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Transformative Deals
Key Contacts
Steve Abraham
London
William Devaney
New York
Nandakumar Ponniya
Singapore
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Mergers and Acquisitions (M&A) can be a powerful tool for transforming a business. However, M&A is not a strategy in itself—it’s an enabler. To maximize value, it's essential to look beyond financial metrics and align acquisitions with broader organizational goals. This requires navigating complex legal and regulatory environments and integrating corporate cultures. This guide explores the five critical challenges that must be addressed in orchestrating transformative deals.
Challenge 1: Strategic Alignment and Justification
While it may seem obvious, any successful M&A deal must clearly align with broader business strategies and have well-articulated rationales with quantifiable benefits driving long-term goals. Anchoring decisions in long-term value creation rather than short-term wins positions companies for transformative success. Transactions should be deliberate steps toward sustainable competitive advantage, with disciplined focus and robust due diligence essential to validate strategic fit and mitigate risks.
Challenge 2: Navigating the Regulatory Labyrinth
Regulatory complexities are a significant challenge when closing deals. With over 100 countries having active merger frameworks, transactions face multi-jurisdictional reviews, extensive filings, and detailed information requests. For example, the E.U. demanded 2.7 million documents for a recent life sciences acquisition, adding cost and time burdens. Sectors like technology face heightened scrutiny and complex divestment remedies. Proactive planning, upfront work, and a clear roadmap are essential to overcoming these hurdles.
Challenge 3: Cultural Integration and Workforce Alignment
While financial synergies usually dominate discussions, cultural integration and workforce alignment are the true linchpins of long-term success. “The cultures of the organizations involved must be understood and assessed to ensure a smooth integration that maintains morale,” explains Elizabeth Ebersole, an Employment and Compensation partner based in Chicago. Companies need to evaluate factors such as core values, communication styles and engagement levels, as these foundational differences can significantly impact integration. Engaged employees are typically more resilient and adaptable to change. Even seemingly minor differences in workplace policies, such as remote work flexibility, can influence morale and integration success. Conducting early cultural assessments and fostering transparent communication can bridge gaps and build buy-in, ensuring smooth integration and maintaining morale.
Challenge 4: Post-Acquisition Integration
Closing an M&A deal is just the beginning. True success lies in the post-deal integration phase, where clear objectives, meticulous execution, and senior leadership engagement help to realize benefits. "For every hour spent on the acquisition, you need to be prepared to spend significantly more on integration," says Nick Bryans, an M&A partner based in London. Experienced companies are typically better at managing M&A complexities and cultural integration.
A recent multi-billion-dollar acquisition in the consumer goods and retail sector demonstrated the importance of top leadership involvement, with the CEO and CFO fully engaged and leading every aspect of the deal. Without senior management's oversight, even well-structured deals can falter. Their commitment is essential for navigating priorities, ensuring alignment, and securing employee buy-in.
Challenge 5: Compliance and Safeguards in the Age of Activism
With the rise of shareholder activism, transparency and proactive engagement with investors are essential. It's important to consider shareholder reactions to major acquisitions and communicate the strategy and rationale clearly before announcing deals.
Listed companies are accountable to shareholders and subject to activist scrutiny. Addressing their concerns constructively can prevent public disputes. This will nearly always require good communication and, at times, measured concessions. Listening and acting on shareholder feedback might suffice in some instances, while more significant steps—such as offering board representation or recalibrating strategic priorities—may be necessary in others.
Legal counsel can help prepare for activist challenges and productive engagement, considering broader implications, including reputational risks. Proactive dialogue and acknowledging vulnerabilities are more effective than combative approaches.
Preparing for the Future of Transformative Deals
In today’s dynamic environment, it is crucial to identify the right opportunities, execute and successfully integrate deals that create lasting value. Addressing operational, cultural, and strategic challenges from the outset ensures M&A remains a powerful tool for long-term success.
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KEY CONTACTS
Nick Bryans
Partner, M&A
London
Elizabeth Ebersole
Partner, Employment and Compensation
Chicago
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DISPUTES
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Disputes Forecast
EU POLICY
The EU Pay Transparency Directive
FINANCE
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US POLICY
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Transformative Deals
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EU POLICY
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Trending Toward Pay Transparency
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Key Contacts
Steve Abraham
London
William Devaney
New York
Nandakumar Ponniya
Singapore
Much has been discussed about the increasing importance of transparency in the workforce, driven by evolving employee and stakeholder expectations and new regulation coming into force globally.
The EU’s upcoming Pay Transparency Directive is just one example of new regulation that will require increased transparency in relation to worker pay. Multinational companies will need to act now – conducting audits, assessing policies and preparing for these new reporting requirements on the horizon.
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What is The EU Pay Transparency Directive?
