Globalne transakcje fuzji i przejęć w 2020 - wpływ COVID-19

2020
Global M&A in 2020:
Impact of COVID-19

32
GLOBAL M&A IN 2020: IMPACT OF COVID-19GLOBAL M&A IN 2020: IMPACT OF COVID-19
Contents
Introduction............................................................................................................................................... 05
1. Who, what and how?........................................................................................................................... 08
Sellers........................................................................................................................................................ 08
Sectors...................................................................................................................................................... 09
Deal process............................................................................................................................................ 10
Distressed M&A...................................................................................................................................... 11
Deal types................................................................................................................................................. 12
Due diligence.......................................................................................................................................... 13
2. Pricing mechanisms............................................................................................................................. 14
Pricing mechanisms: majority share deals....................................................................................... 15
Earn-outs.................................................................................................................................................. 16
Earn-out periods to bottom................................................................................................................. 16
3. Conditional deals.................................................................................................................................. 18
Split sign & close.................................................................................................................................... 18
Costs protection..................................................................................................................................... 19
Conditions................................................................................................................................................ 19
MAC protection....................................................................................................................................... 20
Repetition of warranties........................................................................................................................ 20
4. Security.................................................................................................................................................... 22
Escrow....................................................................................................................................................... 22
5. Limitations.............................................................................................................................................. 24
Claims threshold..................................................................................................................................... 24
6. W&I / RWI................................................................................................................................................ 25
COVID-19 exclusions.............................................................................................................................. 25
Claims........................................................................................................................................................ 26
7. Disputes................................................................................................................................................... 28
COVID-19 impact on M&A disputes.................................................................................................... 28
Outlook for M&A disputes.................................................................................................................... 29
DLA Piper: Our global presence........................................................................................................... 30
About DLA Piper........................................................................................................................................ 32

54
When we published our annual M&A Intelligence report in spring of
this year, Asia was in the midst of dealing with COVID-19, Europe was
just starting to feel the impact and for the US, COVID-19 was widely
expected to have an impact but the scale and timing was unclear.
Many people, including us, speculated on how the M&A market
would react to the unprecedented disruption and government
support for the economy and how deal terms might change as
the scale and severity of the pandemic became clear. Looking back,
there is no doubt that Q1 2020 witnessed one of the biggest and
most sudden disrupting events the global M&A market has ever
experienced but, just as it has with all geopolitical events to date,
the M&A market has adapted and recovered.
So what are the headline changes?
COVID-19 has impacted businesses in many different ways. Whilst
the vast majority have been adversely impacted, for some the
impact has been minimal and for others it has been positive. Those
businesses already riding the wave of technological or societal
change have seen that change accelerate and the value of their
businesses grow. You will see from the following pages that this is
reflected in the market. Some transactions are done on terms that
mirror those prevalent in the sellers’ market of 2018 and H1 2019.
Others look very different and where a seller needs to sell that is
very often reflected in the deal terms.
Overall, our research shows that whilst there have been some
changes to deal terms, many things have also stayed the same; in fact
it is fair to say that more stayed the same than some commentators
expected. 54% of our partners surveyed reported that the general
balance of deal terms between buyers and sellers has not shifted.
There was undoubtedly significantly less M&A around the globe in
Q2. Many deals were put on hold, others aborted entirely and those
that did continue on average took longer to reach signing and closing.
Many deals that were signed in the pre-COVID world suddenly looked
very different from a buyer’s perspective and we saw some buyers
looking to exercise walk away rights; buyers in deals that had not
signed sought to negotiate broader termination rights than had been
market standard prior to the pandemic.
Introduction

