Our thinking

Navigating change: US M&A H1 2018

What's inside

Clouds are forming on the horizon, however appetites for big-ticket deals have not yet diminished

US M&A defies market uncertainty

An impressive first half of the year for US dealmaking reflects M&A's enduring value in an uncertain market

After a very strong 2017—when M&A in the US reached its third-highest overall deal value since the financial crisis—deal value grew again in the first half of 2018. Compared to H1 2017, value rose 30.5 percent to US$794.8 billion when compared to the same period in 2017, while deal volumes held steady.

Activity has been brisk despite increasing macro-economic headwinds. The Federal Reserve recently raised interest rates and signaled its intention to do so again twice more before the year is out. Threats of a bourgeoning global trade war are intensifying after the imposition of tariffs by the US and other large economies. And the US stock market has experienced significantly higher volatility this year than it did last.

One could reasonably expect that M&A would cool against this backdrop, but the fact that it has not suggests that deals are going ahead for essential strategic reasons rather than opportunistic ones.

Technology and its disruptive impact across all sectors is one of the main factors that has made M&A a necessity. The impact has been most apparent in sectors such as retail and healthcare, where digital platforms are ideally placed to disrupt established service and distribution channels. No sector has been untouched, however. Unless non-tech companies have the resources in-house to write their own software and algorithms—and most do not—M&A may be the best option to keep pace with dynamic change.

We expect the second half of the year to be busy, but no one can afford to ignore the threats posed by rising interest rates, increasing protectionism, an incipient trade war that could increase tariffs, a potentially inverting yield curve, unsustainable pricing demands and a volatile stock market. Companies will need to navigate these dynamics if M&A's bull run is to continue.


John Reiss
Global Head of M&A
White & Case

Gregory Pryor
Head of Americas M&A
White & Case


Navigating change: H1 in review

First-half activity remains on par with 2016, as strong fundamentals continue to drive M&A

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PE hits new post-crisis high

Despite intensifying competition within the market, US private equity activity is yet to show signs of a downturn

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Sector watch

Energy, mining & utilities leads the field

Bulky oil & gas deals pushed energy, mining & utilities close to the top spot in H1, while digital disruption ensured a steady flow of tech deals

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Technology M&A gets white hot in 2018

Dealmakers across all industries are looking to secure US tech assets in order to keep up with the technological changes disrupting their industries

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Consumer firms adapt to survive

Despite a drop in headline figures, M&A within the US consumer sector remains an important method to secure long-term growth

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Oil & gas M&A gains cautious ground

A steadying oil price signals a brighter future for oil & gas M&A, yet market caution remains

oil pipelines

Big-ticket deals drive pharma M&A

Activity in the sector is fueled by the need to refill product pipelines and navigate convergence between health and tech firms


Industrials & chemicals M&A gathers pace

Corporate repositioning and tax reform are two key trends driving M&A in the sector


Is blockchain M&A poised to accelerate?

US dealmakers are learning to navigate the complex world of blockchain M&A, but they will have to proceed with care in heavily regulated sectors

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In focus: Financial services regulation

An overview of the financial regulatory landscape and key trends to watch

US dollar

Decision time for M&A in Delaware

Noteworthy rulings out of the Delaware Supreme Court and the Court of Chancery in the past six months are already having consequences for M&A activity

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Spotlight on public companies: Cybersecurity and governance

The number and severity of cybersecurity incidents at major companies has increased, causing regulators to take a tougher approach. We look at five practical steps companies can take to manage these risks

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Key trends to watch in the months ahead

Acquirers shrugged off macro-economic uncertainty in the first half of the year to secure deals of strategic necessity

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Meet our partners

Global M&A leaders

John Reiss


John Reiss
Partner, New York


Gregory Pryor


Gregory Pryor
Partner, New York


 Dr. Jörg Kraffel

Dr. Jörg Kraffel
Partner, Berlin


Christopher Kelly


Christopher Kelly
Partner, Hong Kong


Allan Taylor


Allan Taylor
Partner, London


 Barrye Wall


Barrye Wall
Partner, Singapore


John Cunningham

John Cunningham
Partner, London


Alexandre Ippolito

Alexandre Ippolito
Partner, Paris


Is blockchain M&A poised to accelerate?

