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In Mizuho | Greenhill’s Beyond The Obvious podcast channel, we uncover the value that others miss.
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Welcome to M&A Corner.
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I'm delighted to be joined by
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Stephen Amdur of Pillsbury,
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one of the largest law firms in the world,
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who happens to head their
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global M&A practice as well as
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their private equity practice.
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Stephen, welcome to M&A Corner.
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Thank you, Kevin.
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Happy to be here.
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I want to talk a little bit about
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the general environment
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-Sure.
-for M&A,
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and then we can talk more specifically about things that
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I know you're particularly focused on with your practice.
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Clearly, it's an interesting environment
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from an M&A perspective.
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It's constantly changing, constantly evolving.
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What are you seeing from boardrooms,
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from private equity sponsors who you're advising
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in terms of how they're approaching such an
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interesting market?
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I've always found that when clients have
certainty or confidence about
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which way the market's going, whether up or down.
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It drives them to take actions.
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It drives them to be acquisitive,
to find opportunities to pursue.
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It drives them to recalibrate, restructure, take actions,
dispose of divisions, or even do a sale
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if they think things aren't going the right way.
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I think what we've had over the past couple of years is a lot of uncertainty that's really compressed the marketplace.
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You've had a lot of clients who just aren't sure whether things are good or bad or otherwise,
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and you've seen that result in sponsors holding on to assets longer.
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You've seen it result in large corporates being less interested in doing transactions,
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both for marketplace reasons and regulatory reasons.
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I think what we've seen in the past couple of months is people have developed a greater degree of confidence and certainty
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about where things are going and are much more interested in actually moving to transact.
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And so, the last 60 days have been about as busy as we've ever been as clients are really taking the opportunities to
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move on transactions, to bring things to market, to move forward with deals because
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they believe they finally have an understanding of where the marketplace is, where the levels are at,
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and now they're ready to move.
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Yeah, I couldn't agree more.
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I mean, you sometimes need to upset the chessboard and have the pieces move around
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for people to revisit their strategic priorities and what they should be doing from an M&A perspective,
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but when it is so uncertain, it's very hard to initiate those transactions, and that market environment,
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clearly after Liberation Day, has been somewhat unsettled.
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But the way I'm seeing it and the way our clients
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seem to be approaching it is that people are just getting used
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to the temperature of the water,
and it's going back and saying,
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okay, it’s a little bit unsettling
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from Inauguration Day to Liberation Day and beyond,
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but people are starting to get used to this environment
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and able to hopefully be able to transact through that.
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In terms of how you price a transaction in an environment that is so choppy, whether it's public equity or private companies
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that are looking to bridge valuation gaps.
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Have you seen anything new in terms of technology that people have employed?
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I think we've seen a lot of people just get more comfortable with where the levels are at now.
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I think after a number of years of real
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dislocation from those heights of 2020 and 2021,
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I think now we're finally seeing people get comfortable
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with where the new levels are at,
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and maybe it's not on the hyper-upward trajectory
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that they were on in 2020 and 2021,
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but people are getting more comfortable with,
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sort of, where the market has reset to,
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sort of, where the market has reset to,
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and I think if you've got that level of confidence
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of this is an acceptable valuation
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because you're no longer comparing it to
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unrealistic levels that were set
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at interest rate environments
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that just, you know, are not the norm anymore.
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Now you're seeing people who are a little more comfortable making a move, getting the returns,
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distributing capital out to their investors, and moving on to the next deal as opposed to holding on and waiting for
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a sunny day that's just not coming around any time soon.
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Right. Or trying to hold on to at least some of the equity in an asset in a transaction.
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So while it might be not a traditional earn-out, we're seeing revisiting of majority transactions where maybe the seller
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takes a minority and is able to potentially realize some upside in the future.
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I think we were seeing a bit more of that over the past couple of years.
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It seems like people are maybe potentially moving on to full-sale transactions again, right?
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That we're seeing more traditional M&A transactions coming to market
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now than maybe there had been for a couple of years where
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I think that real dislocation was a concern, that they were buying or selling at just the real wrong time,
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and they wanted to hold on to a piece so that they were better positioned for when things bounced back.
