Skadden’s 2022 Insights

Skadden’s 2022 Insights



Needs of Strategics, PE Firms and SPACs Led to Record US M&A Levels, Likely To Sustain Dealmaking in 2022
M&A dealmaking set new records in 2021, driven by strategics, PE firms and SPACs. Corporate needs and significant capital available to be deployed are likely to sustain high merger activity into 2022.

Choppy Market for SPACs and PIPEs, Competition for Targets Spurs Deal Innovations
SPACs are weighing creative capital-raising and deal structures as shareholder redemptions increase, PIPE financing has become more challenging and competition for targets has increased. Meanwhile, regulatory oversight will likely intensify.

Will Europe’s M&A Boom Survive Stricter Regulation, Shareholder Resistance and COVID?
European M&A deal volume set new records in 2021, after a boom in the second half of 2020. But tougher stances by regulators, more demanding shareholders and higher interest rates could put the brakes on.

SPACs Considering German Targets Face Unique Challenges
Looking to expand the universe of potential targets in the face of increasingly competitive de-SPAC processes, some U.S. SPACs are pursuing German targets. But successful deals require careful due diligence, complex deal structures, and thorough tax, accounting and governance planning.

Activism Landscape Continues To Evolve
Some activists will pursue takeovers, underperforming de-SPACed companies will be vulnerable and ESG issues will remain central in many campaigns. Changes to index fund policies and voting procedures could make outcomes less predictable.

Institutional Investors, Activists and Legal Reforms Begin Altering Japanese Corporate Governance
Japanese management traditional resistance to shareholder pressure is slowly breaking down as even passive institutional investors demand accountability and shareholder activists succeed in electing outside directors.

Private Equity and Sovereign Wealth Interests Converge in US Real Estate
As sovereign wealth and foreign pension funds have grown in size and sophistication, and focused more on alternative investments, their interests and the interests of PE firms are increasingly converging in the U.S. real estate space.

Capital Markets

Strong IPO Demand Offered One Route to Public Markets; Other Companies Opted for De-SPACs or Direct Listings
Traditional IPOs, SPACs and direct listings had record years in 2021. IPO companies are attracting retail investors through trading apps, opening up their roadshows to the broader public and negotiating more flexible lockups.

Wide-Ranging Reforms of UK Capital Markets: A Watershed Moment? 
Reforms of London’s listing rules could begin bearing fruit in 2022, as restrictions on SPACs, rules on listing companies with dual-class share structures and free float requirements loosen.

Hong Kong Encourages Listings by Foreign Companies, SPACs
To remain competitive, the Hong Kong Stock Exchange is liberalizing rules on secondary and dual primary listings. It will also allow SPACs to raise capital, although subject to significant restrictions.

Environmental, Social and Governance Issues

Investors Press for Progress on ESG Matters, and SEC Prepares To Join the Fray
As the SEC prepares to propose new disclosure requirements about ESG matters, investors and proxy advisors are pressing companies for enhanced disclosure and evidence of progress on issues from workforce diversity to carbon emissions.

UK, US and Some Asian Jurisdictions Join in Pressing Companies To Diversify Their Boards
U.K.-listed companies will likely be required, starting in 2022, to disclose whether their boards meet gender and ethnic diversity targets and, if not, explain why. The new rules parallel those adopted recently in other major financial markets.

ESG Disclosure Requirements Put New Spotlight on Private Capital Managers
New EU ESG rules require many private capital fund managers, including those outside the EU that access EU investors, to make public disclosures on investment processes and policies that have historically been kept confidential.

Increased Demand for Renewable Energy PPAs Expected To Create Seller-Friendly Market
As more companies adopt sustainability policies, strong demand for renewable energy is giving producers more leverage in negotiating power purchase agreements.

Corporate Restructuring

Expansive Stimulus and Monetary Policy Helped Limit Restructurings, but Debt Maturities Loom
Despite the devastating impact of COVID-19, default and bankruptcy rates remain low. Whether this will continue or not depends on inflation, government policy and the capital markets.

Recent Delaware Bankruptcy Rulings Address Whether a Plan of Reorganization Can Deny a ‘Make-Whole’ Payment Without Impairing Lenders’ Claims
Recent bankruptcy cases ruled with differing results on whether lenders’ claims were unimpaired by debtors’ reorganization plans that denied payment of allegedly due make-wholes.

