EUROPEAN M+A NEWS - Morrison Foerster

M+A NEWSEUROPEAN Fall 2015

IN THIS ISSUE ARE YOU PREPARED FOR THE EMPLOYMENT
CHALLENGES IN EUROPEAN M&A?
Are You Prepared for the
Employment Challenges in By Hanno Timner and Caroline Stakim
European M&A?
Page 1 Across industry sectors, there is one thing that all organizations have
in common: people. Every organization needs a workforce to steer it in
Current Developments the right direction. This means that when it comes to M&A transactions,
German Government Subsidizes VC regardless of size, there will inevitably be employment law and human
Investments – Investors Get 20% resources issues to deal with.
Reimbursement
Page 3 These issues can, and often do, affect not only the process and cost of a
transaction, but can also impact on how a company is able to manage its
Noteworthy Deals business going forward.
Planet Labs Acquires BlackBridge
Group Helpfully, there is some uniformity across the EU in employment law
Page 3 and practice, largely due to a number of employment-related EU-level
Directives, each of which is implemented into the national laws of the
Dispute Between Volkswagen and 28 Member States. Although this means that a common approach is
Suzuki Settled taken in relation to particular issues, the details of how those laws apply
Page 3 in practice can vary widely from country to country.

GE’s Alstom Acquisition Gets
Clearance by EC Commission
Page 4

Mitsui Sumitomo Insurance Takes
Over English Insurer Amlin plc
Page 4

Chinese HNA Group Acquires
Swissport International Ltd.
Page 4

Chinese Powerway Group Invests
in German Berkenhoff
Page 4

continued on page 2

Attorney Advertising

1. Have You Heard of TUPE? diligence, for example, by disclosing or relying on
only aggregate or anonymized employee data. The
At the very outset of a transaction, it is important to recent decision of the ECJ (European Court of Justice)
understand how it will be structured - and whether it is a denying protection by means of the existing safe-
share or asset sale - as this will affect both the issues that harbor arrangement between the EU and the United
could arise and the process involved. States underpins the importance of the observation of
such provisions.
One key difference between a share sale and an asset
sale is that in a share sale, the employing entity stays the The diligence process itself can help the purchaser
same. All employment costs and liabilities remain with assess what, if any, steps it needs to take post-
the target company as the current employer. On the other completion. In a share sale, any dismissals or changes
hand, in an asset or business sale, the application of the to terms and conditions are generally subject to the
EU Acquired Rights Directive (ARD), as implemented same employment laws that would apply if taken
in all EU Member States, means that the employment outside the confines of an M&A transaction. In an
of assigned employees transfers to the purchaser asset deal, on the other hand, a significant difference
automatically by operation of law (TUPE stands for is that the application of the ARD also places further
Transfer of Undertakings - Protection of Employment). restrictions on what an employer can and cannot do
The transaction itself results in a change of employer, with its workforce, for example, in relation to their
and the purchaser inherits all employees predominantly terms and conditions of employment or proposed
working in the business with all rights and obligations dismissals.
under the existing employment contracts (and under all
benefit plans applicable to the transferred employees) 3. Did You Know About Your Obligation to Inform
- even where that is not the intention of the parties. For and the Employees’ Right to Object to Being
this reason, it is important to understand whether there Transferred to the Purchaser?
have been any increase or reduction to the number of
affected employees or important key employees shortly Importantly, the ARD also triggers substantial
prior to a transaction. information obligations which need to be taken
into account when contemplating the structuring
2. The Importance of Due Diligence (and Data and timing of a transaction. The seller and the
Protection Considerations) purchaser are required to comprehensively inform
each individual employee (or in some countries, the
In either case, due diligence exercises are important. employee representatives) of the planned transaction
The purchaser should fully understand what costs and the effects it will have on the employment
and liabilities it is inheriting: How many employees relationships. This includes information regarding
does the target business have and which ones are the date of the transfer; the reasons for it; the legal,
key to its success? What salary and benefits are they social and economic consequences; and the details of
entitled to? To what extent have vacation or (often any measures the purchaser contemplates taking in
entirely unfunded) pension entitlements accrued? connection with or after the transfer. In a number of
Are there existing trade unions or works councils? Is EU countries, including Germany, only the provision
there any ongoing or threatened employment dispute of comprehensive and correct information to the
or litigation, and will liability for these need to be employees in writing will trigger the one-month period
assumed by the purchaser, even if such claims arose during which employees are entitled to object to being
before the transaction? transferred to the buyer of the business. Consequently,
the parties will need to take this information obligation
This might be familiar territory to non-EU parties. seriously and make sure that they are able to prove
While conducting due diligence in the EU, however, when the information notices were served to the
one important difference is the application of the employees.
EU Data Protection Directive, which (amongst other
things) restricts the processing and disclosure of Both parties to an asset transaction and corresponding
so-called personal data, i.e., information relating to business transfer also need to consider the
an identified or identifiable individual. Information consequences of employees objecting to the transfer
concerning the employees who will transfer to the of their employment to the purchaser. While in some
purchaser will inevitably constitute such personal EU countries (such as the UK) an objection leads to the
data. The seller and the purchaser therefore need automatic termination of the employment relationship
to safeguard such data and ensure that they take meaning (with the effect that employees hardly make
appropriate steps to ensure compliance during due use of their right to object), other local laws (such