76
In fact, 2019 and Q1 2020 saw an already slowing M&A market and
deal terms were showing signs of moving in favour of buyers. As
with many things, COVID-19 accelerated that trend. We have already
seen more M&A related litigation and that is probably the start of
a trend that will continue over the next few years as buyers look to
recoup value for businesses that have performed very differently
to expectations.
All that said, a lot has stayed very similar. We expected to see more
asset deals but the balance between asset deals and share deals
stayed broadly the same. Some ‘hot’ assets remained very much
in demand and we continued to see highly competitive and quick
processes for certain assets (including distressed businesses
marketed at discounted valuations).
The ‘locked box’ continued to be just as popular in Europe save
for smaller deals where we saw an overall increase in completion
accounts; escrows were used in a similar number of deals although
where they were used, the time they were held for and the escrow
size all increased and finally, whilst we saw some increase in earnouts,
it was lower than we expected – it may be that where a price couldn’t
be agreed, the parties put the deal on hold rather than try to agree
an earnout structure in an environment where the foreseeable future
remained relatively uncertain.
Some things did not change
DLA Piper has been the world’s busiest M&A practice for each year
in the past decade (Mergermarket 2019). The stats for 2020 aren’t
out yet but we can confidently say we have continued to be one of
the busiest M&A practices in the world, giving us unprecedented
insight into the terms on which deals get done. As well as reflecting
the results of a survey of our global M&A partners, our report looks
at deals we advised on across the globe in the post COVID-19 era
and compares them to deals from 2019, giving real insight based on
actual deal data into how the market reacted.
Finally, a little housekeeping. We recognise that COVID-19 hit
different parts of the world at different times and therefore selecting
a threshold date for a post COVID-19 deal is not a precise science.
For the purposes of this report, we have chosen the date on which
the WHO declared COVID-19 as a global pandemic (11 March 2020)
as our threshold.
We hope you enjoy the report. As ever, your usual DLA Piper
corporate contact would be pleased to discuss any of it with you.

98
Sellers
COVID-19 caused a significant initial slowdown in the global M&A
market. According to Mergermarket, global M&A activity decreased
32% by volume and 53% by value in H1 2020 compared to H1 2019.
When the pandemic hit and countries entered lockdown, unless sale
processes were very well progressed, trade and PE sellers generally
pulled assets from the market and during Q2 2020 very few new
processes started.
New sale processes that were launched at the beginning of the
pandemic were generally: (i) forced sales where the seller had no
choice but to proceed with the sale (e.g. due to financial distress
of the seller, target or both); (ii) where sellers remained intent
on exiting their business (e.g. individual founder sellers who are
concerned about possible changes in capital gains tax rates) or the
business required further funding from PE or other investors; or (iii)
for assets whose value increased as a result of the pandemic (e.g.
certain types of technology and healthcare companies).
However, since the summer break, we have seen more and more
trade and PE sellers look to bring their assets to market and start
auction processes. A number of these have yet to proceed to
signing and it remains to be seen how many of these processes
will successfully conclude, particularly in light of the COVID-19
“second wave”, and any subsequent waves we may see in 2021.
Nevertheless, combined with continuing unprecedented levels of
dry powder and available debt, hopes around viable vaccines and
rebounding capital markets lead us to believe that H1 2021 will be
a significantly better period for M&A than H1 2020.
Our statistics for 2020 reflect the above and show (as compared
to 2019) a decrease in trade and PE sellers and a corresponding
increase in the percentage of individual sellers.
1. Who, what and how? Sectors
• Technology has been our most active sector, accounting for
21% of our post-COVID-19 transactions. The pandemic has
required businesses to look at their business models and how
they need to adapt to the new world in which we live. This
has caused many businesses to seek to accelerate their focus
on digitalisation and use of technology, making technology
companies attractive to buyers.
• The consumer goods, food and retail sector has also seen
significant activity. However, much of this has been in the food
manufacturing sub-category of this sector (as opposed to food
service) and there has been little retail M&A (other than in
distressed scenarios).
• Other active sectors include infrastructure, construction and
transport and industrials. There have also been a number of
significant transactions in the life sciences sector for attractive
pharma assets.
• The real estate sector saw a significant drop off in M&A activity,
Technology
Consumer goods, food & retail
ICT
Industrials
Life sciences
Energy & natural resources
Financial services
Professional & business services
Real estate
Media, sport & entertainment
Healthcare
Other
Deals by sector
Trade
PE
Individuals
12%
28%
18%
21%
17%
13%
13%
9%
5%
5%
4%
2%
1%
1%
9%
Change in sellers

