At risk projects and transactions

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ANTICIPATED TERMINATION OR FREEZE OF PENDING PROJECTS, TRANSACTIONS, ETC.

A number of (pre-)signing M&A and Capital Markets transaction processes are being paused, slowed down or reconsidered. However, recent experience shows that, if and when the war in Ukraine becomes a "known" element to market participants, activity could rebound quickly and strongly. At that time, there is likely to be increased focus by sellers on deal certainty, but also reputational and compliance risk around sanctions and related termination rights. Buyers able to move quickly, show committed financing, and otherwise demonstrate limited deal certainty risk, will be best placed to capitalise in any market rebound. This is not a copy of March 2020 though as other factors will increase the cost of debt and equity capital for investors. If and when there is a market recovery, it may not be as buoyant as the last two years.

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Broader considerations on ANTICIPATED TERMINATION OR FREEZE OF PENDING PROJECTS, TRANSACTIONS, ETC.

Several (pre-signing) M&A and Capital Markets transaction processes are being paused, slowed down or reconsidered. In many cases, this is the result of general uncertainty about how the unfolding Ukraine situation will impact markets and the global economy. Dealmakers, and financing parties, are often reluctant to take big steps in such circumstances. In other cases, the target may be directly impacted by the developments – e.g., due to Russian or Ukrainian operations, or both – or the sell-side may need time to assess whether and how the fast-developing sanctions environment will impact the target business. ​

Some of these processes may stop entirely. However, recent experience with the pandemic shows that, if and when the war in Ukraine becomes a "known" element to market participants, activity could rebound quickly and strongly. At that time, there is likely to be increased focus by sellers on deal certainty, but also reputational and compliance risk around sanctions. We may see an increase in termination rights or other conditionality related to sanctions. Buyers able to move quickly, show committed financing, and otherwise demonstrate limited deal certainty risk (e.g., on antitrust / FDI and in relation to sanctions), will be best placed to capitalise in any market rebound.

This is not a copy of March 2020 though. In particular, rising inflation and interest rates (due to both the pandemic and the Ukraine situation) will increase the cost of debt and equity capital for investors. If and when there is a market recovery, it may not be as buoyant as the last two years.