At the 2017 Mergermarket European Corporate Development Summit, on July 6, 2017, the Kira Systems team had the opportunity to hear Martin Mendelssohn and Alexandra Romert from the law firm CMS give a presentation of their recently published European M&A Study 2017. The presentation highlighted key developments within sale and purchase agreements from the past 12 months, trends in deal structures and how deal terms compare between different European regions and the USA. Inspired by their presentation, we thought we would share some of their key insights with you, and show you how Kira can help you keep track of the shifting legal landscape around the world.
The CMS study looks at the trends in M&A in Europe in the context of the big political changes over the past year, including Brexit and the US election. To prepare their report, CMS compared data from over 3,200 M&A deals in Europe where CMS acted for either the buyer or the seller, and used historical data on deals they acted on going back to 2007 by way of comparison. CMS also used US data from the “2015 Private Target Mergers & Acquisitions Deal Points Study” prepared by the American Bar Association. Here are a few of their interesting conclusions:
- Deal Flow: while global deal value fell by 18% in 2016, recent geopolitical developments did not adversely affect deal flow. This was especially the case in Europe which benefited from an increase in UK deals as a result of the weaker GBP.
- Risk Allocation: the political climate has had the effect of shifting more risk back to the seller, a reversal of the trend noted since 2010.
- Deal Size Variations: some of the general trends noted include the increased inclusion of purchase price adjustments, fewer (but longer) earn-outs, and proportionately lower liability caps in deals in excess of €100m as compared to under €100m.
- Regional Variations: the study highlighted both regional differences within Europe, as well as between Europe and the US. For example, deals in France included longer warranty periods (40% had a period of at least 24 months) compared to those in Benelux (8% had a period exceeding 24 months, the lowest in Europe). They found that indemnity baskets are much more prevalent in the US (90% vs. 55%), and the basis for recovery also diverges (65% of US baskets are based on “excess only” recovery, compared to 18% in Europe).
Gaining this type of visibility into global legal trends that are continuously shifting can be time consuming and labor intensive. Kira provides firms with a tool to conduct their own deal points studies that focus on the issues and provisions that are most important to their clients.
CMS has the market penetration in many European jurisdictions that allowed the firm to use only its own data to create its study. With Kira, firms of all sizes can:
- upload their own documents, or sample documents that are publicly available;
- extract provisions they’re most interested in tracking by using any of Kira’s 245 built-in provisions, or train custom provisions using Quick Study;
- review summaries in multiple formats that highlight market trends and anomalies; and
- create a searchable archive of those provisions for future use.