Despite the fact that France's economic growth rate continues to be one of the lowest in the EU, French corporate lawyers have been kept busy in recent years by a steady flow of large M&A deals. And some important legislative changes slated for 2020 could further amplify their workload.

A key instance of this is incoming change to French "squeeze-out" rules. "Squeeze-out" refers to the process of compelling minority shareholders to sell their stakes in a business when a deal is on the table of which a majority of shareholders approve.

The current threshold to initiate a squeeze-out in France is 95%, but this is set to fall to 90%. This might seem like a fractional change, but lawyers think it is likely to have a noticeable effect on the M&A landscape.

"We can expect more leveraged buy-outs of listed companies," says one French M&A partner. "Also, there are a few family-owned groups that are listed which do not really used the markets for fundraising and typically they are good candidates to go private."

Infrastructure increase

One sector of the French economy tipped to be particularly busy when it comes to dealmaking next year is infrastructure. "There is huge competition between infrastructure funds to buy the best assets in the market," says the M&A partner. "There are a few transactions in the pipeline, and many have already occurred relating to telecom towers and fibre networks, and so on. Social infrastructure has also been active."

Renewable energy is likely to be an important growth area for French infrastructure M&A, says one French competition partner. "In France there are a lot of offshore and onshore windfarms planned. This is an area of activity that has given us a lot of cases over the past two years."

He goes on to explain that this trend is likely to continue for two reasons. First, a desire on the part of the French energy industry to move away from nuclear power plants, a significant source of power in France, but a controversial one.

Second, renewable energy projects are often heavily subsidised by the French state – for example, through guarantees that all electricity produced will be bought for a number of years by a state-backed electricity provider. This gives investors a highly desirable very certain cashflow for the period in question.

Technology is another potentially hot sector. "We will continue to advise corporates on achieving their digital strategies by taking stakes in technology companies. That is very clear in terms of pipeline," says the M&A partner.

Deal blockers

However, not all is rosy for French M&A. Changes to French competition law could curb dealmaking, including in the technology sector, some lawyers believe. The French Competition Authority is considering new legislation that could give it wider powers to cancel closed transactions on competition grounds.

"This is a law that could kill acquisitions in the hi-tech or in pharmaceutical sectors," says the competition partner. At risk are acquisitions of promising young companies with a currently very low market share that are acquired by bigger organisations. At the moment parties involved do not need to notify competition authorities of deals like this because changes to the acquirer's turnover are likely to be negligible – but the new law would change things on the grounds that these deals do have competition implications.

"This is a law that could kill acquisitions in the hi-tech or in pharmaceutical sectors"

"There has been a lot of debate, and the legal world is not very happy about this because of legal uncertainty," the competition partner adds. "But the French Competition Authority seems to be supportive of it, so we will see how it goes."

French dealmaking could also be slowed by activists next year, both shareholder activists and protestors.

"Shareholder activism is clearly something that is very present in the market, either as a challenge to the management of a corporate or because they are challenging the price and other aspects of a deal," says the M&A partner. He says that the government takes the issue seriously enough to contemplate new legal provisions around shareholder activism "to avoid undue disruption".

Meanwhile, ongoing political uncertainty in France, including protests by the still-active gilets jaunes and the more recently marshalled anti-pension reform campaigners, has the potential to depress M&A activity.

Trimming tax

Outside dealmaking, important changes to French corporate law due for 2020 include a cut in corporation tax from 33.3% to 28%, with indications that the rate will decrease to 25% over the next five years.

"There are some things that come up every time when you talk about the non-competitiveness of France [compared to other countries in the European Union] and corporation tax is one of these," says Arnaud Touati, lawyer at startup-focused firm Hashtag Cabinet d'Avocats. The upcoming cut, he says, is "a significant move – the difference is too high right now between, say, Ireland and France".

Touati also sees 2019's PACTE package of business legislation reforms as an important shift that will start to have a real impact on the French market in 2020. Moves to enable businesses to be set up more quickly, for example, will "facilitate the creation of startups" and help make operating in the French business world "more flexible and quicker", he says.

Dispute resolution reform

A desire to make French business more nimble may also be behind an upcoming change to French dispute resolution procedure. New law now requires all civil business disputes to go through a mediation process before the parties seek a resolution from the courts.

However the real motivation, thinks Touati, is to save money. "The government will say they want to find resolutions between people, but for me the main reason is to limit the budget for justice in France as much as possible."

"The government will say they want to find resolutions between people, but for me the main reason is to limit the budget for justice in France"

Other procedural changes that look set to affect the way that French disputes are conducted include alterations to the way that documents are shared between parties pre-trial. Clearer rules around business secrecy are likely to make it easier for defendants to justify withholding information.

There are also proposals under discussion to grant legal privilege to French in-house counsel, who currently are not entitled to this, in order to bring France into line with international norms.

This could "ease communication internally in international groups between those who currently have legal privilege and those who do not have it, and would also enable French in-house counsel to not get lawyers involved artificially in order to make [communications about a certain matter] privileged", says the disputes partner. However, "as you can imagine, regulators are quite defensive about it", he adds.

Employment updates

Employment law and practice in France could also change significantly in some ways next year as President Macron continues his programme of labour reforms. A cap for former high earners on unemployment benefits, which in France are pegged to the salary you earned in your most recent role, was implemented last month and will start to bite in 2020. Changes to professional training are also in the works.

Most high-profile are upcoming proposals to simplify France's pension systems, full details of which are due to be finalised in mid-December. But these have already sparked huge strikes and protests across France.

But Macron does appear to have won one significant employment law battle. A cap on the amount of damages – previously unlimited – that employees could claim for unfair termination of an employment contract was introduced in 2017. But this faced challenges from unions on the grounds that it was not in compliance with EU law, and from French labour courts, which refused to enforce it.

Now that the France's Supreme Court and Paris's Court of Appeal have confirmed that the cap is lawful, it should face no barriers to implementation. But employers' headaches in this area are not over.

"What we have seen is that claims have become more complex," says Nataline Fleury, a partner at Gibson Dunn and head of the firm's Paris employment practice. Employees are now more likely to bring additional claims alongside an unfair termination lawsuit – for example, in relation to illness or sexual harassment – because damages for these claims are not covered by the cap.