Cross-Border Deals

Recently, in the Mergers, Acquisitions, and Split-Ups course here at Harvard Law School, which is co-taught by Professor Robert Clark and Vice Chancellor Leo Strine, Jr., three expert practitioners shared their insights on the complex cross-border transactions that increasingly define the M&A landscape.

The panelists included Raymond McGuire, the co-head of Global Investment Banking at Citigroup, Toby Myerson, the co-head of Paul Weiss‘ Mergers and Acquisitions Group and Scott V. Simpson, the head of the European Mergers and Acquisitions Group at Skadden, Arps, Slate, Meagher & Flom.

Ray started the discussion with an overview of global trends in M&A and cross border transactions. He emphasized how the market today is far more globally connected, and that the increase in LBO activity during the 2002 to 2007 period was coincident with increased use of debt, and in particular covenant light debt. He also highlighted issues with the subprime market, and the government bailout of certain institutions.

Toby and Scott focused on the European regime, and offered fascinating perspectives on the social and political considerations that underlie the differences between the European and US approaches. In particular, Scott noted the differences in the corporate governance regime. For example, certain European countries such as Germany require directors to consider broader corporate interests, such as employee interests, in responding to takeover offers, as opposed to the US model where shareholder interests are paramount. Toby and Scott also took the class through case studies of two recent cross-border deals that illustrate the application of these principles, as well as the quickly changing landscape facing M&A practioners. The first case, Mittal Steel’s acquisition of Arcelor, illustrated how lawyers could exploit international reconciliation requirements to delay an acquisition, thus giving the target the ability to shop for a higher price. Scott noted how this successful technique is no longer effective due to recent international harmonization. He then discussed Access Industries’ Basell Holdings acquisition of Lyondell Chemicals Company, where the parties needed to use another technique involving the separation of voting and economic interests using derivatives. In both cases, the panelists highlighted the social and political matters that inevitably arise when a foreign acquirer pursues a large target.

A video of the discussion can be accessed online here.