Getting to closing
From dealing with an onslaught of regulatory considerations and competition issues, to understanding what is going on in the global markets and pinpointing where the sticking points can be, this panel saw Natasha Scanes, Senior Corporate Counsel at Eutelsat OneWeb and Erin Meier, Legal Director at Fidelity International, discuss how to shepherd your deal along from signing to a successful closing.
The gap between closing and signing is getting longer - why is that and how can you move it along?
The general consensus when it comes to getting to closing is that the gap between closing and signing is getting longer. Part of the reason for this is that there are more regulatory hurdles to jump than ever. Deals are getting more complex, often more international, and worldwide regulatory approvals are being taken more and more seriously.
Eutelsat’s merger with OneWeb saw the reality of this, with over 20 regulatory approvals required to get the closing over the line. From Foreign Direct Investment (FDI) regimes, antitrust, national security, employee options and dealing with the French Works Council, Natasha had to deal with it all.
“It was a really interesting experience, and very educational - for the regulators too, as what we are doing in the industry is very new," Natasha says.
The situation was also quite unique, as Eutelsat was already a shareholder in OneWeb. "We also had a commercial deal with them that signed a little while before the merger happened, so the business was already used to working with closely with Eutelsat."
Eutelsat's merger with OneWeb saw over 20 regulatory approvals required
The gap between closing and signing is getting longer - why is that and how can you move it along?
The general consensus when it comes to getting to closing is that the gap between closing and signing is getting longer. Part of the reason for this is that there are more regulatory hurdles to jump than ever. Deals are getting more complex, often more international, and worldwide regulatory approvals are being taken more and more seriously.
Eutelsat’s merger with OneWeb saw the reality of this, with over 20 regulatory approvals required to get the closing over the line. From Foreign Direct Investment (FDI) regimes, antitrust, national security, employee options and dealing with the French Works Council, Natasha had to deal with it all.
“It was a really interesting experience, and very educational - for the regulators too, as what we are doing in the industry is very new," Natasha says.
The situation was also quite unique, as Eutelsat was already a shareholder in OneWeb. "We also had a commercial deal with them that signed a little while before the merger happened, so the business was already used to working with closely with Eutelsat."
"Legal encouraged a really open dialogue between the business and the legal team to help people navigate the period between signing a deal and closing, and what the nuances of signing a deal but not quite being one company yet are."
Natasha Scanes, Senior Corporate Counsel, OneWeb
A challenging part of the deal for OneWeb was dealing with national security requirements and the US government's Federal Communications Commission. The business had to prove that they weren’t competitors to Eutelsat as they operated in different use cases. This itself was complex work - but something they managed to do successfully.
Natasha says that when it comes to handling regulatory approvals, make sure you set up a tracker for the status of each approval, so that you can keep on top of which are outstanding and why.
Dealing with regulatory filings also requires lawyers to work collaboratively with the business. So much detail is needed about the business and industry, that the process involves pooling the information of various stakeholders within the business - you can expect to learn a lot from it, and build relationships from all corners of the company.
Having a longer timeframe between signing and closing also required a large education process with the business to explain concepts like gun jumping, and making sure that they were very restrictive with sharing competitively sensitive information. While it was public that the deal was going to complete, it was key to get across the fact that until the deal had closed Eutelsat and OneWeb were, and needed to be treated as, separate companies.
Part of that involved training sessions, where "legal encouraged a really open dialogue between the business and the legal team to help people navigate the period between signing a deal and closing, and what the nuances of signing a deal but not quite being one company yet are." For example what information you can or can't share before the deal has closed. "This ended up being a huge workstream for us," Natasha says.
The number of regulatory approvals required for M&A is only going to increase with countries getting more stringent when it comes to things like national security and competition law
How can lawyers get creative when it comes to closing the gap?
Erin was involved in a different type of M&A, undertaking a competitive process to acquire a private assets manager to establish a new business in Fidelity International, focusing on collateralised loan obligations (CLOs).
Upon reaching a comfortable stage to sign the deal, a joint supervisory team from the bank identified two of the three mandates as critical functions, which meant they required regulatory approvals. This was likely to cause a delay in closing as they would have to wait for the approvals to come through.
"We didn't want to delay it and risk the deal falling apart at a later time, so this was a great opportunity for lawyers to come up with a solution for how to get more comfortable that the transaction was going to sign. We worked with our outside counsel and our business partners to come up with an arrangement!" The solution involved an option to exercise after signing, contingent upon receiving approvals from the ECB. This is an example of one thing you can do to keep things moving between signing and closing. Sometimes it requires thinking outside the box.
During the exercise period, emphasis was placed on operational readiness, including signing a transition services agreement, testing systems, documenting transition services, and ensuring confidentiality arrangements were in place. Doing this ensured that everything could complete smoothly once the regulatory approvals had been given.
Erin explains that these kinds of regulatory approvals aren't going away. The FDI is heading more towards national security, and other countries are establishing FDI regimes meaning this is only getting more stringent and time-consuming. Taking this into consideration and delpoying external counsel who can help you present your knowledge to the business in the right way and know how filings are most likely to get approved makes a huge difference to improving time frames.
"We didn't want to delay it and risk the deal falling apart at a later time, so this was a great opportunity for lawyers to come up with a solution for how to get more comfortable that the transaction was going to sign."
Erin Meier, Legal Director, Fidelity International