European deal wave anticipated amid growing market confidence

Holcim/Lafarge merger and Vivendi’s SFR acquisition lead the way

Corporate partners are forecasting the next big European M&A wave after deal values this quarter shot up, partly on the back of ready debt finance and growing market confidence. Such conditions have supported a run of lucrative mandates, including the €40bn merger in April of cement companies Holcim and Lafarge and the acquisition of Vivendi’s phone unit SFR by cable group Altice for a total value in excess of €17bn.

Cleary Gottlieb Steen & Hamilton, Linklaters and Freshfields Bruckhaus Deringer were among a host of firms advising on Holcim’s combination with Lafarge, a deal that, subject to regulatory approval, will create LafargeHolcim, the world’s biggest cement maker.

Cleary, led by Paris-based corporate partner Pierre-Yves Chabert, advised Lafarge on the merger, fielding a large multi-jurisdictional team that included over 30 lawyers spread over three offices.

Cleary is a long-term adviser to Lafarge and in December last year advised the company on the sale of its 20% stake in European and South American gypsum operations for €145m.

Swiss firm Bär & Karrer also advised Lafarge, with a team led by corporate partner Rolf Watter that also included M&A partner Mariel Hoch and head of tax Raoul Stocker.

Linklaters provided Switzerland’s Holcim with French legal advice, led by Paris-based corporate partner Fabrice de La Morandière. Freshfields Bruckhaus Deringer Brussels-based competition partner Frank Montag advised the company on antitrust issues while Holcim’s long-term Swiss adviser Homburger was led by managing partner Daniel Daeniker.

Daeniker told Legal Business: ‘We’ve been working with Holcim for the last 25 years and have advised on every major transaction. This is the start of the next big M&A wave.’

With data from mergermarket for the beginning of January up to mid-April showing European deal value up by almost 40% to €177.1bn compared to €127.3bn over the same period last year, partners involved in the latest large deals argue that the availability of debt finance is driving much of the deal activity, including European cable group Altice’s acquisition of SFR through its subsidiary company Numericable Group.

A Ropes & Gray team led by finance partner Michael Kazakevich and including London co-managing partner Mike Goetz and tax partner Brenda Coleman advised long-term client Altice, while Allen & Overy advised Vivendi out of its Paris office led by partners Marcus Billam, Frédéric Moreau and Frederic Jungels. Latham & Watkins advised the underwriters, led by London-based partners Dan Maze and Scott Colwell.

This was the largest leveraged buyout since the collapse of Lehman in 2008 and the debt was structured through a number of different instruments, including high-yield financing, US covenant-lite bank loans and a revolving credit facility.

Kazakevich told Legal Business: ‘The bond market is very active and there is clearly a healthy appetite for high-yield debt. As a result, banks are finding it less risky and are offering better terms to underwrite large deals, as they have greater confidence in being able to place the debt with investors.

‘If the market holds up, I think there will be more sponsors and corporates who will be looking to do high-yield deals to finance their acquisitions.’