Thank you everybody for rejoining us for this second session, navigating to closing and how to prepare for this journey. Sebastian and Damian have rejoined me on the stage as well as Laurie, and to welcome Ayman and Megan on the CFIUS FDI and antitrust side as well. So Ayman, if we can perhaps start with you on the CFIUS side please. Sure. Thanks very much. Thank you all for joining. So CFIUS has had a busy few years. When I left the Treasury Department we had just finished negotiating a significant expansion of the CFIUS authorities. And although that authority now gives CFIUS the ability to look at non-controlling investments, and it also creates some mandatory filings, perhaps the most significant impact of the recent changes has been the significant increase in the resources that the committee has to look at transactions. And one of the practical implications of that is that whereas it used to be a strategy for companies to look to fly under the radar, that really is no longer an effective strategy. Last year the committee reached out to over 100 companies on over 100 transactions that hadn't been notified. A lot of them were definitely Chinese or Russian related, but there were European companies that got the call. And while many of those don't turn into actual requirements to file with the committee, it certainly has resulted in a significant increase in the amount of attention that needs to be paid to CFIUS issues at the front end. CFIUS also, because it's more resourced, is more willing to impose conditions on companies. It used to be that limited resources meant that the committee was relatively particular about when it actually imposed conditions on companies. But with significantly more resources now, it's the bar for requiring companies to adopt conditions, sometimes which can have a material impact on operations, has lowered significantly. The committee is as active as ever, if not more. Some of the key positions have yet to be filled, but the key trajectory, the direction of CFIUS really hasn't changed all that much in this administration compared to the last. Obviously the Trump administration was very vocal about the conflict or the tension with China. That has continued and if anything is more focused and is more deliberate in its nature now. So any CFIUS transaction has some element of inquiry related to China. Obviously direct Chinese investment is easy. There are very few transactions involving direct Chinese investment that are not going to receive heavy scrutiny and at a minimum a really long and uncertain process if not with the greater likelihood that it would have difficulty getting through with some exceptions. But more to the point perhaps for this audience is that it's not just Chinese direct investment that triggers concerns. One, there's a lot more scrutiny on where funding is coming from. So limited partners that are Chinese are drawing a lot of scrutiny. Secondly, co-investors, if you're investing alongside Chinese entities or if you have a practice of doing so, that type of thing also draws CFIUS scrutiny. And perhaps most challenging is that CFIUS now is spending quite a bit of time looking at European and otherwise friendly country investors and looking at their footprints in China so that if a company has extensive R&D operations, joint ventures, or even if the market is a significant market for them, that is generating quite a bit of CFIUS attention and potential execution risk. And I'll get to some examples later on. Of course, while China is and is continuing to be a key focus for CFIUS, Russia continues also to be and has been for many years now an area of critical concern for the U.S. from a foreign investment point of view. There isn't that much direct Chinese investment. European funds are getting scrutinized for where the money is coming from, and there have been a number of transactions where limited partners or other funding sources have had Russia connections. And in fact, even connections to Ukraine. And in some cases, these are individuals who left Russia because they disagreed with the policies of the government, but their lingering connections have still drawn scrutiny from the U.S. government. And so, I think that's one of the things that's happening. And I think that's one of the things that's happening. I think that's one of the things that's happening. And I think that's one of the things that's happening. Of course, COVID laid bare the importance of having domestic supply chains, because in a time of crisis, you may not be able to rely upon supply from your allies when there's competition for the same resources. So, you can expect in the U.S., and you're seeing this in Europe as well, increased scrutiny, again, not just driven by who the acquirer is, but what the target, the significance of the target. So, some practical implications. You can't make sort of broad presumptions that a particular transaction will not draw scrutiny just because it doesn't involve an investor from a country of concern. And, you know, it really is, it becomes important to understand how the government perceives these issues and how to speak their language, how to help them understand the facts, because, you know, there are a lot of companies that are doing business in China, and it's often the case that when you're entering into deals, in China, the counterparty likes to enter into broad strategic agreements. These may never have any activities underneath them, but from their perspective, it's important to have that type of circumstance around the relationship. Now, when somebody in the government, in the U.S. government, gets that, what they read into that is that there's a significant potential for transfer of technology. And so, you find that there's really, you have to have a conscious process of engaging with the government understanding how they perceive issues, what their language is, and then translating sort of the business language into government speak, because there are obviously a lot of people in government who have never spent a day in business, certainly don't know sort of the cultural components of doing business, and unless they're given that proper frame, which is generally up to the company and council, you can end up with a very problematic result. And the other thing is that you really have to recognize how to engage with the government once they identify an issue, because when the government first comes to you with their concerns and their set of requirements, those often can be deal-killing. And if you don't know, you have to be willing to push back. You have to know what their concerns are and whether or not there's an alternative to present to them that can essentially bridge the concern that the government