mARCH 2012 www.lawyer-monthly.com Marsh

Even if it is a UK transaction there tends to be a cross-border angle to it as it is very rare these days to find a company that operates solely in just one jurisdiction.

Daniel Max

operates solely in just one jurisdiction. The deals might be led out of the UK, which is something we often see because a lot of PE firms that we deal with have a major focus on London, but most tend to have an element of cross-border activity within them.”

Daniel went on to discuss the

inevitable challenges that can arise within cross-border deals and the legal and regulatory implications that can accompany such deals. He explained: “There are a few challenges related to cross border deals, firstly there is the issue of dealing with different cultures - people have different expectations and different ways of doing things. For example, in different jurisdictions people are used to expecting different retention amounts or limitations under a sale and purchase agreement. Culturally people do deal slightly differently in different parts of the world.

“Another point is related to specific

areas such as tax. Tax is very different in different jurisdictions and so negotiating cross-border deals where particular tax regimes have to be taken into account, there is high importance attached to the level of understanding and diligence that is involved with that.

“Additionally, getting a good feel for

the fundamental negotiation aspects such as disclosure is critical - when we are considering insurance placements to back up M&A deals, we place a lot of reliance on the quality of the disclosure

process based on a detailed knowledge of the advisors and lawyers that are involved in the deal. What we see now as we are going into less tried and tested jurisdictions, is that sometimes questions are raised as to whether or not that jurisdiction can support the same standards of diligence and disclosure as others. That is not to say that they can’t, just that people tend to be more wary of it. As we end up working on more and more deals that have multi-jurisdictional aspects to them, we have to factor in to the process the fact that people are going to build a higher level of conservativeness in to the deal structure to take into account the fact that they cannot have quite the same level of comfort as they would normally because of uncertainty or lack of experience of a certain jurisdiction.

Trends have recently seemed to show

that there is increased interest in investing in SMEs. When asked about this, Daniel answered: “I don’t know whether or not there is an increased trend, but what I would say is that the last few years have seen PE firms reduce the enterprise value of deals they are prepared to look at. For example, where three years ago a mid-to-large buyout firm would be looking at deals of around £300million, they are now perhaps looking at deals of around £100million. The deal values may have reduced and it is a given now that the debt component will be a smaller percentage of the overall deal value

than before. Similar trends exist with advisors; top tier law firms are taking on or being invited to run a process on deals that are a fraction of the size they would be working on back in 2008 or before. We are seeing that quite regularly now, you have advisors traditionally associated with very large deals acting on what is not actually a particularly large transaction.

“This is a direct result of less large

deal activity and the fact that multi- billion pound acquisitions and club deals are few and far between these days.” LM

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Daniel Max