July 2012 /
In this Issue/
10
DEAL GURU:
6
SECTOR TALK:
Noll Associates
Private Equity-Backed Consumer & Retail Deals
63 SECTOR SPOTLIGHT: Q2 Mid-Year Review
RED ROCK — Acquisition International talks to Andrew Bell, Executive Chairman at the UK listed mining company Red Rock Resources Plc / 8
www. ACQUISITION-INTL .com
LATIN AMERICA QUARTERLY
— AI talks to Andy Webb-Vidal about business in Latin America / 12
TRANSPORT & LOGISTICS
— An M&A report from the full service transportation law firm Scopelitis, Garvin, Light, Hanson & Feary / 13
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CONTENTS:
July 2012
Editors Comment The UK markets rebounded as the ECB left its interest rate unchanged at 1% and extended its unlimited short-term cash offering until 2013. The FTSE 100 closed up 2.4% at 5,384 and the FTSE 250 gained 2.3% as investors retuned in better mood following the long Jubilee weekend. Resources stocks (+5.4%) and financials (+4.7%) led the advance in London, with Barclays closing up 8.2% after announcing the acquisition of the card portfolio of Edcon in South Africa. UK stocks gained as China cut its interest rates for the first time in four years in an attempt to encourage lending and to provide a boost to the country’s faltering economic growth. In the UK, the Bank of England left rates and QE on hold at the MPC meeting, while services beat consensus to maintain their growth rate during May, with the PMI figure coming in at 53.3, the same level as April, against a consensus estimate of 52.4. In the US, new jobless claims for last week fell by 12,000 to 377,000, beating consensus estimates. The FTSE 100 closed up 1.2% at 5,448, while the FTSE 250 gained 1.5%. Resources stocks led the benchmark index again, with miners helped by the rate cut in China to add 2.6%. The next best performers were the other cyclical sectors, financials (+1.8%) and industrials (+1.4%), while only utilities were in the red (-0.3%). This month Acquisition International scans the markets noting hot spots and the best deals. Enjoy the Issue, Charlotte Abbott, Editor charlotte.abbott@acquisition-intl.com
How to get in touch AI welcomes news and views from it’s readers. Correspondence should be sent to; Address/ Acquisition International, Blakenhall Park, Barton under Needwood, Burton on Trent, DE13 8AJ. Tel/ 0844 809 4788 Email/ reception@acquisition-intl.com Website/ www.acquisition-intl.com Find us on/
ACQUISITION INTERNATIONAL
CONTENTS — July 2012
ON THE COVER - RED ROCK: /08
Acquisition International talks to Andrew Bell, Executive Chairman at the UK listed mining company Red Rock Resources Plc.
NEWS: /04
The latest news stories from around the world.
DEAL GURU: /10
Noll Associates — Doug Noll speaks to AI about the Financial Sector
SECTOR TALK: /06 Private EquityBacked Consumer & Retail Deals Powered by Prequin.
DEAL DIARY: /73 The latest M&A from around the world.
SECTOR SPOTLIGHT: /63
Q2 Mid-Year Review
Growth of Litigation Funding
/14
Protecting Intellectual Property
/15
Rewriting the rules on Insolvency
/20
Double Taxation Agreements
/24
Tax Matters
/28
Malta — Bouncing back
/29
The Cayman Islands — Bouncing back
/30
US Domicile for Captive Insurance
/32
Forming companies / doing business
/35
The key to M&A Success
/40
Strategic due diligence
/42
The Asset Based Finance Industry
/43
Pension Obligations and Issues
/44
Doing business around the world
/46
Doing Business in Turkey
/52
Doing business in Italy
/57
Resolving disputes
/58
Q2 Mid-Year Review
/63 July 2012 /
3
NEWS:
from around the world
MARKET UPDATE The UK markets rebounded on Wednesday as the ECB left its interest rate unchanged at 1% and extended its unlimited short-term cash offering until 2013. The FTSE 100 closed up 2.4% at 5,384 and the FTSE 250 gained 2.3% as investors retuned in better mood following the long Jubilee weekend. Resources stocks (+5.4%) and financials (+4.7%) led the advance in London, with Barclays closing up 8.2% after announcing the acquisition of the card portfolio of Edcon in South Africa. Mining shares gained on the back of rising copper, lead and nickel prices with Vedanta rising 9.0% and Fresnillo up 7.4%. In Europe, the CAC40 closed the day up 2.4% and the DAX up 2.1%.
UK stocks gained as China cut its interest rates for the first time in four years in an attempt to encourage lending and to provide a boost to the country’s faltering economic growth. In the UK, the Bank of England left rates and QE on hold at the MPC meeting, while services beat consensus to maintain their growth rate during May, with the PMI figure coming in at 53.3, the same level as April, against a consensus estimate of 52.4. In the US, new jobless claims for last week fell by 12,000 to 377,000, beating consensus estimates. The FTSE 100 closed up 1.2% at 5,448, while the FTSE 250
gained 1.5%. Resources stocks led the benchmark index again, with miners helped by the rate cut in China to add 2.6%. The next best performers were the other cyclical sectors, financials (+1.8%) and industrials (+1.4%), while only utilities were in the red (-0.3%). Among individual stocks, Johnson Matthey posted its largest gain since February, rising by 4.9% after announcing encouraging full year figures, while Burberry gained 5.1% on the back of a broker upgrade.
ECM COMMENTARY A short week in a quiet market gives us little ECM activity to get excited about this week. One bright spot is Synergy Health PLC’s £22.6m accelerated bookbuild today. The transaction demonstrates that the markets are still open for quality growth stories and management teams with a demonstrable track record. The fundraising is to fund the acquisition of SRI/Surgical Express Inc. for
£24.9m, also announced this morning. Synergy is a FTSE 250 provider of healthcare services, medical devices sterilisation and hospital sterilisation services. NASDAQ listed SRI is a supplier and re-processor of reusable surgical linen and instrumentation to hospitals and surgeries throughout the US. Synergy opened the
books this morning and filled and priced the book by early afternoon. The book was 2.4 times covered and new and existing blue-chip institutional investors and was priced at 820 pence, a mere 0.5% discount to last night’s close. Investec is acting as Sole Bookrunner on the accelerated bookbuild placing.
DLA PIPER ADVISES ON EDS ACQUISITION Lawyers from DLA Piper’s Corporate team have advised Sheffield-based EDS Group Holdings Limited (EDS) on its acquisition by specialist environmental support services group, Silverdell Plc, for up to £18.6 million. Silverdell has announced the conditional placing of 80,101,466 Ordinary Shares at a price of 11 pence per share, raising approximately £8.81 million (before expenses) to part fund the acquisition which exchanged today (30 May 2012). The transaction is expected to
complete by 19 June 2012. Providing demolition and remediation services within environmentally sensitive locations, EDS is a multi-national organisation with customer bases in the UK, North America, China and Australia. Servicing the chemical and pharmaceutical
industries, its projects range from controlled explosive demolitions to the decommissioning of oil refineries, chemical process structures, pharmaceutical production lines and highly contaminated buildings.
ACCORD GROUP DOUBLES SIZE OF HEALTHCARE OFFERING THROUGH ACQUISITION OF DIRECT HEALTH Midlands-based Accord Group has doubled its capacity for providing healthcare and support services in homes, by announcing the acquisition of one of the UK’s leading home care providers; Nottingham-based Direct Health Group. The deal will see the housing group approximately double both the turnover and
4
/ July 2012
reach of the care services it offers, enabling it to provide around 3.5 million hours of home-based and residential care each year, allowing more people to lead independent lives. The Group has also announced that the agreement will help it to create around 2,000 new job opportunities over the next three years,
driven by a planned expansion in services and natural vacancies. There will be no job losses. The acquisition is considered a natural extension of the Accord Group’s already significant health and social care business and will create a combined workforce of around 4,500.
ACQUISITION INTERNATIONAL
NEWS:
from around the world
ECON VENTURE FUNDS VOTE: EVCA voices concern about depositary requirements and missed opportunity to boost SME financing The European Private Equity and Venture Capital Association (EVCA) today responds to the European Parliament’s Economic and Monetary Affairs Committee (ECON) vote on its text of the proposed European Venture Capital Fund Regulation (EVCFR). While the EVCA welcomes the overall Commission’s proposal to facilitate cross border fundraising by VC
funds, the EVCA is disappointed about the outcome of today’s vote, which sees the adoption of a depositary requirement. The EVCA fears that the financial burden imposed by a requirement to appoint a depositary will make it impossible for small, venture capital fund managers to volunteer to enter the EVCFR regime. The funds will miss out on the benefits of cross-border
marketing offered by EVCFR and this will undermine the potential for the regulation to boost venture investing in Europe. The depositary amendment outweighs the positive impact of the other positive amendments adopted such as improvements in the requirements related to qualifying assets.
