In this article we look at some of the key factors that influenced deal term trends through analysing the many transactions Shoosmiths advised on over the last year.

For the third successive year Shoosmiths remained the UK’s most active law firm advising on mergers and acquisitions (according to Experian MarketIQ), acting on over 400 deals worth over £7bn in 2023.

Elia Montorio, Head of M&A comments:

“Regularly advising on more M&A transactions than any other law firm in the UK, Shoosmiths is uniquely positioned to provide insights into ever-changing deal term trends. In this article we share some of the key themes that emerged across the many transactions we advised on over the past year. This real-time market knowledge gives Shoosmiths the edge and reassures our clients we have the experience to guide their deals through to a successful completion, however transformational or complex.”

Industry sectors: Financial and professional services and Technology lead the way

Reflecting the diversity and dynamism of the UK economy, Shoosmiths M&A team has a strong track record of advising clients across a wide range of industry sectors. In 2023, we saw particularly strong activity in the financial and professional services and technology sectors, which accounted for over 40% of our deals by value. These are two of our core areas of specialism and our industry experts understand the market drivers, opportunities and challenges facing our clients.

Some notable deals we advised on in these sectors include:

• Advising a national accountancy and business advisory group on multiple acquisitions including of RSM UK's specialist medical accounting team.
• Advising Dotdigital Group plc on the acquisition of Fresh Relevance Limited, a vendor of cross-channel personalisation technology.
• Acting for Certara USA Inc. in its acquisition of Formedix Limited, a Scottish company which provides a clinical metadata repository and clinical trial automation software.
• Advising a FTSE 100 company on its cross-border acquisitions of technology medical and testing devices.

We also advise clients in other sectors such as healthcare, consumer, energy and infrastructure, manufacturing and industrials, and real estate. We have a deep understanding of the specific issues and opportunities in each sector, and we tailor our advice to suit the needs and objectives of each client. Our clients continue to expand into multiple territories and we are delighted to advise clients across the globe including EMEA, North America and Asia.

National Security and Investment Act: Navigating the new regime

The National Security and Investment Act (NSIA) came into force in 2023, introducing a new regime for screening and approving transactions that may pose a risk to national security. The NSIA applies to a wide range of sectors and activities, and requires mandatory notification and clearance for certain transactions, as well as giving the government the power to intervene in other transactions that may raise national security concerns.

Shoosmiths M&A team is experienced and proactive in recognising and navigating across all forms of FDI regimes in different countries on cross-border deals, including dealing with the NSIA and has advised clients on how to comply with the new regime whilst minimising any disruption to the deal timetable. In 2023, 6% of our deals required mandatory approval under the NSIA, falling across a broad spectrum of sectors such as defence, energy, communications, transport, and artificial intelligence. We successfully obtained clearance for all transactions, and our specialist competition experts worked closely with the government to answer their queries and provide the necessary information and assurances.

We have also advised clients on how to mitigate the risk of the government intervening in transactions that do not require mandatory notification but may still fall within the scope of the NSIA. This includes conducting due diligence, engaging with stakeholders, and implementing appropriate contractual protections.

Warranties and indemnities: The role of insurance

Warranties and indemnities (W&I) are contractual provisions that allocate the risk and liability between the parties in a M&A transaction. Warranties are statements of fact or opinion made by the seller about the target business, and indemnities are obligations to compensate the buyer for specific losses or liabilities. W&I are often subject to extensive negotiations and can have a significant impact on the deal value and structure.

W&I insurance covers the liability of the seller or the buyer in a M&A transaction and can provide benefits to both parties, such as reducing the need for escrow or retention arrangements, facilitating a clean exit for the seller, and enhancing the protection for the buyer.

In 2023, over a quarter of our transaction values were underwritten by W&I insurance, reflecting the increasingly important role it provides in minimising both parties exposure to risk under the warranties. 

Conditionality: Managing the deal timetable

Before a transaction can be completed certain conditions need to be satisfied or waived and can include regulatory approvals, third party consents, shareholder approvals, and completion of due diligence. Conditionality can affect the deal timetable, certainty, and value, and can create opportunities or challenges for the parties.

Shoosmiths M&A team help our clients to identify, negotiate, and manage the conditions that are relevant and appropriate for their deals, and to mitigate the risks and costs associated with them. We also advise our clients on how to deal with any issues or disputes that may arise in relation to the satisfaction or waiver of the conditions.

Of the transactions that we advised on in 2023 that required a split signing and completion, 50% included a material adverse change clause, which allows the buyer to terminate the deal if there is a significant deterioration in the target business between signing and completion. Over 65% required the sellers to repeat the business warranties on completion, which ensures that the warranties remain accurate and up to date.