The EU Pay Transparency Directive must be implemented across the EU member states by June 7, 2026. It introduces measures aimed at making it easier to identify gender pay inequality and therefore enforce the right to equal pay for men and women doing equal work, requiring among other things:
In-depth public reporting on gender pay gaps in respect of not only the same roles, but those that are assessed to be of ‘equal value’
If gaps of 5% or more are found that cannot be explained by non-discriminatory reasons, joint pay assessments involving worker representatives
Pre-employment pay transparency measures and a prohibition on asking job applicants about their pay history
Clear criteria for pay determination accessible to both workers and representatives and individual rights to pay information
The transparency compliance obligations set forth by the EU Pay Transparency Directive will be further amplified by the Corporate Sustainability Reporting Directive (CSRD), which includes its own set of employment-related disclosure requirements.
Breaking Down the Concept of "Equal Work"
Like roles: the same role
Work rated as equivalent: differing roles rated as having equivalent value under a job evaluation scheme
Work of equal value: differing roles that are deemed to be of equal value to the organization, accounting for the efforts, skills and other requirements of the role. These requirements extend outside the scope of basic pay, encompassing other contractual, pay-related terms including commissions, bonuses and allowances.
Learn more about equal pay issues
Tune into our Diving into Diversity vlog series to learn more about how UK and multinational employers can navigate emerging equal pay requirements.
A Global View
Similar pay transparency regimes are coming into force around the world:
North America
Washington, DC, Minnesota and Vermont (effective July 1, 2025) have joined California, Colorado, Illinois, and New York, among several other US states, to mandate pay transparency in job postings.
Latin America
In 2023, Brazil passed a law promoting pay transparency, requiring organizations with 100+ employees to report salaries and compensation criteria every six months. It is the first pay gap reporting regime of its kind in the region.
Asia Pacific
In 2023, Australia’s government introduced legislation requiring employers with 100+ employees to publicly disclose gender pay data, along with a new workplace right tackling pay secrecy – employees are now permitted to ask any other employee about their remuneration.
Key Steps to Navigate New Pay Transparency Requirements
Staying ahead of new pay transparency requirements and reporting obligations means that employers and HR professionals must prepare to accurately collect, assess and report this data – and do so in a legally compliant manner that accounts for local data privacy considerations. Preparing for these reporting requirements before they come into force is key to ensuring regulatory compliance.
Prepare your organizationBaker McKenzie's Equal Value Assessment (EVA) solution can conduct a standalone equal value analysis of the roles in your organization, with a view to identifying the correct groups within which to identify and report on pay gaps.
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KEY CONTACTS
Stephen Ratcliffe
Partner, London
Paula Talavera
Partner, Madrid
Agnes Herwig
Counsel, Frankfurt
Ida Cederborg
Senior Associate, Stockholm
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DISPUTES
Global
Disputes Forecast
M&A
Transformative Deals
FINANCE
Adaptation Financing Tool
US POLICY
Trump Administration Sector View
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Adaptation financing tool map
EU Pay Transparency Directive
Transformative Deals
Why ethnicity in law matters
Briefed
In
Actionable advice on doing business globally
Briefed
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Actionable advice on doing business globally
FINANCE
Adaptation Financing Tool
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The gap between the amount of climate adaptation finance needed and the amount available is significant.
Finance for adaptation purposes needs to increase fourfold, and the private sector can play a critical role in bridging the gap. It is a challenge for institutional investors and commercial banks, as explored in Climate Adaptation Finance: Unlocking Private Finance. With the global environmental crisis worsening, decisive action is needed.
We map out the financial tools available below that could help fund the gap.
Driving accountability from leadership can help to boost the efficacy of cybersecurity measures. “Board level training should be kept refreshed so that addressing cyber risk is meaningful, effective and positively impactful to a cyber readiness eco-system that is fit for purpose,” says Bange.
Tool
Debt-for-impact (or nature) swaps
How it works
A sovereign debtor, whose debt is trading at a discount, repays existing debt by issuing new debt at or near par value of a lower face amount, directing a percentage of the savings to finance local climate adaptation projects.
Use cases
Ecuador's 2023 USD 1.6 billion debt-for-nature finance swap is the largest in value to date. Benefitting from political risk insurance and a development bank guarantee, new bonds were issued on more favorable terms than existing ones that traded at a substantial discount. USD 300 million of "savings" was spent on marine conservation around the Galápagos Islands.
Use Cases
Challenges
These swaps depend on credit support provided by multilateral banks and development finance institutions, which have limited capacity. Private finance must step into these roles to increase capacity for transactions.
Key Benefits
The insurer's and the development bank's prudential strength enables refinancing on a more favorable basis, creating savings.
Challenges
Key Benefits
Tool
Public/private
partnerships (PPPs)
Concessional finance
How it works
PPPs are a mechanism for governments to procure and implement public infrastructure and/or services using the private sector's resources and expertise.