has with the government's needs. So, the second practical implication is that the decision to file is now a relatively nuanced one, because on the one hand, in many transactions, you'll have some degree of latent risk, because the challenge with these processes is that the government has information that you often, as a company, don't even have. There have been transactions where the parties come in, and they had no idea that they had technology that was of importance to the government. And you have a European investor that's investing in a U.S. company, and there's some hidden connection to the government that can potentially risk the deal. So, and then at other times, the government doesn't necessarily have a strong concern, but once you put the transaction in front of them, because you want to resolve, you want to eliminate any risk that the government can come in afterwards, you actually make it more likely in some instances that the government may impose conditions than if you had not taken it to them in the first place. So, some of these sort of early considerations have become much more nuanced and important from sort of a strategic point of view in terms of how you think about deal timelines and whether or not you, and how you engage the government. And to that point, it's become ever more important to think about these issues earlier in the process, because we've seen now on a number of occasions, or I certainly saw it when I was in the government, and I've seen it since then come up where companies haven't given due regard to the issue, including at the time of discussing deal terms and deal timelines. And it's only right before signing or after signing that they realize that there are potential issues that could make the FDI process the long pole in the tent. You know, again, just to say that while the majority of transactions aren't going to ultimately raise CFIUS issues, there are going to be times when you have to consider them at the front end just because they have an impact on deal timing considerations and competitiveness in auctions and so on. And then there are going to be times where there may be latent or hidden risks that if you don't identify them at the outset, they can cause significant problems down the line. And then there will be those where you know that there are potential issues. And unless you have your strategy lined up, it can become not only the long pole in the tent, but also potentially a deal ending event. I have a question. Go on, Tom. You're allowed. Yeah. So because there are many situations where it's, you know, there are mandatory filing situations, right, critical technologies or things, but there are plenty of situations where it's a judgment call. And you know, how do you advise if you're on the buy side, like, you know, what are the ramifications of getting that wrong, right? Because a lot of times targets will say, you know, targets tend to not want you to file, right, because they want to get the deal done quicker, right? So how do you, like, if you make the judgment call not to, maybe what are some of the factors you take into account in deciding that? And then if you're wrong, what are the ramifications? Yeah. And obviously, from the perspective of figuring out whether or not you have to file, assuming it's not a mandatory filing, then you have to understand what the risks are that the transaction presents. And then you have to extrapolate from that and understand what remedies the government might seek. Because if the remedies that the government might seek are potentially, if they may potentially undermine the value of the deal or the commercial rationale, then that certainly would be an instance where you'd want to think about going in voluntarily. Obviously, if it's not mandatory, you'll receive, in many cases, pushback from the sell side, at which point you have to decide whether you want to push forward the filing and agree to a reverse termination. Or a breakup fee. Or whether, you know, the, and in some cases, you know, the risk, or whether you have to increase the, you know, the premium that you're paying. We've seen that as well. You know, I think it becomes important how you structure your efforts clause, because CFIUS, by its nature, is a bit of a black box. And as I mentioned, there are times where companies may walk in and not understand what the company, and it may not be possible to fully understand what the government's interests are at the front end. And it's certainly possible that, you know, CFIUS often doesn't prefer, doesn't look to structural deals where you're carving something out, because that may not solve the issue if the, if the, you know, if the concern is with the core of the business that's of interest in the transaction. And I've seen instances where companies accepted a hell or high water, and they walk out basically with only a passive economic interest, because they were obligated to close, but they didn't build in the protections that they needed to allow them to walk if they're, if they were presented, for example, with a requirement that they subject their interest to a proxy agreement or certain other conditions. So, you know, it requires a pretty sort of careful analysis in that regard. Okay. Thank you, Ayman. We're very fortunate indeed to have Ayman's deep experience and expertise and wise counsel. We probably need to move on, but if anybody wants to talk to Ayman afterwards with questions, please, please do so. We hope to have our partner, Michelle Davis, here to talk about FDI more generally, working very closely with Ayman, but the wrong test results this morning for her. Get well soon. Michelle, but we are fortunate that Megan has made it from Washington. And Megan, handing over to you on the antitrust landscape. Sure. Glad to be here, everyone. And I will spend the first 30 seconds of my 15 minutes talking about an anecdote. So I became a merger lawyer because I really loved the idea that you were working with the regulator to look at facts, to find the truth, to try to come to a conclusion. And it felt like a collaborative process. And just an example of that was a couple of years ago, was working on a transaction had a problem that needed to be remedied. And I spent three days on the road with the FTC staff attorney going to factories to look at factories that we could carve up or carve out of the transaction. And we found one that was an appealing factory, but our client was really focused on keeping investments they had just recently made in the transaction. And we explained this to the staff attorney. And so we worked collaboratively sitting in a conference room, whiteboarding how we would carve up this factory so that we could divest the part that was problematic