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The good news is, as the activity levels do pick up,
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there does seem to be a more receptive regulatory environment for people to transact within.
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So whether that's the FTC or the DOJ, which people tend to focus on,
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or some of the other regulatory agencies, including the FCC, which is really changing the entire media landscape
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with people able to do transactions that they were fundamentally not able to do under the prior administration.
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So it does feel like once we do get through that period of uncertainty,
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people do get used to the temperature of the water
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and begin to transact,
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those should be able to be consummated in a way that they haven't been, perhaps, over the last few years.
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I think that's 100% right.
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I think the last administration, you saw a lot of, again, uncertainty being created
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by an unwillingness to give clear guidance about certain matters.
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There was obviously a heightened focus on big tech, which I think the current administration continues to maintain,
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but there was a broader suite of transactions that—
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It was just unclear whether or not these deals would be approved, would they be blocked,
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and I think that level of uncertainty really drove people away from the table.
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I think, again, this administration,
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while clearly having its own priorities
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about what deals it will and will not support,
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while clearly having a broader perspective
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on acceptable and unacceptable transactions
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in the global regime.
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This administration seems more willing
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to give guidance,
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to be communicative with regulatory lawyers,
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and give guidance on transactions
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so that you know this deal can work,
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this deal won't work,
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and you can start having those conversations
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earlier on in the process,
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take them into account when structuring
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and considering a transaction
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and really find a way to move forward
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or not move forward, as the case may be.
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It's actually very interesting because a lot of people don't understand that you can actually interact with regulators
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in advance of a transaction and utilize that input to actually structure something that makes sense
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both for the parties and for the government.
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Even with agencies like CFIUS, where you wouldn't normally think that was an option.
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CFIUS will be the first to tell you that we are here to help you, not to harm you, and to slow down your transaction.
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So it's actually a really interesting point.
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Obviously you have to have the right people in the right places to have those conversations,
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which obviously Pillsbury does, but it is a very important element of how you actually negotiate
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and consummate a transaction.
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Can we talk a little bit about Delaware?
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We can absolutely talk about Delaware.
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We can absolutely talk about Delaware.
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It has been in the news recently.
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For many years, Delaware was the state of choice for incorporation for a number of reasons.
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Obviously it had very clear law, it had a chancery court that was effectively designed
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to help resolve corporate issues and disputes in a very efficient manner up until very recently.
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And a lot of the focus has been around controlled companies, whether it's Tesla or others,
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where there's been outcomes that at least people in the deal community have questioned.
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As a result, Delaware's changed its statutes, and in fact we actually worked on the Skechers transaction
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as a sell-side advisor to the company, and as a controlled company, we were able to take advantage of a
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as a sell-side advisor to the company, and as a controlled company, we were able to take advantage of a
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streamlined process that Delaware allowed corporations to pursue.
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It didn't fundamentally change the nature of the transaction or the standard of review of the board of directors,
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which was obviously very high, but it did remove some of the technicalities
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that would otherwise come into play in Delaware.
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How are you seeing your clients think about Delaware now as a home for their incorporation?
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Are they reconsidering it, or do things like what they've done in terms of changing the statutes move it back into a direction
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where it is fundamentally a good place for corporations to be?
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Obviously the state of Delaware has had a very long history as the state of choice for corporate incorporation,
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and I think there's a lot of very good reasons for that.
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We've seen for many, many years that the Delaware Chancery Courts
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and the sophistication that they provide in their review gives a lot of certainty and guidance to deal professionals
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in knowing how deals will be reviewed, how they'll be considered, what you can and cannot do.
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I think the state has shown a willingness
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both at the legislative and judicial level
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to be pragmatic about the realities of changing corporate times,
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and the most recent round of legislative modifications
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I think is evidence of exactly that,
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of a desire to make and keep Delaware as the state
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where companies can incorporate in,
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govern themselves, go public,
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live a long and successful career and life as a public entity,
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and understand the way their actions will be reviewed,
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work with sophisticated outside counsel and inside counsel
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to understand what they can and cannot do
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and have good guidance so that they can operate
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to the best of their ability.
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Yeah, I couldn't agree more.