M&A COMMENTARY With only a couple of bolt-on transactions to talk about this week allows us a little time to reflect this week on CGI’s offer for Logica which hit the screens last week. While a counter bid cannot be fully ruled out, on balance we see it as unlikely. While the valuation is not high in terms of take-out ratios, a counter bid in excess of 10% of the deal price would push total deal values to levels that start to overlook Logica’s structural challenges after allowing for the heavy restructuring price tag that would likely be needed. The current 105p offer implies a FY12E EV/EBITDA of 6.5x based on our forecasts. Any counter bid would need to be >10%
higher given the irrevocables, putting valuation levels at >7x EV/EBITDA. However we see risks to our forecasts as on the downside and CGI (N/R), the current bidder, has stated they will spend £165m on integration costs. Allowing for modest forecast pressure and cash costs, this could take gross deal values for any counter bidder closer to 8x EV/EBITDA, which we would see as expensive considering the structural pressures we believe Logica faces.
Our review of potential counter bidders suggests that in most cases, we see more reasons against than for. In terms of any bidding war, we think CGI would need to step back considering its net debt/EBITDA ratio rises to 2.2x just to fund the current deal. On balance we therefore think this offer could be as good as it gets for Logica shareholders.
SECTOR TALK:
Private Equity-Backed Consumer & Retail Deals
PRIVATE EQUITY-BACKED CONSUMER & RETAIL DEALS — Powered by The consumer & retail sector includes companies operating in consumer products, consumer services, retail, restaurants, publishing, and leisure. Since 2006, there have been over 2,600 deals in this sector globally, representing an aggregate deal flow of $383.1bn.
NO. AND AGGREGATE VALUE OF PE-BACKED CONSUMER & RETAIL BUYOUTS GLOBALLY:
H1 2006 - H1 2012 Period
No. of Deals
Aggregate Value of Deals ($bn)
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012
254 239 274 259 198 165 119 135 177 191 236 194 216
55.0 70.4 99.7 23.1 13.8 7.3 3.8 13.4 14.7 20.7 22.4 18.1 20.6
Deal activity in the consumer & retail sector was strongest during the buyout boom era of 2006 and 2007, with 254 deals valued at $55bn in H1 2006, 239 deals worth $70.4bn in H2 2006, and an all-time peak of 274 deals valued at $99.7bn in H1 2007. Following this peak, deal activity in the consumer & retail space dropped off markedly as markets began to feel the effects of a growing subprime debt crisis, with a massive 77% decrease in the value of deals in the sector between H1 and H2 2007, when $23.1bn worth of consumer & retail deals closed.
NUMBER OF PE-BACKED CONSUMER & RETAIL DEALS BY REGION:
2006 - 2012 YTD (as at 10-Jul-2012) Region
2006 2007 2008 2009 2010 2011 2012 YTD
North America 243 Europe 194 Asia & ROW 56
278 189 66
173 136 54
139 85 30
151 163 54
188 163 79
111 72 47
This slide in activity continued, reaching a low at the height of the financial crisis in H1 2009, with only $3.8bn in consumer & retail deals closed during that six month period, a huge fall from the all-time peak two years earlier. However, following this period, deal flow picked up again in the sector, reaching a post-Lehman high of $22.4bn from 236 deals in H1 2011, almost five times the level of activity seen two years earlier at the height of the financial crisis. Deal flow in the consumer & retail sector has remained stable in recent months, nearing the post-Lehman high of H1 2011, with 216 deals valued at $20.6bn in H1 2012.
BREAKDOWN OF PE-BACKED CONSUMER & RETAIL DEALS BY REGION:
2006 - 2012 YTD (as at 10-Jul-2012) Region
2006 2007 2008 2009 2010 2011 2012 YTD
North America 49% 52% 48% 55% 41% 44% 48% Europe 39% 35% 37% 33% 44% 38% 31% Asia & ROW 11% 12% 15% 12% 15% 18% 20% Source: Preqin
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/ July 2012
ACQUISITION INTERNATIONAL
SECTOR TALK:
Private Equity-Backed Consumer & Retail Deals
AGGREGATE VALUE ($BN) OF PE-BACKED CONSUMER & RETAIL DEALS BY REGION:
2006 - 2012 (as at 10-Jul-2012) Region
2006
2007
2008
2009
2010
2011
2012 YTD
North America 92.9 Europe 19.7 Asia & ROW 12.9
53.1 60.5 9.2
8.2 10.6 2.3
7.4 6.6 3.2
14.8 16.6 4.0
13.8 16.4 10.3
11.8 4.3 4.6
Source: Preqin
When assessing deal flow by region, North America is the most prominent area of activity for the consumer & retail sector, consistently representing approximately half of all deals globally. During 2012 to date (as of 10 July 2012), there have been 111 consumer & retail deals in North America valued at $11.8bn. Europe accounted for over a third of deals in the consumer & retail sector during the boom era, rising to 44% of all deals globally during H1 2009.
BREAKDOWN OF PE-BACKED CONSUMER & RETAIL DEALS BY TYPE:
Jan 2012 - July 2012 (as of 10-Jul-12) Type
No. Aggregate Deal of Deals Value
LBO Add-on Growth Capital Public to Private
48% 24% 17% 11%
64% 2% 5% 28%
Source: Preqin
However, in recent months Europe has become less prominent in the global consumer & retail landscape, representing 31% of deals in the sector during H1 2012, its lowest proportion ever. This dip in European deal flow in the consumer sector has been met by an increase in activity in Asia and Rest of World, which accounted for 18% of consumer & retail deals in 2011, and 20% of deals in 2012 to date, a peak for consumer investments in the region. Of the 230 consumer & retail deals announced in 2012 to date, 48% have been leveraged buyout transactions, contributing almost two-thirds of deal capital invested. Twenty-four percent of all deals have been addon acquisitions, with PE firms bolting-on smaller companies to their existing consumer & retail holdings. Growth capital deals represent 17% of all consumer & retail deals in 2012 to date, whilst public-to-private deals account for 11% of all deals and 28% of the aggregate value of all consumer deals. The largest consumer & retail deal during 2012 to date has been the recapitalization of Party City Holdings Inc., a premier party supplies retailer in the US, in a transaction valued at $2.69bn. The deal was announced in June 2012, with Thomas H Lee Partners stating that it would acquire a 66% stake in the firm post-completion.
THE 10 LARGEST PE-BACKED INDUSTRIALS DEALS:
2011 - 2012 YTD (as at 20-Jun-2012) Firm
Investment Type
Deal Gate
Deal Size
Investors
Bought From/ Exiting Company
Primary Industry
Location
Party City Corporation
Recapitalisation
Jun-12
2,690.00 USD
Thomas H Lee Partners
Consumer Products
US
EMI Music Publishing
Buyout
Jun-12
2,200.00 USD
Blackstone Group, Mubadala Development, Sony, The Raine Group
Advent International, Berkshire Partners, Weston Presidio Capital Citigroup
Publishing
US
Collective Brands Inc.
Public To Private
May-12 2,000.00
Blum Capital Partners, Golden Gate Capital, Wolverine World Wide, Inc.
Retail
US
Jupiter Shop Channel Co., Ltd. P.F. Chang's China Bistro, Inc. Alain Afflelou Great Wolf Resorts, Inc.
Buyout
Jun-12
Bain Capital
Retail
Japan
Public To Private
May-12 1,100.00
Sumitomo Corporation -
Restaurants
US
Buyout Public To Private
Apr-12 780.00 EUR Lion Capital Apr-12 798.00 USD Apollo Global Manage-
Bridgepoint -
Retail Leisure
France US
Europris The Garden Centre Group Anticimex
Buyout Buyout
Mar-12 500.00 EUR Nordic Capital Mar-12 276.00 GBP Terra Firma Capital Part-
Retail Retail
Norway UK
Buyout
Apr-12 2,700.00
Lloyds Banking Group Ratos
Consumer Services
Sweden
ACQUISITION INTERNATIONAL
USD
100,000.00 JPY USD
Centerbridge Capital Partners
ment
ners
SEK
EQT Partners
Source: Preqin
July 2012 /
7
ON THE COVER:
Lead Mandate — Red Rock
LEAD MANDATE — Red Rock
Andrew Bell, Executive Chairman at the UK listed mining company Red Rock Resources Plc (AIM:RRR), talks to Acquisition International regarding the recent disposal of the Mt. Ida royalty asset, its strategy and successful track record of deal making, and how being transactional can create shareholder value in the junior mining and mineral exploration sector.