from a competitive perspective, but to allow our client to maintain this business that had no competitive implications, but that was really important to them. And so something like that, I just don't think is going to happen today. And I've talked to my colleagues here in London and my colleagues in Brussels, and they're seeing the same change in tone where it's not collaborative. And if you look at what the new head of the DOJ has said, Cantor, he said explicitly, we're enforcers, not regulators. And I think what I described is really the way a regulator works. And so they've really shifted their tone. And I think when you take a step back and you talk about those traditional assumptions, you actually can talk about some substantive assumptions that we really no longer can hold true. So the first assumption that we always had was that vertical mergers or non-horizontal transactions weren't going to draw as many issues or weren't going to draw as much scrutiny as a horizontal transaction, because fundamentally, vertical transactions or transactions between parties at different levels of supply chain are efficiency enhancing, and they're synergy producing, and they're pro-competitive results. But that's wrong now. In the US, in the last year or two, we've seen five vertical challenges recently. NVIDIA, our Lockheed Martin Aerojet Rocketdyne, which was abandoned, and I was the lawyer representing Aerojet Rocketdyne. Illumina, Grail, Tronox, TZR, and UnitedHealthcare, changed healthcare, which was one that the DOJ voted a complaint just a couple of weeks ago to try to block that transaction. So that's the first assumption that no longer holds. I think the second assumption that no longer holds is that a difficult deal can be resolved with a consent decree or a remedy. And the scenario I described, it's hard to imagine that happening today. And what we're seeing and hearing explicitly from our teams that are working with the agencies, particularly the DOJ, but also in experience with the FDA, we see now that they are increasingly unwilling to talk about remedies. And if there is some sort of remedy, it will only be structural and it will only be very, very simple. So you're not going to get that carving up of a factory that you might have gotten a few years ago. And we're also seeing much more evidence in the US, particularly, that behavioral remedies are no longer sufficient for vertical transactions and that the agencies have a preference for litigation. And then really the final substantive assumption that no longer really holds true is that merger investigations are going to focus on traditional concerns, so price and quality effects. But now we're really seeing a heightened focus on things like innovation, labor monopsony, for instance, less interest in things like your share increment. So even if you're only adding 1% share increment, even if you're already large in a particular market, that's bad for these new leaders at the agencies. So we're really in a new antitrust world in the US and also globally. And we expect to continue to feel that uncertainty for some time. But there are certain patterns starting to emerge. And there are certainly large and difficult deals that are getting done. So let's talk first maybe a little bit about the leadership. I feel like a lot of these points about the new leaders of agencies are out in the newspaper, so I won't spend too much time on them. But at the FTC, there's a chair named Chair Kahn. And she is 32 years old. And she really has taken a lot of actions in her first nine months in office. O2 and test system. So for anybody who's been through a second request, it's just a 60, 70-page document where you basically respond to a bunch of interrogatories. She personally and her staff are reviewing those, and that would have never happened before. She and her staff are also looking at modifications to a second request. Again, something that never would have happened, and it would have been decided at much lower levels. But it really is happening now at the chair's level because they have a view that enforcement over the last several years, decade, since the Obama administration has been lax. And so they're concerned that the staff is just letting things happen. So I'll turn to the DOJ. The DOJ Antitrust Division is led by Assistant Attorney General Cantor, and he really has come out with fighting words stating in a speech a few weeks ago an intent to challenge deals in court rather than enter into complex remedies. And as I said, he said, we're enforcers, not regulators. So that is just no real reflection of the change in tone and the real pugilistic stance that they are taking with parties. And then finally, I'll talk about Tim Wu. He's an economist, and he's really the White House antitrust czar. And he's having a significant impact as well as he has the president's ear on competition issues. And he's a big proponent of interventionalist antitrust, and he's one of those folks who's believed that increases in concentration have led to all sorts of things like stagnating wages, increased inflation, and the entirety of social ills that are not really truly connected to antitrust. And he is a big figure in drafting Biden's executive order on promoting competition, which really called for a whole-of-government approach to dealing with competitive issues. So in not just the rhetoric from the leaders, but also in this executive order, they have said that they are targeting certain industries. So it's really those industries that impact consumers, tech, pharma, life sciences, social media, agriculture, financial technologies. But honestly, nobody is immune. Any industry that is particularly consolidated, they've said that they're looking into. So the defense industry is one example. Famously, Senator Klobuchar has said that many industries are consolidated from cat food to caskets. Another quote from Khan is that she was standing in a store one day and realized that all these different types of candy in the store were made by three companies. And so she realized that the candy industry was consolidated. So they really are looking at everything. And what's interesting is that this increased focus on enforcement is colliding with a really active M&A market. So in 2021, there were double the HSR filings as there were in 2020, which you would think was an outlier year because of the beginning of the pandemic. But actually, 2020 was probably a pretty average year. So there were 4,000 HSR filings in 2021. And in 2020, there were 2,000. So double the number of filings, which is really significant for agencies that hadn't really grown in terms of budget, in terms of staff. So they are truly overworked, which you would think that that would