Posts Tagged ‘UK’

To-may-to To-mah-to: 10 Surprises for a US Bidder on a UK Takeover

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday April 4, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Stephen Cooke, partner and head of the Mergers and Acquisitions practice at Slaughter and May, and is based on a Slaughter and May publication by Mr. Cooke.

“You like to-may-to and I like to-mah-to…
Potato, potahto, tomayto, tomahto
Let’s call the whole thing off”

(“Let’s Call The Whole Thing Off” by George & Ira Gershwin, 1937)

Two nations divided by a common tongue. In M&A, as in so many spheres, common language and terminology often give rise to the assumption that the architecture is similarly homogenous. Although the US and the UK have a number of similarities in terms of capital markets and business practices, there are fundamental divergences in approach to public takeover practice and regulation.

Consistent with the title of this post, I have used the great American songbook as an entry point to this guide to the ten principal differences between takeover practice and regulation in the US and the UK.

…continue reading: To-may-to To-mah-to: 10 Surprises for a US Bidder on a UK Takeover

Does Volcker + Vickers = Liikanen?

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday March 8, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from David R. Sahr, partner at Mayer Brown, and is based on a Mayer Brown update. The complete publication, including footnotes, is available here.

EU proposal for a regulation on structural measures improving the resilience of EU credit institutions

1. On 29 January 2014 the European Commission published a proposal for a regulation of the European Parliament and of the Council “on structural measures improving the resilience of EU credit institutions”. This proposed legislation is the EU’s equivalent of Volcker and Vickers. It was initiated by the Liikanen report published on 2 October 2012 but the legislative proposal departs in a number of ways from the report’s conclusions. There are two significant departures: the legislative proposal contains a Volcker-style prohibition, which also departs from the individual EU Member States’ approach, and, although the proposal contains provisions which mirror the Vickers “ring-fencing” approach they are not, in direct contradiction to Liikanen’s recommendation, mandatory.

…continue reading: Does Volcker + Vickers = Liikanen?

UK Shareholder Activism: A Toolbox for 2014

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday March 2, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Jeffery Roberts, senior partner in the London office of Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn alert by Mr. Roberts.

Following an increase in shareholder and investor activism beyond pure executive remuneration issues in the United Kingdom (UK) in 2013, with some 25 companies targeted for public campaigns, this post provides a summary of certain principles of English law and UK and European regulation applicable to UK listed public companies and their shareholders that are relevant to the expected further increase in activism in 2014. This post covers (i) stake-building; (ii) shareholders’ rights to require companies to hold general meetings; (iii) shareholders’ rights to propose resolutions at annual general meetings; and (iv) recent developments in these and related areas through raising and answering a number of relevant questions.

…continue reading: UK Shareholder Activism: A Toolbox for 2014

Do Managers Manipulate Earnings Prior to Management Buyouts?

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday January 17, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yaping Mao and Luc Renneboog, both of the Department of Finance at Tilburg University.

In the paper, Do Managers Manipulate Earnings Prior to Management Buyouts?, which was recently made publicly available on SSRN, we investigate accounting manipulation prior to buyout transactions in the UK during the second buyout wave of 1997 to 2007. Prior to management buyouts (MBOs), managers have an incentive to deflate the reported earnings numbers by accounting manipulation in the hope of lowering the subsequent stock price. If they succeed, they will be able to acquire (a large part of) the company on the cheap. It is important to note that accounting manipulation in a buyout transaction may have severe consequences for the shareholders who sell out in the transaction: if the earnings distortion is reflected in the stock price, the stock price decline cannot be undone and the wealth loss of shareholders is irreversible if the company goes private subsequent to the buyout. Mispriced stock and false financial statements are still issues frequently mentioned when MBO transactions are evaluated. The UK’s Financial Services Authority (FSA, 2006) ranks market abuse as one of the highest risks and suggests more intensive supervision of leveraged buyouts (LBOs). The concerns about mispriced buyouts are therefore a motive to test empirically whether earnings numbers are manipulated preceding buyout transactions.

