European regulators’ openness to PE investors is presenting attractive banking sector opportunities, but such opportunities require careful regulatory planning and local issue navigation.
By Carl Fernandes, Hans-Jürgen Luett, David Walker, Tom Evans, and Catherine Campbell
Ten years ago, a PE investment in a European bank would have been a rare occurrence. However, more recently, PE firms have deployed capital in the banking sector, encouraged by changing regulatory perceptions of PE bidders. Apollo, together with parallel investors, acquired the former German subsidiary of KBC Bank NV, which since then has completed several add-on acquisitions, kicking off a series of German bank deals. PE firms including Cerberus, JC Flowers, and Blackstone have also completed bank buyouts, as European regulators become more open to financial sponsors — a trend we see continuing in 2019.
What Is Driving European Bank Transactions?
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Disposal requests from the European Commission — as a consequence of breaching subsidy regulations — and regulatory reform have produced deal opportunities. The emergence of new growth markets has drawn the interest of PE, underlined by Blackstone’s €1 billion deal for Baltic lender Luminor. New technology and digital products have also attracted interest, as demonstrated by Cerberus’ acquisition of French consumer business GE Money Bank. Further, control of non-performing loans has meant less unpredictable downside risk for acquirers, but potential upside through enhanced operational efficiency (e.g., adopting FinTech) and exploiting scalability (e.g., through consolidation). As ever, distressed situations also present opportunities.
Antitrust authorities are paying closer attention to “common ownership”, the simultaneous ownership of non-controlling stakes in competing companies, with the EU’s Competition Commissioner, Margrethe Vestager, publicly stating that the European Commission is looking “carefully” into the issue. While public companies were the initial focus, we expect that private companies will face a similar level of scrutiny. As co-investment deals and non-controlling acquisitions become more common, deal teams should not assume that acquiring a minority position will mean that antitrust issues cannot arise.
Following two years of dialogue between the European Union (EU) and Japan, the European Commission (EC) adopted its mutual adequacy decision (Decision) for Japan on 23 January 2019. As noted in the 
The General Data Protection Regulation (GDPR) has been in effect since May 2018. Although the French data protection authority (CNIL) has imposed the highest fine to date — €50 million on 21 January 2019 — German federal data protection authorities have already imposed fines for GDPR infringements in 41 cases nationwide and say that they have “very many” additional fine proceedings in progress. This first wave of fines has come from five German authorities, with 11 authorities having not yet imposed any fines under the GDPR.
Many sponsors of clinical trials believe that companies based outside the EU who sponsor clinical trials conducted in the EU through clinical research organisations (CROs) and/or clinical sites do not themselves need to comply with the General Data Protection Regulation (GDPR). Sponsors believe the GDPR does not apply to them as they do not conduct the research directly but only receive results in key-coded form, and only their CROs and/or clinical sites will have access to the raw data and/or the key that connects the key-coded data to individual patients. However, sponsors need to reconsider this presumption in light of current guidelines and the Breyer case. Similar issues arise in other fields, for example, data and market research, in which only key-coded data is received by the organisation commissioning the research. But following the GDPR and the Breyer decision these organisations may still be subject to the requirements of the GDPR.
Warranty and indemnity insurance (W&I) has become a common feature of European transactions in recent years, amid a strong sellers’ market that has enabled vendors to offload risk to buyers. According to the most recent edition of the Latham & Watkins Private M&A Market Study, which examined transactions between July 2016 and June 2018, the proportion of transactions employing W&I has continued to increase — from 8%, 13%, and 22% of deals in the previous three editions of the survey, to 32% for the latest period surveyed. We believe M&A deal teams should be aware of changes and enhancements to W&I that will bring insurance coverage closer in line with the US market. In our view, the developments are positive for M&A bidders. 
In November 2018, Germany’s first fine under the General Data Protection Regulation (GDPR) was imposed — and it was much lower than many expected. The favourable outcome of the proceedings for the defending company demonstrates that, with a proper defence strategy, GDPR infringements may not necessarily end in a worst-case scenario for companies.
Wenn mit der Aufstellung eines Bebauungsplans neues Baurecht geschaffen werden soll, setzt dessen Ausnutzung nicht unbedingt voraus, dass das Inkrafttreten des neuen Bebauungsplans abgewartet wird. Vielmehr kann das neu geschaffene Baurecht unter den Voraussetzungen des § 33 des Baugesetzbuchs (BauGB) auch vorzeitig ausgenutzt werden. Dies bietet für den Bauherrn die Chance einer frühzeitigeren Verwirklichung seines Bauvorhabens, beinhaltet aber auch gewisse Risiken.
The German Federal Court recently ruled that parties may informally modify a property purchase agreement if the conveyance has become binding — thereby confirming prior case law. The Court further held that the parties may also make such informal modifications if they have granted fiduciary instructions to the notary not to file the conveyance with the land register until the purchaser has paid the full purchase price.