A global pandemic, a U.S. presidential election process unlike any other the country has experienced, a renewed spotlight on racism, a historic agreement between the EU and the U.K. In 2020, the range of factors impacting businesses extended well beyond the typical market outlook, litigation trend or regulatory development. Although 2021 brings with it the hope of turning the tide on COVID-19, many of 2020’s challenges persist, and clients need to understand the evolving legal and business landscape in order to successfully respond. To that end, we are pleased to share the new edition of our annual Insights publication. Collaborating across offices and practices, our attorneys have assembled their thoughts on the corporate, litigation and regulatory developments most likely to impact clients in the year ahead.
Corporate
US M&A Outlook: Rebounding Market Fuels Optimism for Deal Activity in 2021
The U.S. M&A market faced unprecedented challenges in 2020 as a result of the COVID-19 pandemic. Dealmaking returned in full force by the end of the year, and economic and political conditions support a strong 2021 for U.S. M&A.
2021 Forecast for UK M&A and IPOs: Delayed Gratification?
COVID-19 took a toll on U.K. deal activity in 2020, but a resurgence of M&A late in the year, an abundance of dry powder and the prospect that the pandemic will be brought under control all bode well for 2021.
UK Follows Global Trend To Enhance National Security Protections
The U.K. is the latest G-8 nation to propose enhanced protections against certain types of foreign direct investment. A proposed law before Parliament comes amid the U.K.'s separation from the EU. The breadth of businesses intended to be covered, without a number of the typical safe harbors, makes the new U.K. scheme broader in scope than any other foreign direct investment regulatory system of a major economy, including the U.S.
The Year of the SPAC
Transactions by SPACs exploded in 2020, resulting in a 320% increase in the number of SPAC IPOs compared to 2019. SPACs are established as legitimate investment and M&A alternatives, both for shareholders seeking investment opportunities in the IPO and target companies looking for M&A partners in the de-SPAC transaction, and are expected to remain popular in 2021.
European Debt and Equity Markets Resilient in Face of Turbulent Year
European markets began returning to life in mid-2020 following the initial impact of COVID-19, leading to a strong year for European high-yield issuance. Equity markets also showed strength in response to the pandemic and the unpredictability it brought, with many listed companies accessing equity markets for liquidity, and IPOs rebounded in the second half of 2020. Market conditions bode well for a strong start to 2021.
Hong Kong’s Exchange Improves Its Allure for Chinese Issuers
U.S.-listed Chinese companies are finding that a secondary listing in Hong Kong is not just a hedge against U.S. regulatory uncertainty but also a good way to raise more capital. Meanwhile, Hong Kong is making it easier for Chinese biotech companies to list there.
US Corporate Governance: The Ascension of ESG
The events of 2020 and their aftermath have made it clear that ESG is not a fad that will recede, even during a crisis. If anything, 2020 made ESG's importance clear and firmly established it as being a more important engagement and voting topic going forward.
Uptick in Restructurings May Outlast COVID-19 Pandemic
The COVID-19 pandemic has caused massive disruption across the globe, resulting in a significant uptick in U.S. restructuring activity. But many experts believe we have yet to see the full extent of the surge in filings that will occur in the aftermath of the COVID-19 crisis. The amount of leveraged loans that becomes due in the next five years, combined with the economic impact of COVID-19, may serve as the catalyst for the next wave of restructuring.
Corporate Sponsorship of Private Funds as an Integrated Asset Finance Platform
Corporate sponsored funds present a range of advantages for corporate enterprises and institutional fund investors, including their ability to support a corporate enterprise's key strategic objectives and secure high-upstream investment opportunities for Investors.
Litigation/Controversy
Despite Pandemic-Related Disruptions, Securities Class Action Filings Remain High With No Signs of Slowing
Despite unprecedented disruptions to the court system from the COVID-19 pandemic, plaintiffs continued to bring securities class actions at elevated levels in 2020 — a sign that filings will remain high in the year ahead.
Biden Administration Signals Its Intention To Be Tougher on Corporate Crime
The Biden administration has signaled its intention to bolster enforcement of corporate crime. Corporations should expect DOJ policies and priorities that emphasize individual culpability and incentivize robust corporate compliance to remain unchanged, while policies that suggest a more business-friendly approach to corporate prosecutions are likely to be amended or abandoned.
Impact of Brexit on UK and EU Sanctions Frameworks
The U.K. adopted an autonomous financial sanctions regime post-Brexit. The U.K. and EU have both stated that they intend to coordinate sanctions policy as much as possible. And with the U.K. having historically played a role in shaping EU sanctions policy, we expect it to continue to take a proactive approach under the new regime.
Developments in Delaware Corporation Law
The Delaware Court of Chancery’s docket exploded with expedited “broken” deal litigation in 2020, driven by the impact of COVID-19. Meanwhile, stockholder plaintiffs remained focused on claims involving controlling shareholders and increased focus on claims against officers for breaches of the duty of care. There were also significant developments in connection with stockholder statutory books-and-records requests.
