M&A Practice Update: Lessons From The Eurozone Crisis

  1. Introduction

    Greece's recent second bailout of €130bn and related debt cut has successfully resulted in the country averting a disorderly default and exit from the eurozone, for now at least. It has also provided an element of stability to the uncertainty that had previously plagued the future of the euro and its members generally, though underlying doubts remain over the health of several of the economically weaker eurozone nations.

    The uncertainty and speculation that the problems faced by certain of the weaker eurozone countries might lead to a breakup of the eurozone in some form or another, has undoubtedly had somewhat of a suppressant effect on the European M&A market in recent months. However, the practical experience, legal analysis and market commentary regarding the issues over the past several months as the crisis has unfolded have given rise to some key practice points for crossborder European M&A deals and for buyers' assessments of eurozone risks.

    As the eurozone crisis continues to play out, there are certain key steps and approaches that M&A market participants can and should take to seek to quantify and assess deal risks going forward. This Stay Current identifies and discusses certain key practice points and will be of interest to those looking to acquire businesses or assets with significant European exposure. It will also be of use to multinationals who already have European operations and who are looking internally to analyse and assess their current risk.

  2. Implications for M&A: key practice points

    Interest in European M&A investment is increasing. However, any potential purchaser will remain concerned to ensure that the risks involved in acquiring a business with significant exposure to some of the weaker member states are adequately understood, assessed and, to the extent possible, protected.

    In this regard, the two principal ways in which the purchaser would want to re-focus its M&A practice and protections are:

    Due diligence – obtaining as complete a picture as possible of the relevant eurozone risks associated with the target business; and SPA protection – obtaining appropriate protection in its share or asset purchase agreement. Each of these aspects is discussed in more detail below.

    1. Due diligence

      If a purchaser is looking at a target with pan-European operations, including in one or more of the economically weaker member states, then the principal risks it will be looking to assess are what might happen if...

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