Sazeracs and Speculation: What We Heard at the 35th Annual Tulane Corporate Law Institute
March 30, 2023Last week, professionals from across the country, including a team from H/Advisors Abernathy, gathered in New Orleans for Tulane University Law School’s annual corporate law conference, the year’s biggest gathering of mergers & acquisitions practitioners. As we worked our way through conference panels, networking lunches, and a jazz concert or two, we kept our ears open, listening to what other experts are observing, shared our insights, discussed what is different this year, and most importantly – theorized about what is coming next. Here are our takeaways.
The M&A “Brick Wall”
The tone of the conference was perhaps set by Anu Aiyengar, JPMorgan’s global head of M&A, who acknowledged that there is currently “a brick wall in front of M&A activity.” With inflation, geopolitical tension, rising interest rates, the increasing likelihood of a recession, and the banking crisis, dealmakers are finding it harder to sign and complete deals.
With M&A activity down, deals reporters are also working harder to get their scoops and break deals before they’re announced. While major business publications typically send a few reporters to the Tulane conference, this year we noticed an abundance of M&A reporters in attendance. If these diligent reporters came town to check on their sources and better understand the market, it’s possible we will continue to see the trend of deals will continue to leak earlier and with accurate information in this current environment.
Hostile-Curious Buyers
While seller value expectations are becoming more reasonable, there is still a disconnect around price between potential buyers and sellers. In today’s market, some potential sellers are hesitant to launch a proactive sales process because they don’t want to be perceived as weak or struggling in the current environment where so many distressed sales are occurring.
As a result, panelists during the conference shared anecdotal evidence that more buyers are considering their options to take an unsolicited (or even hostile) approach if a target won’t come to the table or agree on price. Potential targets should be prepared for unexpected or unwanted attention from buyers. Conversely, buyers that are committed to getting a deal done should recognize that a hostile approach, which may have been fruitful in forcing a reluctant buyer to the negotiating table in a more frictionless environment, may be more challenging in the current market.
Regulatory Stalemate
One of the biggest challenges to dealmakers is the current regulatory environment in both the United States and abroad continues to be a significant deterrent to consolidation. Large deals, in particular, are facing increased antitrust scrutiny and taking longer to close.
While U.S. targets are still considering cross-border deals, international targets are focusing less on North American targets due the challenging regulatory backdrop and strong dollar. The increasing volatility of U.S. politics also has some buyers sitting in the sidelines, waiting for potential regulatory shifts and policy decisions.
Is the UPC really making a difference?
The adoption of the Universal Proxy Card in September 2022 has prompted many companies to re-evaluate their corporate governance, adjust bylaws, and proactively engage in board refreshment in an effort to pre-empt or prepare for an anticipated wave of activist campaigns.
Experts at Tulane noted that thus far, however, the biggest impact of UPC has been the anxiety surrounding it, rather than either increased volume of campaigns or new entrants into the activist space. Despite that, no company (or director) wants to become the test case for the new rules, and experts suspect this may be why companies are opting to settle relatively quickly when faced with a proxy fight.
The intense scrutiny that the UPC puts on individual directors, rather than the Board as a whole, is also making many current and prospective directors less willing to serve. For many individual directors, the prospect of being dragged into the spotlight by an activist is unappealing and enough of a deterrent to decline a director position they might previously have accepted. Ironically, this reluctance to join Boards comes right as many companies are seeking new candidates to refresh their Boards.
If we learned one thing coming out of Tulane, it’s that the future is uncertain, and companies and advisors alike are trying to anticipate a change in tide that could potentially impact their or their client’s business objectives. Major shifts are happening faster than ever before, as the unprecedented pace of the recent banking crisis demonstrated, and the ripple effects are less contained in today’s interconnected global environment.
Kyla MacLennan is a Vice President in the New York office and provides ongoing strategic communications, public affairs and investor relations counsel to clients across industries, including technology, media and telecom, financial institutions, alternative investments and healthcare. With a specialization in M&A and transaction communications, Kyla has advised on transactions with a total value of more than $125 billion
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Emma Prenn-Vasilakis is a Vice President in the New York office and supports publicly traded and privately held companies on complex strategic communications matters. She has significant experience with crises and special situations, including reputation management, cybersecurity and litigation. She also assists clients with corporate strategy and financial communications, including company milestones and transformations, mergers & acquisitions and shareholder activism
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Contact the authors
Kyla MacLennan
Vice President
Emma Prenn-Vasilakis
Vice President