Mergers And Acquisitions 2017

I OVERVIEW OF M&A ACTIVITY

M&A activity remained relatively strong in Luxembourg in 2016 and 2017, despite a global slowdown due to the uncertainties resulting from Britain's decision to leave the European Union and key global elections. Some of the reasons therefor are Luxembourg's regulatory and legislative framework, its legal and political stability and its domestic market, in particular its fund industry and financial sector.

Luxembourg remains the largest investment funds centre in Europe, and the second-largest in the world behind the United States. At the close of March 2017, the net assets under management in Luxembourg amount to €3.943 billion.2 Hence, the investment funds industry continues to play a major role in stabilising the Luxembourg market.

Luxembourg continues to be ideally placed to implement tax-efficient M&A transactions and hence to be a key platform for M&A and private equity activity. One reason for this is that the relevant legislation continues to be adapted and modernised in order to be as attractive and flexible as possible: this includes new forms of companies, namely the special limited partnership and the simplified stock company, which offer additional solutions for economic actors, including those of the private equity world. Funding instruments and methods created and used by practitioners over past decades, such as the use of tracking shares or the issuance of hybrid instruments, have recently been confirmed by the legislator and codified in the law of 10 August 2016 amending the law of 10 August 1915 on commercial companies (1915 Law), hence creating additional legal certainty.

Luxembourg remains one of the leading European hubs for vehicles investing directly or indirectly in European real estate. It is also worth noting that a lot of actions are being undertaken by the government to make Luxembourg a leading hub in the areas of information and communication technology, FinTech and space technology.

Chinese banks continue to establish their European headquarters in Luxembourg. In general, Asian dealmakers and investors continue to set their sights on European targets in a bid to reduce reliance on their domestic market. North American investors on the other hand may feel more inclined to stay at home, as there may be new opportunities in a less regulated and lower tax US environment as promised by the new US President.

With a number of promising drivers and deals in place, we anticipate a relatively active M&A market in 2017. Low costs of funding and the continued desire to expand geographic reach and innovation capabilities speak in favour of an active year. On the other side, key global elections, heightened regulatory scrutiny, in particular of Chinese investors, and speculations around 'Brexit', may result in a slowdown in M&A activities. Whether investors fleeing Brexit may find Luxembourg an adequate alternative remains also uncertain, especially given the strong concurrent bids from other leading European hubs.

IIGENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

The Luxembourg Civil Code, notably the provisions governing contracts, and the Luxembourg Commercial Code provide the statutory framework and form the legal basis for the purchase and sale of corporate entities in Luxembourg.

Statutory mergers, including cross-border mergers with EU or...