Melville Bugt / Greenland
After starting his career as a natural resources analyst, Bell’s time spent in fund management and advisory work at leading financial institutions, international corporate finance work, and private equity experience lead to a focus on M&A, joint venture activities, and creative financing structures. Building on these experiences Bell has evolved to become one of the most imaginative deal makers across the junior mining sector with a quantifiable track record of success. “Junior explorers carry the highest risk and reward ratio because exploration in the end is an all or nothing proposition. A relatively large amount of money can be bet in relation to a firm’s market capitalization. The payoffs are not usually quick, though they can be. Deal flow can create a revenue stream where exploration does not, raising cash, changing the perceived risk profile, and allowing the company to capitalize on a diversified portfolio and create or smooth cash flow in volatile mineral and stock markets.” “A successful deal can also dramatically shorten a project’s time horizon, bringing a payoff forward, and reducing the time capital is tied up in the project. This can help the company lock in a return that exceeds its cost of capital. We seek to take assets in two directions: through the exploration/development cycle, and up the value chain. Diversity of projects by area and stage, deal flow, and as many potential exit points as possible are our objective, since having these characteristics in our portfolio will maximize our chances of being able to monetize value for shareholders.”
8
/ July 2012
“We can for example take an asset with a ten year exploration cycle, acquire it during the phase we feel we can best bring our expertise to bear, and then pass it along to a larger player more suited to take the project through to completion. We end up participating in larger projects than we otherwise would be able to consider. We can also do something very similar by creating or selling royalties over our projects. The benefits received are often significant and long lasting: the sale of part of the Mt. Ida royalty is a case in point.”
Billiton) Pallinghurst consortium then committed to funding the firm’s steel feed strategy, later adding a second asset, the Tschipi Manganese project in South Africa.
He explains a little more about the company and its aims: “Red Rock Resources Plc was established in September 2004 to pursue mineral exploration opportunities. Initially these opportunities were located in Australia, in particular the Northern Territory and Western Australia and were focused on iron ore, manganese and later, uranium which we hived off. Over time, the Company acquired more assets in central and eastern Africa and Central America, notably uranium properties in Malawi, gold in Kenya and Colombia, and most recently an iron ore project in Greenland.” Red Rock typically has not more than two to three main projects at any time, often at different stages of the exploration and production value cycle, which enables a fairly steady flow of transactions.
After the partial royalty disposal with Anglo Pacific, Red Rock retains half of the original 1.5% gross production royalty on the assets, and has added $14M to the total value realized by the initial investment over the past few years.
Recently, Red Rock disposed of 50% of its interest in the Jupiter Mines Mt. Ida magnetite royalty to Anglo Pacific Group Plc. The potential 1.5 billion ton Australian magnetite project asset arose from a 2007 deal in which Red Rock vended its iron exploration tenements into Jupiter Mines Ltd, then listed on the ASX. Under a JV structure set up by Bell himself (director of Jupiter Mines since 2008), Brian Gilberton’s (former CEO of BHP
Red Rock’s initial shareholding was diluted over time, but with Jupiter growing to over AUD $700m in value by early 2011, the initial investment in the tenements of some AUD $400k paid off many times over and has helped to fund Red Rock’s subsequent operations.
WHAT ARE THE STRATEGIC REASONS BEHIND THE DISPOSAL? “This transaction sought to continue the monetization process on the Mt. Ida investment. We wanted to offload risk. By realizing some of the investment today we ensured a percentage of the upside was locked-in, regardless of whether the underlying asset ultimately reaches production in 2015 or later. We retain a significant interest in seeing Mt. Ida eventually producing iron, both indirectly through our shareholding in Jupiter Mines Ltd, and directly through our remaining royalty interest. We now share that interest and the associated risks with Anglo Pacific.” “Furthermore, we wanted to balance our exposures. We were in our view exposed to Jupiter Mines assets, directly and indirectly
ACQUISITION INTERNATIONAL
ON THE COVER:
Lead Mandate — Red Rock
including having the Mt. Ida royalty on our books though this would only be generally evident if we were able to benchmark its value through a partial sale. Our view was that Red Rock’s share price was overly correlated to Jupiter’s performance, due to the significant value tied up in our investment relative to our market capitalization. This was something we had sought to reduce over time through sales of Jupiter stock, but the price had gone too low for that to be sensible when Jupiter is about to bring world class Tshipi mine into production. Selling part of the royalty made sense, as the signal from our market valuation was that unlocking hidden value in our portfolio was preferable to issuing new stock at a discount to an already discounted value, and as we would be sending a price signal to the market on the value of our remaining royalty interest.” WHAT PLANS DOES THE COMPANY HAVE FOR FUNDS RAISED THROUGH THE DISPOSAL? “The deal calls for $6m today, and two additional payments of $4m at various stages of project advancement, so some of the $14M will arrive later, but is something we can start to project and incorporate into our planning cycle,” he states. “Currently we intend to use some of the funding to advance one of our largest and most exciting projects, our second field season in Greenland, where we’ve recently drilled our first holes with the goal to end the year with both a haematite and a magnetite mineral resource estimate. The Greenland project is a type in which we specialize. It’s an asset where we felt we could acquire an interest at an early greenfield stage in one of the world’s last exploration frontiers, and within two years potentially have a significant asset base that could be worth many times the costs of exploration, and which has already attracted the interest of several major iron players.” “Most of the creativity in the royalty deal was focused on bridging the gap between our competing valuations of the project. We sought to find a structure that valued the asset as highly as possible, while considering the timing implications, and various decision points Jupiter Mines would go through on their path to production. Anglo Pacific presumably wanted to pay as little as possible for a series of future cash flows that could potentially dwarf the price they paid at completion.” “Ultimately we agreed on a large up-front payment $6m for 0.3% of the GRR paid out in a mix of cash and shares, and then two further payments of $4m for 0.225% each of the GRR. The second payment is timed to match a DFS (Definitive Feasibility Study) with a formal decision to mine, and a part of the capital costs locked in. The final tranche comes at commercial production and takes Anglo’s holding to 0.75%.” “After much discussion and negotiation, this was the structure that both sides found themselves comfortable with, that met each parties’ valuation expectations, and that ultimately allowed the deal to close even during deteriorating financial market conditions. Shareholders benefited from the realization of prior investments in the form of excess cash and reduced dilution to fund future projects.” Red Rock has a strong track record of deal making which is quite rare in the junior mining and exploration sector. From its investment in a shuttered Colombian gold mine to picking up inexpensive exploration assets in Kenya from a floundering delisted Canadian firm, the management has been able to find value creation opportunities at nearly every turn.
ACQUISITION INTERNATIONAL
Mt. Ida / Australia
“I think it’s one of our selling points as a firm, part of our DNA.” says Bell. “The royalty deal will be considered a success regardless of how things pan out with Mt. Ida in Western Australia.” “If Jupiter Mines takes Mt. Ida to production we still get half of the 1.5% royalty stream, which with a 20 year mine life should be significant annual revenues for Red Rock.
Red Rock is always actively seeking investment opportunities and new projects that it feels it can take up the value curve.
If for any reason Jupiter Mines does not progress Mt. Ida due to waning Chinese demand for iron ore, Australian tax or regulatory concerns, or infrastructure complications, then Red Rock has locked in significant value to its shareholders regardless of the outcome.” “Our challenge then remains to take the funds received and wisely allocate them to current and future projects to maximize the next series of returns for our investors.” WHAT DOES THE FUTURE HOLD FOR RED ROCK? “With market conditions as they are and with many of the world’s junior mining players hurting for capital or in operational hibernation, this is a ripe time for the stronger players to move in and discuss deal opportunities.” Coming to heads of terms for disposal in Colombia as announced on the 17th of July, further enhances Red Rock’s reputation for deal making and taking underperforming and undervalued assets and improving them while realising an attractive return. Red Rock is always actively seeking investment opportunities and new projects that it feels it can take up the value curve. ”
Company: Red Rock Resources Plc Name: Andrew Bell Email: exploration@rrrplc.com Web: www.rrrplc.com Address: 115 Eastbourne Mews London W2 6LQ Telephone: +44(0)2070995840
July 2012 /
9
DEAL GURU: Noll Associates
DEAL GURU — Noll Associates Doug Noll of Noll Associates proves that an ounce of prevention is worth a pound of cure… especially in the financial sector! WHAT IF YOU COULD MAKE THE BEST BUSINESS DEAL OF YOUR LIFE, EVERY TIME! WHAT STOPS YOU FROM DOING IT? LACK OF INFORMATION? MISUNDERSTOOD EXPECTATIONS? PERSONALITY CONFLICTS? POOR DECISION MAKING PROCESSES? PLAIN BAD LUCK?