1110
Distressed M&A
Many predicted that by the time of writing this report we would have
already seen a significant increase in the volume of distressed M&A
transactions as a result of the COVID-19 pandemic. However, this
is yet to materialise. This is likely due to the levels of government
support provided to businesses across the globe and restrictions
placed on landlords, debt providers and other creditors from
enforcing their rights against businesses.
Unfortunately, we still expect there to be a significant uptick in the
number of distressed M&A transactions when the breathing space
given to businesses is removed and government support falls away.
Distressed M&A could be a significant feature of the global M&A
market in 2021. Indeed, we are already seeing a number of investors
looking at roll-up strategies in areas such as retail and hospitality
and leisure.
In the distressed M&A transactions that we have seen, 20% used an
accelerated M&A process run on a very short timetable and with one
or a small number of bidders. The target has been in financial distress
in 70% of the distressed M&A transactions we have advised on, with
the seller group being in financial distress in 40% of the transactions.
Deal process
The percentage of deals completed as a result of concluded auctions
nearly halved, with auctions accounting for only 9% of our post-
COVID transactions compared to 17% of transactions in 2019. For
transactions with a value in excess of EUR100m, auctions remained
at similar levels to 2019 but otherwise they were rare (especially
new processes). Given the environment, potential buyers have been
less willing to take up significant amounts of management time and
incur advisory fees on auction processes where there is no certainty
that they will be successful. Similarly, COVID-19 led to many sellers
pulling or delaying auction processes at the start of the pandemic,
and many of those that were relaunched after the summer have yet
to conclude.
For particularly attractive assets (e.g. certain pharma and technology
companies), we have seen highly competitive auctions, involving a
large number of bidders and run on very short timetables. However,
for assets that are less attractive, those auctions that have continued
have generally involved fewer bidders and have been conducted on
extended timetables (partly due to logistical issues for bidders in
carrying out due diligence but also to enable bidders to assess the
impact of COVID-19 on the target). One notable exception came
in the form of a number of “fire sale” situations, where processes
were accelerated.
Post-COVID deal process
<EUR100m >EUR100m
Seller Group in financial distress
Target in financial distress
67%
93%
33%7%
Non-Auction Auction
Unsurprisingly, we have also seen a significant increase in the
percentage of auctions that broke at some point during the process.
Over 50% of our partners surveyed reported seeing an increase in
the number of broken auctions. Although, interestingly, as many
auctions broke due to a pre-emptive bid as they did due to a lack of
bidders and/or interest.
70%
10%
40%
Law Firm of the Year, Paris Grands Prix Private
Equity Magazine Awards, 2019 & 2020
#1

1312
Deal types
The vast majority of our transactions (representing 67% of our post-
COVID-19 deals surveyed) continue to be structured as the acquisition
of all of or the majority of the shares of a target company. However,
the proportion of our deals that utilise these transaction structures
has decreased by 15% compared to 2019, which is significant.
Interestingly, and perhaps indicative of buyers looking to mitigate
risk, we have seen a significant increase in minority share deals, which
accounted for 15% of our transactions. These minority share deals
were often accompanied by a call option or some other path
to control for the new investor.
We have also seen an increase in the proportion of deals being
structured as asset sales compared to 2019 but perhaps not as
significant as many predicted, accounting for 14% of our deals
surveyed. However, given the ability to leave historic liabilities
behind in an asset sale, these may become ever more prevalent
in the coming months, particularly in distressed M&A transactions.
Due diligence
Over a third of our partners surveyed reported that they had
encountered practical difficulties with carrying out due diligence
as a result of the pandemic (e.g. an inability to carry out in-person
site visits, difficulties in obtaining documents to be uploaded to
data rooms during lockdowns, etc). Where such practical difficulties
were encountered, due diligence inevitably took longer and led to
extended deal processes.
Two-thirds of our partners surveyed also reported that the pandemic
had led to a change in emphasis of due diligence. Buyers are
particularly focussed on:
• current trading;
• supply chain disruption;
• its impact on material contracts (e.g. termination, reduced
volumes, etc);
• its impact on employees and their working environment; and
• government support taken by the target.
Change in deal type
Shares – Majority
Shares – Minority
Assets
Mixed
15%
87%
40%
33%
International Law Firm of the Year,
The African Legal Awards, 2020
#1