2 European M+A News, Fall 2015 continued on page 3

as German law) stipulate that objecting employees CURRENT DEVELOPMENTS
must remain employed by the seller of the business,
who might in turn need to dismiss these employees, German Government Subsidizes VC Investments –
taking local dismissal protection regulations into Investors Get 20% Reimbursement
consideration.
The German government has issued its “Key Paper
4. Are You Aware of the Co-Determination Rights on the Promotion of Venture Capital in Germany”,
of Works Councils and Their Impact on the aimed at boosting venture capital investments and
Timing of a Transaction? improving the financing situation for new, innovative
companies in Germany. The paper covers several
Asset transactions will regularly lead to consultation steps, in particular:
obligations with local works councils, which can,
depending on the countries involved and whether the • Expanding the existing German government’s
transaction also has an effect on the structure of the investment program (INVEST) in 2016. The
business operations, extend from simple information current threshold up to which investors can
obligations to the seller’s duty to follow quite detailed get a grant of 20% reimbursement on invested
consultation processes. Information and consultation capital will be doubled from EUR 250,000 to
requirements might even need to be initiated prior to EUR 500,000 per year. In addition, a tax refund
the signing of an asset deal. While local EU laws do not will be granted on capital gains from such
regularly enable the works councils to permanently investments, and there will be a proportional
hinder the transaction, works councils are able to delay promotional grant to compensate losses.
the consultation processes (and, consequently, the
transaction itself), considerably. Negotiations might • Exempting innovative companies from taxation
take as long as six months (sometimes even longer), on free-float shares. Under current draft
and the parties are well advised to take this factor into legislation, the German Finance Ministry put
account when working on the transaction timeline. forward a proposal on the taxation of capital
gains and a tax reduction for business angels and
Failure to comply with the required consultation startups. The German government will ensure
processes can have severe consequences: Some that new obstacles are not created for funding
countries, such as Germany, allow works councils new and innovative companies.
to obtain injunctive relief from the local labor court
prohibiting the transaction from being carried through More information about the key paper can be found
until the seller has complied with all consultation here.
obligations. Other local laws, such as those in France
and Finland, even impose criminal liability on the NOTEWORTHY DEALS
management if consultation obligations vis-à-vis the
works councils are disregarded. Planet Labs Acquires Canadian BlackBridge Group,
Including German RapidEye Satellite Network
Additionally, in France, where part of a business
is being sold, the labor authority must approve the San Francisco-based Planet Labs, Inc., acquires
transfer of any employee representative’s employment. Canadian BlackBridge Group, including the German
Failure to do so can result in the transfer being satellite network operator RapidEye. The acquisition
deemed void as well as a claim for compensation or gives Planet Labs access to an extensive network of
reinstatement from the employee concerned. over 100 distribution channels and customers globally.
The Berlin-based RapidEye, consisting of five earth-
Further consultation obligations may also be triggered observation satellites and a ground station in Germany,
by post-completion actions the purchaser may take. enables Planet Labs to provide one of the largest
For example, where collective dismissals are being commercial satellite imagery datasets to the web. The
contemplated, the EU Collective Redundancies transaction was supported by a Morrison & Foerster
Directive may apply, obliging the employer to cross-border team, including lawyers in Berlin, San
collectively consult with workers’ representatives, as Francisco and Denver.
well as inform national authorities of their plans.
Dispute Between Volkswagen and Suzuki Settled

