fivehundred magazine > Practice area spotlight: M&A > Bermuda firms watch the digital assets space

Bermuda firms watch the digital assets space

Lawyers must learn to adapt to the differences between jurisdictions and to
work effectively with onshore counsel, suggest Matt Ebbs-Brewer and Gary Harris

Please give us an overview of the current legal market in Bermuda and how any recent developments have impacted your practice?

Bermuda’s legal market has been subject to a recent spate of growth with new participants entering the market. As attorneys with an existing practice, we have to continue to ensure that our clients receive quality, commercial advice in a timely manner.

A whole raft of legislative change is being introduced to ensure that Bermuda meets international standards in a sensible way, but continues to be an attractive place to do business. We have contributed to the form of those changes and evolved our practice as a result. For instance, we have been advising clients in the digital asset space, which is becoming a growing industry and presents many exciting opportunities.

What significant trends exist in the M&A market presently? Are you seeing these just domestically or internationally as well?

M&A activity in Bermuda continues to focus more on quality than volume.

Domestically, we have seen certain business lines, notably insurance, remain active targets for M&A work, but we are also seeing a demand for targets operating in corporate and administration services. We are necessarily impacted by international trends as many cross-border transactions involve Bermuda holding companies.

In terms of distilling a key theme, transactions tend to be effected more by way of a straight share sale (where there is an English market focus) or merger (where there is a North American market focus) rather than by way of amalgamation or scheme of arrangement.

What are the three biggest challenges to practising M&A in Bermuda at the moment?

Bermuda is very fortunate in that it has a very flexible statutory framework which can accommodate or mirror structures that advisers in onshore jurisdictions are familiar with and wish to implement. There are certain nuances between the rules of different jurisdictions and we work hard to ensure that those nuances don’t stop us from getting the deal done.

We frequently work on transactions where onshore counsel is leading the commercial discussions and main transaction documentation. As Bermuda counsel, it is key to ensure we give advice that shares our experience of the market in Bermuda, which is necessary to complete the transaction, without being seen to overstep by our instructing counsel.

How does M&A fit into the firm as a whole? Is it easy to collaborate with other teams?

In a firm like ours M&A fits well. We have several teams (corporate, dispute resolution, employment, etc.) that can bring their specializations to the table to give the client the best possible advice. Collaboration is easy and everyone involved is aware of the quick turnaround required on M&A matters. The spate of Bermuda-based insurance company mergers showcased this perfectly as we advised groups with a substantial physical presence and a significant number of employees, which required a collaborative, interdisciplinary approach to provide all of the advice our clients needed.

In addition to the internal team, there are often accountants, investment bankers and other professionals involved, with collaboration across different time zones. Because of this, it is important that clients hire firms like ours which have hands on deck 24/7 and the expertise to be a one-stop shop.

What advice would you give to the next generation of M&A lawyers?

Junior lawyers must pay attention to detail. M&A deals are high pressure and fast paced. Junior lawyers should take their time and review their work. It is always better to do the task slowly and thoroughly once, than have your hastily completed document being sent back multiple times with corrections and amendments.

There is also a temptation to give undue deference to precedents. Precedents are a tool, not a template. If a lawyer doesn’t understand a provision in the precedent, it is absolutely key that they don’t send the finished document out until they do as that provision may not be required or even be appropriate for that transaction.

What are your predictions for M&A in Bermuda over the next five years?

There have been a significant number of M&A deals in Bermuda recently, particularly in the (re)insurance sector. We expect this trend to continue due to the ongoing soft-market conditions, the impact of technology (particularly Insurtech), and the US tax reform at the end of last year (which has caused some divestments of non-core onshore business). In addition to these factors, the pursuit of capital efficiencies, market reach, and other strategic needs in the reinsurance space are all key factors driving the current consolidation trend.

If the digital asset market develops in the way in which people hope, five years may well be enough time to start to see established players seeking opportunities to grow, identify synergies and combine with others in that sector.