Concessional finance can help close any "viability gaps."
Where governments are facing aging or a lack of infrastructure and require more efficient services, a partnership with the private sector can help foster new solutions and bring finance.
Board level training should be kept refreshed so that addressing cyber risk is meaningful"
Use cases
Typically, a PPP is a long-term contract between a private party and a government entity for providing a public asset or service, in which the private party bears significant risk and management responsibility; for example, energy and power (waste to power), transport, water, and sanitation. There is no standard definition of a PPP, but it covers many types of agreements between public and private sector entities.
Use Cases
Challenges
Scaling these initiatives can be difficult, and public funds may not always be available or may be subject to onerous terms.
Key Benefits
By reducing investment risk and through incentivization, it can unlock private finance's collaboration with a range of partners, especially when the return on investment would otherwise be inadequate. This helps to simplify traditional project finance structures.
Challenges
Key Benefits
Tool
Project finance
(nonrecourse or limited-recourse financing)
How it works
Direct debt or equity investments are made into a project via a special purpose vehicle, whether on a commercial or concessional basis. Lenders and investors rely primarily on the projected cash flows generated by the project to repay debt and earn returns on invested capital.
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Use cases
These financing structures are typically used for large, complex and capital-intensive projects, where the project itself is established as a legally and economically self-contained entity. They are used across a variety of sectors, including energy, mining and infrastructure.
Use Cases
Challenges
Up-front costs can be high, including the need for extensive due diligence and risk analysis, which can be a major hurdle for lenders.
Key Benefits
Project finance often falls under the Equator Principles, which provide a risk management framework for determining, assessing and managing the environmental and social risks associated with project financing.
Challenges
Key Benefits
Tool
Debt financing facilities and equity investment
How it works
Debt financing can take several forms and be provided by private investors or commercial banks, often alongside concessional finance and equity investment providers.
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Key Benefits
Debt financing can help to bridge funding gaps for challenging projects and provide risk-sharing solutions for concessional funding providers and equity investors.
Use Cases
Use cases
Debt financing has versatile uses across a range of project types.
Challenges
Debt financiers will require a return on their investment so are likely to require intense due diligence and impose stringent terms and close monitoring.
Challenges
Key Benefits
Tool
Results-based finance
How it works
This is debt or grant funding for a project that depends on achieving specific goals. This may include impact notes, climate bonds and conservation trusts.
Use Cases
Use cases
This is suitable for blended finance, offering favorable repayment terms or bonuses for achieving goals.
Challenges
Projects require agreement between the parties on well-balanced goals that are both challenging and achievable. They involve intense, suitably qualified monitoring, and verification processes.
Challenges
Key Benefits
This ensures a real focus on achieving maximum positive impact, which in turn will lead to returns on investment.
Key Benefits
Tool
Grants
How it works
Grants are nonrepayable or interest-free funding. These help with technical assistance funding and project preparation facilities.
Use cases
Grants are suitable for projects with little commercial potential or where funding is required to bring them to an investable stage.
Use Cases
Challenges
Funding is limited, making access challenging, and may be subject to strict conditions.
Key Benefits
Grants provide funding for crucial projects that might not otherwise attract investment.
Challenges
Key Benefits
Tool
Guarantees
How it works
Third-party guarantees are used to repay funding where a borrower defaults.
Use Cases
Use cases
Guarantees are available from local or multilateral development banks or sovereign entities in relation to a wide range of projects to attract investment.
Key Benefits
Guarantees are useful where a borrower has a poor credit record, or it is otherwise necessary to reduce project risk.
Challenges
Negotiating and securing a guarantee can be a lengthy process and come with stringent, prescriptive terms.
Challenges
Key Benefits
Tool
Liquidity instruments
How it works
These are grant or debt facilities that provide immediate access to funding.
Use Cases
Use cases
The varying nature of the products captured within this category means they can be used in a wide range of projects that might encounter difficult or unexpected circumstances.
Key Benefits
These are appropriate in emergency situations, especially where there is insufficient financial and technical capacity.
Challenges
Due to the circumstances in which these types of instruments are sought, providers may impose strict requirements, including high fees.
Challenges
Key Benefits
Tool
Local currency swaps
How it works
These protect long-term finance options in local currency through fixed and inflation-linked swaps, designed to mitigate the risks of currency and interest rate fluctuations for climate investments.
Use Cases
Use cases
These are commonly deployed to support investments in emerging markets and to hedge against currency and interest rate volatility.
Key Benefits
These facilitate access to funding in foreign currencies (where foreign capital providers can be reluctant to provide capital in domestic currency), helping borrowers diversify their funding sources.
Challenges
Currency swaps represent an additional cost to obtaining financing and can be unsustainable in developing countries unless subsidized.
