Increased regulatory scrutiny and its “chilling effect” on M&A was top of mind for speakers on Day One of Tulane’s 34th Annual Corporate Law Institute conference in the Big Easy.
Dealmakers should realize that in the current environment, deals will take longer to get done, the speakers said. Expect a “paradigm shift” in dealing with this issue, said Scott Barshay of Paul Weiss. For major transactions, dealmakers should allot a year, give or take, to get a deal done, at least for the duration of the current administration.
With companies holding record cash balances and financial sponsors pressured to deploy cash, deals will still happen in 2022.
Companies have accrued $3.8 trillion in cash, of which 20% is held by Big Tech, according to a presentation by Gordon Dyal of Gordon Dyal & Co. Private equity coffers total $1.3 trillion.
As companies and their advisors take measure of regulatory risk, there is now more focus on quiet, efficient negotiations, said Melissa Sawyer of Sullivan & Cromwell. While it can be a tough decision for a target company to limit its buyer pool, some boards believe single bidder deals can reduce the possibility of a leak, which can be especially damaging in terms of managing stakeholder reception of transactions.
In the face of the evolving regulatory environment, other panelists have seen their clients take risk off the table before announcing a deal, sometimes with a “fix it first” approach. To aid the antitrust process, companies could choose to sell a stake in a joint venture before filing, for example. Ideally you can close the fix before you’ve made your filing, added Ethan Klingsberg with Freshfields.
Later this morning, our CEO Steve Lipin will be discussing these subjects and more with Lauren Silva Laughlin of Reuters Breakingviews, Svea Herbst-Bayliss of Reuters and Michelle Davis of Bloomberg.
Have a great weekend,
The GPP Team
