Jefferies

Actionable Ideas for Companies and Sponsors

Increased Global Regulatory Scrutiny Creating Both Opportunities and Challenges in M&A

Active intervention by government regulatory bodies around the world driven by anti-trust concerns, national security protection, tax policy and changing domestic regulations is having both positive and negative implications on M&A activity.

For well-prepared potential buyers – both strategic and financial sponsor – the increasing number and size of disposals from transactions with anti-trust issues is creating a unique opportunity to acquire attractive assets outside a traditional auction process. In the U.S., divestitures from the spate of multi-billion-dollar transactions announced over the past eighteen months are expected to be significant contributors to mid-market M&A activity, particularly in the media and healthcare sectors.

Domestic regulators are also influencing deal activity. In China, the regulatory takeover of Anbang Insurance in January is expected to result in significant real estate divestitures in Europe and the U.S. In the U.S., the relaxation of certain aspects of the U.S. financial regulation laws is expected to spur U.S. bank M&A. And in the European Union, expansively-defined personal information data privacy regulations will result in increased M&A activity in data security, data hosting and personal information monitoring software.

On the cautionary side of this environment, considerations beyond price need to be even more carefully evaluated by clients. Government scrutiny of perceived reduction in competition, eroded domestic tax base, and national security implications, will require sellers and buyers to rethink who are the right counterparties for any potential transaction, and for clients to be even more astute in negotiating “deal certainty” provisions.