mean they would let some things go. But I think they've often gone the other way. So I think one thing that people do look at quite a bit in the press is the discussion of all of the legislation changes and the potential for changes in the standard. But as I mentioned earlier, a lot of the process changes that the enforcers have had without any sort of congressional oversight can really have a real impact on a transaction's timeline to completion and also the potential remedies or lack of remedies that can impact whether or not a deal can go through. So a few process changes that have had significant impact. So the first one is no early termination. So initially, that was sort of a temporary suspension to deal with the onslaught of HSR filings during the pandemic and folks working from home. But that's starting to seem like a permanent change. And so what that meant was that for non-controversial deals, the timeline often never had to run the full 30 days. And now every transaction, even if they're non-controversial, you have to wait the 30 days. So that's one change. I think another thing that we've seen is a longer clearance process between the agencies, which really can eat up a lot of your initial 30 days. And what that means is the clearance processes, the FTC and the DOJ often have sort of a assigned roles or assigned areas of responsibility in terms of industries, but sometimes they'll fight over one. And just a recent example, I had a deal this winter where there was a three -week clearance process between the FTC and the DOJ as to who was going to investigate this transaction. And luckily, we hadn't actually filed our HSR filing because we knew that this could take longer. And so if we had filed, we would have eaten up three weeks of our 30 days just dealing with which agency was going to look at it. And we would have been forced to pull and refile, which was just not something we really thought we needed to do. So another thing that we're seeing that's directly related to the leadership of the agencies is a demand from the management, from the staff, as to the amount of evidence that they need to prove to let something go, especially if it's superficially interesting. So if it superficially looks like a potential problem, even if the staff decides there's nothing here, they're actually really requiring the staff to do more to get rid of a deal. And again, another example, very recent example, I worked on a deal that superficially looked like it would be interesting. And we did the work. And like I said, we didn't file immediately. We spent time with the staff explaining why they shouldn't be worried. And the staff was pretty clear that they needed help writing their closing memo. And so we needed to help them, give them support so that they could defend their decision to let our deal go. So that's another thing. Another point is that at the FTC now, only one commissioner is required to sign off on compulsory process. So now you don't have to have any sort of consensus on whether or not something like a second request is issued, because now just one commissioner can decide there's a problem. And then on the topic of second requests, we're seeing lengthier second requests. So more questions, more in-depth requests, looking at things like labor and a variety of other things, and also a staff that's increasingly unwilling or unable to modify the very onerous second requests. And it's really because they have to get those changes signed off by management. And the management really doesn't want to leave any stone unturned, because they don't want to feel like they've missed something. And so the staff's hands are tied, even if they agree, you don't need the 50th custodian when you've already turned over 45 custodians or something, 49 custodians. I think another one that's pretty significant as well is the prior approval requirement and consents. So this, again, impacts parties' willingness or ability to really enter into consents. So now the FTC has said that they're going to, basically, if you enter a consent, you're not allowed to do a deal without their prior approval, even if it's not HSR reportable in the future. And sometimes those prior approval requirements can be up to 20 years. So that's pretty significant for a company that may do a lot of deals that are not actually technically HSR reportable and really overrides the purpose of the HSR requirement. So the bottom line is that there are lots of challenges right now. Those challenges really are not insurmountable. They just really add time and money and pain to the process. So I'll pause there and see if we have any questions. I can kind of go on. I'm looking at my time. There's one at the back there. Hi there. Thanks for that. I just wanted to ask a question about, so a practical example, we sold a business and we had to do our HSR filing and the 30 days ran out. And we were quite surprised by that, thinking that, you know, actually we were going to get a second request. And then we received this letter saying, oh, by the way, it's expired, but we can come back and challenge this and ask for more information. We've closed over the top. What's the risk? Yeah, so the nasty grams. So the agencies have always been able to go back and investigate a consummated transaction. So that's not new. What is new is, you know, we're issuing these letters. And I think Commissioner Phillips, it was just last week, he was on a panel and he mentioned these close at your own risk letters, which now it's not just an FTC thing that's happening. The DOJ is also doing this. And he said of the 50 close at your own risk letters that he was aware of, he didn't know any that were still being investigated. And, you know, this is to his knowledge, of course, you know, information flows are challenging among the commissioners, to say the least, these days. To his knowledge, all those 50 close at your own risk investigations were no longer happening. So it's a little bit of a paper tiger. And again, you know, the agencies were always able to look at consummated transactions. Does that answer your question? Okay. I've got one for you, actually. Yeah. So with the sort of increased time and these close at your own risk letters, I know that the staff is, they're staffing up some, right? But at the end of the day, in order to totally block a transaction, unlike in Europe, where the commission can just say no, they would ultimately have to sue, right? So do you see, given just sort of the level of resources available, do you see actually more transactions, sort of going forward, do you see more transactions actually sort of where there will be lawsuits just based, to stop the deal, just based on basically the bandwidth of the agencies? I