The following examples are taken from an overview of bespoke solutions to public M&A in Germany conducted by Christian Cornett in previous firms; in these transactions Christian Cornett was the client's key contact partner. “We” refers to the respective team. Project names are code names. Note: all the below examples have been published and/or discussed by the press.
Our Client’s Challenge
A group of investors saw the unique opportunity to enter the contract logistics market prior to an expected wave of consolidation. We were asked to structure and establish a platform that would promote such consolidation – and create equity value.
Our Solution
We initially developed and implemented an appropriate legal and tax platform. At the next stage, we negotiated 15+ logistics insourcing deals, partly financed via a private equity investment. Subsequently, we structured and led the company’s IPO, followed by 10+ add-on acquisitions, mainly by way of share-for-share transactions in order to establish adequate turnover and increase both profitability and free float. Finally, in a reverse merger transaction with a larger logistics platform, we diluted the original investors and ultimately assisted them in the preparation and implementation of the sale of their shares and their exit.
We set up a tax-efficient legal framework that was attractive to both our client and its future partners.
Our interdisciplinary team repeatedly adjusted the structure of the deal in order to reflect market changes.
Our team identified legal parallel tracks and structured calls and puts that helped optimise the solution and reduce taxes, delays or operational restraints to the business.
This interdisciplinary solution was developed and implemented in collaboration with the client’s financial advisers to enhance timing and to realise value when the capital markets boomed.
Our Client’s Challenge
A German-listed internet provider asked us to give an overview of the company’s structural options prior to anticipated market consolidation and to coordinate all legal aspects of a sales process.
Our Solution
In close co-operation with the client's financial adviser, we presented several options to the board (sale, take-over, merger etc.) and ultimately implemented an open-ended multi-track process:
Aborting an auction process, our client decided to partly combine its operations with those of another listed group. We structured a combined share and asset sale to dispose of the relevant part of the business against a staggered consideration in shares, cash and convertibles.
The final transaction was implemented and communicated as a strategic alliance rather than a mere take-over. This solution not only resulted in the highest possible price for our client; moreover, this solution allowed the client to participate indirectly in a future increase in the value of the sold assets.
Due to the considerable value of the transaction (EUR 500 million), the solution was set up to allow for re-financing and adjusted to optimise the balance sheets of both parties.
An innovative and flexible interim structure allowed for the transaction between two listed entities to proceed smoothly, although shareholder approval on both sides was required.
This solution allowed the client to play an active role in market consolidation – and, in addition, to participate in a subsequent substantial increase in the value of the combined businesses.
Our Client’s Challenge
A leading banking group controlled and thus had to consolidate a German-listed real estate subsidiary. When the real estate market boomed, we were asked to identify ways to remove the entity from the bank’s balance sheet and to reposition the listed entity on the market as a stand-alone entity.
Our Solution
We suggested a staggered process with different potential scenarios, contingent on market development. As part of our solution, the following steps were taken:
We relisted the entity on the German regulated market under the relevant European passport regime.
The entity was deconsolidated via an innovative share conversion process and the converted shares were listed under separate ISINs without reducing share liquidity.
We scheduled and handled the entire deconsolidation process, including announcements, documentation and three shareholder meetings within one fiscal year.
Finally, in a share-for-share transaction (valued at above EUR 1 billion), the listed entity acquired another group against shares, cash and debentures; this transaction significantly diluted the original shareholders and established an international private equity fund as a new anchor investor.
This back-door IPO of the acquired group not only led to a significant dilution; any residual ties between our initial client and the listed entity were severed, thereby favourably repositioning the revitalised business on the market.
This solution was tailored to meet the client’s specific needs by taking advantage of the momentum of the market in order to achieve financial deconsolidation through an innovative conversion and a dilution of the shareholder position.
Our Client’s Challenge
Changes in the German regulatory framework threatened a listed client’s business model. Initially, the client instructed us to act on a potential sale by way of a limited auction process. We were also asked to identify fall-back options to preserve stock value and to promote the client’s future international business.
