcelor’s highest-ever share price (initially Mittal’s €18.6bn offer implied a 25% premium).
If it’s different – what’s been the most memorable deal you’ve completed during difficult market conditions?
In 2023, in a down year for M&A globally and in a very difficult year for tech companies and leveraged buyouts, we had the opportunity to advise online advertising company Adevinta and its special committee of independent directors in connection with the $13.2bn offer from funds advised by Permira and Blackstone, as well as General Atlantic and TCV, to acquire all of the outstanding ordinary shares in Adevinta, eBay and Schibsted.
Since then, with inflation and interest rates appearing to settle, companies have started to capitalise on strategic opportunities. We have started to see a resurgence of large M&A dealmaking and a growing pipeline of M&A deals, reflecting a renewed confidence in deal making as well as the adaptability of market players.
How has the role of an M&A partner changed since you started out?
I’m not sure it has; or at least it hasn’t at my firm. Partners at my firm get stuck into transactions and work on all phases of complex deals as strategic advisers to the clients. While the pace of deals has been accelerating and technology has facilitated 24/7 exchanges with clients, M&A partners at my firm have always operated on that basis, it was just harder to do so 20 years ago, and required more physical time in the office.
What are your top tips for success for those who want to become M&A stars of the future?
Gain diverse experience – seek opportunities to work on a diverse range of M&A deals, across different industries and jurisdictions. Hone your analytical abilities to assess complex business risks and opportunities.
And then, most importantly, put yourself in the shoes of your client and ask yourself, is this work product, this email, this phone call, this advice useful to me? Is it digestible? What can I do with it?
Build strong relationships over your career (externally and internally), and start from day one. Seek mentorship and continuous learning – this is an important one. It is also important to offer to mentor people coming up through the ranks too, always offer the hand up just as others have done for you.
Keep on the straight and narrow – clients value a strong moral compass.
Lorenzo Corte is global head of transactions at Skadden, Arps, Slate, Meagher & Flom LLP.
In many ways, the deal is the easy part. Financing in place, subclauses, choosing exactly the right type of pen to make things official, and there you have it – it’s announced. Your company intends to acquire another company – and at a great price! You’re confident this is a transaction from which the public will benefit as well. You, the buyer. Them, the seller. Any number of interested third parties. You hold these things to be self-evident – it’s a good deal.
Then the phone rings. Your blood chills. There’s somebody you forgot to ask.
The Federal Trade Commission. Worse still – the Department of Justice agrees with them.
Continue reading “To live or die in DC – getting deals done amid US antitrust crackdown”
They say ‘you can have too much of a good thing’ and while cash is king, in a Belgian M&A context, this old saying turns out to be true.
In the context of M&A transactions involving one or more individual sellers who are tax residents in Belgium, ‘excess cash’ has become a hot topic. This results from the Belgian tax system under which, while private individuals may benefit from a full tax exemption on the capital gains they realise on shares (except under particular circumstances), a 30% Belgian withholding tax is levied on any dividends received.
In this framework, Belgian private individual sellers tend to leave amounts of cash that exceed the target companies’ operating needs (so called ‘excess cash’) on their balance sheets, hoping that the buyer will agree to take this cash into account when determining the acquisition price. This is bearing in mind that a buyer which benefits from the participation exemption in acquiring 100% of the target’s shares can – immediately or shortly after the transaction – upstream (free of tax) these funds to, eg, reimburse the acquisition debt(s).
Although these operations had been under the scrutiny of the Belgian tax authorities for several years, unless in (very) specific circumstances, it was only in 2012 with the introduction of the new general anti-abuse rule (GAAR) in the Belgian Income Tax Code that the tax administration found a legal basis for contestation.
Synthetically, the Belgian GAAR renders a legal act, or a set of acts thereof linked by a joint intent, that is constitutive of tax abuse as unenforceable against the tax administration. In such a case, the tax administration can impose the operations conducted as if the abuse had not taken place.
The application of the GAAR by the Belgian tax authorities led to the groundbreaking decision issued on 6 September 2022 by the Court of Appeal of Antwerp. In short, in this rather complex case:
The Belgian Supreme Court confirmed this decision in a ruling issued on 11 January 2024. In its ruling, the Supreme Court approved the Court of Appeal of Antwerp’s findings and reasoning and confirmed that for a joint intent between different operations to exist, it is not required that the taxpayer be formally part to all of them.
Now, relying on the precedents set by the Court of Appeal of Antwerp and the Belgian Supreme Court, the Belgian tax authorities are on the hunt for potentially abusive transfers of cash-rich entities by Belgian taxpayers and although it has always been a topic of discussion between sellers and buyers, excess cash is now more relevant than ever in a Belgian M&A context.