would actually think in some ways the bandwidth issue works in the opposite direction to some extent. So, you know, one of the things that the FTC and the DOJ are doing is they're asking parties to sign timing agreements. And they've historically asked parties to sign timing agreements to give them longer than the 30 days that's available under the statute for them to review a transaction after you substantially comply. And pre-pandemic, often the agencies would ask for 60, maybe 45 days, so, you know, a little bit beyond the initial 30 days that they have. Now we're seeing them ask for things like 120 days, 90 days, like really long time periods. And in the before times, when you would agree to a timing agreement, you would get some sort of modification or some sort of goodwill or grace from the staff on various aspects of substantial compliance. So it really made sense to enter into a timing agreement. You know, it was a little bit of a give and a little bit of get. And today, you know, I think we're increasingly seeing parties less willing to agree to timing agreements, willing to just deal with a painful second request, because in some ways second requests are painful anyway, and just tempt the FTC or the DOJ to take them to court with limited resources. Because it actually takes a lot of work to bring a case. And then to actually go to the third parties, get the affidavit evidence you need, take all the evidence you need, and then all of the discovery from third parties, write your complaint. I mean, get everything approved. I mean, it really actually takes a lot of work. Get your experts on board. So to give them only 30 days to do that, they have to really want to sue you. And so in some ways, that is a great strategy, right? Don't give on the timing, force them to make a decision in 30 days. And I think that is a position that some aggressive parties are taking. And in a recent transaction, not one that we've worked on, anecdotally, we've heard that the parties took a very aggressive stance with the agency. And the acquirer ended up producing documents from 200 custodians. The target, which was a teeny tiny target, produced documents from 45 custodians and said, you know, go pound sand about timing. And so it gave them 30 days. And so, of course, the agency tried to block this transaction. Unfortunately, this transaction ended up being called into the European Commission by Article 22. And so at the end of the day, if the party's strategy in the U.S. was to get before a court and get a preliminary injunction or get a preliminary injunction dismissed, which is what the agencies have to ask to get you to stop from closing your transaction. So their strategy kind of backfired there because it was a global deal. And I think this really tees up how important it is to have global coordination across all of the jurisdictions because we're seeing quite a bit of not only regulator collaboration to sort of have, the different agencies that don't have the same judicial review requirements we have in the United States to do the dirty work of the FTC and the DOJ. And, you know, right now, the regulator to do the dirty work is really the CMA. And as a non-CMA lawyer, I will not talk about the CMA. But I've heard enough about what's happening over there that it doesn't take a lot to get a deal before the CMA and they don't have judicial review. And, you know, you can really kill a deal pretty easily by just saying, hey, CMA, have you looked at this? You might have a couple of ticket sales in the UK and you block your deal. And that actually happened in Sabre Fair Logics. And I think the DOJ brought suit in the United States. And I think the party has won. But the CMA actually ended up blocking the transaction based on, you know, a very limited number of sales in the UK. I wonder if that's the right segue into allocation of regulatory risk, Sebastian and Damien. Sure. I'm going to go first? Yeah, sure. Whatever you want. So, you know, we've been spending time, you know, thinking about and also with counterparties thinking about and talking about in light of some of this uncertainty, what do we do in the terms in the deal documents to allocate risk? And if you think about it, before it was like in the pre-period when you were focusing on horizontals, it was a little bit more straightforward, right? You knew what the calendar was, right? You knew, you know, what it would take to get it done. You knew what it would take to get through a second request generally. You could also think through, okay, I've got overlaps and I know what the remedy is. I have to divest either this or I have to divest this. And you would negotiate with the counterparty about whether or not you were willing to do that, right? And then the parties could assess, all right, what's the likelihood that they asked for more than that? And you'd have those kinds of discussions. So it was a relatively, like, discreet discussion around, like, you know, calendar, outside date, and then, you know, what do we think it's going to take to get it done? And does the buyer willing to accept that? And does the seller think that that's sufficient? And then if there wasn't kind of like a meeting there, you know, you'd either accept a little bit of risk or you could ask for, like, a reverse breakup fee or something. So, like, it was a relatively, like, coherent discussion that had meets and bounds that we all kind of, like, understood. And now it's gotten complicated because, you know, in light of everything that Megan and even Iman said around, well, some of the stuff is, like, okay, now we've got to do this. Now we have a vertical. Like, there is no remedy, right? Like, there is no divestiture that we can do because we're not in this business. We want to buy this business. So what's the remedy? We sell this thing that we just bought, and they're not going to accept behavioral remedies. So I think parties are really talking and trying to figure out how to allocate risk in a way, in a world that's now gotten a little bit murky. So how are we seeing that, like, manifest? We're definitely seeing longer outside dates. You know, I had a deal that signed up in December where we all agreed that there was no substantive antitrust risk, but there were some bad documents. And we were on the buy side, and we were nervous that if we proposed a very long outside date that the target would freak out. And we kind of, like, trial ballooned throughout nine months. And they said, how about 15 months, right? Okay. So, like, that's a crazy outside date for a deal that everybody thought had no substantive risk, right? So longer outside dates. That then puts pressure on the operating covenants because, you know, all the stuff around what the target