Forum shopping
M&A / Merger ModelChoosing the jurisdiction in which to restructure, and where necessary creating the connection that makes that jurisdiction available.
Also written: venue selection, restructuring venue
Restructuring regimes differ on the things that decide outcomes, so the choice of forum is a commercial decision taken by the group and its creditors rather than a consequence of where the head office happens to be.
Five questions drive it. Which claims have to be bound, and can this forum bind them. Is a stay on enforcement needed. Must the process be kept private, since a confidential Dutch route or a non public German one can be run without customers finding out while an English plan is a public proceeding. Which priority rule applies on cram down. And where does the order have to be recognised, which is a question about where the assets sit.
Connections are frequently created rather than found. Groups have moved a subsidiary, changed a centre of main interests, or amended the governing law of their debt with the consent of the required majority in order to reach a chosen court, and the English court has accepted connections created deliberately for the purpose where the restructuring benefits creditors as a whole.
The phrase carries a pejorative edge it does not always deserve. Choosing a forum that maximises value for creditors as a whole is part of the advice; choosing one that advantages the party paying for the advice at the expense of a class that cannot object is what courts scrutinise, which is why recognition and the fairness of the split are argued at sanction rather than assumed.
Worked example
A group with no UK operations amends the governing law of its senior facility to English law with majority lender consent, illustratively.
That supports a sufficient connection with England and opens the restructuring plan, with its cross class cram down and its absence of a priority rule.
The alternative was a domestic procedure whose priority rule would have left the sponsor with nothing, which is precisely why the choice was made.