As the EMEA region looks towards 2025, the M&A landscape presents a mix of opportunities and challenges. In Benelux, growth sectors like TMT and Business Services will likely continue to attract investment (Deal Drivers: EMEA Q3 2024). Meanwhile, Luxembourg’s financial sector remains a key driver of activity, supported by its adaptability to complex deal structures and evolving regulatory frameworks.

With improved macroeconomic conditions and expected increased PE activity, the stage is set for a potentially strong year ahead, but, as discussed at our recent M&A breakfast event in Luxembourg, success in the region will hinge on navigating regulatory complexities and leveraging innovative dealmaking techniques.

A Complex Dealmaking Landscape

Luxembourg, often viewed as a hub for sophisticated financial deals that has hosted mega-deals like the recent €2.8bn SES-Intelsat transaction, has seen smaller transactions dominate recent activity. Many of these involve restructurings or fire sales.

However, positive signs have emerged in recent months, with real estate deals making a comeback and large private equity (PE) transactions gaining traction after an 18-month lull. Moreover, Luxembourg’s financial sector, accounting for roughly one-third of the country’s GDP, is poised for heightened M&A activity, particularly in fund administration and depository services.

However, practitioners are learning to navigate the introduction of Luxembourg’s first foreign direct investment (FDI) regime, which is expected to affect deal timelines due to unfamiliarity among both practitioners and government ministries. A new merger control law will further reshape Luxembourg’s regulatory environment.

Additionally, employment regulations such as the Transfer of Undertakings (Protection of Employment) (TUPE) directive can impact deal structures. For example, TUPE applies to asset deals but not share deals, requiring careful consideration during due diligence and planning.

Innovative Deal Strategies for Success

One recent deal exemplifying Luxembourg’s financial M&A complexity was Carne Group’s acquisition of GAM’s third-party fund management business. GAM, a Swiss-based asset manager, sold this business line as part of a larger restructuring. The transaction was particularly notable for its use of a universal transfer of assets and liabilities. This mechanism allows the transfer of regulated business operations without requiring individual consent for each asset or contract, streamlining the process while adhering to regulatory requirements.

The deal underscored the importance of universal transfer structures in regulated industries. Unlike standard asset or share deals, universal transfers offer a flexible solution for transferring entire businesses efficiently. This approach is especially relevant in Luxembourg’s financial sector, where licensing timelines for new special-purpose vehicles (SPVs) can delay transactions.