Indeed, although the seller is primarily responsible for the taxes to be paid on (deemed) dividend they receive, under the standard Belgian tax statutes of limitation the tax administration can only go back three years to claim evaded taxes from the seller, while it has a five-year window to act against the company if it considers the company should have withheld the tax due on the (deemed) dividend distributed. One cannot therefore exclude that the Belgian tax authorities try to recover the withholding tax from the company rather than from the individual seller in a scenario like the one presented to the Court of Appeal of Antwerp.
However, it is important to note that, in this case, it was obvious that the target company had excess cash and the tax authorities could prove that it was intended to be allocated to the reimbursement of the acquisition loans immediately or closely after the closing. Of course, it would be more challenging for the Belgian tax authorities to prove the existence of an excess cash issue and a court may refuse to apply the Belgian GAAR even to a sale of a cash-rich company if the debts incurred for the acquisition were serviced through the future profits of the target company’s activities and the cash was invested by the company itself (after the sale).
Finally, although the decisions summed up above do not shed much light on the concept of excess cash, which can be difficult to apprehend in practice, one can find guidance in the past Belgian Ruling Office’s decision on the so called ‘plus-values internes’/ ‘interne meerwaarden’ cases and the criteria developed and used by the Ruling Office from 2012-17 to assess the existence of excess cash.
Established in 2012, Tetra Law is a business law firm with offices located in Brussels which has rapidly emerged as a significant presence in all fields related to corporate and personal taxes, tax litigation and white-collar crime, corporate law, M&A and labour law. Tetra Law is grounded on three core principles: passion, synergy and enterprise. Passion for the firm’s unwavering dedication and commitment to clients and delivering excellence in the legal practice, synergy for its belief in maximising collaboration between different areas of expertise that mutually reinforce each other and enterprise for the firm’s dedication to providing pragmatic advice that brings added value to clients and their business endeavours. These core principles have led the firm to its current success.
Jérôme Terfve is a highly regarded lawyer in the field of corporate and tax law and a partner at Tetra Law. Jérôme focuses on the economic activity of businesses. He advises them on tax, accounting and corporate law issues. He assists in the planning and implementation of structuring and restructuring strategies, in developing M&A operations and in setting up remuneration and planning policies intended for executives and managers. He also assists clients with obtaining advance rulings and in litigation. Jérôme is the author of various publications and a lecturer, and is frequently invited to speak at conferences.
Guillaume Charlier is a lawyer and associate at Tetra Law. He advises businesses in the fields of corporate law and corporate taxation, dealing with M&A operations, due diligence, national and cross-border corporate and tax matters, restructuring and reorganisation, tax structuring and advance rulings. Guillaume has authored several publications in his areas of expertise and is a lecturer at the Belgian Chamber of Accountants in Brussels where he teaches corporate taxation.
Why did you decide to become an M&A lawyer, and has it lived up to expectations?
I became an M&A lawyer because I was instantly drawn to the pace and diversity that comes with being at the centre of a transaction – I don’t think my personality would work well not knowing everything about everything on a transaction. Being an M&A partner has definitely lived up to my expectations – it has been a privilege to work with really smart, dedicated and diverse teams within my firm, and with clients and advisers – the feeling of being part of a team that is striving to achieve something difficult together is the reason I still love what I do.
A quick scan of the inevitable January opinion pieces predicting trends in the litigation market for the year ahead gives a fairly consistent view of topics we are likely to see. Against a backdrop of continued economic and geopolitical instability, ongoing inflation, high interest rates and supply chain disruption, commentators foresee an increase in insolvency-related litigation and disputes resulting from pressure on commercial contracts. The same factors are likely to increase loan defaults and distressed debt claims. In addition, frauds inevitably emerge in the wake of failing businesses.
Commentators are similarly consistent in their observations that ESG-related litigation will likely increase due to increased regulation and undeterred shareholder activism. Lastly, no forecast is complete without referencing AI and the possible disputes that may arise from its increasing integration into our lives and the resultant regulation.
This all feels familiar. Turn the clock back a year to early 2023 and the predictions were pretty much the same. That perhaps comes as no surprise, given such predictions are a commentary on current themes coupled with educated assumptions rather than new topics dreamt up from a crystal ball. Furthermore, the economic, political, and social climate of 2024 seems little different from that of 2023. The world may not feel stable right now, but that instability is a constant in itself, and it seems likely that 2024 will be similar to 2023 in the litigation market. Thankfully, we are not (so far as we know, at least) in a year such as 2020 when everything changed. Is there a risk we are lulled into the false sense of security of thinking we know what to expect?