1514
2. Pricing mechanisms
Pricing mechanisms: majority share deals
• Locked box pricing mechanisms have always been rare in US
transactions. Outside the US, many predicted that there would
be a significant shift away from locked box pricing mechanisms
towards completion accounts.
• Although our statistics show that there has been a move to
completion accounts away from locked boxes, the change has not
been as significant across non-US deals as many expected.
However, our statistics show there has been a significant increase in
the number of non-US deals that use completion accounts pricing
mechanisms as opposed to locked box in the lower-to-mid and mid-to
-large deal segments. In the mid-to-large category, only 33% of our
non-US post-COVID deals were locked box deals, compared to 73%
last year. There has been no significant change in non-US small deals.
Where completion accounts are used, the adjustment mechanisms
generally remain net debt and working capital. Only 19% of our
partners surveyed reported seeing an increase in revenue or
earnings adjustments.
Locked box
In post-COVID deals, it has been rare for locked box accounts to
be more than six months old, with 87% being up to six months old
(compared to 70% pre-COVID). Interestingly, we have not seen a
significant difference in accounts that have been four months old
or less (54% of post-COVID deals surveyed compared to 49% of
pre-COVID deals).
Completion accounts Locked box Other
50%
63%
33%
44%
6% 4%
Pre-COVID Post-COVID
Age of locked box accounts
Completion accounts Completion accountsLocked box Locked boxOther Other
<4 months >12 months>4 months <6 months >6 months <12 months
Small Lower–mid Mid-large Small Lower–mid Mid-large
56% 58%
49% 54%
21%
33%
28%
10% 2% 3%
73%
67%
42%
18%
33%
9%
40%
4%
49%
42%
9%27%
73%
International Law Firm of the Year,
Law.com 2020
#1

1716
Earn-outs
Our reports have consistently shown that there is a correlation
between a more buyer-friendly market and an increased prevalence
of earn-outs. We would therefore expect the post COVID-19 market
to see more earn-outs, particularly to bridge pricing gaps between
buyers and sellers.
This is, to some extent, verified by our data but the picture is more
nuanced than we might have expected. The prevalence of earn-outs
for deals surveyed of under EUR100m increased (up around 5%
overall) whereas for deals over EUR100m, we actually saw a decrease.
The (hopefully) one-off nature of COVID-19 is probably a significant
factor here, with many sellers being reluctant to entertain reduced up
front pricing in return for contingent consideration that is likely to be
materially impacted by a unique and exceptional occurrence.
Earn-out periods
The data on earn-out periods is much clearer – we have seen a
significant shift from earn-out periods of under two years to earn-
outs of over three years. This reflects the uncertain duration of the
COVID-19 impact on certain target businesses.
<EUR50m
<1 year >1 year <2 yeras >2 years <3 years >3 years Event driven date
> EUR50m <EUR100m > EUR100m
Post-COVID deals with earn-outs
Earn-out periods
16%
25%
11%
26%
22% 24%
17%
22% 22%
18%
10%
4%
35%

1918
3. Conditional deals
One of the most contentious areas in any SPA are the conditions
to closing. Certainly, it is a matter of public record that a number of
deals where COVID-19 impacted between signing and closing saw
these provisions being tested in litigation.
What our report focuses on though is how deal terms around
conditionality changed once the impact of COVID-19 became
known. Some of the results are perhaps not what might have
been predicted.
Split sign/close
Some commentators thought that COVID-19 would result in more
deals with split signing and closing. In fact the opposite was true,
with a significant increase in the percentage of simultaneous
signing and closing; where deals did continue with a gap between
signing and closing, it is likely that both buyers and sellers wanted
to minimise any period of “limbo” and uncertainty. Deals where
there was a period of time between signing and closing but no
conditionality (which are always a minority of deals anyway)
fell by over 20% globally.
Given the wide-ranging effects of the pandemic, the restrictions
imposed on sellers between signing and closing have become even
more important and referring to running a business “consistent with
past practice” may no longer be appropriate. 46% of our partners
surveyed reported seeing buyers agree to a loosening of these
restrictions to allow sellers to deal with the effects of the pandemic.
However, a number of buyers are looking for even greater control
(subject to “gun jumping” concerns where merger control approvals
are required prior to closing) given the impact that the pandemic
has had and continues to have on businesses.
Costs protection
Perhaps with greater uncertainty in the deal-making environment, it
might have been expected that bidders would try to limit their costs
exposure on abortive deals – with costs protection being an obvious
route. In fact, there was no real change compared to our pre-COVID
data, with break fees continuing to be seen in only a very small
percentage of deals.
Common conditions
Conditions
• Perhaps the most striking points on the types of conditions to be
found were the decrease in merger approvals, the very significant
increase in foreign investment approvals, and that for the rest of
the usual headings of conditionality there was a lack of significant
change. Some of this is easily explained by the raft of government
support measures that were introduced post-COVID (article
here: https://lens.dlapiper.com/covid-19-the-governmental-
response/). Some governments (especially in Central and Eastern
Europe (CEE) and Australasia) extended the requirements for
foreign investment approval by lowering thresholds and extending
their scope. Also, deal sizes fell and the geographic mix of deals
changed, triggering fewer mandatory merger control thresholds.
However, there is a theme that we are seeing repeating itself here:
neither buyers nor sellers want to take risk on the non-completion
of deals.
• Particularly at the outset of the pandemic, we saw an increase in
the time taken to obtain required regulatory and governmental
approvals, which led to an increase in the duration of long stop
dates for the satisfaction of the conditions.
M
erger
approvals
Foreign
investm
ent
approvalTax
clearanceO
therregulatory
approvals
Shareholderapproval
Em
ployee/pensions
related
Third
party
consents
Pre-sale
reorganisation
11%
21%
24%
21%
25%
15%
10%
12%
34%
32%
17%
21%
4%3%
26%
42%
Simultaneous
signing & closing
Split signing &
closing with no
conditions
18%
22%

