2) The rise of near instant communication technology
Writer and inventor Arthur Clarke said “Any sufficiently advanced technology is indistinguishable from magic.” Most of the pre-closing coordination and logistics for my seven-country deal was conducted by email and conference calls typically involving at least four and sometimes 20 or more people. The speed with which we are able to conduct business today is truly magical. Sometimes it’s hard to comprehend that swift communication by telegraph was only expansively possible in the U.S. by 1861. It’s not by accident that significant mergers and acquisitions of companies began to take place in the 1870s—about a decade after we were able to conduct business around the globe, and within the same day.
Besides the thousands of emails coordinating and planning for the AVX acquisition, much of the actual day of closing was conducted by email. In Germany, the document that confirmed that the seller received the purchase price was emailed to the German notary, who confirmed receipt and then sent another email to the German law firm as well as my law firm and seller’s counsel. In Romania, counsel received emails from London when the documents were signed, which initiated the process for Romania counsel to complete the local closing in Romania. In India, signed documents had to be emailed to five directors in India, who each then had to confirm receipt by email and then email local counsel in India to confirm closing. Without emailing, the complexities and time-constraints of coordinating deals among multiple companies in different countries would have been deeply challenging.
Of course, instant communication has its downside. Many of my good friends and clients at global companies lament the fact that their email boxes are constantly filling, whilst they sleep, 24-hours a day. As a cross-border M&A lawyer working with businesses across the world, I sympathize with those who never experience an empty email inbox. On the other hand, I’m grateful for the ability to send a late-night (US time) email to Europe, and to wake up to an answer.
3) Greatly mitigated risk
Our world is shrinking, in the sense that our communication and transportation speed compresses our geography. A UK company can easily visit an acquisition target in Japan to conduct due diligence, inspecting the target’s facility and interviewing management in a matter of days. An Australian company can set up a data room and conduct an auction with bidders from around the world. It is quite common for business executives to travel frequently and extensively, and virtual data rooms are used in almost all M&A transactions.
A basic tenet of M&A is that due diligence decreases risk. Mobility of people and information facilitates due diligence in cross-border M&A transactions and decreases the risk of doing a deal. Moreover, money now flows almost instantaneously. As long as planning occurs to place funds in bank accounts in relevant jurisdictions and currencies, closings can occur in multiple countries with certainty that fund flows can be initiated and confirmed as received same-day, if not within hours.
In his study of globalization, international economist and researcher Richard Baldwin calls what has happened — the rise of highly mobile capital and of the technology tools we now take for granted — “the second unbundling.” With this “second unbundling,” the keys to successful cross-border M&A deals — whether the sector is chemical, automotive, advanced materials, or IT, and whether the countries involved are Japan, France, and Switzerland, or Australia, China, and Brazil — become easier to achieve.
With the “second unbundling,” an M&A attorney’s role becomes more strategic, focused on project management and swiftly facilitating a transaction, using the technology and communication tools that we now have at our fingertips. C-suite executives who pursue cross-border transactions need advisors who are at ease managing large teams spread through many countries, delegating carefully, and being attentive to input from local counsel to discover and address any dangers that are lurking in the target business. Every cross-border deal involves meticulous planning to bring all the pieces together seamlessly at closing. The “second unbundling”, however, allows us to complete cross-border transactions with amazing speed and increased certainty.
Most M&A attorneys can agree with Thomas Jefferson’s philosophy: “I like the dreams of the future better than the history of the past.” But when I stepped into that office that Spring morning to finally launch the AVX closing — and on many other mornings since then — there’s no doubt that the future of the deal relied on the history of the past’s great transformations.