If you had to wager which current trend has the potential for surprise curve balls, surely it has to be generative AI. Its breakneck development speed and potential for integration into a broad range of sectors, from healthcare to manufacturing, gives it the power to create seismic changes. Following its explosion into the public consciousness in 2023 (a JP Morgan analysis paper notes that 40% of S&P 500 companies mentioned AI in their Q2 2023 earnings calls), might 2024 be the year the apocalyptic fear of malevolent robots taking over comes true? Or perhaps a new tool that finally allows us to clone our favourite associate? Perhaps not. But I don’t rule out the possibility that something dramatic happens regarding how we operate as lawyers or the litigation issues arising for our clients. Beyond the current seam of copyright infringement and data privacy claims emerging in the US, who knows what is next? Even ChatGPT can’t answer that question.
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If any trend is set to define the London disputes market in 2024, it is the continued rise of group litigation. A vast array of mass claims are winding their way through the courts, spurred on by an increased willingness to adapt to the challenges of case management, heightened awareness of environmental, social, and governance (ESG) issues on the parts of corporates and the general public, the maturing of the claimant Bar, and the development of the Competition Appeals Tribunal (CAT) regime – including the rise of the first opt-out class actions.
Following the refusal of the CAT to allow Dr Gormsen to commence collective proceedings in February 2023, a hearing at the start of January considered the reformulated claim. The revised claim alleged that Meta had abused its dominant position through its collection of ‘off-Facebook data’, and had combined this with data gathered on the platform to enable extremely targeted advertising. Through this collection, and arguing it formed a ‘take-it-or-leave-it’ condition, it was argued Meta had imposed an unfair trading condition on its users, who subsequently had suffered losses of over £2bn.
The reformulated claim was ultimately successful, with the CAT satisfied that there was a clear blueprint to trial laid out and that the ‘Pro-Sys’ test was met. The decision in the certification hearing was eagerly anticipated, in providing insight to the CAT’s ongoing approach to certifying class representatives, and whether they would continue with a low-bar approach. The CAT granted a collective proceedings order (CPO) based on the new application, holding there was an arguable and triable case against Meta. It was clarified that the CAT will be looking closely at funding arrangements at the appropriate stage, and, that collective proceedings were largely encouraged, with the judgment stating that ‘the certification process should be viewed in the light of access to justice’.
Michael Jacobs at Boies Schiller contends that the saga demonstrates the approach of the CAT to ensuring only meritorious claims are heard. ‘At the certification stage, you used to think the CAT would green light everything. In Gormsen v Meta, the tribunal said “hold on, the claim looks badly formulated”, and sent it away to reformulate. The CAT just greenlit bringing the reformulated claim forward. There are checks and balances in place to ensure claims aren’t entirely ill-conceived.’
For Liza Lovdahl Gormsen: Greg Adey (One Essex Court), Robert O’Donoghue KC and Sarah O’Keeffe (Brick Court Chambers) and Tom Coates (Blackstone Chambers) instructed by Quinn Emanuel Urquhart & Sullivan
For Meta: Tony Singla KC, Marie Demetriou KC and David Bailey (Brick Court Chambers), Andrew Lomas (One Essex Court), and James White (Henderson Chambers) instructed by Kim Dietzel and Stephen Wisking (Herbert Smith Freehills)
2018 saw Ofcom decide that BT held significant market power in relation to stand-alone landline customers, finding that the company had been overcharging customers by at least £7 a month. Due to the significant market power exerted by BT, Ofcom and BT agreed to reduce its prices going forward. However, compensation was not provided for consumers for the previous years of overcharging, nor for clients who had purchased both internet access and phone access.
The initial claim, filed in 2020, saw class representative Justin LePatourel seeking compensation on behalf of these consumers. In the first-ever opt-out collective action to reach trial, it is set to be closely watched by claimant and defendant firms alike, and is anticipated to have significant effects on the class action landscape in England and Wales.
The CAT first considered the claim, brought on behalf of over three billion BT customers and valued at £1.3bn, in a six-week hearing from 29 January. Milberg partner Natasha Pearman explains that the claim has already dealt with a range of novel issues including class certification and disclosure. The proceedings following trial will provide clarity regarding the tribunal’s approach to damages and returns to funders – in particular in cases where a high proportion of class members who are either elderly or deceased.
For Justin LePatourel: Ronit Kresiberger KC, Jack Williams, and Michael Armitage (Monckton Chambers) and Derek Spitz and Matthew Barry (One Essex Court) instructed by Sarah Houghton (Mishcon de Reya)
For BT: Daniel Beard KC, Daisy Mackersie and Natalie Nguyen (Monckton Chambers) and Ali Al-Karim and Sarah Love (Brick Court Chambers) instructed by Patrick Boylan and Satyen Dhana (Simmons & Simmons)
For the Competition and Markets Authority as an intervening party: David Bailey and Jennifer MacLeod (Brick Court Chambers) instructed by the CMA in-house team