The Czech National Bank cut its key repo rate by a further 75bp at last week’s monetary policy meeting. While this was in line with market expectations, analysts expected a smaller decrease of 50bp. A poorer growth outlook for the Czech economy due to the COVID-19 pandemic remains the main reason for the loose monetary policy. The central bank also decided to decrease the counter cyclical capital buffer to 1% starting on 1 April and is prepared to buy government bonds in order to stabilise the financial sector. Once again, the bank declared its readiness to defend the koruna – which is weakening significantly – through the FX intervention. It did not cite a trigger value, but one was set internally. We forecast another rate cut of 50bp in the event of more severe economic impacts. As the cuts are state dependent, they can be implemented any time.

Europe continues to be a sellers' market. All countries across Europe now apply “seller-friendly” risk allocation techniques, while the US continues to firmly favour the buyer. These conclusions were published by CMS today in the 12th edition of its annual European M&A Study, a multi-year analysis of the key legal provisions within M&A agreements. The study is the most comprehensive of its kind and is based on a proprietary database comprising more than 4,600 deals.  In identifying the primary deal drivers for transactions, CMS revealed that almost half of deals represented buyers entering a new market (46%) or acquisitions of know-how or acqui-hire transactions (41%). The proportion of these transactions both increased since 2018 (32% and 23% respectively). One fifth of the deals represented the acquisition of a competitor.  Stefan Brunnschweiler, Head of the CMS Corporate/M&A Group, said: “We are seeing demand for deal certainty in the unpredictable macroeconomic context, greater use of clever risk allocation strategies, as well as new cutting-edge technologies benefitting the industry. The M&A Study 2020 will be a useful guide for those considering transactions in a more and more challenging investment climate.” Key findings for 2019 include:  Upward trend of legal technology tools – AI and document automation were used in numerous of the reviewed transactions, often leading to significant cost savings. Rise in popularity of Warranty & Indemnity (W&I) insurance – up by 2% to 19% of all deals but used in almost half of deals valued over EUR 100m.  Gradual decline of purchase price adjustments (PPAs) – in 45% of all deals, up one-percentage point from the previous year, but significantly behind the average level for the previous three years.  Upward trend of locked box structures continues – in 56% of deals with no PPA, highlighting parties’ wish for as much certainty as possible. de minimis and basket provisions becoming the market norm – now applying in majority (73% and 66% respectively) of transactions, most likely reflecting the increasing use of W&I insurance. Liability caps determined by deal size and W&I insurance – overall cap in smaller deals most likely to be full purchase price, compared to only 10-25% for larger deals. Additionally, almost half (45%) of W&I deals have caps of less than 10% of the purchase price, compared to only 10% of non-W&I deals.