fivehundred magazine > Practice area spotlight: M&A > Keeping the pace with modern business in Guernsey

Keeping the pace with modern business in Guernsey

Private equity funds and buy-out firms are driving a significant amount of M&A activity, while schemes of arrangement have become a popular means for effecting deals, write Andrew Harding and Jeremy Berchem

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

The local M&A market in Guernsey was relatively active throughout 2017, and this has continued well into 2018. We would characte

rise the market as, for the most part, a “seller’s market”, with a number of buyers (both domestic and international) looking to undertake transactions in Guernsey. Private equity funds and buy-out firms are currently in a cycle where they have excess dry powder and this has driven a significant amount of local M&A activity – particularly in the fund and trust administration sector. However, as Guernsey is a sophisticated international financial centre, the market is exposed to the same economic and political factors as affect the level and type of M&A in larger onshore jurisdictions.

One of the great strengths of Guernsey is that it has kept its Companies Law under review since its introduction in 2008, ensuring that it has kept pace pragmatically with the needs of modern business, and to respond to developments in other jurisdictions and industry feedback. New parts were inserted into the Companies Law, by Ordinance, dealing with the Takeovers and Mergers Panel and the Regulation of Auditors for the purposes of Directive 2006/43/EC. In addition, as part of the ongoing review of the Companies Law, some further potential areas for amendment have been identified through engagement with key stakeholders, with a consultation paper being issued in June of this year. Responses are currently being considered by the Committee for Economic Development with a view to developing policy proposals.

 

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

In Guernsey, Appleby has continued to develop its growing specialism in advising major corporates on deals effected by way of scheme of arrangement in the Guernsey courts. Since their introduction in 2008, schemes of arrangement have become a regular and popular means of effecting takeovers, amalgamations and corporate restructurings in Guernsey. It seems that their application has been embraced by both the local courts and industry as a viable alternative to a traditional takeover bid, amalgamation or corporate restructure.

The Guernsey provisions dealing with schemes of arrangement are broadly similar to those in England and Wales.

 

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

Across Appleby as a firm, we consider the three biggest challenges to M&A activity in both Guernsey and the Channel Islands as a whole to be:

  • Political uncertainties including Brexit in Europe, the midterm elections in the US and Chinese government scrutiny over outbound deals;
  • US and UK tax and regulatory reforms; and
  • Current macroeconomic and geopolitical factors influencing transactions.

 

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

Appleby has experts in offshore corporate, finance, funds, restructuring and dispute resolution. The M&A team plays a central role in Appleby’s wider corporate and finance offering, and is comprised of industry experts with deep knowledge of private equity, energy, insurance, banking, healthcare, real estate, media, telecoms, investment products, regulatory matters and FinTech.

Given the cross-jurisdictional nature of many of the M&A transactions that we work on, our Guernsey team routinely works closely alongside the corporate and finance practices of other Appleby offices. Our unique global footprint enables us to provide a seamless cross-border service to our clients.

 

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

M&A lawyers need to be as knowledgeable as they can be about not only corporate law, but also finance, capital markets, tax and competition law, so they can understand the transaction they are working on and provide the best advice to the client. In addition, M&A lawyers must understand what is most important for their clients’ businesses and their strategic goals, in order to most effectively represent them. It is important to be able to identify what is worth being tenacious about and what is not – for example, knowing not just the purpose and effect of a warranty, but also whether it is relevant to your client’s business or not, meaning whether you should insist on it or can do without it. Therefore, always be prepared, and focus on developing from being just another average lawyer into being a true trusted strategic adviser for your clients.

It is important to understand that while it is your role to provide advice, it is ultimately the client who makes the business decisions. Too often, lawyers are more aggressive than is necessary, and lawyers making a meal out of something which is not in their client’s interests is never good for anyone.

 

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

Locally, we expect further consolidation and restructuring of insurance and fiduciary businesses during any Brexit transitional period. If the current geopolitical climate of protectionism and trade wars continues, we may see an increase in global restructuring as companies seek to minimise any tariffs imposed on their business and goods produced. Any such movement would undoubtedly have an impact on the M&A market in both Guernsey and the Channel Islands as a whole. That said, Guernsey is one of the leading offshore jurisdictions, so we anticipate that it will remain attractive to global public and private companies, financial institutions, funds and high-net-worth individuals.