Hello everybody, welcome to today's edition of C&F Talks. Today I have with me Will Pearce, who's a Partner at Davis Polk. Will is going to be chairing and speaking at the M&A Summit in London on the 24th of November.

Will's a Partner at Davis Polk and is head of its Europe practice and leads its M&A practice in London. He advises corporates, private equity and investment banking clients on domestic and cross-border public and private M&A, takeovers and mergers and security offerings and listings, as well as on corporate governance, shareholder activism and restructuring matters.

He has over 25 years’ experience of advising on the UK's takeover code and listing rules and is widely regarded as one of the top M&A corporate and ECM lawyers in London. Will, welcome.

Good morning, Maurice.

Great to have you with us.

As chair of the M&A Summit, could you give us your perspective on the most significant overarching trends that you are observing in the global M&A market in late 25 and looking forward to 2026 and how do these differ perhaps between public and private M&A transactions?

So that's a pretty huge question to get started with and I think we'll hopefully touch on all of that some more during the course of the M&A Summit.

Indeed.

I mean look, I would say 2025 we continue, and you and I have chatted about this at length, but we continue to live in what we might refer to as interesting times. So, we still have global conflict, the world is getting used to tariffs, which is obviously having an impact on trade and business. We continue to live in times of political uncertainty, we have inflation, we have continued pressure on the cost of living, particularly in the UK.

All of that I think plays through to M&A as it has done and we've had these conversations for the last few years; it's sort of no change. I guess at one level people now have just learned to live with it, so there's sort of the shock of conflict in Europe, maybe the shock of tariffs, the breakdown of globalization. I think now people are just getting on with life.

If you look at deal values and volumes for global M&A in the first half of the year and you compare it with last year, depending on which analysis you read, I think the consensus is that probably first half of 2025 compared with first half of 2024 is broadly flat, if not slightly down in terms of volumes. But maybe the silver lining in the cloud is that the value of deals and the return of the mega deals, they have come back. So, volumes were up, sort of values were up quite a bit in the first half of the year and that's continued through the last three or four months as we've moved into the second half, so that's good.

Anecdotally, because I didn't think we've got the proper stats yet for the later, for the latter part of the year, but anecdotally I think if you talk to suddenly lawyers around Europe, most people would say that there's been a, that we've all seen a little bit of a tick up in the volume side of M&A. So, you know, people put different values on where the volume is, but the 250 to 750 million size deals and the bank has probably started getting the calls for processes first half of the year and that's moved forward to the lawyers and executed in the second half of the year. So, I would say that's positive because we've had a pretty subdued 18, maybe 18 months in Europe, those sort of mid-market deals that maybe the slightly smaller private equity deals.

If you then look at the difference between public M&A and private M&A, I think on the public M&A side, if we split it into two, you've got the activity by UK public companies. That's sort of ticking along. There were probably, I guess, over 20, over 20 deals, maybe sort of pushing 25 in the first half of the year.

That would be what in the old days we would have called significant transactions that would have required a shareholder vote, but now the listing rules you just need to announce. So, there is activity there by UK listed companies, which is good. On the takeover side, I think the latest numbers showed that we have almost had as much activity in the first nine months of the year as we had in the entirety of 2024.

So, no doubt by the end of the year, we'll be saying that 2025 was a busier year for UK takeovers than 24. Again, the value's all over the map. On the takeover side, I would say the big difference is that and I think talking to colleagues at other law firms and talking to the investment bankers, same thing.

There were lots of people who were taking an interest in particular deals, maybe speculatively, which we haven't really seen before. There are a few competitive situations creeping back into the market, which is good.

On the private M&A side, obviously before we had the lull of the last 18 months, we'd all got used to a particular way of doing deals in Europe with controlled sales processes largely driven by PE. I would say the deals that we've been involved in this year, and you look at some of the deals in the market, they're a little bit more difficult to do. They're a little bit more bespoke. They require a little bit more time on the negotiation.

Regulatory issues are there, but the good news is that things like transactional warranty and indemnity insurance coverage, the pricing is good. It's available. Companies can get debt to do deals.

So, whilst things are a little bit more difficult in the negotiations and agreeing the value, everything else you need to do the deal, so the debt and the W&I insurance is readily available. Bottom line, I guess, the world is a complicated place, but M&A keeps on trucking. You look at the volume of businesses that private equity has in their portfolios, amongst the portfolio companies, and the pressure that's coming to investors to seek exits, that can only be good for volume and only good for the market.

So, all in all, quite a positive picture with things ticking up.