2120
MAC protection
Contrary again to what some commentators predicted, the
percentage of material adverse change clauses actually saw no
material change and, if anything, the use of MAC clauses slightly
decreased. Parties perhaps decided that the biggest decision
was really whether or not to proceed with a deal and once that
commitment was made the uncertainty of “get out” clauses was
to be avoided.
This is reinforced by the fact that only 20% of transactions allowed
termination for a material breach of warranties repeated at
completion – a very significant reduction from the 33% of our
2019 deals.
Repetition of warranties
Whilst deals became more certain at signing, buyers looked for, and
were more successful in obtaining, repetition of warranties at closing
with a right to damages if the warranties were no longer correct.
The number of deals with that sort of protection increased by 14%
and the seller protection of a supplemental disclosure process was
cut back by 55% .
Repetition of
commercial
warranties
Supplemental
disclosure
MAC
Yes
32%
No
68%
14%
55%

2322
4. Security
Escrow
The use of escrows or price retention was one of the areas where
we saw some significant changes in terms. Escrow/retentions are
seen in only a minority of global deals, despite being commonplace
in the US. However, where an escrow/retention was used, they were
larger (the percentage of escrows/retentions representing more
than 20% of the purchase price nearly doubled), longer in duration
and covered more types of claims (46% of them covered all SPA
claims compared to 29% pre-COVID). Clearly there were greater
concerns over the strength of some sellers’ covenants. Escrows were
already commonplace in the US, although one of the consequences
of increased use of W&I insurance was that they were already less
frequently used than they used to be. We saw some increase in the
use and size of escrows in the US but the change was not significant.
Release periods
Claims secured
Pre-COVID
Percentage of price
<2% All claims
under SPA
Warranty
claims
Tax
claims
Specific indemnity
claims
Pricing
mechanisms
Event driven
release date
<6 months >6 months <12 months >12 months <18 months >18months <2 years >2 years < 3years >3 years>2%-5% >5%-10% >10%-15% >15%-20% >20%
Pre-COVID Post-COVID Post-COVID
10%
15%
23%
22%
18% 19%
12% 12%
22%
41%
16%
13%
10% 12%
22%
25%
19%
35%
9% 9% 9%
17%
4%6%
29%
46%
22%
17%
11% 12%
18% 17%
20%
8%

