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Stricter anti-trust regulations are main hurdle in cross-border M&A, says Paul Hastings report

European companies competing in the global M&A market consider that increasingly tight anti-trust regimes in countries around the world are now the single most important hurdle facing international dealmakers.

That’s according to a new report by law firm Paul Hastings, “Global M&A: Momentum for Growth”, which is based on interviews with 40 top European corporations, investment banks, private equity funds and other business leaders. The potential limitations on a company’s freedom to manoeuvre, due to ever-stricter competition laws, meant that other forms of corporate combination may come back into favour as companies try to navigate antitrust regulations.

“We are witnessing a major increase in the amount of sometimes extra-territorial regulation, in areas such as anti-trust, anti-corruption and tax,” says Guillaume Kellner, partner in charge of the Corporate Department at Paul Hastings in Paris. “This trend is increasing the legal risks for M&A transactions, forcing acquirers to think ahead and adopt increasingly sophisticated approaches.”
During first half 2014, a total USD1.57 trillion worth of M&A deals were closed, making it the busiest six-month period in cross-border M&A since 2007, according to Mergermarket data. With an estimated EUR1 trillion in current reserves at European-listed companies, the pace of dealmaking is not expected to slow.
However, corporate executives interviewed for the Paul Hastings M&A report said that that they are very vigilant about hurdles to international deals. More than 120 countries now have antitrust regimes in place, targeting cartel activity and other anti-competitive activity internationally. As the pace of global M&A has picked up, so has the expansion and vigor of these anti-trust regimes, adding enormous complexity to planning and execution of cross-border M&A, the report said.
The second most important constraint for cross-border deals, according to dealmakers interviewed for the report, was ever stricter anti-corruption compliance in countries around the world. More stringent oversight from government regulators and courts globally has increased the pressure on acquirers and targets to comply with all the different laws and regulations applicable to transactions, including extra-territorial laws such as the Foreign Corrupt Practices Act [FCPA] and equivalent legislation in Europe and Asia.

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