SPONSORED STATEMENT：MERRILL DATASITE
Protectionist issues in cross-border M&A seem to be morphing into concerns about national security, according to a panel of three distinguished M&A professionals who participated in an interactive live video webcast, Cross Border M&A: The Rising Tide of Nationalism and Protectionism.
Expert view: Global Finance’s Matt Greco (far left) discusses cross-border M&A trends with (left to right): Ken Meyers, head of M&A for the Americas at Siemens; Jim Lavelle, managing director and co-head of the industrials group at Houlihan Lokey; and Allen Miller, head of Chadbourne & Parke’s M&A practice.
The webcast, sponsored by Merrill DataSite® and presented by Global Finance magazine, focused on how prevalent issues of protectionism are in 2011.
Some high-profile deals, such as the proposed hook-up, announced in January, of the New York Stock Exchange with Deutsche Borse, have shown there are still considerable protectionist concerns in the US. But although deal volume has been rising steadily for three years now and looks set to grow sharply in 2011, protectionist issues should not be overstated, commented Jim Lavelle, managing director and co-head of the industrials group at international investment bank Houlihan Lokey. Lavelle pointed out that the vast majority of cross-border deals are mid-sized, meaning they generally don’t have the visibility of larger deals so they don’t raise the security concerns or prompt a protectionist backlash.
Allen Miller, partner and head of international law firm Chadbourne & Parke’s M&A practice, warned that size may not be a defense against protectionist concerns, however. He pointed out, for example, that the Committee for Foreign Investment in the United States has thrown up roadblocks to deals as small as $2 million. “It’s not about size, it’s about national security,” he said.
Lest anyone think it’s only the United States with concerns with security issues, China recently passed a raft of regulations that attempts to do the same thing, Miller added.
Lavelle noted that in other countries and regions these concerns often focus on natural resource companies—such as in 2010’s squelched attempted takeover of Potash Corp. of Saskatchewan, Canada, by BHP Billiton of Australia. In this case, Canada invoked an obscure national interests clause—in agreement with Saskatchewan province, which was concerned about jobs— despite the fact that BHP is a fellow Commonwealth-based company.
Ken Meyers, head of M&A for the Americas for Germany-based international conglomerate Siemens, added his unique perspective to the conversation as a corporate executive directly involved in researching and shepherding along deals. Meyers new about protectionism—Siemens got a taste of it in the 1990s when it acquired Westinghouse’s nuclear power division, and has been dealing with security and protectionism issues with its US acquisitions since 2000. As an international conglomerate, Siemens has interests in healthcare, energy and industry, but it is mainly the coompany’s acquisitions of software companies that have raised concerns with US officials. In this matter, Siemens, as a foreign company, has a unique advantage: It created a proxy company 11 years ago composed of US citizens—including former highranking military people—that vets the deals and creates a Chinese wall to keep sensitive information within US borders. Companies would be hard-pressed to create such a proxy company today, Meyers acknowledges, which gives Siemens an edge in certain competitive acquisitions.
But, as Lavelle pointed out, many deals don’t have protectionist or security concerns and companies, whether targets or acquirers, should talk to their advisors and let the economic sense of a deal be their first concern before worrying about protectionism.