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January 26, 2018

January's Newsletter


Corporate news



2017 ends on a positive note for M&A activity in the UK

Despite an uncertain political backdrop in the UK, merger and acquisition (M&A) activity has continued to be stable over the past 12 months and the general outlook is positive, with records showing that whilst the number of deals have fallen slightly since 2016, the overall value of transactions has increased.

According to Experian’s market IQ report, the total value of M&A activity across the country reached £217 billion in 2017 which is a rise of almost 30% on activity for 2016. It is thought that institutional lending played a large part in M&A funding which continued to increase throughout the year. It is estimated that Institutional funding is involved in up to 70% of all transactions.

Alternative funding solutions such as asset-based financing, private equity and crowdfunding has also enhanced available funding in the market which will provide a further hike to M&A activity. The availability of alternative capital presents a challenge to traditional lenders, as borrowers, (particularly start-ups) are taking a cautious attitude to debt-based lending and are therefore looking to unconventional means of funding.

Whilst the rise in the value of deals in the UK in 2017 can be partly attributed to an increasingly active private equity market, it has perhaps surprisingly also been strengthened by an increase in cross-border transactions. The acquisition of UK companies by foreign companies abroad appears to have slowed perhaps in response to the uncertainties around Brexit. However, the cross-border acquisition of foreign companies by UK companies has continued to rise with 33 successful outward M&A transactions being recorded in the UK in 2017 amounting to a total overall value of £51.1 billion.

The third quarter of 2017, in particular, saw a considerable increase in the value of cross-border deals involving UK companies with 163 transactions taking place between July and September at a combined value of £84.6 billion compared to the 241 transactions which took place in the quarter being valued at £33.2 billion. In looking forward to 2018, Corporate Finance experts have reported that they are anticipating continued cross-border activity in both directions from Europe, the Middle East and Africa based companies and investors.

In Wales, M&A activity throughout the past 12 months has also been promising with the total value of corporate transactions amounting to more than £560 million in Wales last year much of which can be attributed to increased cross-border activity and a rise in the overall value of transactions.

The corporate team at Greenaway Scott has seen a general increase in cross-border activity, having recently advised UK headquartered medical device manufacturer, Flexicare (Group) Limited on their acquisition of Netherlands based medical manufacturer Medisize B.V. Over the past 12 months we have also advised German bitcoin exchange company Vaultoro on its seven-figure investment from German-based Fintech investor Finlab AG and US-based medical device company Clinical Innovations Inc on its acquisition of German-based medical distributor Brenner Medical GmbH earlier this year.


Nigel Greenaway, Founder of Greenaway Scott, commented: "Our focus this year has been to expand our offering and explore diverse international markets which provide enhanced growth opportunities for us. In respect of the Vaultoro deal, we feel this has undoubtedly been achieved, and we are delighted to have assisted them in securing this seven-figure sum.


Thanks to our success this year, we are now planning ahead for further growth in 2018. A constant re-evaluation of our offering and growth is vital to ensure we continue to meet our clients' needs while staying on top of industry trends.


We look forward to the opportunities that lie ahead for us in the next year.”

Commercial news
Excluding or limiting your liability under a commercial contract

When entering into a commercial contract the parties will always want to be clear about any liabilities they may have if there is a breach of the contract. Therefore it is common to see clauses excluding and limiting a party’s liability, and by using careful drafting, this can offer the parties a degree of certainty and help to manage their risk. 

A party can seek to limit their liability under a contract in two ways. Firstly by placing a cap on the amount, the other party can recover under the contract in the event of a breach of its terms. This could be a set figure, the amount paid by the other party under the contract or calculated by reference to a formula. Secondly, by excluding certain types or categories of loss, for example, parties will typically not want to be liable for any losses that are indirect, consequential or do not flow directly from the breach. You have to be careful here though to distinguish between types and categories of loss because the loss of profits for example, is a category of loss that could be a direct or indirect type of loss. It is important therefore to be clear about exactly what you are trying to exclude under these clauses as simply excluding one type of loss (e.g. all indirect loss) may not exclude certain categories of loss as intended.

It is also important to consider the reasonableness of the clause, and particularly in relation to business to business contracts for the supply of goods and/or services, the clause must comply with the Unfair Contract Terms Act 1977 (UCTA). Certain liability can never be excluded by law, for example, death or personal injury arising from negligence, fraud and fraudulent misrepresentation. However, for liability that can be excluded, the clause will still be subject to the test of reasonableness under UCTA. Under the test a clause must be fair and reasonable having regard to the circumstances under which the contract was entered in to. Some of the considerations include the strength and bargaining powers of the parties, whether the clause was brought to the other party’s attention, whether the party had legal representation and whether there was any inducement to agree to the term.

Where there is ambiguity in the drafting of a contract, the court will look to a number of different principles of interpretation to try and establish its meaning. Traditionally the courts have always taken a restrictive approach, particularly in relation to exclusion and limitation of liability clauses. However recent cases have demonstrated that the courts are now moving towards interpreting these clauses using the natural and ordinary meaning of the words and considering business common sense. This is an objective test and aims to ensure that the interpretation of the clause reflects what the parties intended. This will be welcome news for businesses as it shows the courts are keen to enforce what has actually been agreed by the parties and recognises that commercial parties have the ability to allocate liability among themselves. This is assuming that the drafting is clear and that it actually reflects what the parties had intended, as the courts cannot save a party who has simply entered into a bad deal.


Employment news

Employees' Article 8 privacy rights

The recent case of López Ribalda and others v Spain in the European Court of Human Rights (ECtHR) considered whether an employer's decision to install surveillance cameras to detect a potential theft could amount to a violation of the privacy rights of employees under Article 8 of the European Convention on Human Rights (ECHR). Employees were notified of the visible surveillance cameras installed but not the surveillance cameras which were installed covertly. Article 8 grants individuals the right to a private life and an employer can only interfere with this right where necessary in a limited number of circumstances.

In the case of Köpke v Germany, an employee was dismissed for theft on the basis of covert video surveillance (CVS) evidence. The facts are similar to the López case as both involved the dismissal of a cashier on the grounds of theft evidenced by footage captured on CVS. The three primary considerations in both scenarios were the cashier's Article 8 rights, the employer's interest in the protection of its property and the public interest in the proper administration of justice. The ECtHR found that a fair balance had been struck between these interests in the Köpke case but not in the López case. 

A comparison of the specific facts of each case provides clarification on the distinction between protecting an employer's interests and respecting an employees’ private life. In the López case, the decision to install CVS was based on a general suspicion against all employees due to stock discrepancies which valued up to €20,000 in some months. The CVS was active in all working hours over a period of weeks without any limit on the duration or the target. In contrast, the Köpke case involved the use of CVS which had a limited duration and target. The employer was aware that the discrepancies arose from a specific department and targeted 2 employees for the CVS for a period of 2 weeks. The ECtHR found that this more restricted approach proved that the interference with the employee’s private life was necessary to achieve the aims pursued by the CVS and that the intrusion into the employees' privacy was necessary to further the employer's interest of protecting their property. 

Guidance provided by the Information Commissioner's Office states that it will be rare for CVS of employees to be justified. It may be justified in instances where openness would likely prejudice the detection of crime or the prosecution of offenders. Senior management authorisation should be a prerequisite if any sort of CVS is going to be used to monitor employees. It is advisable for employers to maintain a strict policy that CVS will be limited to exceptional circumstances where the employer reasonably believes there is no less intrusive way of dealing with the issue. If CVS is used, it should operate for the shortest possible duration and affect as few individuals as possible.

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