Freshfields sets up new group to tackle deal roadblocks as protectionism rises

Freshfields Bruckhaus Deringer has set up a new group to help clients deal with rising levels of protectionism across the world.

According to research carried out by the firm, since 2014 there has been a 30% increase in £1bn-plus transactions that Freshfields has worked on that have been impacted by foreign investment rules or public interest issues.

The firm’s research also highlights that five of the G7 countries have strengthened their foreign investment or public interest regimes since 2014, while the UK, US and EU are all currently reviewing the way that they deal with such issues.

In response to these developments, the firm has established a public interest and foreign investment group to help clients facing these issues on M&A deals. The group is co-led by competition partners John Davies in London and Alastair Mordaunt in Hong Kong, and includes about 40 lawyers from the firm’s competition and corporate teams around the world.

“The group needs to be global in scope to cover how these issues are increasing around the world,” says Davies. “What is crucial is pulling together our existing capability and making sure that, when a particular matter needs it, we are operating as efficiently as possible.

“In order to get these deals through, you need to engage with all stakeholders and not just the relevant government, which is one reason why this group needs to go beyond what we have been doing historically.

“I led all the global regulatory work on the AB InBev-SABMiller merger, where we had 30 jurisdictions to make filings in. What is less understood is that in 15 of those we needed remedies to obtain approval. Of those, half were public interest or foreign investment situations.

“For example, we had to engage on that front in South Africa, in four or five other African countries and in a number of South American countries and Australia, which also had material foreign investment provisions.”

Davies added that the firm was working to develop a “roster of advisers” around the world that they could pull together as a team to act for clients on transactions. “To a certain extent, that is what we have been doing previously, but now we are going to be doing it more systematically,” he said.

According to Davies, this would include both local counsel in various jurisdictions and other advisers such as banks and public affairs consultants.

“On the South African part of the AB InBev-SABMiller merger, we had two law firms, we had public affairs advisers, investment banks, everyone working together to achieve the successful outcome,” Davies said.

The launch of the group comes after the firm’s hire this March of Shawn Cooley from the US Department of Homeland Security in Washington DC, where he served as director of foreign investment risk management. He has joined the magic circle firm as special counsel to advise on Committee on Foreign Investment in the United States issues, and according to Davies, the firm is likely to make more hires in this area.

Bruce Embley, who co-heads the firm’s global M&A client group and who was also part of the firm’s team on the AB InBev-SABMiller deal, adds that while protectionist measures are increasing around the world, there is usually a solution to get transactions over the line.

“It is quite significant when it bites, but there are ways to get through these issues, and the fact there are now more public interest issues doesn’t necessarily mean the impacted deal will be blocked,” he said. “There are successful examples, such as Softbank’s acquisition of Arm Holdings, where there were legitimate public interest concerns that were successfully resolved.

“What is clear is when we do have one of these deals, the approaches that you need to get them to successful closing are evolving. It is one of the reasons why, although this skillset has been around for a long time, we have decided we need a dedicated group that can focus on this very fluid and rapidly changing space.”