• “What are the five non-quantifiable ways this deal could be maximized for your needs?”
In the high stake world of mergers, acquisitions, hedge funds, venture capital, and investment banking, success often rides on the intangibles. Financial analysis and due diligence may identify and quantify the objective and quantifiable risks, but will not help you figure out if the “chemistry” of the deal is right.
• “List the top three ways this deal could turn unprofitable? • “What are the five events that are sure to lead to business failure?” • “How do you want to respond to signs of trouble?” • “How do you want to deal with conflict?”
Thus, an ounce of prevention is worth a pound of cure, especially in important business relationships. I have come to believe that the best way of averting disputes in business deals is to make sure that the underlying business relationship is well-established before the contract is signed. One powerful relationship-building tool is strategic facilitation. In strategic facilitation, the principal decision-makers and the personnel directly responsible for execution of the deal meet very early in the relationship. A neutral, trained moderator, called a strategic facilitator, guides the group through an interest-based conferencing process. In this process, the participants learn about each other, the history and culture of the companies, and the deeper underlying needs, desires, goals, and interests that are motivating the business deal. EXPECTATIONS ARE MAJOR DRIVER IN MERGERS AND ACQUISITIONS. HOW WELL DO YOU KNOW AND UNDERSTAND YOUR OWN EXPECTATIONS OF A GIVEN DEAL? There is a lot more involved than just making profits. For example: • “If this were a perfect deal, how much time would you spend on this deal after it closes?” • “If this were the best deal of your life, how would the other people in the transaction be treating you?”
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/ July 2012
The facilitator challenges the participants to examine the weaknesses of the deal, as well as its strengths, with questions like:
Through a highly structured process, the participants develop a deeper understanding of each other, learn how to communicate effectively, plan for and anticipate future problems, make effective decisions, and develop the skills necessary to resolve conflicts and disputes fairly and efficiently. MANY BUSINESS DEALS ARE MADE WITHOUT REGARD TO THE UNDERLYING INTERESTS OF THE PARTIES. EACH SIDE “ASSUMES” THE OTHER SIDE WILL KNOW, THINK, ACT OR OTHERWISE AGREE WITH THE OTHER. AFTER ALL, THEY HAVE A DEAL, DON’T THEY? In truth, failed deals are based on unstated assumptions and expectations when left unfulfilled lead to frustration and conflict. With foresight, this type of conflict can be avoided. For example, two companies agreed to create a strategic alliance. During a strategic facilitation process, they learned that their actual interests were substantially different than what they had both assumed. As a result, the direction of the deal completely changed. Had they not engaged in the strategic facilitation process, the deal would have collapsed because of unstated assumptions and expectations that each company held about the other. Strategic facilitation is particularly useful in complex deals such as industrial construction projects. In one case, a city let out a bid to construct a wastewater treatment plant.
construction. Through strategic facilitation, the parties were able to resolve the design issues very early, avoid costly claims, and insure efficient prosecution of the work. The agreements were incorporated into a memorandum of understanding that governed the course of construction. The multi-hundred million dollar project was completed on time and on budget with minimal conflicts and disputes. In a large business acquisition, the strategic facilitation process uncovered issues unknown to all of the parties involving the merging of product lines. As a result, significantly more planning resources were dedicated to that aspect of the deal and a potential disaster was turned into a heretofore unseen profit center. A strategic facilitation starts with individual conferences and study to understand the dynamics of the deal. The individual meetings lead to a conference that may take up to several days, usually at an offsite location convenient to the participants. Over the course of the conference, business relationships are solidified as people learn more about their own motivations and expectations and share common interests with each other.
The key is uncovering unstated assumptions and expectations, and learning to communicate clearly. The conference is followed by a report out of the conference summarizing what was learned and setting out the action steps agreed upon by the parties. To the extent desired, the strategic facilitator works with the financial and legal advisors as a process consultant to help craft the final deal consistent with the goals identified at the conference. The process is another tool to improve bottom line performance of business deals. The investment in time and effort can yield surprisingly large returns.
The bid was awarded and immediately after the award, the city’s construction management and design team met with the prime contractor’s construction superintendent, managing principals, and key subcontractors for strategic facilitation. During the day-long process, the parties identified their respective interests and needs, agreed upon their respective obligations and responsibilities, walked through the plans and specifications, agreed upon procedures for submissions and approvals, identified potential problem areas, defined lines of authority and communication, and agreed upon a dispute resolution process. he facilitation process uncovered some design issues that would have exploded on the parties during the course of
Company: Noll Associates Name: Doug Noll Email: doug@nollassociates.com Web: www.nollassociates.com Address: PO Box 2336 Clovis CA 93613 USA Telephone: 01 559-903-2011
ACQUISITION INTERNATIONAL
Nasri H. Barakat Arbitrator, Umpire and mediator l II&RCS, Inc.
In 1994, Nasri H. Barakat established his practice as a full-time commercial, insurance and reinsurance arbitrator and umpire. As president of II&RCS, Inc, International Consultants, he continues to provide arbitration and litigation support for complex international disputes, expert testimony, run-off and liquidation services to the insurance and reinsurance industry.
Mr. Barakat has more than 40 years of insurance and reinsurance experience in the U.S., Europe and the Middle East. He has participated as arbitrator, umpire and mediator in a large number of arbitrations involving commercial, insurance and reinsurance disputes. Mr. Barakat is an ARIAS-US certified arbitrator and umpire. He is also listed on the “Roster of Neutrals” of the American Arbitration Association’s commercial domestic (AAA) and International (ICDR) panels, the USCIB, AIRROC and CPR panels. His extensive exposure to international commercial business includes major industry privatization of several Middle Eastern countries applying for admittance in the World Trade Organization (WTO).
His keen knowledge of the Islamic Sharia Law and abilities to fluently read, speak and write French, Arabic and English put him in a unique position to serve on certain international panels. Prior to founding II&RCS, Inc., Mr. Barakat served as president of National American Insurance Company, vice-president of Chandler Insurance Company Limited (an Offshore Reinsurance Company) and vice-president of Old American Insurance Services, Inc. of Dallas, Texas. He also held executive and other positions with Republic Insurance Company of Dallas, Texas and ITT Hartford.
Mr. Barakat is a non-practicing attorney.
SERVICES Arbitrations Mediations Litigation Support & Management Reinsurance Inspections Insurance Inspections Expert Testimony Due Diligence Collections Liquidation Management Run-off Management
www.nhbarakat.com
CONTACT
353 East 72nd St., Apt. 4D New York, NY 10021 Tel: (646) 707-0157 Fax: (646) 224-8404 Cell: (214) 912-9848 Email: iircsinc@ipa.net nasrib@yahoo.com or nasrib@nhbarakat.com
ON THE COVER:
Latin America Quarterly
LATIN AMERICA — Quarterly Chief Executive Officer of Latin-IQ Corporation, Andy Webb-Vidal, talks to Acquisition International magazine regarding business in Latin America and what the future holds for the region. changes,” he elaborates. “We’ve recently begun to see an uptick in interest in Mexico. More investors have been able to see that the risks stemming from criminal violence are in fact limited to only a few regions. In addition, with the elections now out of the way there is some cautious optimism that the incoming government will eventually push through some reforms that will improve the business environment in Mexico. Elsewhere in the region, some funds are betting on regime change later this year in Venezuela and looking at scooping up assets at bargain-basement prices, but we think the real chances of regime change in Venezuela are quite low.