can't do between signing and closing, if you have to budget for a longer period of time, we're seeing a lot of play around that. Litigation now is a strategy. So does the merger agreement commit the parties to litigate? And a lot of merger agreements were silent on that topic before, and now we're talking about that. We're talking about, you know, remedies language that addresses not only, like, antitrust risk, but now what is that? What is the CFIUS risk, and what does the buyer have to do for that? Does the buyer have to agree? If the buyer agrees, I'll do stuff with your assets, but not my assets. Well, what happens if the FTC asks for them to do a prior approval commitment? That's an effect on their incumbent business. Do they have to agree to that? So we're having to think through and address these points. I think it's going to see, then you have to think about, okay, you have a buyer that agrees to hell or high water, right? And the only way to do that is to say, if it's hell or high water, you don't need a reverse breakup fee because the buyer has to go to the ends of the earth. Well, now we're living in a world where the FTC and the DOJ may not even want to do any kind of remedy discussion with you. So hell or high water plus reverse breakup fees now, right? So I'd say you're seeing, you know, a lot more focus on these provisions. You're seeing, you know, longer time periods. We're seeing, you know, tiered breakup fees in the Activision, I think it was the Microsoft deal. There's a, you know, like an escalating breakup fee depending upon how long the thing goes. Ticking fees as a concept again. So I definitely say we're seeing all of these things get discussed to try to address a lot of these aspects. And then the last thing I would say is, you know, some kind of fix it first thing, right? Can we figure out, we have got a horizontal, we know we have this issue. Can we figure out a solution for that and sell it and find a buyer and get all that done before we even file for hard scot, right? So we could just take the jurisdiction, take that out of the jurisdiction of review. So I'd say that people are definitely thinking about all of these things and so some of the features that we're seeing people talk about. Sebastian, if you could. Yeah, I mean, I think to that last point about fix it first, I mean, one of the things that these provisions have typically done is tell you that you need to move as promptly as possible. You know, everything has to be done with all deliberate speed, as it were, and often like file HSR in 10 business days or something like that. And that doesn't really make sense anymore, particularly when you're coordinating worldwide. It's, you know, all of the changes that Megan and I have discussed just go to how important it is to have a coherent strategy, a worldwide coherent strategy for antitrust, you know, at the time you announce the deal. You need to have thought about, you know, not only do you need to know where the filings are going to happen, of course, but you need to think about, you know, interactions between the CMA and the U.S., right? You know, how do you want to play it out in terms of timing? Do you, you know, want the CMA to be able to come back and block a transaction after the DOJ or FTC is done with it? And it really means that, you know, sort of control, the way you map out the timing and the control over the timing has to be thought of a lot more, right? You don't necessarily want to sprint in. You want to take your time. You want to get it right as opposed to just moving as quickly as possible because the, the agencies are really just around the world. It just, it isn't, it's not a case of just sort of, you know, kind of moving as quickly as possible will, you know, get you to the end as quickly as possible. It may very well be that, you know, waiting the right period of time, getting your ducks in a row and then doing the filings is going to get you a, you know, a better and speedier outcome as well. Okay. Should we, having talked about some of the lengths of some of these processes, I think employee retention becomes ever more acute. So Laurie, we might pass to you on that. Sure. So when the time comes to actually hammer out the specifics of employee retention and new employment agreements, which is, you know, usually shortly after signing and extending throughout the period and we're often finalizing everything right, right at closing depending on how far down we're talking. There are a couple of U.S. laws and requirements that have been surprising my European clients. So I wanted to, I wanted to talk about them. I guess, you know, in the first instance, the target CEO and management team usually have employment contracts targeted to the public company, the public company CEO, public company management team. And they're usually pretty rich employment contracts. So that's often, you know, the surprise, that's often the first surprise at exactly how much money that these people are. And then the second surprise is much less common outside the U.S. that allows an employee to say, you know, my duties have been diminished as a result of this transaction. Or, you know, of course, if you lower their pay and other more egregious things, but the surprising things are, you know, you're still the CEO, but you're just the CEO of a subsidiary now. And so often the CEO and others have the ability to leave and get severance. And if the buyer, you know, sometimes the buyer is okay with that and they just want to pay him out, have their new person and be done with it. But often the buyer wants the individual to remain. And so we talk about what we can do to get them. They don't want to pay out this individual right at closing. They want to convert the severance to some sort of retention payment. And that's where this counterintuitive and strange law, Section 409A of the tax code comes in, which was devised to cover deferred compensation, but deferred compensation, you know, traditional deferred compensation plans primarily, but deferred compensation is defined incredibly broadly under Section 409A, and it picks up a lot of severance arrangements. And 409A doesn't allow you to simply change severance that would have been payable at closing or that would have been payable upon a termination of employment to say, no, we're going to pay it instead in two years or in one year if you remain. And so the amount of time that I've spent, it seems like it shouldn't be that way, but the amount of time that I've spent trying to solve this issue for different people depending on what the language says and depending on exactly what the duties will be going forward and what the terms will be, it just becomes a complicated part of the deal. And