raising capital growth

Raising Capital for Growth

The benign interest rate environment that helped cushion the aftermath of the Great Recession is ending. While this is expected to play out over the year, it is already changing the dynamics between borrowers and lenders and will affect the large stock of dollar-denominated debt held outside the U.S., hitting emerging economies particularly hard. Companies seeking finance at every stage in the growth cycle will need to weigh the optimum lending structure, given the monetary and fiscal policy changes ahead in the major international economies, especially but not exclusively the U.S. In many developed economies there is no shortage of capital providers within and outside the mainstream lenders, including both the private equity and debt sectors. The relatively well-capitalized U.S. money center banks are well placed in this market, but there is much official support for companies in other economies to develop target industries.

Our Partners' Perspectives

What is the top trend to watch in M&A in Europe this year?

Political uncertainties will play a major role in shaping boardroom decision making. The uncertainties that have characterized the past few months following the Brexit vote will continue without resolution of crises in Italian banking and with Greece’s ongoing debt discussions. Combined with elections in The Netherlands, France, and Germany, and concerns about the direction of U.S. policy, the European deal-making environment presents the perfect combination for caution in the boardroom. Despite this, there is plenty of opportunistic energy in the market, with both intra-regional and external acquirers looking for well-priced assets with high brand value, good market positioning, or cutting-edge tech capacity.

Ronan O’Sullivan

London

What is the biggest area of opportunity in the U.S. capital markets in the year ahead?

Regulatory and tax reform are high on the new U.S. administration’s agenda, part of a program to improve the business lending environment and increase economic growth. Any lowering of corporate taxes will increase shareholder value. If there is congressional agreement on a tax repatriation plan, that will also have a beneficial impact on investment capital, share repurchases, and dividends. All of these will open up opportunities for investors, in particular in the government contracting sector, but also more generally, especially if we continue to see an upturn in both alternative and other investments in a growing range of asset classes as well as increased M&A.

Teri O’Brien

San Diego

What recent trend or development do you expect to have the greatest impact on the European private equity market in the year ahead?

Uncertainty and volatility will drive 2017 for European private equity—a mix of Brexit negotiations, elections in several large EU countries including Germany and France, Italy and Greece’s debt tensions, and the unknown consequences of the new U.S. administration. However, this uncertainty should generate considerable opportunity for European private equity, which like its U.S. counterpart is replete with dry powder following very successful funding rounds. A relatively stable legal and tax environment combined with extremely attractive European debt financing provides an attractive investment platform. This makes it likely European purchase multiples will continue to increase, although Europe still offers comparatively excellent value in tech, agribusiness, and infrastructure.

Olivier Deren, Pascal de Moidrey and Alexis Terray

Paris

What do you see as the most critical development for the Hong Kong capital markets over the next 12 months?

2017 should be full of opportunities, as well as some challenges, for the Hong Kong capital markets. While the re-opening of the A-shares market may attract some companies considering an IPO back to mainland China, the launch of the Shenzhen-Hong Kong Stock Connect will provide more liquidity. It should have a positive impact on the valuations of Hong Kong-listed companies, making the exchange here more attractive. Financial institutions, including city commercial banks, trust companies, and insurance companies, are still eager for capital. We expect their appetite will continue to grow. From an industry perspective, I expect companies in the healthcare, education, and consumer sectors to continue to be hot spots.

Zhaoyu Ren

Hong Kong

What do you see as the next big area of opportunity for investment in Latin America?

Latin America is looking to the U.S. and the new administration to see what the approach will be generally toward Latin America, particularly over NAFTA and trade. Since the new administration, Mexico has been hit hardest compared to the rest of Latin America, where the impact has been more muted. That said, even in Mexico, lending activity has continued, as it has across the region. Investor appetite is high, despite some widespread fraud trials and investigations in the region. Brazil has seen investors willing to take on risk with continuing M&A activity, and there has been a pick-up in capital markets activity in Argentina. Project bonds deals are active, as well as financings generally and refinancings, a trend we expect to continue.

Cathleen McLaughlin

New York

Law Firm of the Year — Europe

Private Debt Investor

A Closer Look

What's Next for European Private Equity
The New U.S. Administration: Outlook for Dealmakers

Highlights of Our Client Successes

Wells Fargo’s US$31B acquisition of GE Capital’s corporate finance business

Our lawyers served as special finance counsel to Wells Fargo on its purchase of portions of GE Capital’s North American Corporate Finance business. The total acquisition included assets of approximately US$31B and businesses employing approximately 2,800 team members. The deal strengthens our client’s capabilities and deepens its customer relationships in key commercial lending markets across the U.S. and Canada.

Largest-ever investment fund focused on Southern Europe

We advised Investindustrial on the formation of Investindustrial Fund VI, the largest-ever fund focused primarily on Southern Europe. Fund VI will pursue majority investments in quality European mid-market companies typically headquartered in Italy, Spain, Portugal, or Switzerland and with strong internationalization potential. This marks the first fund of over €2B raised for the region, while Investindustrial’s funds include three of the only four €1B+ funds raised in the region over the past decade.

JPMorgan leads US$1.2B financing for Murphy Oil

We represented the global lenders providing a US$1.2B revolving credit facility for Murphy Oil Corporation, Murphy Exploration & Production Company – International, and Murphy Oil Company Ltd. Our lawyers advised JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, DNB Markets, Inc., Wells Fargo Securities, LLC, BNP Paribas Securities Corp., The Bank of Tokyo-Mitsubishi UFJ, Ltd., and The Bank of Nova Scotia as co-lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A. as administrative agent for the financing.

Leading broadband provider acquired in US$1.5B deal

Our lawyers represented FairPoint Communications, Inc., a leading broadband communications provider, in its acquisition by Consolidated Communications Holdings Inc. The all-stock transaction is valued at US$1.5B, including debt. The combination doubles Consolidated’s revenue and increases its fiber network to more than 35,000 fiber route miles across 24 states.

M&A Firm of the Year

The American Lawyer’s Asia Legal Awards