I'm an optimist, Maurice.

Well, that's good to hear. So am I. I agree with that way of viewing life.

But turning to private equity, perhaps in a bit more detail, you mentioned more bespoke deals. You mentioned, obviously, the need to recycle portfolios. And obviously, there's a fair amount of dry powder as well. So, what are the current issues in PE deal making at the present time?

Look, there are lots of different reasons. And I'm sure it's a combination of all of the above as to why people think things have been a little bit slower. I guess one of the difficulties going back to the top of the call was just sort of market uncertainty and the various issues that the world or complications that the world has that lead to uncertainty.

I think people, as I say, are used to that now. So, they're just going to get on with deals. In the private context, obviously, with a sales process, generally, people are a little bit more cautious.

So hot assets will always fly off the shelf. But your run of the mill average process, to the extent that there is one, I think is just taking a little bit more time. I would say that sellers are taking more time over preparation. They're taking intelligence issues more seriously. They're getting the management teams; they're spending more time with the management teams to get them ready for the presentations. So, they're trying to anticipate the issue so that the formal part of the process is a lot smoother.

You've obviously got some chatter, I guess, in the press around the state of the private credit markets with the last couple of weeks. Obviously, private credit has become massively important over the last 10 years and certainly over the last five years as a source of acquisition financing, particularly for private equity. So, it's early days, but to the extent that we get some wobbles in the private credit market, that no doubt will have an impact.

On the public side, you know, probably to help bridge valuation gaps and you get the valuation gaps when you've got the sort of the factors creating uncertainty in the market. The panel recently put out guidance on what we call stub equity. So essentially, where you give target shareholders the chance to roll over into the private equities Bidco.

That's probably quite helpful guidance, given the number of deals that we've seen over the last 18 months with public, you know, with bidders for UK public companies offering stub equity. Obviously, they all have different reasons for doing that, maybe to allow the management to roll. But quite often, it's used as a gap to bridge the difference in value between the target's expectations of what it's worth, what the target shareholders want and what the bidder's prepared to pay.

So that's certainly something on the public side. And then, look, the regulatory world, the regulatory world continues to pose challenges and pose uncertainties for, you know, particularly for acquirers.

Yeah.

So, I mean, on the regulatory side, Will, do you think that there has been an increase in the degree of regulatory scrutiny on deal timelines? And what's the impact been on transaction costs and the overall certainty of closing transactions?

Yeah, look, it's a really interesting question, particularly for me as a corporate partner managing a budget on a deal. And, you know, you pretty much have an idea as to where you'll be on costs and timeline, if you just take the M&A piece, whether that's agreeing an agreement or whether it's the sort of the regulated process of doing a public deal. And certainly, for us as corporate M&A lawyers, the increase in intervention by antitrust regulators, the proliferation of, you know, regulation of foreign direct investment.

So, it's actually the rest of the world taking inspiration from the CFIUS regime in the US and other jurisdictions in the UK in the form of the NSI regime that has created more work for antitrust lawyers. That whole piece has become more important, whether it's a public deal or a private deal, because the parties to a transaction, again, going back to the top of the call and the market uncertainty, more pressure is put to bear on us as advisors in an uncertain world to deliver certainty when parties put their head above the parapet on a transaction. And that's increasingly, has become increasingly difficult with the proliferation of regulation. So, you know, it is a bigger part. It does require tackling difficult issues upfront in a deal. It does involve a little extra cost.

It involves having conversations with clients around commercially, what are they prepared to live with in terms of regulatory risk? So, you'll be familiar with the terms high or hell water, the level of effort that a buyer needs to expend to get the regulatory clearances for a deal. So, we spend, I'd certainly say, I think all lawyers spend a lot more time having those conversations.

And then depending whether it's a private deal or a public deal, you know, there's the drafting, the strength of the undertakings to dispose of assets or agree to remedies with regulators. And in certain cases, thinking about reverse, you know, break fees, termination fees to compensate a seller to the extent that lawyers and advisors get the regulatory risk wrong and the regulator takes a contrarian view. So, yeah, I think everybody's just spending more time thinking about that and thinking about how to address it in the commercial terms of a deal.

Quite challenging, I guess, about that additional burden. Will, I think we've run out of time. 

For our viewers, we're very much likely to join us, if you can, at the M&A Summit in London on the 24th of November. Further information that is available on our website, www.cityandfinancial.com. 

So, thanks so much, Will. Always great to chat to you and looking forward to seeing you in November.

Thanks very much, Maurice, and hopefully we'll have a very interesting debate on the day, as we always do.