Ask any City partner about the current state of the market, and they will point to a softening in the M&A market in line with the clouds gathering over the economy. It seems no one told Tesla and SpaceX owner Elon Musk, who recently completed a highly-publicised acquisition of social media giant Twitter. The initially hostile takeover pulled in some of the US’ premier law firms, but events since suggest that the legal proceedings may be only just beginning.
Musk’s headline-grabbing acquisition was completed in October. According to filings, the total payment was $44bn (£38.1bn), making the transaction one of the largest M&A deals of 2022. It also saw the company taken private, having previously been listed on the New York Stock Exchange.
On the adviser front, Twitter combined tech know-how with transactional power by instructing Wilson Sonsini and Simpson Thacher. Wilson Sonsini put together an extensive deal team, which included partners from the corporate, employee benefits, corporate finance, tax, IP, antitrust, regulatory and litigation departments. Chair of the board Katie Martin led the on corporate aspects, alongside fellow partners Marty Korman, Doug Schnell and Lisa Stimmell in Palo Alto, as well as Remi Korenblit in Seattle.
Simpson Thacher advised Twitter’s board of directors. The cross-practice deal team was spearheaded by New York M&A partners Alan Klein, Anthony Vernace, Katherine Krause and featured lawyers with expertise in credit, executive compensation, capital markets, antitrust and regulation.
The initially hostile Twitter takeover pulled in some of the US’ premier law firms, but events since suggest that the legal proceedings may be only just beginning.
Musk himself was represented by Skadden. On the M&A side, Palo Alto partners Mike Ringler and Sonia Nijjar took the lead alongside New York partner Dohyun Kim. Other key members of the deal team included New York banking partners Steven Messina and Tracey Chenoweth and capital markets partner Laura Kaufmann Belkhayat, also in New York.
Davis Polk took the lead on the financing aspects of the transaction, advising the lenders on a $6.7bn senior secured first-lien term loan, a $500m senior secured revolving credit facility, a $3bn senior secured first-lien bridge facility and a $3bn second-lien bridge facility. New York-based co-head of finance James Florack led the team, which also included equity derivatives partner John Brandow and capital markets partners Alan Denenberg and Stephen Salmon.
However, the legal advice did not end there. After initially being hostile to the takeover, in July Twitter turned to Watchtell, Lipton, Rosen & Katz as it sought to bring a claim against Musk in Delaware that would force him to complete the acquisition.
For his part, Musk has a longstanding relationship with Quinn Emanuel Urquhart & Sullivan litigator Alex Spiro. Having acted for the world’s richest man in several disputes, Spiro was recently charged with representing Musk in a dispute with the US Securities and Exchange Commission relating to an accusation that details of an investigation into Musk had been leaked. Spiro is also believed to be working closely with Musk on reforming the company.
Even post-takeover, Musk’s activities have been catching the eye of lawyers. Immediately after the transaction was concluded, Musk began an aggressive strategy of cutting down the size of the workforce. Globally, the company is believed to have laid off approximately 50% of its workforce, including 140 redundancies in Ireland. In the UK, the company’s actions drew parallels with the P&O layoffs of March this year, and prompted business secretary Grant Shapps to write to the company in an attempt to ensure UK labour laws, which require a consultation process when laying off more than 20 people, were being complied with.
The most recent chapter in the tale has been the closure of Twitter’s Brussels office. The shutdown, combined with the departure of European digital policy heads Julia Mozer and Dario La Nasa, has prompted concern from market pundits about the company’s intention to comply with the EU’s newly-introduced Digital Services Act. There are also parallel fears relating to how the platform will engage with the UK parliament’s Online Safety Bill, should it come into law.
‘Like me, everyone starts with objections about anything that curtails free speech. However, the world has moved on and that simple stance can’t be the end of the debate nowadays.’
Tom Smith, Geradin Partners
Ultimately, the legal saga that has spawned from the takeover may only just be beginning, given the incompatibility that seems to exist between Musk’s own views on freedom of speech and the current regulatory appetite. Speaking to Legal Business, Tom Smith (pictured), partner at competition boutique Geradin Partners, said: ‘Like me, everyone starts with objections about anything that curtails free speech. However, the world has moved on and that simple stance can’t be the end of the debate nowadays. If they were shown examples of the most extreme online content, most people would agree on some level of protection. Having accepted that premise, you are immediately put in a position of needing to draw the line between acceptable and unacceptable content. It is a genuinely difficult thing to do. It will be interesting to watch Elon Musk’s personal journey on these issues.’