Our Solution
We advised on an open-ended process to protect the value of the business of the listed entity:
When, due to regulatory uncertainties, no purchaser for the client’s business would close the deal, we suggested establishing an orphanised (i.e. de-controlled) sub-structure to transfer the de-controlled operations to another jurisdiction.
In order to demonstrate the feasibility of such an orphanisation, we advised on an innovative approach that would open the gate to continued IFRS consolidation.
We developed an innovative bespoke solution which resulted in a new group structure that promoted the group’s business development without major interference and was sufficiently flexible to allow the group to expand further.
In collaboration with our teams located in other jurisdictions, we reduced the effect of regulatory restrictions and, pursuant to careful tax restructuring, helped to increase the group’s net income more than two-fold.
In conjunction with additional measures, such as re-registering the business as a new legal form (SE), the implemented solution enhanced the client’s international business strategy.
Our Client’s Challenge
The supervisory board of a company listed on the German regulated market was faced with the combined challenge of a declining stock price, the need to appoint new management and additional finance requirements. The board asked us to provide a solution that would allow for recapitalisation and future transactions whilst also making the entity more attractive to new management and investors.
Our Solution
We structured a viable solution and assisted the client entity in:
This solution resulted in the successful repositioning of the client on the capital markets. Our solution was designed to meet the client’s initial aims and proved to be sufficiently flexible also to accommodate newly identified ways to move forward.
Our Client’s Challenge
As part of its overall strategy, a US investor initially asked us to identify a flexible way to acquire a significant stake in a German-listed entity as one step within a larger strategic vision.
Our Solution
Having identified a variety of options, we advised on an open-ended process which granted our client full flexibility and a strong negotiation position until signing. In addition to technical legal advice, we duly structured and implemented:
This solution matured during the process. Our client was therefore grateful to have been provided with the flexibility to enable it to embrace emerging business opportunities “along the way”.
From time to time, our bespoke assistance in on-going projects is called for by clients or other advisers in the latter stages of a project to complement advice by in-house or external counsel.
Our Client’s Unforeseen Challenges
A leading international banking group had agreed to provide a certain funds guarantee (exceeding USD 1 billion) required for a public take-over offer for a listed German AG. In the latter stages of the process, when turmoil on the financial markets led to increased risk sensitivity, the bank called for our assistance in order to protect its reputation and limit its financial exposure.
Our Solution
As our client had undertaken to issue a financing confirmation to its customer, our task was to optimise the bank’s risk position before issuing the required certain funds confirmation.
We reviewed all existing agreements between the bank and its customer, introducing specific escrow and ring fencing as well as deferred release mechanisms etc., allowing the bank to issue the (certain funds) financing confirmation required under the German Takeover Act, without accepting any final default risk for the banking group at any time.
In a subsequent squeeze-out of the remaining shareholders, we also advised the bank on the issuance of additional financing confirmation serving to facilitate the squeeze-out.
We advised the banking group on re-allocating the roles of the lending and issuing entities in order to use a specific relevant EU passport regime. In addition, we designed a contractual structure enabling the bank to issue the (certain funds) confirmation without incurring liability risks. This challenge ultimately increased the customer’s belief in the banking group’s international capacity.
Many of the challenges handled or co-handled by Christian Cornett relate to PIPEs, block trades, share-for-share transactions, take-overs or delistings, or arise from advising boards of listed companies. In public M&A, clients often ask for bespoke solutions. Sometimes, however, clients ask only for a second opinion or an assessment of specific questions. It is precisely then that alternative concepts or solutions often emerge.
Our Client’s Surprising Challenges
As part of a restructuring transaction, an investor unintentionally almost gained indirect control over a listed German entity. When this risk was identified only after signing, the entire transaction was about to be aborted, because gaining control under German law would have triggered a mandatory offer that could not have been financed in the specific case. Shortly before closing, we were asked for a solution.
Our Solution
After a thorough analysis, Christian Cornett presented the client with the pros and cons of the obvious solution – and, alongside it, a further, faster and simpler alternative, which the client ultimately chose:
We advised delaying the closing by some weeks and applying for an exemption under German takeover law. As the original structure did not permit this, we proposed minor adjustments to the transaction and prepared the application in parallel. The exemption was granted and closing took place six weeks after we were instructed.