TRANSACTION STRUCTURING
Building approval for a transaction
Public authorities, as part of a strategic operation, can intervene during negotiations by exercising their governmental powers. They may also, when necessary, participate as investors.
The government has significant tools to protect national interests in a company deemed strategic, whether through regulation or public ownership. This enables the government to safeguard economic sovereignty in sensitive sectors.
In particular, during a merger or acquisition involving foreign investment control, approval from public authorities is mandatory. This approval must be obtained before, during, and after the transaction. It serves as a crucial mechanism to ensure that the economic, technological, or geopolitical implications of such a deal align with national priorities.
Thus, the intervention of public authorities becomes a key step in preserving a country’s strategic interests in an increasingly globalized economic environment.
Securing Asset Valuation in the Institutional Context
The involvement of public authorities, or even multiple states, in the negotiations of a strategic transaction adds an additional layer of complexity to the structuring and finalization of the deal. The participation of public authorities is not insignificant, as it alters the usual negotiation dynamics by introducing political, economic, and geopolitical considerations. These elements must be accounted for from the very beginning of the process to avoid unexpected delays or obstacles.
Ensuring the success of the transaction and preserving the value of the asset, technology, or targeted company requires close and specific negotiations with public authorities. This process must be handled with tact and in close collaboration with other advisors involved in the transaction, whether they are legal, financial, or sector-specific experts. The goal is to define the contours of the deal in a satisfactory and sustainable manner, taking into account the requirements of public authorities without compromising the viability of the business or the transaction.
In a deal requiring government approval, especially in a foreign direct investment control procedure, the market value of the asset can fluctuate significantly based on the outcome of negotiations with government authorities. These authorities possess substantial means to influence or, in some cases, block the transaction if it is perceived as threatening national interests or economic security.
The parties involved in the transaction are now fully aware, based on past high-profile deals, of the potential loss in value that a transaction might face due to the difficulty or even impossibility of completing a sale made complex by stringent government requirements or regulatory hurdles. This underscores the importance of integrating, from the outset, a tailored negotiation strategy that addresses the public dimension of the deal to minimize the risks of disruption.
Mastering the institutional complexity of negotiations
Institutional structuring refers to the set of processes required to develop the financial, legal, and operational framework of a transaction, while considering the doctrines and strategic priorities of the State, both in the short and long term. The goal is to ensure that the transaction is acceptable to all stakeholders, particularly public authorities, who play a crucial role in regulating and approving many deals.
This structuring is based on a thorough analysis and anticipation of the public authorities’ stance from the early stages of a deal, whether it involves an investment, a merger and acquisition (M&A), or the sale of strategic assets. It is essential to understand the expectations and concerns of the authorities to anticipate and manage potential regulatory or political obstacles that may arise during the transaction.
Institutional structuring can thus be seen as a form of institutional due diligence. It involves a series of diagnostics aimed at deciphering the unspoken intentions and implicit objectives of public authorities, to resolve points of friction and facilitate the valuation of the asset sale. This forward-looking analysis helps identify the necessary levers to align the transaction with State requirements while preserving the interests of the involved parties.
It becomes especially critical in deals where the State is directly involved as a stakeholder, particularly in cases involving foreign investment control. These transactions can be complex due to the sensitivity of the assets involved, especially when they concern strategic infrastructure or elements vital to the economy or national security.
In these contexts, the expertise of institutional structuring specialists, like Relians, becomes indispensable to successfully navigate the institutional and regulatory challenges.