in this scenario, the executives usually have their own counsel separate from the target counsel who are on top of this particular issue. Another law that comes into play when dealing with all of this is Section 280G of the tax code, totally separate from Section 419A, Section 280G imposes an excise tax on the individuals who receive parachute payments if the parachute payments exceed basically three times their average, you know, compensation for the past five years. There's also a potential loss deduction at the U.S. subsidiary, at the company that will become the U.S. subsidiary of the acquirer. Over the years, there have been tax gross-ups are more or less in favor in terms of whether, you know, if the individual is taxed in the first instance, putting aside the deduction issue, executives often negotiate, want to be grossed up by the company. It's not, you know, from their perspective, it's not their fault this deal is happening and that there's this tax. Gross-ups are pretty disfavored by shareholders kind of as a theoretical matter in the, you know, if you, if the deal is not on the horizon and you and an executive negotiate, it's pretty uncommon right now for executives to have gross-ups built into their employment agreements. But at the time of the transaction, it is common. It's, I feel like it's back in favor. I just did a transaction where there was a $40 million gross-up pool for executives just to pay the taxes. And sometimes we don't even call it a gross-up pool. We call it a transaction bonus pool because we don't, it still doesn't look great to describe it like that. Everything, again, everything is going to be disclosed in the proxy. Some surprising aspects of 280G are that even post -closing payments by the buyer can be picked up and called and go into the mix for 280G and count. And so when the acquirer says, you know, I want to pay, I want to come up and pay a transaction bonus if someone stays until closing or if someone stays a little bit after closing or I want a retention bonus pool or I'm going to grant new equity awards, all of that needs to be considered if it's agreed to prior to closing. So ideally, from a 280G perspective alone, the acquirer would not commit to any new promises until after closing. That's pretty hard, though, for the CEO. As we were discussing, we have trouble waiting to signing. It's hard to wait until closing. So we usually have, in addition to our advice, there's usually 280G consultants who are doing the math kind of throughout this process and figuring out different ways to get around this or to lower the 280G payments by, there's not that many strategies for a public company. For a private company, it's a whole different situation. There's an exemption that can apply if private company shareholders approve these payments. But for a public company, there are 280G mitigation strategies to increase, the main strategies are to increase the individual's base amount that you're comparing their parachute payments to. The 280G tax hits if your payments exceed three times your base amount, your average compensation for the past few years, five years. So if you're getting towards the end of the year, and this is what kept me busy, in December, you try to think of ways to increase the base amount. Maybe there were going to be options that were going to accelerate shortly following, in the beginning of the year, or you knew they're going to accelerate at closing, which is going to happen in the beginning of the year. For two or three of my clients, we were going through this process of we accelerated that. We let these individuals either exercise their options or we accelerated their RSUs so that they occurred in 2021 and increased their taxes in 2021, subject to clawback. And I was telling this to my European clients. They said, of course, why would we want to allow this to save the executives' taxes? Why would we want to give them money early and if they don't stay until closing? But we always build in a clawback in case closing doesn't occur. I had one client recently who went even further than I've ever seen. And they had a complicated strategy where the RSUs were converted into restricted stock. And we made the individuals make Section 83B elections to be taxed. They were taxed immediately in 2021. And so if the deal didn't close, these executives would have paid taxes that it's kind of tricky to get a refund for. And they would end up forfeiting their shares. But this was agreed to in the name of saving 280G taxes. Everyone thinks the deal is going to close. Another 280G mitigation strategy that the consultants help us with is if you can take the position that any severance payable to a departing executive is in exchange for an non-compete and is not a parachute payment. This is not because the deal is happening. This is not because you're terminating. This is because we're paying you because we don't want you to compete. And that's a common 280G mitigation strategy but requires the consultants to do a deep market study of what the individual's worth is in the market and how much should the non-compete be valued. And so there's a lot of work that goes into that to be able to take a reasonable position. And from the acquirer's perspective, even though the tax is the executives in the first instance, there is a potential loss deduction, which may or may not be that important to the acquirer. But they need to treat these amounts correctly for the employees. They want to get to the right answer. They need to know how much to withhold. This is compensation income. So we do want to get to the right answer. So that's 280G, Section 409A. Another point I want to mention, I guess it's back to 409A. Doing a deal for a big European company, they say, why can't we, you know, we have our programs. We have our equity programs. We have our employment agreements. Let's just serve these up to the CEO of the target. We just want to bring people onto our programs. And it doesn't work that easily for a U.S. executive, mainly because of Section 409A and its strange rules. For example, you know, sometimes European structured equity awards, they continue to vest, even following a termination, termination of employment. And from a U.S. tax perspective, that just doesn't really work for us. It brings them into 409A, which we really want to avoid, and it requires a lot more thought. There's also a six-month delay rule under Section 409A for key employees, all the top people, really 50 people of a public corporation, including a non-U.S. public company, that requires any severance payable on termination to actually not be paid for six months until six months following termination. And so that's something that we really don't want to miss. The