Treatment of Midstream Agreements in Bankruptcy Remains Unsettled, but Limited Consensus May Be Emerging
Exclusivity clauses in midstream oil and gas gathering contracts typically are framed as covenants that run with the land to protect pipeline companies if producers seek to reject them in bankruptcy. But courts remain divided on whether these provisions actually preclude rejection.

Unhappy Lenders Challenge Aggressive Debt Exchanges
Borrowers using “open market purchases” or “Dutch auctions” to exchange loans without offering the same terms to all lenders are facing court challenges. The rulings may shape future restructurings and lead to changes in standard loan terms.

Intellectual Property

NFTs Give Rise to Innovative New Business Models and Revenue Opportunities
NFTs’ surge in popularity of has led to a wave of innovation and new opportunities for brands, rights owners and creators, but also raises novel and important legal issues that stakeholders need to consider.


Issues on the Horizon at the US Supreme Court: 2022 and Beyond
In the near future, the Supreme Court could address business issues such as preemption of state employment laws, web hosts’ liability for social media content and even crowdfunded test cases.

Despite Last Year’s Decline in Filings, Securities Litigation Will Likely Pick Up in 2022 Due to Plaintiffs’ Continued Focus on SPAC Transactions and Event-Driven Litigation
Despite a decline in new securities class actions in 2021, we anticipate filings will increase this year as plaintiffs continue to focus on SPAC transactions and event-driven suits in areas like cybersecurity and cryptocurrency.

Rulings in 2022 Could Bring Clarity on California and Nasdaq Board Diversity Mandates
The obligations of corporations to diversify their boards will likely be clarified by rulings soon in five pending cases challenging California’s and Nasdaq’s mandates to appoint more women and minorities.

Climate-Related Securities Suits May Increase With New SEC Standards
With new SEC climate-related disclosure requirements likely coming soon, companies may face greater litigation exposure. There are steps they can take now to minimize the new risks.

Environmental Groups Have Sued Large German Companies To Reduce Their Products’ CO2 Emissions 
Environmental activists in Germany are taking advantage of a recent constitutional ruling on climate change to sue major German companies, aiming to force them to reduce emissions far more drastically than current legislation requires.

What Is the Future for Opt-Out Class Actions in the UK After Lloyd v Google?
A recent U.K. Supreme Court decision limits the situations in which plaintiffs can bring “opt-out” class actions. However, such suits are still viable where damages are identical for all class members and for antitrust claims.

Courts Weigh ERISA Fiduciary Duty Pleading Standards and Limit Arbitration Clauses
A Supreme Court ruling in 2022 could make it harder for ERISA fiduciary duty class actions to survive motions to dismiss, and two circuit courts refused to enforce arbitration clauses in ERISA cases.

Delaware Courts Simplify Rules for Derivative Actions, Analyze SPAC Fiduciary Duty Review and Clarify Books-and-Records Obligations
The Delaware Supreme Court simplified rules for derivative actions, while the Court of Chancery wrestled with stockholders’ records demands, controlling stockholders’ conflicts and fiduciary claims against SPAC directors and sponsors.

Supreme Court Opens Door for Assignors To Challenge Patent Validity
A 2021 U.S. Supreme Court decision curtailed “assignor estoppel,” a long-standing doctrine that protected patent holders. The decision permits inventors to challenge the validity of patents they have assigned if the buyer has enlarged the scope of the patent.

The Pandemic Brought Some Welcome Innovations to the Justice Process, but Also Many New Challenges
Some of the court system’s workarounds during the pandemic, such as remote hearings and testimony, will likely be incorporated into discovery and court proceedings going forward.

Regulatory and Enforcement

Securities Regulation and Enforcement

SEC Expected To Introduce Host of New Rules in 2022, Enhance Enforcement
The SEC’s ambitious regulatory agenda includes revised rules on ESG disclosures, executive stock sales and SPACs. Meanwhile, the SECs enforcement program will continue to focus on bringing cases involving cryptocurrency offerings, cybersecurity breaches and executive perks.

SEC Revives Proposal for Executive Comp Clawback Rules
The SEC is seeking to finalize rules for a long-shelved proposal that would require public companies to implement policies requiring clawbacks of executive compensation.