The State of Congressional Investigations in 2021
Under the Biden administration, corporations can expect the DOJ and congressional investigations to place greater focus on the private sector. Democrats in the 117th Congress likely will focus on issues including the response to the COVID-19 pandemic, environmental concerns, drug pricing and antitrust questions surrounding Big Tech.
Fifth Circuit To Weigh Enforceability of Make-Whole Premiums in Chapter 11
A recent decision now on appeal represents the latest foray by a bankruptcy court into two disputed areas of law that can materially impact creditor recoveries as well as a debtor’s flexibility in confirming a plan of reorganization. If In re Ultra Petroleum Corp. withstands appeal in the U.S. Court of Appeals for the Fifth Circuit, it will represent a victory for sophisticated creditors and will be a significant consideration for prospective debtors when evaluating their optimal filing venue.
US Courts Gain Prominence as ‘Anchor’ Forum for Enforcing International Arbitration Awards
A growing number of cases in which private parties are seeking enforcement of very large arbitration awards are percolating through the U.S. courts. These cases are likely to remain a feature of the landscape for some years and will therefore continue to present challenges for litigants, financial institutions and courts alike, as award creditors will continue to seek to attach bank accounts, shareholdings and other assets through judicial proceedings in the United States.
Regulatory
Transition From Trump to Biden May Bring Less Change to Antitrust Enforcement Than Expected
Over the past four years, the DOJ's Antitrust Division and the FTC applied novel theories to increase scrutiny of vertical mergers or acquisitions of potential or nascent competitors, particularly in the technology sector. In doing so, they paved the way for continued aggressive enforcement by the Biden administration.
Post-Brexit, a More Demanding UK Merger Review Process
On January 1, 2021, the U.K. Competition and Markets Authority became a merger regulator independent of the European Commission. The CMA promises to be a competition authority to watch in global M&A in 2021.
Fair Lending Enforcement Poised To Increase Under Biden Administration
The Biden administration is expected to replace the leadership of key agencies and ramp up administrative enforcement and litigation against the consumer financial services industry, particularly in the area of fair lending enforcement. A return to an Obama-era aggressive enforcement posture is likely in agencies such as HUD, the CFPB and the DOJ.
As Blockchain Technology and Cryptocurrency Mature, so Do Their Regulation and Enforcement
This past year marked a turning point for blockchain technology and cryptocurrency, as successful projects in areas such as “stablecoins” and “decentralized finance” sparked increased regulatory scrutiny and enforcement activity. 2021 promises to further develop the contours of regulation and enforcement in this emerging area.
Under Biden, Energy Policy May Shift to Carbon Reduction
The Biden administration appears intent on reducing carbon emissions. To do so, the administration will likely rely on the Federal Energy Regulatory Commission, which has broad regulatory control over the electric industry. Despite Democratic control of the Senate, regulation and not legislation seems likely to become the main battleground.
Climate Change Should Drive Energy and Environmental Policy
Significant changes in federal energy and environmental policy are expected in 2021, propelled by a desire to meaningfully address climate change. The Biden administration is likely to utilize executive actions and rulemaking authority to create a foundation for longer-term implementation of its broader climate plan, and as a means of supporting ongoing carbon-reduction initiatives.
Biden Administration’s Expected Impact on Health Care and Life Sciences Enforcement
In 2021, the health care industry generally, and the life sciences sector in particular, is evaluating the potential impact of a change in administration on regulatory and law enforcement. Companies in the sector should remain vigilant in maintaining ethical corporate cultures and strong corporate compliance programs. Should an increase in regulatory and enforcement commence, both of these attributes should help clients weather the storm.
Changes in Store for Employers Under Biden Administration
President Biden has made many proposals that will affect employers, including changes to the federal minimum wage, immigration policies, worker classification and other labor laws. How these changes are implemented, as well as their breadth and permanency, remains to be seen, but the possible impacts will be significant.
US-China Trade and Enforcement Issues: What’s Next?
As the U.S. changes administration, there is significant interest in how the country’s relationship with China may evolve with respect to trade, national security and government enforcement. Although some modifications in tone and approach under the Biden administration are possible, fundamental changes in these areas appear unlikely.
Major Developments Continue To Reshape the Global Privacy Landscape
Over the past year, new laws, regulations and court rulings reshaped the privacy landscape across the globe. Key developments included two California laws that impose requirements similar to those of the GDPR and a ruling from the Court of Justice of the European Union that set forth new obligations on the transfer of personal data out of the European Economic Area.
Priorities To Shift for Biden’s SEC
The Biden SEC is expected to prioritize ESG disclosure, regulation of foreign-based issuers and share repurchases, and enforcement of insider trading and company disclosure violations.
Growing Complexity in the Tax Aspects of Transactional Negotiations
U.S. tax laws have in recent years undergone an unparalleled number of sweeping changes that have profoundly impacted corporate and partnership transactions. Taking stock of the transformative effect of laws including the Tax Cuts and Jobs Act and the CARES Act can help prepare companies for the types of novel complexities, opportunities and challenges on the horizon.