It is too early to say with any certainty what the long term
impact of Brexit will be on M&A transactions involving the UK.
However, there are some important practical considerations for
those active in the M&A markets both in the interim period and
the longer term.
1. Due diligence
In the interim period, buyers should consider widening the scope
of due diligence to identify matters which may become problematic,
depending on the nature of the UK's relationship with the EU
going forward. These include:
Illegality/change in law provisions which may give a
counterparty rights to terminate existing arrangements
Grants and investments made by EU bodies where eligibility
criteria limit availability to recipients within the EU/EEA
Employment and contractor arrangements for UK nationals working
within the EU, as well nationals from other EU member states
working in the UK
Licences which define territorial rights by reference to the
"EU" or "EEA"
2. Completing transactions
In the short term, volatility in the markets and lack of
confidence in sterling may result in an increased use of financing
conditions, commitment letters and provisions allocating the risk
of exchange rate movements in the period between exchange and
completion. On a long term basis, changes to merger control regimes
could mean that the current "one-stop-shop" will cease to
apply between the UK and EU. If that proves to be the case, where a
transaction exceeds both the UK and EU filing thresholds, filings
will potentially need to be made with both the UK and the EU
competition authorities. Similar issues may arise in relation to
"change of control" filings required under certain
3. Post-completion integration
Post-completion integration activities may become more
cumbersome depending on the changes made to current registration
regimes. For example, if pan-European IP rights such as Community
Trademarks and Community Design Rights cease to apply, separate
registrations may be needed for IP rights in the UK, increasing the
cost and administrative burden of integration.
4. On-going and historic transactions
It is unlikely that events over the last few weeks will trigger
standard "Material Adverse Change" provisions for
transactions that have signed but not yet completed. However, MAC
clauses should be checked to confirm if a party has the right to
walk away. Where deals have completed in the last 12 -24 months,
market volatility and fluctuations in foreign exchange rates may
impact post-completion price adjustments which fall to be
determined in the short term.
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Mayer Brown article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
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