Andy Webb-Vidal is CEO of Latin-IQ Corporation, a boutique business intelligence and risk consultancy specialised in Latin America. Latin-IQ undertakes a number of services in the region, ranging from corporate, litigation and regulatory investigations to complex reputational due diligence, asset searches, and market entry analyses. Recognised as the leading provider of bespoke business intelligence in Latin America, Mr Webb-Vidal talks us through the key strengths of the Latin-IQ team and how the firm as a whole adds real value to a deal. “Latin-IQ is recognised as the leading provider of bespoke business intelligence in Latin America. Unlike other companies in the region that offer consulting as an afterthought to physical security and the like, Latin-IQ’s distinguishing strength is the provision of intelligence derived from an unparalleled network of sources with access to documentation and confidential information, both in the business and political realms.” It’s clear that a firm of this prominence houses a lot of experience within its walls, and Mr Webb-Vidal explains the expertise that the firm brings to the table during the completion of a deal. “In essence, we’re the only firm that has a deep and exclusive understanding of Latin America. The overwhelming reason why clients come to Latin-IQ is because they need useable and reliable intelligence on the key individuals on the other side of a potential deal in this part of the world, be it the shareholders of an acquisition target, a possible joint-venture partner, or a prospective private-banking customer. Our clients need to go way beyond what they can get from standard data providers that merely skim and translate information off the internet. In fact, a number of clients have come to realise that some of the large global
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/ July 2012
risk consultancies not only have a very shallow footprint in Latin America, but more importantly misinterpret the local subtleties. Crucially, this can lead to clients being told that certain risks are much more significant than they really are, and so they lose out on lucrative deals. Conversely, they can underestimate other types of risk, and in turn end up discovering problems only after a deal has been signed.” There are, he continues, certain identifiable trends emerging within Latin America. “There is a greater interest in anti-corruption investigations than ever before. Clients want to know if the key individuals in a target company or counter-party have government links, however tenuous they may be. This is being driven by the intensifying scrutiny being paid to the risk of falling foul of anti-corruption legislation back home, such as the US FCPA, and of course most recently the UK Bribery Act. There’s now more of a focus on this angle than the more traditionally perceived risks in Latin America of money-laundering and terrorist financing, although that’s not to say these latter risks have disappeared. Secondly, there is a growing interest in obtaining a real grass-roots understanding of the reputation of a multinational’s local operations, both from an environmental and a social perspective. This is especially the case with mining companies. For example, a potential investor in Europe may want to know whether or why a multinational mining company based in the UK, South Africa or Canada is keeping quiet about a simmering dispute with a local peasant community living near one of its mines in a remote corner of the Andes.” Mr Webb-Vidal states that Brazil, Colombia and Peru were the busiest target markets last year, especially in the areas of natural resources, defence and infrastructure. “Since the start of 2012, there have been a few visible
“Also, what we’ve very clearly seen since the first quarter is that the sharp deceleration of the Brazilian economy has rendered the country a less attractive prospect going forward. Moreover, Brazil still presents itself as a thicket of red tape for investors. Colombia is likely to continue blinking brightly on the Latin America radar screen, especially for US investors, as the country has begun implementing a free trade agreement with the US. However, although Colombia does have an attractive regulatory and business environment, the security situation is once again deteriorating, and the security risks in the mining sector are pretty serious. The mining sector in Peru will also continue to be attractive, but again the biggest risk is from social upheaval related to environmental issues.” AND WHAT DOES THE FUTURE HOLD FOR LATIN AMERICA? “It’s no secret that there’s a lot of Chinese investment entering the natural resources sectors in various Latin American countries. Chinese state-controlled companies are not traditionally strong buyers of due diligence investigations, but that may change in time. “We are experiencing greater levels of cross-border investment within the region, such as Brazilian and Chilean companies exploring investment opportunities in other markets such as Colombia and Peru, although these infraregional investment flows are still small in comparison to the more traditional foreign direct investment flows from jurisdictions such as North America and Europe.”
Company: Latin-IQ Name: Andy Webb-Vidal Email: awv@latin-iq.com Web: www.latin-iq.com Address: 16th Floor, Plaza 2000, 50th Street, Panama City, Panama Telephone: +44 (0) 845 680 8026
ACQUISITION INTERNATIONAL
ON THE COVER:
Transport & Logistics — M&A report
TRANSPORT & LOGISTICS — M&A report
Andrew K. Light, Gregory M. Feary, Jay D. Robinson, Jr., and W. Todd Metzger are partners with the full service transportation law firm Scopelitis, Garvin, Light, Hanson & Feary (“The Scopelitis Firm”). have been reversed and available freight exceeds freight haulage capacity in many segments of the transport and logistics sector. The slowly growing economic recovery for the transport and logistics sector has been largely broad based, though certain hot spots appear. These hot spots presently include, but are in no way limited to, significant recent acquisition and investment activity in the specialized bulk and energy based transportation, expedited, LTL and intermodal segments.
The Scopelitis Firm serves the legal and business needs of the transportation industry on a full-service basis. We offer advice and counsel to more than 5,000 transportation-related clients globally. Our capabilities rest upon the collective experience of attorneys who have represented motor carriers, private carriers, shippers, brokers, logistics companies, and trucking insurers for over 35 years. In short, a sense of history and a thorough understanding of the transportation industry shape the Scopelitis firm’s commitment to quality legal service. The Scopelitis Firm offers legal services in the following practice areas: • Air and Ocean Regulation, Transactions, and Litigation • Antitrust and Trade Regulation • Commercial and Bankruptcy Law • Complex Litigation • Corporate Structuring and Business Transactions • Driver Leasing • Employee Benefits • Government Affairs • Independent Contractor Issues • Insurance • Labor and Employment • Litigation and Appellate • Mergers and Acquisitions • Negotiation Counsel • Personal Injury, Property Damage, and Cargo Claims • Real Estate • Regulatory, DOT, and Hazardous Materials Compliance • Taxation • Workers’ Compensation The Scopelitis Firm is the largest, full-service transportation law firm in the United States that focuses all its attorneys on
ACQUISITION INTERNATIONAL
transportation law. Certainly, many other law firms with attorneys and even attorney groups whose practices touch on various aspects of transportation law. Unlike those firms, every Scopelitis attorney represents transportation and logistics clients regardless of their practice area. This broad based practice focused exclusively on the transport and logistics sectors allows The Scopelitis Firm to maintain a strong advantage over local and global competitors in virtually every area of practice due to our dedication to the transport and logistics sector. In short, The Scopelitis Firm attorneys intimately understand the transport and logistics sector, with national-level expertise in each respective area of law they happen to practice. A number of factors have contributed to a strong start in the transport and logistics sector generally, as well as a strong start to acquisition activity within the transportation and logistics sector in particular. These factors include, but are not limited to, significant legal developments in the areas of shipper, broker and carrier liability; implementation of state and federal safety legislation reducing freight haulage capacity, the prior recessionary economic period; and the recovering economy. The combination of these and other factors has resulted in increasing freight demand at a time of diminished and diminishing freight hauling capacity leading to a period of growing profitability for participants in the transport and logistics sector. These circumstances have fostered significant acquisition activity as various buyer groups participate in the emerging opportunities . In the past several years, and certainly through the period of the most recent recession while freight haulage capacity exceeded available freight, the transport and logistics sector was not a transportation service sellers market in most transportation sectors. As the economy emerges from the recession and stringent regulatory factors now intervene , roles
Certainly, the transport and logistics sector has seen the return of midcap to large transactions recently, and it is reasonable to expect that this trend will continue, if not accelerate so long as the economy does not contract into recession. The economic impact on the bottom line for all participants in the transport and logistics sector is significant and should be a driver of increasing acquisition activity, including large deal activity into the future. Under these circumstances, and for the most part subject only to continuing economic growth, deal volume will likely continue to increase within the transport and logistics sector throughout 2012 and into 2013. The Scopelitis Firm members are active in a number of transportation industry associations including the American Trucking Associations, the Transportation Lawyers Association, the Trucking Insurance Defense Association, the Truckload Carriers Association, the National Tank Truck Carriers, North American Transportation Employee Relations Association and the Messenger Courier Association of America.
Company: Scopelitis, Garvin, Light, Hanson & Feary, P.C. Name: Gregory M. Feary Email: gfeary@scopelitis.com Web: www.scopelitis.com Address: 10 W. Market St. Ste. 1500 Indianapolis, IN 46204 Telephone: 317-637-1777
July 2012 /
13
SECTOR SPOTLIGHT:
Growth of Litigation Funding
GROWTH OF
— Litigation Funding
James Delaney, Director at TheJudge Limited, talks openly about the growth of litigation funding and the booming market surrounding it. The Judge is the world’s largest dedicated litigation funding and insurance broker specialising in arranging litigation funding for the complete spectrum of litigation and arbitration.
“The starting position to secure competitive funding quickly is for the lawyer to do some initial investigation and be in a position to present what appears prima facie to be a strong case.
Mr Delaney explains further: “We have teams dedicated to arranging funding for large commercial disputes, including international arbitrations (ICSID, ICC, UNCITRAL, LCIA), intellectual property, insolvency disputes, antitrust, tax litigation and tribunals, large shareholder/investor disputes etc. In addition we also have a specialist team who arrange funding for smaller value commercial claims, including portfolio funding.
