Weir and Garrod Quoted in IFLR Articles on Future of M&A
The article “Covid-19 now part of the M&A legal process” reports that dealmakers are adapting to a completely new environment, with some deals taking longer to complete due to the coronavirus pandemic. Others have to be revisited altogether.
Referring to the use of material adverse clauses (MACs) and force majeure wording in pending transactions, Weir said he has advised on more of them “in the last eight weeks” than the rest of his career. Some clients, he said, want to know the potential risk from using them, while others are looking at potentially extracting themselves from a transaction or using the threat of a MAC or force majeure as leverage. “On unsigned deals, people are revisiting standard boiler plate clauses and looking at how they can be rephrased,” he added.
While Weir does not think the current lockdown shuts off all cross-border mergers, human connection, he said, “can prove vital in kicking off a deal and this does pose a challenge in terms of planning a deal pipeline.” If a deal still makes strategic sense, though, “it will do so in three or six months’ time, when lockdown restrictions should be lifted.”
Weir also predicted that private equity funds will drive a lot of deal activity, due to “a lot of cash waiting to be deployed in the right sectors and for the right targets.”
The article reports that regulatory approvals, delayed under the current circumstances, could also be a factor for deal activity. Garrod said, “This means that reviews of the more complex and controversial deals have been delayed. However, the [European Commission] is able to push through with the more straightforward, simplified deals on a similar timeframe.”
In the article “Dealmakers already looking to 2021 as M&A market disappears,” IFLR reports that the UK’s Competition and Markets Authority recently referenced the impact of the pandemic as it decided to approve a deal, because of how the unprecedented circumstances could force one of the parties to exit the market otherwise.
“It is one of few failing firm defense cases to date,” said Garrod. “Expect to see acquirers use this defense more often as distressed acquisitions abound this year.”
While Weir remains optimistic about the future, he said that “a lot of conversations are going on via video conference” in order to get deals done.