Companies Face New Pressure From Shareholders and Regulators To Disclose Political Policies and Contributions
Public companies should expect more shareholder campaigns for information about political donations and other political activity. The SEC has signaled it may require new disclosures as part of its policy to raise ESG standards.

Investigations, Enforcement and Mandates

DOJ Steps Up Corporate Criminal Enforcement, Looks More Broadly at Past Misconduct
The Biden DOJs recent policy pronouncements reflect a more proactive approach to corporate criminal investigations and a tougher stance with respect to corporate resolutions and remedies.

Will FDA and DOJ Reassert Their Enforcement Muscle With Life Sciences in 2022?
Federal enforcement in the life sciences sector recently has been driven by the pandemic. If FDA inspections pick up and more senior positions are filled, the industry could see the enhanced oversight many originally expected from the Biden administration.

Congress Sets Sights on Financial Services, Climate Change and Big Tech
Under Democratic control, congressional committees are likely to continue scrutinizing Wall Street and social media and other large technology companies in 2022.

Federal and New York City Workplace Vaccination and Testing Mandates: A Primer
Two federal vaccination mandates are enjoined pending appeals, but the Supreme Court allowed a third, covering health care workers, to go into effect. Meanwhile, New York City has imposed strict vaccination requirements on its businesses.

Financial Institutions

More Aggressive Consumer Financial Services Enforcement Expected
As senior positions are filled in key agencies, expect more enforcement of consumer financial services laws and regulations. Redlining, loan servicing and credit reporting are all likely targets for scrutiny.

New Rules, Enforcement Actions Make Financial Institutions’ Planning for Cyberattacks Even More Imperative
Companies — from the top down — need to focus on defenses against cyberattacks and plans for recovery as enforcement actions and cyber-related laws gain momentum.

Central Banks Consider Digital Currency Pros and Cons in US and Europe
Central banks around the world are debating whether to create their own digital currencies. The European Central Bank has shown enthusiasm for the concept, and the Bank of England is open to it. Federal Reserve leaders appear skeptical.


Biden’s Broad Mandate Has Altered the Antitrust Landscape, Making Merger Clearance Process Less Predictable
Through procedural changes and new legal approaches, antitrust regulators are trying to expand their power to promote competition and achieve social policy goals, creating uncertainty in an enforcement regime that had been fairly predictable.

Deal Uncertainty Increases as Merger Control Authorities Gain Discretionary Powers of Review 
Competition regulators worried about overlooking “killer acquisitions” of small innovators by large, established firms are amending notification thresholds and exercising discretion to investigate deals that otherwise would not be reviewed.

CFIUS and International Trade

CFIUS Goes Global: New FDI Review Processes Proliferate, Old Ones Expand
As more countries screen foreign direct investments for national security issues, parties need to perform thorough due diligence and be attuned to the concerns of authorities in multiple jurisdictions.

Security Concerns Prompt Multiple Supply Chain Initiatives
Security concerns, together with shortages of key goods and components, prompted new supply chain initiatives in 2021 that will affect U.S. trade in the year ahead.

China Faces Existing and Expanded US Restrictions on Trade, Investment and Technology
The Biden administration has maintained and extended an array of China-related regulatory and enforcement measures to address national security concerns. Meanwhile, companies with Chinese operations need to comply with the country’s new data laws.


Build Back Better Act Would Change Monetization Playbook for Tax-Free Spin-Offs
The Build Back Better Act would amend U.S. rules on tax-free spin-offs, making it more challenging to monetize value by reallocating debt to a spin-off company. But a distributing company may still be able to extract value with the right structuring.

Multinationals Should Consider Adding ‘Competent Authority Processes’ to Their Tax Strategies
With new uncertainties about transfer pricing, multinationals should consider “competent authority processes” to address double taxation and other disputes, and to win preapproval for future internal cross-border transactions.

Tax Law Struggles To Keep Pace With the Proliferation of Cryptocurrency
Cryptocurrency transactions can fit poorly into traditional tax frameworks, forcing authorities and market participants to wrestle with thorny questions about how to apply tax rules – or write new ones.

Musings on Multinational Tax: What To Expect From GILTI Conscience
Skadden is proud to present “GILTI Conscience,” a new podcast series in which tax partners Nate Carden and David Farhat invite other industry leaders and authorities to join them in discussing pressing transfer pricing issues, international tax reform efforts and tax administration trends.