Interviewer: John, private mergers and acquisitions business has been pretty brisk. Are there big differences between the UK, Europe and America when it comes to market practice?
John: It’s a very interesting question because the world is flat and you would expect there to be a total alignment of practice between particularly major jurisdictions and it is true that is the trend. But there are still some differences and I think I would put them in three categories, I suppose. One is cultural – cultural and language differences even between the US and the UK, second is differences in law and I suppose third is differences in practice. Taking each of those, taking language and culture, some of that is about negotiating techniques, some of it is about terminology that’s used closing versus completion for example between the US and the UK and in law it might be employment law and labour law in Europe compared to say the US which is more regulated.
Interviewer: So if your American clients are doing deals in Europe what of those three would you really think are the most important to get a handle on?
John: I think differences in practice are probably the most important because a US buyer, our US clients, will have certain expectations of what a negotiated transaction will look like, what their rights will be and what protections they’ll have. And certainly when I’ve been advising US clients one of the things we do early on is talk about some of those things in order to manage expectations so that there are no surprises and/or it’s taken into account in their due diligence process.
Interviewer: And are UK and Europe practices more buyer friendly than in America?
John: Well actually it’s probably the contrary. The UK and Europe really I suppose is more seller friendly in a number of respects. For example, warranties tend to be less extensive, disclosure tends to be much more general, the ability to recover for a buyer if you’ve got actual knowledge of a matter that you discovered in due diligence is more difficult and also risk in the UK tends to pass on signing rather than in the US where it tends to be on closing. You tend to have conditionality in a US deal like material adverse change provisions which protect the buyer which you don’t tend to have in the UK. That’s the sort of thing.
Interviewer: When things do go wrong, what sort of remedies can be accessed say for Americans again looking to move for European business?
John: Well it is similar in the sense that there may be an action – there may be a right to rescind although as I indicated the ability to terminate a transaction after signing is quite difficult in the UK and Europe. And then there’s of course damages claims. The big difference is that in the US effectively all these things are indemnified so whatever losses you suffer the expectation is that you’ll recover pound for pound for the loss. Certainly in the UK market and most European or multi-jurisdictional European deals will be done under English law. There are measures of damage which limit the ability to claim to the extent for example that the loss is not reasonably foreseeable or is too remote and also there’s a duty on the buyer to mitigate losses which have been suffered as a result of breach. So again there are these subtle differences which can impact on the rights and remedies available to a buyer in the UK and Europe versus the US.
Interviewer: John, thank you.
In the first of a series, Partner John Bennett looks at the differences in deal terms and market practice in the European versus the US private M&A market. He outlines the three main issues for US buyers and considers whether Europe compared to the US might be considered a more seller or buyer friendly market.