US dealmakers are learning to navigate the complex world of blockchain M&A, but they will have to proceed with care in heavily regulated sectors

5 min read

As the token industry continues to mature, so do the opportunities for token project M&A. In particular, strategic buyers are increasingly active in this space as they seek to expand their operations and pivot toward new business lines. As is characteristic in highly regulated and emerging industries, though, there are numerous legal issues that ought to be considered and resolved in order to make an M&A transaction in the token space successful.


Interest in M&A grows

While it may not have been clear to token industry participants in 2017, it should now be abundantly clear in 2018 that US federal and state securities regulators are of the view that token offerings, given the typical fact patterns under which many are conducted, are generally securities offerings. This is particularly so for token offerings that are conducted to raise capital in lieu of more traditional equity or debt financings.

Despite greater regulatory pressure, the token economy continues to grow. While token projects are reported to have raised US$5.6 billion in 2017, they have raised US$6.3 billion in just the first quarter of 2018 alone and this is gradually translating to an increase in M&A transactions. According to PitchBook Data, the emerging blockchain industry has produced 88 completed M&A transactions since 2010.

M&A among exchanges and alternative trading platforms has been particularly active this year, as they push to become fully regulated crypto exchanges under the FINRA and the SEC. In February, US payments start-up Circle announced that it is acquiring cryptocurrency exchange Poloniex for US$400 million and, in June, US cryptocurrency exchange Coinbase announced its intention of acquiring securities dealer Keystone Capital for an undisclosed amount.

Given the highly regulated nature of token project business models, many of the financial regulatory considerations that accompany M&A transactions involving a financial institution may apply. These considerations range from conducting focused regulatory due diligence to obtaining appropriate regulatory licenses, registration and approvals.


M&A among exchanges and alternative trading platforms has been particularly active this year, as they push to become fully regulated.

Due diligence faces complex issues

Token projects that are acquisition targets present a host of complex issues when it comes to due diligence. Many projects were founded by entrepreneurs and technologists who, while often highly innovative and technically competent, are not as steeped in the complex legal, compliance and regulatory challenges that face fintech companies. Furthermore, their risk-reward calculus as start-up founders may have led them down a risk-taking path that a mature company would not have pursued.

Acquirers should be sure they understand the culture of innovation upon which many start-up token companies were founded and conduct due diligence appropriately. Fintech start-up targets are often not without their regulatory issues, but a token due diligence investigation should be calibrated to fully assess whether these issues are both quantifiable and manageable in light of the potential upside of an acquisition.


Regulatory hurdles

In the context of regulatory authorities, there are numerous registrations that may need to be made, or licenses, charters, non-objections or approvals that may need to be obtained prior to conducting business in the token space. For example, many token companies may be operating as money transmitters under federal or state law. This may require them to register with FinCEN or obtain money transmitter licenses from one or more states.

Some states, such as New York, have virtual currency-specific licensing and regulatory regimes.

In other contexts, some token businesses may involve the extension of credit. As with money transmission, the licensing regime for lending outside of the bank or credit union context is administered by state regulatory authorities that, in various instances, may require a particular token project to obtain lending licenses.


Strategic buyers try a new approach

Strategic buyers in the token space may also pursue other structures to accelerate, but still manage, their exposure to the token economy. One increasingly popular approach is to form a joint venture whereby a mature corporate contributes capital to the joint venture and a start-up fintech company contributes intellectual property and talent.

Joint ventures can be structured in numerous ways and can include subsequent fundraising by way of debt, equity or tokens, or options for either party to acquire equity from the other party's parent entity. Parties contemplating a joint venture should be mindful of conducting due diligence and reverse due diligence, and consider fully the regulatory implications both for the joint venture and the controlling parent companies, prior to forming a joint venture.


M&A outlook

As the token industry continues to mature, opportunities for M&A transactions will continue to abound. Start-ups will seek exits, and infrastructure players in a fractured market will be consolidated and absorbed by more efficient market leaders. And in a bid not to be left behind, established market players will leverage their existing client bases to pivot toward token exposure.

In navigating these transactions, however, it is important to remember that token technologies, while novel and potentially revolutionary, are not immune from the fundamental legal, regulatory and compliance frameworks that apply to business, and in particular financial services business, more generally.



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© 2018 White & Case LLP