Corporate/M&A

In a nutshell

Corporate lawyers provide advice to companies on significant transactions affecting their activities, including internal operations, the buying and selling of businesses and business assets, and the arrangement of the finance to carry out these activities.

Mergers and acquisitions (M&A) involve one company acquiring another by way of a takeover (acquisition), or two companies fusing to form a single larger entity (merger). The main reasons for a company to execute an M&A transaction are to grow its business (by acquiring or merging with a competitor) or add a new line of business to its existing activities. Mergers are also a means of strengthening two or more existing companies facing financial trouble, and companies going into administration can be snapped up in so-called pre-pack deals. M&A can either be public (when it involves companies listed on a stock exchange) or private (when it concerns companies privately owned by individuals).

Corporate restructuring involves changes to the structure of a company and the disposal of certain assets, either because the company wants to concentrate on more profitable parts of its business, or because it is facing financial difficulties and needs to free up liquidity.

What lawyers do

  • Negotiate and draft agreements – this will be done in conjunction with the client, the business that is being bought or sold, other advisers (e.g. accountants) and any financiers.
  • Carry out due diligence – this is an investigation to verify the accuracy of information passed from the seller to the buyer. It establishes the financial strength of the company; the outright ownership of all assets; whether there are outstanding debts or other claims against the company; any environmental or other liabilities that could reduce the value of the business in the future.
  • Arrange financing – this could come from banks or other types of investors; they will wish to have some kind of security for their investment, e.g. participation in the shareholding, taking out a mortgage over property or other collateral.
  • Gather all parties for the completion of the transaction, ensuring all assets have been properly covered by written documents that are properly signed and witnessed. Company law requires that decisions are made at properly convened board meetings and recorded in written resolutions.
  • Finalise all post-completion registrations and procedures.

Realities of the job

  • The type of clients your firm acts for will determine your experiences. Publicly listed companies and the investment banks that underwrite deals can be extremely demanding and have a different attitude to risk than, say, rich entrepreneurs, owner-managed businesses (OMBs) and small to medium-sized enterprises (SMEs). To deal with such clients, a robust and confident manner is required and stamina is a must.
  • Corporate transactions can be large and complicated, with many different aspects of the company affected in the process. Lawyers need to be conversant in a variety of legal disciplines and know when to refer matters to a specialist in, say, merger control (competition), employment, property or tax.
  • Corporate deals involve mountains of paperwork, so you need to be well-organised and have good drafting skills. Above all, corporate is a very practical area of law, so commercial acumen and a good understanding of your clients’ objectives is a must.
  • Corporate work is cyclical and therefore the hours lawyers work can vary depending on the general state of the market and the particular needs of the clients, whose expectations have risen even further since the widespread use of instant modes of communication. It's fair to say there can be some very late nights.
  • The most junior members of a deal team normally get stuck with the most boring or unrewarding tasks. The banes of a corporate trainee’s life are data room management (putting together and caretaking all the factual information on which a deal relies) and bibling (the creation of files containing copies of all the agreed documents and deal information). More challenging tasks quickly become available to driven junior lawyers.
  • You need to become absorbed in the corporate world. If you can’t develop an interest in the business news then choose another area of practice pronto.
  • A sound grounding in corporate finance makes an excellent springboard for working in-house for major companies. Some lawyers move to banks to work as corporate finance execs or analysts. Company secretarial positions suit lawyers with a taste for internal management and compliance issues.

Current issues

  • The value of inbound M&A fell from a record high of £190 billion in 2016 to £35.3 billion in 2017, a similar value to 2015. Inbound M&A in the first quarter of 2018 picked up from the final quarter of 2017 to £21.7 billion, but the value of outbound M&A dropped to £1.7 billion. The value of outbound M&A was £76.6 billion for the whole of 2017, the highest since 2000 – the acquisitions of Mead Johnson by Reckitt Benckiser and Reynolds American by British American Tobacco accounted for 75% of that figure. Meanwhile the value of purely domestic deals fell from £24.7 billion in 2016 to £18.6 billion in 2017.
  • Uncertainty in M&A markets typically leads to a drop in investment activity in general, and if Brexit negotiations go sour M&A and investment are likely to take a hit. Of late, deals in the UK have primarily been driven by inbound activity as savvy investors looked to take advantage of the declining value of the pound after the EU referendum. Foreign investment from China has been especially high: in 2016 there were 25 Chinese-led UK acquisitions valued at £6.8 billion compared to 15 at £1.3 billion in 2015.
  • Large corporate businesses with global operations often have to apply for merger clearances in a number of territories worldwide before a transaction can be completed. The British government continues to tighten its screening of foreign investments to ensure that takeovers are in the national interest and to limit potential threats to national security. A 2018 white paper sets out plans to screen inward investment from China specifically. The move follows similar action taken by the US, Germany and France. Out of the main Western economies, Britain is one of the most open to foreign investment, with international investment creating 76,000 jobs in 2017.
  • Globally, the value of M&A deals reached $2.5 trillion in the first half of 2018 (a 65% leap from the same period in 2017). While the UK, North America and the Asia-Pacific region all saw dips, deal value in Germany rose by 27%. India and Africa were also bustling with M&A activity. The technology, energy and industrial/chemical sectors are producing lots of deals, while the consumer, retail and leisure sectors are performing more poorly.
  • Despite the political uncertainty caused by Brexit, many industry experts are hopeful UK investment will remain strong throughout 2018 and 2019. Others suspect the inevitable re-jigging of global trading relationships post-Brexit may hinder M&A activity.