What significant trends exist in the M&A market presently? Are you seeing these just domestically or internationally as well?
M&A activity in Bermuda continues to focus more on quality than volume.
Domestically, we have seen certain business lines, notably insurance, remain active targets for M&A work but are also seeing a demand for targets operating in corporate and administration services. We are necessarily impacted by international trends as many cross-border transactions involve Bermuda holding companies.
In terms of distilling a key theme, transactions tend to be effected more by way of a straight share sale (where there is an English market focus) or merger (where there is a North American market focus) rather than by way of amalgamation or scheme of arrangement.
What are the three biggest challenges to practising M&A in Bermuda at the moment?
Bermuda is very fortunate in that it has a very flexible statutory framework which can accommodate or mirror structures that advisors in “onshore” jurisdictions are familiar with and wish to implement. There are certain nuances between the rules of different jurisdictions and we work hard to ensure that those nuances don’t stop “getting the deal done”.
We frequently work on transactions where onshore counsel is leading the commercial discussions and main transaction documentation. As Bermuda counsel, it is key to ensure we strike the right balance between advice that shares our experience of both what is “market” in Bermuda and that which is required to complete the transaction, without being seen to overstep by our instructing counsel.
How does M&A fit into the firm as a whole? Is it easy to collaborate with other teams?
In a firm like ours M&A fits well. We have several teams (Corporate, Dispute Resolution, Employment etc.) that can bring their specialisations to the table to give the client the best possible advice. Collaboration is easy and everyone involved is aware of the quick turnaround required on M&A matters. The spate of Bermuda-based insurance company mergers showcased this perfectly as we advised groups with a substantial physical presence and a significant number of employees which required a collaborative, interdisciplinary approach to provide all of the advice our clients needed.
In addition to internal team, there are often accountants, investment bankers and other professionals involved, with collaboration across different time zones. Because of this, it is important that clients hire firms like ours which have “hands on deck” 24/7 and the expertise to be a one stop shop.
What advice would you give to the next generation of M&A lawyers?
Junior lawyers must pay attention to detail. M&A deals are high pressure and fast paced. Junior lawyers should take their time and review their work. It is always better to do the task slowly and thoroughly once, than have your hastily completed document being sent back multiple times with corrections and amendments.
There is also a temptation to give undue deference to precedents. Precedents are a tool, not a template. If a lawyer doesn’t understand a provision in the precedent, it is absolutely key that they don’t send the finished document out until they do as that provision may not be required or even be appropriate for that transaction.
What are your predictions for M&A in Bermuda over the next five years?
There have been a significant number of M&A deals in Bermuda recently, particularly in the (re)insurance sector. We expect this trend to continue due to the continued soft-market conditions, the impact of technology (particularly Insurtech), and the US tax reform at the end of last year (which has caused some divestments of noncore onshore business). In addition to these factors, the pursuit of capital efficiencies, market reach, and other strategic needs in the reinsurance space, are all key factors driving the current consolidation trend.
If the digital asset market develops in the way in which people hope, five years may well be enough time to start to see established players seeking opportunities to grow, identify synergies and combine with others in that sector.