2524
5. Limitations
The time period for fundamental warranties such as title warranties
is not usually a contentious point, but in competitive processes,
particularly auctions, sellers have been successful in shortening the
period of these warranties. We did see an increase in time periods
overall, probably driven by fewer auction processes.
Claims threshold
Generally, claims thresholds (or baskets) are lower across the board
post-COVID – indicative of a softer market (and therefore more
buyer-friendly) but also of fewer auctions.
<0.5% >0.5%-0.75% >0.75%-1% >1%-1.5% >1.5%-2.0% >2%
14%
40%
16%
6%
19% 17%
22%
8% 9% 2%
20%
27%
<2 years >2 years <4 years >4 years <6 years <6 years Statutory period
33%
22%
11%
7%
19% 19%
26%
41%
11% 11%
Fundamental warranty periods
6. W&I / RWI
There is no doubt that W&I / RWI has become an established
transactional tool and so no survey of the effects of COVID-19 would
be complete without a review of the impacts on this part of the
market. Once again we are hugely grateful to Lockton Transactional
Risks for providing the data.
When the COVID-19 brakes to transactional activity started to be
applied, this impact immediately fed through to the W&I / RWI
market. Similarly the H2 pick–up has also been mirrored. What
is interesting though is that within this general picture there were
important nuances:
• sector mattered – insured real estate deals decreased dramatically
during the lockdown whilst insured deals involving technology
businesses and green energy deals actually increased in Q2;
• geography mattered – the Nordics, CEE and Germany were less
heavily affected in terms of M&A activity during Q2, possibly as
they were less heavily impacted by COVID-19 or implemented less
strict lockdown measures than others; and
• size mattered – during the lockdown period most transactions
took place either in the sub EUR100m bracket or in mega deals
over EUR500m.
So whilst the market continued, how did it change?
COVID-19 exclusions
Typically, there are three ways in which insurers are approaching
transactions when it comes to COVID-19:
• Mandatory exclusion – blanket upfront exclusion for “any matters
relating to COVID-19”. These insurers have been losing out on
deals to competitors who are adopting a less stringent approach
to these exclusions.
• Quasi-mandatory exclusion – an initial exclusion for certain deals
relating to certain affected sectors. Businesses such as healthcare,
leisure and transport were affected earlier in the year, but insurers
who took this approach are moving towards an underwriting
assessment for these sectors. Any sectors outside of these
highly-affected ones will be analysed on a case by case basis,
with the COVID-19 effect being closely reviewed as a “heightened
risk” factor.
• Deal by deal assessment – increasingly this is the way in which
a highly competitive market is moving and entails no mandatory
exclusion. Instead, the impacts of COVID-19 are treated as a
“heightened risk” item for in-depth underwriting.

2726
Underwriters expect COVID-related claims to fall generally
into three camps:
• an increase in third-party claims, including in connection with
labour related issues and material contracts that have been
terminated on the basis of an apparent force majeure;
• an increase in claims relating to key customer insolvency where,
pre-signing, there were circumstances that were known to the
warrantors that indicated that the relevant customer was in
financial difficulty; and
• an increase in claims relating to the incorrect use of the various
job retention schemes that were implemented by national
governments in the wake of COVID-19.
Lockton is the world’s largest independent broker. The Lockton Transactional Risks
team assists investors around the world to de-risk transactions, enhance returns and
get deals done. Our 28 professionals spread over eight global hubs include 12 former
M&A lawyers and seven former W&I underwriters. Last year, our team worked on over
500 transactions, advising on GBP70 billion of transaction value.
Claims
No underwriters have reported any notable jump in claims activity as
a result of COVID-19. Underwriters are cautiously looking out for any
change in notification count due to “buyer’s remorse” if investments
do not perform as expected. Recent claims trends include:
• Stock and inventory – an increase in stock related claims in
retail and manufacturing businesses normally related to stock
that is either damaged, obsolete or slow-moving. This has been
particularly true of business that is seasonal, requires frequent
updates or is subject to price fluctuations. Underwriters note that
this risk is increased in locked box deals where there is no stock-
take following closing. COVID-19 has meant physical stock checks
have been harder to undertake and companies may have built up
large quantities of stock due to reduced orders and/or concerns
about supply chain resilience.
• Accounts receivable – an increase in the number of claims in this
area, with common allegations including the setting of inadequate
bad debt reserves and errors in terms of quantifying a company’s
total accounts receivables. The post-COVID landscape may mean
that claims increase in this area with underwriters scrutinising the
size of the accounts receivable figure in the accounts relative to
the size of the balance sheet.
2020 2019
0.8%
0.9%
0.9%
1.0%
1.0%
1.0%
1.2%
1.2%1.2%
1.4% 1.4%
1.4%
1.3% 1.3%
1.4%1.3%
0.9%
1.0%1.0%
1.2%
1.1%
0.6% 0.8%
1.4%
1.4%
1.3%
Aerospace/ defence
Financial servicesAgriculture
FMCGBusiness service
HealthcareEducation
InfrastructureEnergy
ManufacturingEngineering
TMT
Transport & logistics
Premium as a percentage of limit purchased