Critical issues such as the realistic claim value and enforcement must be addressed, as we well as analysis of legal merits. Applications made at a really early stage, ahead of any meaningful investigation might be swiftly rejected. Some funders may offer speculative investment to fund investigative costs, but this can significantly impact the overall cost of the arrangement..
My own personal expertise rests in arranging funding for big ticket litigation and arbitration both in the UK and internationally. My career has been dedicated to the litigation risk transfer industry where I started as a specialist litigation insurance underwriter before joining TheJudge in 2005. “TheJudge is a familiar and trusted brand to many of the global 100 law firms. We enjoy a rich heritage in the industry having been established in 2000,” adds Delaney and he continues to explain why he believes TheJudge’s services are superior to that of its competitors. “Our greatest strength is our independence which means we work for the client to secure the best terms we can. This gives lawyers’ comfort as our duty is aligned to their own professional duty to secure the best outcome for the client. Our clients include law firms, SMEs, insolvency practitioners, individuals (e.g. investors), through to fortune 500 companies. “If a law firm approaches just one funder or insurer and that funder declines to offer terms it can potentially prejudice the client’s ability to secure terms from others. Furthermore, crucial time is lost. At TheJudge we approach multiple funders and insurers simultaneously. We aim to deliver clients a range of options. Regardless of the size of the case there are normally multiple structures that could be arranged for a given client.” Mr Delaney goes on to discuss the key elements of the litigation funding market and the best way to secure funding.
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/ July 2012
“Case presentation is also crucial,” he adds. “A case should include a summary from the engaged lawyers setting out their views on the merits, how they believe the opponent will respond and how they will counter any likely defence arguments. Sometimes lawyers, mistakenly, solely highlight the positives. If funders or insurers have to dig to identify where the obvious risks are it increases suspicion.”
clients’ millions in the cost of their funding. Finally, Delaney shares his thoughts regarding the ethics behind conflict of interest. “There are various schools of thought surrounding such concerns,” he muses. “Is it unethical for a third party investor to finance litigation in exchange for a share of the proceeds? We don’t believe so. These agreements are commercially negotiated. Any emerging market is often treated with a degree of suspicion in the early stages.
The global litigation funding market is currently booming and James attributes this partly to the multiple choice options now facing clients.
I don’t believe a lawyer who agrees to carry some risk alongside a funder prejudices his independence any more than a lawyer paid by the hour.
“Clients previously had no option other than to finance their lawyers by the hour, whereas now they have multiple options as to how to manage risk and expenses, whether from flexible retainers with law firms, litigation funding, insurance or a combination of the three.
With traditional retainers lawyers are not financially motivated to ensure a case resolves quickly, since the level of their remuneration is directly linked to the longevity of the case, which is arguably directly at odds with the client.
“The distressed global economy has also fuelled demand,” he adds. “Not just from smaller business but larger businesses who equally have budgets to adhere to. As larger businesses gain interest so does the interest of the larger law firms as they are also compelled to take note, so awareness and interest becomes self-perpetuating.
I believe the conflict debates are often pushed by traditionalists seeking to hold on to what is increasingly becoming an outdated model of client billing. Fixed fees, risk sharing retainers, alternative litigation funding, will in time overtake the standard hourly rate retainer.
TheJudge has been one of the largest suppliers of commercial disputes to the funding and insurance markets for over 6 years, James embellishes.
As interest has grown in the legal community we’ve seen a steady rise in the number of applications. “With more funders entering the market, particularly evident in 2011/2012, it really becomes a buyers’ market for the client, which in turn makes us well placed as the largest broker. With reference to litigation funding being the key to a case, TheJudge has arranged funding for a large volume of international arbitrations, large investor/securities litigation and insolvency cases, and, by ensuring competitive forces are at play through market competition, the company has saved
Company: TheJudge Limited Name: James Delaney Email: James.delaney@thejudge.co.uk Web: www.thejudge.co.uk Address: 90 Fenchurch Street, London, EC1M 3ST Telephone: +44 (0) 845 257 6058
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property
THE IMPORTANCE OF — Protecting Intellectual Property
Intellectual property (IP) rights are valuable assets for any business, possibly among the most important it possesses. The IP rights of a business can set them apart from their competitors, form an essential part of their marketing or branding and can often be used to secure loans or sold or licensed providing an important revenue stream.
It can be surprising to some how many aspects of the business can be protected, from the company name or logo to designs, inventions and works of creative or intellectual effort.
WHAT AREA(S) OF INTELLECTUAL PROPERTY LAW DO YOU SPECIALISE IN; AND WHAT INDUSTRY SECTOR(S) DO YOU FOCUS ON?
It is of the upmost importance that the senior management of a business understand the importance of their intellectual property and seek the right advice in order to ensure that it is protected. Acquisition International speaks to the experts.
Our practice revolves around patent litigation, especially in the health care sector. Also, we deal with the commercialization of intellectual property, with a focus on whether commercial strategies are anti-competitive or not, mergers and acquisitions and regulatory law.
-----------------------------------------------------------------------Alexis Apostolidis is a partner at the law firm Adams & Adams and specializes in patent litigation as well as the commercialization of intellectual property. He is also the Head of the Firm’s Competition Law Group advising not only on competition law issues but on the interface between competition law and intellectual property. -----------------------------------------------------------------------Please give a brief synopsis of your personal, and your firms experience advising on Intellectual Property law. Adams & Adams is the largest intellectual property law firm in the southern hemisphere and has offices not only in South Africa but Burundi, Tanzania, Mozambique and Angola.
WHAT DOES AN IP ADVISER BRING TO THE DEAL TABLE? HOW IMPORTANT IS THEIR ROLE? An IP adviser’s role is crucial in the development of an intellectual property and commercial strategy and in achieving the maximum leverage possible using the intellectual property of a business. An IP adviser is able to identify whether there is any relevant intellectual property, the type of intellectual property, and whether it should be registered or rather kept as a trade secret. The advisor is also able to provide advice on how best to commercialise the IP. HOW CAN THE IP RIGHTS OF A BUSINESS SET THEM APART FROM THEIR COMPETITORS?
WHO IS A TYPICAL CLIENT? Typical clients range from the local South African private individual simply seeking protection for his or her intellectual property (be it a brand, invention or design for example) to South African corporates looking to protect, enforce and commercialize their intellectual property outside of South Africa, to large multinational corporates seeking to protect, enforce and commercialize their intellectual property in South Africa and Africa.
ACQUISITION INTERNATIONAL
Consumers are generally brand conscious and in a large number of sectors this is an important aspect – there would be no desire to offer various forms of soft drink if there could be no distinction between them in terms of brand. Design rights applied to an article, such as a bottle, may serve to further distinguish one’s product in the eyes of the consumer to that of another manufacturer. It gives one a competitive edge.
-----------------------------------------------------------------------ANNAM IP & LAW is one of the most professional intellectual property & law firms in Vietnam, and a member of APAA, INTA and VIPA. It provides clients with a full range of IP services to protect their inventions, trademarks, industrial designs and related matters not only in Vietnam, but also in Laos, Cambodia, Myanmar and other jurisdictions. The firm also advises on corporate and business law. -----------------------------------------------------------------------With a staff consisting of lawyers and patent and trademark agents practicing in the IP field since 1992, ANNAM IP & LAW has been handling thousands of patent, trademark and design applications for all sorts of clients, from individuals to multinational corporations, in all technical fields. The firm has filed around 10% of foreign patent applications in Vietnam. The firm’s patent attorneys and technical staff have graduated from different technical universities in chemical, pharmaceutical, bio-technology, electrical, and mechanical fields, among others. All members of the firm are experienced in preparing patent applications which are then handled by a professional in the right technical field of the invention. In addition to its in-house staff, ANNAM IP & LAW has technical associates including professors, specialist and engineers who work for the Vietnam Academy of Science and Technology, Hanoi University of Pharmacy, Institute of Chemistry, Hanoi University of Technology. They have been effectively supporting the firm’s patent division to provide its clients with precise Vietnamese specification versions and technical advice. With the experience of more than 20 years in the IP field, attorneys and associates at the firm provide clients Contined on next page...
