Our Israel Practice newsletter covers topics of interest to our Israeli clients and contacts. In this issue, we cover our the FDA's requirements for COVID-19 vaccine; European regulation of foreign direct investment in the public health and high-tech industries; SEC staff statements on public company disclosure and financial reporting; analysis of the Schrems II case and what it can mean for adequacy decisions in countries outside of the EU; negotiating a down round; and how "return first" PE funds can factor ESG considerations into their strategies.
At the end of June, the U.S. Food and Drug Administration released its much anticipated guidance on the licensure of COVID-19 vaccines. This blog post discusses recent COVID-19 vaccine guidance, including current recommendations regarding the data needed to facilitate clinical development and licensure of vaccines to prevent COVID-19. These updates will be of interest to any Israeli company using U.S. government funding from Operation Warp Speed to develop a vaccine.
As European nations increasingly focus on regulation of foreign direct investment (FDI), the UK Government recently announced changes to the Enterprise Act 2002, which underpins the UK’s merger control regime. Within the raft of legislative measures introduced to combat the effects of the COVID-19 pandemic, the UK Government has turned its focus to protection of businesses that are crucial to fighting public health emergencies, while also expanding the jurisdiction of the merger control regime in respect of a new slate of deals in high-tech industries. This client alert provides an overview of the latest developments in this space.
As the COVID-19 pandemic and the measures taken to prevent the spread of the disease continue to affect public companies, the staff of the Office of Chief Accountant and the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) have provided further guidance for companies to consider when preparing upcoming disclosures. These statements emphasize the importance of high-quality financial reporting and a focus on meaningful disclosure about operations, liquidity, and capital resources during the COVID-19 pandemic.
In July, the Court of Justice of the European Union (“Court”) issued its judgement in the Schrems II‑case. The case relates to the validity of certain transfer mechanisms to legitimize international sharing of personal information from the EU to outside the EU. In short, the Court ruled that the Standard Contractual Clauses (“SCCs”) are valid, but that another widely used mechanism, the EU-U.S. Privacy Shield certification (“Privacy Shield”), is not. The Court makes a number of sweeping observations relating to both the SCCs and Privacy Shield, which may very well have far wider implications to international data transfers out of the EU. The European Commission has adopted adequacy decisions for many countries, including Israel, which may also be affected.
Down rounds—equity financing rounds where the company’s valuation is lower than at least one of its previous rounds of financing—have been rare in the sellers’ market of the past few years, where high valuations fueled by an abundance of capital is the norm. However, as the impact of COVID-19 and other black swan events permeates global economies, an increasing number of companies will grapple with fundraising in an environment of increased investor caution around valuations and deployment of capital, particularly for pre-profit companies in harder-hit sectors. In this installment of the MoFo PE Briefing Room, we discuss a few tips for investors when navigating a down round, both as an existing investor and as a new investor coming into the company.
Considering environmental, social, and governance (ESG) factors when making an investment is no longer solely the province of “impact-first” investors—those who prioritize social or environmental impact above return on capital—but has become, to one degree or another, the norm among private equity funds. As the calls from both investors and consumers for companies to integrate ESG considerations into their operations and rethink the way they have done business grow louder, funds are increasingly looking to respond to these concerns and integrate consideration of ESG factors into their investment and portfolio management strategies. This means that even “return-first” funds—those whose primary focus remains return on capital—are seeing advantages to considering ESG factors and synergies in connection with their own investment strategies.
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For more than four decades, Morrison & Foerster has been at the forefront of the Israeli market, representing numerous Israeli companies globally, at every stage of their evolution, as well as the foreign investors and investment banks that finance those companies. Our Israel Practice takes advantage of the firm’s global platform to fit the needs of virtually any client. We believe that this deep insight, as well as our historic commitment to Israel, has contributed to our long and successful track record with Israeli clients.