…continue reading: Do Managers Manipulate Earnings Prior to Management Buyouts?

Who Is Responsible for Libor Rate-Fixing?

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 26, 2013 at 9:00 am
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Editor’s Note: The following post comes to us from Mark R. Patterson at Fordham University School of Law.

On December 4, the European Commission announced the imposition of €1.7 billion in fines on eight international banks for participation in cartels in euro- and yen-denominated interest-rate derivatives. The banks had conspired on submissions for euro and yen Libor rates, and the fines were imposed under European antitrust law. As EU Commissioner Joaquín Almunia said, “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.”

Commissioner Almunia’s comment might have been addressed specifically to U.S. antitrust enforcers. Although the Antitrust Division of the Department of Justice has been involved in some of the settlements that the department has reached with banks, to date none of those settlements has included antitrust liability. Instead, the banks have pled guilty or admitted liability only for fraud, even though the statements issued by the Justice Department when announcing the settlements describe just the sort of collusion to which Commissioner Almunia referred.

…continue reading: Who Is Responsible for Libor Rate-Fixing?

Director Networks and Takeovers

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 19, 2013 at 9:22 am
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Editor’s Note: The following post comes to us from Luc Renneboog, Professor of Finance at Tilburg University, and Yang Zhao of the Accounting and Finance Section at Cardiff University.

In our paper, Director Networks and Takeovers, which was recently made publicly available on SSRN, we study the impact of corporate networks on the takeover process. In recent years, some scholars have applied graph theoretical methods in the research on the impact of director networks on managerial decision-making. They found relations between networks and remuneration contracting, the managerial labor market (hiring and firing of top management, attracting non-executive directors), corporate restructuring, and firm and fund performance.

In this paper, we examine the effect of the connections between the acquirer and target firms on the takeover process, more specifically on M&A frequency, the M&A negotiation success and duration, the means of payment in the offer, the M&A expected performance (as reflected in the short term wealth effects of the bidder), the bidder’s CEO compensation subsequent to the M&A, and target director retention rate in the merged company. The idea is that direct connections enable both parties to gather information more easily on the counter party which establishes trust, and that the overall network (which includes the indirect connections) enable firms to scout for suitable takeover targets and collect relevant information on the whole takeover market.

…continue reading: Director Networks and Takeovers

The (Advisory) Ties That Bind Executive Pay

Posted by Robert C. Pozen, Harvard Business School, on Monday November 4, 2013 at 9:30 am
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Editor’s Note: Robert Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. This post is based on an article by Mr. Pozen and Theresa Hamacher that originally appeared in the Financial Times.

While shareholders of public companies in the UK and US have been voting on advisory (non-binding) resolutions about executive compensation, those in the Netherlands, Norway and Sweden have been voting on binding resolutions.

This might change. The UK government has proposed moving from advisory to compulsory resolutions on executive pay and, recently, the Swiss approved a referendum directing its parliament to require public companies to hold binding shareholder resolutions over pay.

Based on the available data, however, we do not support a general requirement for all public companies to hold a binding shareholder vote on executive compensation. But if less than a majority of the shares voted at one annual meeting favour a company’s executive compensation plan, then at the next annual meeting, the shareholder vote on that company’s executive compensation plan should be binding.

Let us begin by reviewing the data on advisory resolutions in the US and UK. In the first half of 2012, only 53 US public companies received less than a majority vote on their executive compensation plan. Of these 53, however, 45 gained majority support for their say on pay resolutions in 2013, according to Institutional Shareholder Services.

…continue reading: The (Advisory) Ties That Bind Executive Pay

Cross-Border Schemes of Arrangement and Forum Shopping

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday September 9, 2013 at 9:32 am
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Editor’s Note: The following post comes to us from Jennifer Payne, Professor of Corporate Finance Law at University of Oxford.