July 2012 /
15
SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property
with professional services before filing trademark/design applications. Their offering is always accurate, timely and costeffective. Since the beginning of its practice ANNAM IP & LAW has established a close relationship with the National Office of Intellectual Property, which is an important component for patent/design/trademark prosecution success. The firm also maintains and strengthens its professional relations with the state enforcement authorities including judicial systems (the Courts and prosecutors), Market Management Bureau, Economic Police, Custom Office, etc. -----------------------------------------------------------------------Vyacheslav V. TROFIMOV is a patent and trademark attorney and the manager of the BELPATENTSERVICE of the Belarusian Chamber of Commerce and Industry, a company-specialist in legal protection of intellectual property rights. -----------------------------------------------------------------------“My personal experience is related to IP rights registration in Belarus and abroad and to the law practice as well: - Trademarks and service marks (Belarusian, Russian, Ukrainian certificates, International registrations). More than 1000 different applications filed have been filed in above mentioned countries, about 10% of the International trademarks of the Belarusian applicants have been filed; - Inventions (Belarusian, Russian, Ukrainian, Eurasian patents, PCT/national phase); - Utility models, Industrial designs. - Geographical indications. Mr. Trofimov was the first in Belarus in protecting still the single Belarusian Geographical indication (MINSKAYA mineral water); - Patent searches; “The firm has been registering and advising on Trademarks, Patents and Industrial Designs for the past 15 years. BELPATENTSERVICE provides a Belarusian Chamber of Commerce and Industry System of voluntary authentication and registration of rights for intellectual activity results: computer programs, literary works, screen versions, scientific works, know-how (production secrets) and handles an identifying documents custody of deposited objects. BelCCI certificates are to be granted for all deposited IP objects and information thereof is to be published in the BelCCI Bulletin “ Mercury”. “SME’s and states owned ones in the first place, individuals are not numerous. Grandees of electric, milk and beverage industries are among our clients too. “Appeals filing is my favourite law specialisation, trademarks applications, including well-known marks are preferable too, industrial designs and inventions in civil construction are among them. Contractual work (licensing, franchising, assignments etc.) is more the necessity than a relative acceptability. WHY ARE IP RIGHTS THE MOST VALUABLE ASSETS FOR ANY BUSINESS? WHY IS A BUSINESS’ IP SO IMPORTANT? “Being at “Pfizer” in 2008 during my study course at the US Department of Commerce relating to IP rights defending matters I realised why the intangibles to market capitalisation of this company are more than 90%. Intangible assets help them not only to be protected but are very useful during claims services, appeal filings and court petitions, unfair competition countermeasures and customs protective measures, licensing, franchising and assignments. I would be glad to add that IP rights are of great value during merging, using as collateral or security for debt finance, in
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/ July 2012
providing an additional or alternative basis for seeking equity from friends, family, private investors, business angels, venture capitalists, specialized banks and infrequently regular banks. “A nice little quote from John Stuart, former “Quaker Oats” chairman that illustrates the value of brands and trademarks: “If this business were to be split up, I would be glad to take the brands, trademarks and goodwill and you could have all the bricks and mortar - and I would fare better than you. Shortly, intangibles are the biggest value drivers in today’s knowledge economy.” -----------------------------------------------------------------------Founded more than a century ago, Cabinet Plasseraud is established as one of the leading European IP firms. Plasseraud is a global practice comprising some 230 staff and over 90 attorneys throughout Europe and China specialising in patents, trademarks, registered designs, copyright and domain name issues. -----------------------------------------------------------------------Strategy advice is tailored to accompany clients throughout all stages of the innovation process relating to brand creation, product design and new technologies. Their goal is to ensure clients obtain and maintain optimum protection reflecting R & D invested to become valued assets. Whilst IP prosecution has traditionally been their core practice, they also handle contentious issues with a litigation unit specifically dedicated to IPR defence and enforcement. Increasing focus is placed on IP transaction work including due diligence and negotiation of transfer, licence and security agreements. They have a department specialised in financial valuation of brands, patents and software for licensing, damage calculation, technology transfer, leveraging and taxation issues. The attorneys provide in depth expertise whilst maintaining an industry-focused approach: - Patent practice areas include mechanical and electrical engineering, IT, electronics, pharmaceuticals and biotechnologies. - Their legal department provides a full spectrum of services relating to trademarks and design issues including availability searching, prosecution, dispute resolution, and enforcement. They also assist clients in contract negotiation, audits of IPR portfolios and drafting of franchise and license agreements drawing on expertise notably in commercial and competition laws. They have a subsidiary specialised in anti-counterfeiting relying on a reliable network of local investigators in every country. Their firm has been ISO 9001:2000 certified since 2007 as a reflection of the quality of their overall practice and their operational procedures and internal support processes. Cabinet Plasseraud was voted “Trade Mark law firm of the year” for France in 2010 by the review Dealmakers. -----------------------------------------------------------------------Cita Citrawinda Noerhadi is a registered IP Consultant and IP Mediator for CITA CITRAWINDA NOERHADI & ASSOCIATES, a law practice which she set up in 2004. She specializes in IP after 21 years of practice. -----------------------------------------------------------------------Please give a brief synopsis of your personal, and your firms experience advising on Intellectual Property law. Law Office CITA CITRAWINDA NOERHADI & ASSOCIATES offers a broad range of legal services which are primarily for the protection of all kinds of IP rights including trade and/or service marks, patents, copyrights, trade secrets, industrial designs both national and international. WHAT AREA(S) OF INTELLECTUAL PROPERTY LAW DO YOU SPECIALISE IN; AND WHAT INDUSTRY SECTOR(S) DO YOU FOCUS ON?
The areas of Intellectual Property Law we specialize in are Patent, Trademark, Copyright, Industrial Design and Trade Secret; and the industry sectors we focus on are among others pharmaceutical, technology and IT, electronics, vehicle, garment, and food and beverages.
Company: Adams & Adams Name: Alexis Apostolidis Email: alexis.apostolidis@adamsadams.com Web: www.adamsadams.com Address: Pretoria Telephone: +27 (0) 12 432 6202 Fax: +27 (0) 12 432 6589
Company: ANNAM IP & LAW Name: Le Quoc Chien Email: mail@annamlaw.com.vn Web: www.annamlaw.com Address: 10, Lane 34, Au Co Street, Tay Ho District, Hanoi, Vietnam Telephone: (844) 3718 6216
Company: BELPATENTSERVICE of the Belarusian Chamber of Commerce and Industry Name: Vyacheslav V. TROFIMOV Email: patent@cci.by Web: www.en.ip-cci.by Address: P.O.Box 40, 220029, Minsk, Belarus Telephone: + 375 17 288 27 71
Company: Cabinet Plasseraud Name: Patrick Boyle Email: info@plass.com Web: www.plass.com Address: 52, rue de la Victoire, 75440 Paris cedex 09, France Telephone: + 33 (0)1 40 16 70 00
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS? We pay attention to every detail and always update any development related to all IP matters. We are committed to working in partnership and proactive with our clients. WHY ARE IP RIGHTS THE MOST VALUABLE ASSETS FOR ANY BUSINESS? WHY IS A BUSINESS’ IP SO IMPORTANT?
IP is very important in business, considering that IP is an asset that must be protected that will be able to carry the name of the company in the business world. Under IP law, owners are granted certain exclusive rights for their intangible assets. HOW ARE YOU AND YOUR FIRM ABLE ASSIST THE MANAGEMENT TEAM OF BUSINESSES IN PROTECTING THEIR IP? We provide solutions and advice of any problems that exist in a company, especially in the field of IP, and help to audit any existing IP in their company and help to register with the Directorate General of Intellectual Property Rights. Our team has experienced and dedicated intellectual property professionals to help our clients manage, protect, and enforce their IP rights. DO YOU HAVE ANY COMMENTS OR PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS? IP Law will be more advanced. It will harmonize with the International Treaties that have been in ratified by Indonesia. A discussion of the revised Patent Law, Trademark and Copyright has been going on and shall be further discussed in the House of Parliament. -----------------------------------------------------------------------Prof. Dr. Michael Paroussi is a counsel at the Law Office Dr. P. Theodoridis – Dr. H. Papaconstantinou, specializing in Corporate Law and Licensing. -----------------------------------------------------------------------PLEASE GIVE A BRIEF SYNOPSIS OF YOUR PERSONAL, AND YOUR FIRMS EXPERIENCE ADVISING ON INTELLECTUAL PROPERTY LAW. The firms’ area of expertise spans over all aspects of IP Law, including the portfolio management of patents, trademarks, domain names, designs, SPCs, etc. Moreover, we also undertake all contentious and non-contentious legal work with respect to the above areas, as well as to copyright, unfair competition, anti-counterfeiting/anti-piracy/border measures, internet law, antitrust, licensing, franchising and ADRP procedures. HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS? Experience, Effectiveness and personal care for clients through our team of 14 specialists guarantee a highly appreciated
ACQUISITION INTERNATIONAL
level of services. Throughout our numerous years of activity, we have succeeded in establishing long-standing, invaluable collaborations with hundreds of highly reputable firms around the world, enabling them to represent some of the most important companies internationally – either directly or through their legal agents – building on our solid basis of reciprocity. HOW ARE YOU AND YOUR FIRM ABLE ASSIST THE MANAGEMENT TEAM OF BUSINESSES IN PROTECTING THEIR IP? IP Assets as intangible capital, either in its non-institutionalized form of goodwill and branding, or in its institutional form covering TMs, Patents, Copyrights, Designs, Domain Names etc. makes an important part of due diligence and valuation with regard to M&A, but also a great deal in the course of M&A negotiations and final transactions. We support our clients in controlling and evaluating, as well as in protecting and securing these intangible goods, that have acquired huge value in the course of a company´s life. DO YOU HAVE ANY COMMENTS OR PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS? Greek Competition and Trademark Law has been very recently brought in line with the Community Legislation. Especially the new TM-Law constitutes partly the transposition of the EU Enforcement Directive 2004/48/EC, but introduces also a TM registration and prosecution framework that follows the patterns of the Community Trademark provisions. The new TM Law will enter into force in October 2012 and will require specialized consulting for all IP owners. We are confident that we will lead our clients to the right strategies concerning the acquisition and protection of their IP rights in all their special forms.