2928
7. Disputes
COVID-19 impact on M&A disputes
• Previous recessions have led to an increase in disputes relating
to M&A transactions. We have therefore surveyed DLA Piper
corporate disputes specialists from 18 jurisdictions across Europe,
Asia-Pacific, Africa and the Americas in relation to the impact of
COVID-19.
• A market in which prices of targets are generally rising leads to
fewer M&A related disputes; even where an issue is identified
post-closing, the financial implications of many issues can
be removed or mitigated by a general increase in valuations.
Conversely, where prices are generally falling, we see much higher
levels of buyer’s remorse which are not compensated by a general
increase in value.
• Whilst the unprecedented levels of government support for
businesses impacted by COVID-19 will act as a temporary sticking
plaster, once that support is removed, issues will become more
obvious and M&A disputes are likely to increase in number, value
and complexity.
Outlook for M&A disputes
• There has been a significant increase in disputes arising from the
interpretation of MAC clauses. The ability of a buyer to invoke a MAC
clause will depend on the specific wording of the clause and the
legal treatment of such clauses in the relevant jurisdiction.
We have seen a number of transactions where a MAC has been
invoked by the buyer to try to change the terms of deals pre-
completion, or to avoid transactions altogether where commercial
dynamics have changed due to COVID-19. Buyers have generally
been unsuccessful in terminating a transaction through reliance on
a MAC clause but there have been several cases where the threat of
doing so has led to price renegotiation and/or revised deal terms.
• In the US, we have seen a flurry of cases brought by shareholders
in state courts (particularly in Delaware) attempting to challenge
transactions due to the changes in financial dynamics. There has
also been a trend towards using federal law to challenge M&A
transactions rather than state courts.
• Our specialists in several jurisdictions have noted an increase
in buyers looking at possible claims under representations/
warranties and indemnities in an attempt to recoup some of the
consideration they have paid on transactions that have already
completed. An increase in the number of earn-out and deferred
consideration claims has already been observed. Both these
trends are expected to continue over the coming months. Fraud
claims are also expected to emerge with increased scrutiny of
representations/warranties made by sellers.
• Over 60% of the jurisdictions surveyed reported that a rise
in disputes has already begun. Many claims are also being
considered (but not yet brought) as parties hold fire pending a
better understanding of what the “new normal” looks like.
• An increased desire to settle claims has also been reported in
many jurisdictions, reflecting an unwillingness or inability among
buyers to fund M&A claims through to trial. This may accelerate
the trend towards the use of third party funding (through firms
such as Aldersgate Funding Limited, which provides “best in class”
funding terms solely to DLA Piper clients) to enable claims that
would otherwise be unviable to pursue to be brought by claimants
without committing to significant legal costs and risk.
Deal of the Year: Global Corporate M&A Deal
(Mid-market), M&A Atlas Awards, 2019
#1

3130
DLA Piper: Our global presence
TALKTALK GROUP
On the sale of FibreNation and Bolt Pro Tem
to CityFibre
Deal Value: GBP200m
INTL FCSTONE INC.
On its acquisition of GAIN Holdings, Inc.
Deal Value: USD236m
SILICON LABORATORIES INC
On the acquisition of Redpine Signal Inc’s
Wifi & Bluetooth Business
Deal Value: USD308m
EQT PARTNERS AB
On their investment into food delivery
app, Wolt
Deal Value: EUR100m
ERBER AG
Relating to the acquisition of Erber Group
by Royal DSM
Deal Value: EUR980m
IBERDROLA
On the takeover of Infigen Energy
Deal Value: AUD893m
ALTICE EUROPE NV
On the sale of 50.94% of its stake to a
private investor
Deal Value: EUR2.5bn
CPA GLOBAL MANAGEMENT TEAM
On its merger with Clarivate Plc
Deal Value: USD6.8bn
ROARK CAPITAL ACQUISITION LLC
On its acquisition of ServiceMaster Brands
Deal Value: USD1.55bn
2 SISTERS FOOD GROUP
On its sale of part of Fox’s Biscuits
Deal Value: GBP246m
ECOLAB INC.
On its acquisition of CID Lines
Deal Value: Confidential
VODACOM AND SAFARICOM
On its acquisition of M-PESA via joint venture
Deal Value: Confidential
IFS MANAGEMENT TEAM
On its disposal to a new EQT Fund
and TA Associates
Deal Value: EUR3.2bn
SDL PLC
On all-share combination with RWS Holdings
Deal Value: GBP854m
SOLAR CENTURY HOLDINGS
On its sale to Statkraft
Deal Value: USD118m
HMI CAPITAL
On its investment in Klarna
Deal Value: USD460m
DS SMITH
On the sale of its Plastics division
Deal Value: USD585m
Cooperation firm
DLA Piper presence
Deals
Some examples of our COVID-19 deals

