In what ways are cross-border transactions significantly different to domestic M&A deals?

Managing cross-border M&A deals can require a very different approach compared to domestic deals – including in relation to due diligence. Each country involved in a cross-border deal will have its own regulatory regime, and its own contract, licensing and IP law, for example. All of these legal complexities must be taken account of during the diligence process.

Internally, companies must have a discussion about how cross-border deals should be run – for example, what level of disclosure will be required internationally, or how quickly they wish to seek regulatory approval from the various international regulators. That’s not just a matter for the in-house legal department – everyone needs to agree on the strategy, and sing from the same hymn sheet, especially when dealing with the other side of the transaction.

Some deals may be difficult to structure in a way that is legally permitted in some important markets. Where companies experience problems in structuring a deal that “works” internationally, most sophisticated general counsel will defer to the views of their regional offices – these are the people who understand how businesses work in their own markets.

From a project management point of view, time zone differences can pose challenges. For important stages of a transaction – for example, closing the due diligence process, or finalising a negotiation – people are going to have to travel, so they can meet and negotiate together in the same room. If key employees aren’t willing to travel, a matter that would ordinarily take a week to finalise could take up to a month instead.

What role can private practice law firms play in facilitating cross-border deals?

It depends on the nature of the transaction. If we are advising a multinational company on their investment into Canada, then we will typically only advise on the Canadian law elements of the transaction. If we are acting for a company that is making an international acquisition, we will often help co-ordinate the transaction process as well as the transaction documents.

As part of the legal due diligence process, we can offer our clients “virtual” data rooms for storing and sharing essential documents. If the client or its legal team do not have sufficient resources available, we can provide junior associates to aggregate and categorise the documents that need to be added to the data room.

At what stage of a typical transaction will a firm such as yours be brought in to advise on the process?

We will typically be instructed even before a letter of intent has been drafted, or a formal approach has been made to the target company. This allows us to strategise how we will approach the particular target company, and decide on the parameters of the offer we want to put on the table.

At our first meeting with the client, it’s important they can tell us the imperatives behind and objectives of the deal – what are the ground rules that we must conform to? For example, does the client want the transaction to be structured as an asset acquisition, rather than a share acquisition? Must the deal be structured in such a way that it protects a particular relationship? Some companies will only want to initiative a friendly takeover, not a hostile one.

It’s also important for companies to consult with tax lawyers at the same time as they are consulting with their deal lawyers. Many transactions are tax-driven, and the tax advisers may have their own imperatives on how a deal should be structured. Corporate and tax lawyers must work together to agree on a structure that is acceptable to them, and their client.