consequences of violating 409A, I should have mentioned, are a penalty tax, a 20% extra penalty tax on the individual. Laurie, I wonder, I suspect you've given people a lot to think about in terms of their planning, and certainly finishing with a 20% penalty tax, which normally gets people's attention. I wonder just in view of the time, whether we might just spend a little bit of time in the last five minutes on deal protection and shareholder approvals. Sure. Sebastian, do you want to? Yeah, sure. There's not a lot that has changed in this over the last several years. So basic U.S. deal protections are that you have a non-solicitation clause in the agreement that says you will not go and try to do a deal with someone else, essentially. And there are all sorts of rules then around, sort of contractual rules around what happens when someone actually shows up and does want to overbid the transaction. And so you negotiate what it is that actually counts as something that allows you to start discussions, what it is that allows you to actually find that a transaction is superior, and then you negotiate break fees if there is an actual superior transaction. Along the way, there's also always match rights that the buyer gets in order to basically have the last look if something is going to be overbid. But again, it's all sort of been the same, and it's really kind of constrained by Delaware law. What I find sort of interesting as a comparative point to Europe is that this is all Delaware law. There isn't an active regulator in the United States the way that you have the takeover panel or like the FSMA in Belgium or the BOFIN that sort of looks at the way that kind of goes into the transaction as it is occurring and is saying, OK, this is OK, this isn't OK. You need to make these disclosures. You have to make a bid within a certain period of time. And in the UK case, that you can't really have deal protections in a public transaction. It's all actually sort of just a long buildup of case law that says, essentially, you can have a not solicited in the contract, but it needs to have these exceptions for the board's fiduciary duties. And that's sort of what the buildup has been over the years. I'd say just as a breakup fees tend to be an interesting thing. They tend to not go above 4% again basis of Delaware law. Often, the bigger the transaction, you'll probably see them hanging around 2 and 1 half to 3%, honestly. Damon, did you want to hit on kind of asymmetry points? One of the things that's interesting when you're doing cross-border stuff is that in the US, as Sebastian said, the target's allowed to agree to a breakup fee that can be up as high. It's all facts and circumstances based, but call it 2% to 4% of the deal price, the equity value of the target at the deal price. Whereas in a lot of jurisdictions outside the US, it's kind of limited to 1%. And that can lead to some interesting discussions when you have deal protection on both sides. So if you have a shareholder vote on the buy side, and so you have a fiduciary out for the acquirer, and they're limited at 1%, it's very hard to get the target in the US to agree to a higher one just because they can't. The other thing that's interesting, for example, in the US, we don't define what's a superior proposal by any particular, like you got to beat the incumbent bid by X percent, or it's just more favorable from a financial point of view. It's basically based upon the board's judgment that it's superior. Whereas in non-US jurisdictions, many times, there is kind of like you got to beat it by a certain buffer. So there are, when you're doing situations where you've got fiduciary duty concepts in the contract that are on both sides, like there can be, there are asymmetries that sometimes mean that you kind of go to the lowest common denominator. You know what I mean? The other thing I would point out is there are, you can agree in the US in stock for stock deals, for example, you sometimes see acquirers try to negotiate to not have the target have the ability to terminate to take a superior proposal under the theory that it's, if it's a stock for stock deal, it's business judgment rule, and all the board needs is its ability to change its recommendation, so it has the duty of candor. It's called force the vote. That is permissible as a Delaware code matter. It's a fiduciary duty question as to whether or not you'll agree to that, and I did have a target agree to that last year because they felt like the buyer was really the best buyer in an all-stock deal. And then the other thing is, you know, in private equity deals, you do see go shops where the, you know, the target will have actual affirmative right to be able to go out for a period of time and solicit. That is not legally required. There's no Delaware case that says you have to have that. You see that in PE deals because of the view that perhaps that's, there's conflicts because the management team's rolling over, et cetera, et cetera, but, and you almost never see that in strategics, but interestingly, in the take-two Zynga deal, actually Zynga had a go shop, right, which is interesting. So, you know, it's just sort of some, there are always interesting outliers, you know, force the vote or go shop in a strategic, but Sebastian's right, you know, in a down-the-middle deal, the deal protection in the U.S. kind of tends to stay within a particular alley. Great. Thank you. Conscious of time, I hope today has been enlightening on helping you think through the tactics and value considerations of deals in the U.S., and in particular, how to think about the targets, thought processes. I think we've seen the value of planning, often planning far ahead in the process, and the value of globally integrated approach to deals, whether that's antitrust, whether that's CFIUS, FDI, and all the major jurisdictions, and how that feeds into deal protection and your attractiveness as a buyer, and also, importantly, how to both motivate and retain employees. And I know all your relationship teams will always happily sit down with you, and go into much of this in more detail. I hope we've conveyed the impression of a very integrated and joined-up team that works together very well, and enjoys working together well. Just three quick thank yous from me, first of all, to my fellow panelists up here, and Alice, especially those of you who've traveled, and to Ethan and Michelle, we missed you a bit. Many thanks to organizers, I can see Lucy, Caroline, colleagues in the U.S., and our AV team for organizing all of this. But most of all, thank you all for attending. I know everybody has incredibly busy diaries at the moment, so we much appreciate you making the time. Thank you all very much indeed.