Germany’s Volkswagen and Japan’s Suzuki of Japan
finally settled their dispute before the International
Chamber of Commerce (ICC), putting an end to

3 European M+A News, Fall 2015 continued on page 4

their joint venture of 2009. Under the terms of the reinsurance business and a strong presence in Europe,
cooperation, Volkswagen had purchased Suzuki shares and Amlin a greater capital backing to serve larger
in the amount of EUR 1.7 billion and, in return, clients.
Suzuki had acquired 1.5% of Volkswagen’s common
shares. However, in 2011 Suzuki submitted notice of Chinese HNA Group Acquires Air Cargo Handler
termination of the joint venture, requesting Volkswagen Swissport International Ltd.
to return its stake in Suzuki. Since Volkswagen did not
comply with the request, Suzuki filed for an arbitral The world’s largest ground and cargo handling
proceeding with the International Court of Arbitration company, Swissport International Ltd., based in
at the ICC. Switzerland, was acquired by HNA Group Co. Ltd. in a
transaction with a value of CHF 2.7 billion (USD 2.78
The arbitral award confirmed the valid termination of billion). The seller, French private equity house PAI
the joint venture. Volkswagen has now to dispose of Partners, had bought the Swiss company in February
its 19.89% stake in Suzuki. VW’s counterclaims were 2011 for CHF 1.2 billion from Spanish infrastructure
partially upheld and Suzuki was found in the breach of group Ferrovial. The deal is still subject to approval by
their cooperation agreement. regulatory and antitrust authorities and is expected to
close by the end of this year.
GE’s Alstom Acquisition Gets Clearance by EC
Commission Chinese Powerway Group Invests in German High-
Tech Precision Wire Manufacturer
General Electric Co. received approval by the EC
Commission for its acquisition of the energy business of After long negotiations, German company Berkenhoff
French industrial company Alstom SA. In response to GmbH, a leading manufacturer of high-tech precision
regulatory and antitrust concerns by the Commission as wire, reached an agreement with Chinese Powerway
to the impact on the gas-turbine market, GE had agreed Group Co., Ltd., a world leading manufacturer of
to sell certain assets, including Alstom’s servicing units nonferrous alloys and precision wires itself, according to
and some intellectual property, to Italian competitor which Powerway will purchase the company as its new
Ansaldo Energia SpA. In return, the Commission strategic investor. Details of the transaction are subject
accepted the modification and approved the acquisition, to confidentiality, and the deal requires approval from
clearing the final hurdle to one of GE’s biggest-ever the competent antitrust authorities.
acquisitions.

Mitsui Sumitomo Insurance to Take Over British
Insurer Amlin

Japanese Mitsui Sumitomo Insurance Co., Ltd. made a
takeover offer for British insurer Amlin plc. According
to Mitsui, it offered GBp 670 per share in cash for the
target, i.e. an approximately 36% premium to recent
closing prices, amounting to an acquisition price of
USD 5.3 billion. The deal is said to have benefits for
both companies, giving Mitsui Sumitomo a scalable

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Because of the generality of this newsletter, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice
based on particular situations. The views expressed herein shall not be attributed to Morrison & Foerster, its attorneys or its clients. This newsletter addresses recent mergers
and acquisitions.

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4 European M+A News, Fall 2015 © 2015 Morrison & Foerster LLP