The English scheme of arrangement has existed for over a century as a flexible tool for reorganising a company’s capital structure. Schemes of arrangement can be used in a wide variety of ways. In theory a scheme of arrangement can be a compromise or arrangement between a company and its creditors or members about anything which they can properly agree amongst themselves. It is common to see both member-focused schemes and creditor-focused schemes. In practice the most common schemes are those which seek to transfer control of a company, as an alternative to a takeover offer, and those which restructure the debts of a financially distressed company with a view to rescuing the company or its business.

In recent years schemes of arrangement have proved popular as a restructuring tool not only for English companies but also for non-English companies. A number of recent high profile cases have allowed non-English companies to make use of the English scheme jurisdiction to restructure their debts, including Re Rodenstock GmbH [2011] EWHC 1104 (Ch), Primacom Holdings GmbH [2012] EWHC 164 (Ch), Re NEF Telecom Co BV [2012] EWHC 2944 (Comm), Re Cortefiel SA [2012] EWHC 2998 (Ch) and Re Seat Pagine Gialle SpA [2012] EWHC 3686 (Ch). Typically, these cases involve financially distressed companies registered in another EU Member State making use of an English scheme of arrangement without moving either their seat or Centre of Main Interest (COMI). In general, the main connection to England is the senior lenders’ choice of English law and English jurisdiction as governing their lending relationship with the company.

…continue reading: Cross-Border Schemes of Arrangement and Forum Shopping

Remuneration Regulation in the European Financial Services Industry

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday August 18, 2013 at 9:39 am
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Editor’s Note: The following post comes to us from Edmond T. FitzGerald, partner and head of the Executive Compensation Group at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum. The complete publication, including footnotes, is available here.

The move toward stricter regulation of remuneration in the financial services industry in the European Union has resulted in a confusing web of overlapping European Directives and local EU Member State law and regulation, each of which seeks to place limits on remuneration. This post aims to assist in navigating the new European labyrinth by providing a snapshot of the three main European Directives that regulate remuneration:

  • Capital Requirements Directive IV (CRD IV);
  • Alternative Investment Fund Managers Directive (AIFMD); and
  • fifth Undertakings for Collective Investment in Transferable Securities Directive (UCITS V).

In addition, this post discusses the European Securities Market Authority’s (ESMA) recent Markets in Financial Instruments Directive (MiFID) Guidelines on remuneration policies and practices. The post then considers the additional requirements on remuneration that the UK is planning to impose in relation to the financial services industry.

…continue reading: Remuneration Regulation in the European Financial Services Industry

Alternatives to LIBOR

Posted by Joseph Grundfest, Stanford Law School, on Thursday August 8, 2013 at 9:26 am
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Editor’s Note: Joseph A. Grundfest is the W. A. Franke Professor of Law and Business at Stanford University Law School. The following post is based on an article co-authored by Professor Grundfest and Rebecca Tabb.

Revelations that bank traders attempted to manipulate LIBOR, the London Interbank Offer Rate, on a widespread and routine basis over the course of many years have rocked the global financial community and fueled international calls for reform. In response, the U.K. Government completely overhauled the governance of LIBOR, adopting in full the recommendations of the Wheatley Review, an independent review of LIBOR led by Martin Wheatley, CEO of the new Financial Conduct Authority (FCA) in the UK. Among other reforms, effective April 1, 2013, both “providing information in relation to” LIBOR and administering LIBOR are regulated activities in the United Kingdom. In addition, a new, independent administrator will provide oversight of LIBOR. NYSE Euronext, selected as the first administrator under the new regime, will begin oversight of LIBOR at the beginning of next year.

These reform efforts are an important first step towards restoring the credibility of LIBOR as an interest rate benchmark. The reforms instituted to date, however, do not address more fundamental concerns with LIBOR. In particular, even non-manipulated submissions sometimes bear little relation to actual market transactions because few market transactions occur in certain interbank unsecured lending markets, particularly in times of market stress. As Mervyn King has observed, LIBOR “[i]s in many ways the rate at which banks do not lend to each other…it is not a rate at which anyone is actually borrowing.”

…continue reading: Alternatives to LIBOR

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