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Clients and Friends, Businesses around the globe faced a unique set of circumstances in 2023, including wide swings in economic sentiment and high interest rates; the prospect of greater regulatory oversight; and geopolitical unrest. Meanwhile, a debate raged about the potential, and risks, of AI. Our annual Insights publication covers critical issues we helped clients address in the past 12 months, as well as guidance to help you prepare for the year ahead. I would like to thank our Marketing Department for their work on this publication. Armand J. Jaafari |
Corporate Trends
Global M&A Activity Endures Headwinds in 2023 and
Displays Resilience Going Into 2024
Despite market
headwinds, dealmakers have looked to carveouts, spin-offs, joint ventures and other
creative deal structures to engage in M&A activity, but it is taking longer to
hammer out deal terms.
Gray Zone: When a UK-Incorporated Company Is Protected by
Neither the UK Takeover Code nor US Law
Some
U.K.-incorporated companies listed in the U.S. could find that the U.K. Takeover
Code does not protect them in the event of a hostile or speculative bid, and that
the defenses available to U.S. companies are
not applicable.
Europe Increasingly Turns to Special Committees in
Transactions Involving a Controlling Shareholder
Although
many European companies have controlling shareholders, independent special
committees have not played the crucial role they do in the U.S. That is beginning to
change.
Market Opportunities for Cross-Border M&A in China
Persist Despite Regulatory Changes and Trade Tensions
New
trade and investment restrictions notwithstanding, foreign companies and private
equity firms continue to seek M&A opportunities in China, and Chinese businesses
are buying assets and realigning operations
abroad.
How Companies Are Adapting to Volatile Capital Markets and
Planning Ahead
From navigating volatility to optimizing
balance sheets and exploring creative financing strategies, both companies and
investors were able to successfully manage market challenges in 2023 to be ready for
opportunities
in 2024.
Chinese Issuers See Progress on US Audit Issue and HKEX
Reforms, but US Policies Could Impact Tech Companies
Progress on U.S. audit inspections will help China-based companies, as will
liberalization of HKEX rules. But China is more closely monitoring offshore capital
market transactions, and new U.S. restrictions could
affect certain tech companies.
A Decades-Old Question Answered: Term Loans Are Not
Securities
The Second
Circuit recently laid to rest the argument that the terms of syndicated term loans
are now so similar to those of high-yield bonds that they should be subject to
federal and state securities laws, including registration,
disclosure and trading rules.
Adapting to a Dynamic Commercial Real Estate
Landscape
As reduced demand and higher rates take a toll
on commercial real estate, lenders are demanding more protections, and borrowers
with maturing debt need to develop strategies. The stress will create opportunities
for those with capital.
Climate Change and Its Undeniable Impact on Insurance: How
To Respond?
Climate change will interfere with
insurers’ risk predictions and pricing policies. They may need to work with
clients on new types of coverage, apply novel technology and collaborate with
governments and other
entities.
Exits, Ring-Fencing and Other Risk Management Strategies for
Multinationals Operating in Geopolitically Volatile Areas
With a growing risk of geopolitical disruptions, multinationals should devise
contingency plans for vulnerable local businesses, such as that range from
structures that ring-fence the business and to exit, cash management
and supply chain strategies.
ESG
The Supreme Court’s Affirmative Action Opinion
Continues To Spawn Challenges to DEI Programs
Businesses
can expect continued challenges to DEI programs, as emboldened opponents to these
programs seek to expand the reach of the Supreme Court’s opinion prohibiting
the consideration of race in university
admissions.
Non-EU Companies Face Challenges Preparing for
Europe’s Corporate Sustainability Reporting
Directive
Non-EU companies need to prepare for the
EU’s sustainability reporting requirements taking effect in coming years. But
many crucial details will not be finalized until 2026, so it is essential to design
reporting
systems with flexibility.
Antitrust
As US Antitrust Agencies Double Down on Merger Enforcement
Approach, New Deal Strategies Emerge
The DOJ and FTC
continue to pursue an aggressive merger enforcement agenda with new merger
guidelines and filing requirements. Companies can still close deals if they
structure them to “go the distance”
and have a solid litigation strategy.
EU and UK Merger Regulators Look Beyond Horizontal and
Vertical, With Digital ‘Ecosystems’ a New
Focus
EU and U.K. merger regulators are applying novel
forms of analysis to deals in the digital sector, looking at “digital
ecosystems” and considering the potential for a combination to diminish
potential
competition in nascent markets.
Other Regulatory Developments
AI in 2024: Monitoring New Regulation and Staying in
Compliance With Existing Laws
Companies that develop or employ AI tools have to consider proposed
AI-specific regulation as well as an array of existing IP, privacy, employment and
other applicable laws.
Private Sector Space Projects Take Off, Leaving Legal
Unknowns in Their Contrails
The rapid expansion of the
commercial space industry, fueled by accelerating investment, is generating a host
of novel legal issues, from liability to IP ownership, taxation, dispute resolution
and insurance.
Transferability: IRS Guidance Energizes Participation in a
New Tax Credit Monetization Strategy
Recent IRS guidance
on provisions of the Inflation Reduction Act that make it easier to purchase
renewable energy tax credits is helping to attract new types of investors and
spurring a more active market in the
credits.
With New Technology and New Hires, the IRS Aims To Audit
More Effectively While Improving Taxpayer Services
The
IRS is overhauling its enforcement capabilities, and large corporations,
partnerships and wealthy individuals will see more scrutiny. The agency is also
working to improve taxpayer services and resolution processes.
Election Issues on the Horizon: 2024 National Party
Conventions, Transition Efforts and Inaugural Activities
Companies and executives planning to support the 2024 political conventions and
later, transition and inaugural functions, may be subject to an array of federal,
state and local restrictions on monetary and in-kind
contributions.
‘Small Yard and High Fence’: US National
Security Restrictions Will Further Impact US-China Trade and Investment
Activity in 2024
New U.S. restrictions on exports and
investments in Chinese technology businesses are likely in 2024. In addition, there
are moves in Congress and at the state level to limit Chinese investment in
agricultural businesses
and farmland.
Enforcement and Litigation
Expert Allegations Could Become More Frequent in Securities
Fraud Complaints and Possibly Erode Pleading Standards
A
Ninth Circuit panel ruling that plaintiffs could use expert analysis to bolster
securities fraud claims potentially opens the door to more frequent use of expert
allegations in securities fraud complaints.
DOJ Leverages the Private Sector To Achieve Enforcement
Goals
This year, the DOJ has announced new policies
encouraging voluntary self-disclosures by corporations and created a safe harbor for
companies that disclose wrongdoing they discover in the course of an acquisition.
FTC Enforcement Trends in Consumer Protection Under the
Biden Administration
The FTC has aggressively sought to
fulfill its mandate to protect consumers, pursuing dozens of enforcement actions and
promulgating new rules and guidelines that hint at its priorities in 2024.
Fourth Circuit Holds That Bankruptcy Courts Are Not Limited
by the ‘Case and Controversy’ Requirement of Article
III
The Fourth Circuit held recently that bankruptcy
courts are not bound by the “case and controversy” requirement of the
Constitution’s Article III because they derive their power from Congress,
acting
under its Article I bankruptcy powers.
Insights From Delaware Litigators: What
We’re Watching in 2024
Delaware
has expanded Caremark oversight duties to officers. Key issues in 2024 are
likely to include follow-on rulings in that area, plus cases involving busted deals,
de-SPAC transactions and claims for
lost deal premiums.