3332
About DLA Piper: Global leader in M&A
Having acted on more global M&A deals than any other law firm for the last decade, we have the experience to
execute some of the most complex multi-jurisdictional deals. Our clients benefit from our timely, pragmatic and
commercial approach to problem-solving that adds value to their businesses and enables transactions to come
to a successful conclusion for all parties.
Global reach
Supported by over 1,000 corporate lawyers globally, we carefully
select teams for each specific transaction. This allows us to handle
all aspects of complex domestic and cross-border M&A transactions.
With local lawyers on the ground, we have the ability to flag potential
pitfalls in each country, advise on cultural differences and nuances,
offer vital local advice in such areas as employment and competition
law and manage even the most demanding multi-jurisdictional due
diligence exercise.
Supporting your needs
All our lawyers are aligned to industry sectors. We understand the
internal and external pressures that our clients face throughout a
transaction and the industry-specific issues critical to the success
of a deal. We guide our clients through every stage of a deal; from
due dilligence and structuring through negotiation and preperation
of deal documents to post-transaction transition and post-merger
integration. M&A activities unavoidably affect other areas of law,
such as employment, pensions, tax, intellectual property, real estate,
environmental, financial services regulation, corporate governance,
and increasingly frequently, disputes and litigation. Our deal teams
include practitioners from these and other areas of law to address
all aspects of a deal.
Response to COVID-19
Clearly this year has been very different, presenting many unique
challenges. Yet, as a global business, we are already accustomed
to working together as part of virtual teams in meeting our clients’
needs; so thankfully we found ourselves well equipped culturally
and practically to adapt to the ‘new normal’.
As this report demonstrates, we have continued to work on M&A
transactions throughout this disruptive COVID-19 period and we
remain optimistic that the market will stay ‘open for business’ as
we adapt, evolve and recover.
Corporate Disputes
DLA Piper’s global Corporate Disputes team is dedicated to resolving
our clients’ most complex and sensitive business disputes across
the globe. As well as strategic, pre‑litigation advice and alternative
dispute resolution, our practice is recognised for advancing clients’
interests across the full range of corporate contentious issues
such as: M&A disputes, including breach of contract/warranty
and misrepresentation cases; corporate governance/shareholder
activism; injunctions/interim relief; shareholder/joint venture
disputes and derivative actions; civil fraud claims; directors’ and
officers’ liability suits; collective redress claims ‑ class actions/group
litigation; and regulatory interventions, internal investigations and
white collar crime.
We regularly provide risk management advice to pre-empt litigation
and minimise the risk of disputes arising and/or becoming
entrenched in litigation or arbitration.
Disputes Awards
Acritas Report 2020 DLA Piper ranked #2
Acritas Global Elite Law Firm Brand Index
Global Investigations Review (GIR) Awards 2020
Winner of Most Important Court Case of the Year for the
Barclays-Qatar case
The Lawyer Global Litigation 50 2020
Ranked in the top 2 firms globally by disputes revenue,
and in the USD1bn litigation club
Legal Week Commercial Litigation & Arbitration Awards 2019
Regulatory & Investigations Team of the Year

3534
#1 Global M&A deal count
(for the last decade) #decadeofdeals
#1 European M&A deal count
(for the seventh consecutive year)
#1 UK M&A deal count
(for the last decade) #decadeofdeals
#1 France M&A deal count
(for the third consecutive year)
#1 Nordics M&A deal count
(for the third consecutive year)
#1 Middle East and Africa M&A deal count
(for the second consecutive year)
#1 Europe Private Equity deal count –
Buyouts and Exits combined (for the third consecutive year)
Buyouts (for the third consecutive year)
Exits (for the second consecutive year)
Compare M&A regimes in an instant
• If you are looking to be better informed about M&A
transactions, see our online Global Comparative Guide to
Private Company M&A. This tool covers 13 key topics relevant to
planning and executing an M&A transaction in 44 jurisdictions.
It gives you a helpful overview of issues you may encounter
when undertaking a transaction in any country in which you
do business or plan to do business in the future.
• To register for access, contact your usual DLA Piper contact
or visit: https://www.dlapiperintelligence.com/globalma
2019 (Mergermarket)
#1

This report is not to be reproduced (in whole or part) without the prior permission of DLA Piper.
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at
www.dlapiper.com. This report is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client
relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept
no responsibility for any actions taken or not taken on the basis of this report. This may qualify as “Lawyer Advertising” requiring notice in some
jurisdictions. Prior results do not guarantee a similar outcome. Copyright © 2020 DLA Piper. All rights reserved.

Globalne transakcje fuzji i przejęć w 2020 - wpływ COVID-19

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