An example is Unilever PLC, Unilever Sri Lanka Vs Esandi Product. Action was instituted in the Commercial High Court against the Defendant for manufacturing, marketing and selling “Sunbright” soap which is the same size and weight as the plaintiff’s soap “Sunlight”. The Defendant’s soap wrapper was identical to that of Sunlight Soap owned by Plaintiffs. An enjoining order was issued and a notice of Interim Injunction and Summons were served on the Defendant and the defendant settled the matter by handing over all the wrappers under the impugned mark to Court and gave an undertaking that he will not do so in the future. WHAT ARE YOU PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS?
The Intellectual Property Act No. 36 of 2003 is in line with the TRIPS provisions. There is draft legislation in respect of plant varieties and discussions with regard to protection of traditional knowledge. Contined on next page...
-----------------------------------------------------------------------Mr J M Swaminathan is the Senior Partner of Julius & Creasy. He is in charge of the overall functions of the firm and specializes in Intellectual Property and Shipping Laws. -----------------------------------------------------------------------WHO IS A TYPICAL CLIENT? Our typical client is an individual or company seeking advice in relation to an issue, notably how best this issue could be resolved. WHAT AREA(S) OF INTELLECTUAL PROPERTY LAW DO YOU SPECIALISE IN; AND WHAT INDUSTRY SECTOR(S) DO YOU FOCUS ON? We deal with all aspects of IP in respect of Trademarks, Patent, Industrial Designs and copyright for clients in all areas ranging from pharmaceuticals, cosmetics and motor vehicles to name a few examples.
Company: Law Office CITA CITRAWINDA NOERHADI & ASSOCIATES Name: Cita Citrawinda Noerhadi Email: cita_p@ccpassociates.com Web: www.ccp-associates.com Address: Menara Imperium 12th Floor, Suite D, Jl. HR Rasuna Said Kav. 1, Jakarta 12980 – INDONESIA Telephone: 62 21 835 4055
HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS? Ours is a highly successful firm. We have won the Asia IP Award for Sri Lanka in respect of Trademarks for the last two years. WHAT DOES AN IP ADVISER BRING TO THE DEAL TABLE? HOW IMPORTANT IS THEIR ROLE? When we are briefed with instructions regarding a matter, we weigh the pros and cons and advise the client accordingly. If possible, we suggest that settlement be reached when the parties agree to compromise. Generally, when it’s a matter with an infringement, very often, after filing of action in Court, the Defendant settles the matter by ensuring that such infringement will not happen in future.
Company: Law Office Dr. H. Papaconstantinou Name: Dr. Michael Paroussis Email: mail@hplaw.biz Web: www.iplawconsulting.biz Address: Koumbari 2, 10674 Athens - Greece Telephone: +30 210 3626624
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SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property individuals carrying on a business in Luxembourg. The application of the IP exemption regime is subject to the following conditions: - The IP right must have been acquired or developed after 1st January 2008; - Expenses, amortization and deductions for depreciation in direct economic connection with the IP must be recorded as an asset during the first year for which the benefit of this tax regime is claimed; and - The exemption does not apply if the IP rights have been acquired from an “associated” company. A company is considered as “associated” to another if; it directly holds at least 10% of the share capital of the company receiving the IP revenue; its share capital is held directly by at least 10% of the company receiving the IP revenue; at least 10% of its share capital is held by a third company which holds directly 10% of the share capital of the company receiving the IP revenue.
-----------------------------------------------------------------------Paul-Alexander Wacker is a founding partner of KUHNEN & WACKER Intellectual Property Law Firm, which was established more than 35 years ago in Freising close to the Munich airport. -----------------------------------------------------------------------WHO IS A TYPICAL CLIENT? KUHNEN & WACKER represents major corporate and global technical innovators and medium-sized corporations as well as universities and individual inventors based in Europe, the Americas and Asia. We take particular care to determine and define the business fields and interests of each corporate client beforehand so that conflicts of interest are avoided. WHAT AREA(S) OF INTELLECTUAL PROPERTY LAW DO YOU SPECIALISE IN; AND WHAT INDUSTRY SECTOR(S) DO YOU FOCUS ON? KUHNEN & WACKER is a specialized law firm which has been offering comprehensive legal counsel with its competent team of patent attorneys and attorneys at law in the field of intellectual property for more than three decades. In order to provide the best support for our clients in global competition we have a comprehensive network of colleagues and associates in more than 150 countries with whom we have long-standing trustful relationships. HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS? We are a fine blend of senior attorneys with sophisticated experience, and younger proactive attorneys who can, if needed, rely on the expertise of their more senior colleagues and may complete various interdisciplinary teams.
HOW CAN THE IP RIGHTS OF A BUSINESS SET THEM APART FROM THEIR COMPETITORS? First of all a business having valid IP Rights demonstrates the awareness and need of IPRs and to position their business between other leading edge competitors. Furthermore, an attractive and strategic portfolio demonstrates that the business is up to date and is ready to defend its leading position against counterfeiters and to maintain its market chances. DO YOU HAVE ANY COMMENTS OR PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS?
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The incoming European Unitary Patent and the related centralized Patent Court will become a new challenge to the national patent system, the related national parts of European patents and the related Utility Patents. The keyboard of IPRs has been enlarged and the more it is in the skills of a patent law firm to know how to play these keys to obtain the most harmonic sound adopted to the problem-tailored solution for each competitive challenge.
When such a situation occurs, a reflexion on the appropriate corporate structure might be required in order to meet this condition.”
Company: Julius & Creasy Name: Mr J M Swaminathan Email: jacey@sltnet.lk Web: www.juliusandcreasy.com Address: 41, Janadhipathi Mawatha, Colombo 1, Sri Lanka Telephone: 94-11-2422601
The Managing Partner of LG@vocats, Stéphan Le Goueff, offered AI his insights as to why one should “Think Luxembourg” for intellectual property (IP) management rights. “Luxembourg offers an 80% tax exemption on net income derived from certain IP rights and on capital gains resulting from the disposal of such IP rights and an 80% deemed income deduction for self-developed patents. Thus, qualifying IP rights benefit from a 5.76% corporate tax (in lieu of the 28.80%). The IP rights targeted by this measure are copyrights on software (other copyrights are not included), domain names, patents, trademarks, designs and models acquired or registered after 31 December 2007. This regime applies to fully taxable resident individuals carrying on a business, corporate entities, Luxembourg permanent establishments of non-resident companies and non-resident
Company: KUHNEN & WACKER Name: Paul-Alexander Wacker Email: paw@kuhnen-wacker.com Web: www.kuhnen-wacker.com Address: Prinz-Ludwig-Str. 40 A 85354 Freising/Munich, Germany Telephone: +49 - 8161 608 303
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SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property
-----------------------------------------------------------------------Nigel Parnell is a Registered Trade Mark Attorney and Fellow of The Institute of Trade Mark Attorneys at Phillips & Leigh in London. Nigel works with a wide range of clients, assisting them in searching, registration and enforcement of trademarks and other IP rights. He has over 20 years’ experience. -----------------------------------------------------------------------HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS? With a friendly, approachable and responsive team Phillips & Leigh provides focused and cost effective advice tailored to meet specific client requirements. The firm has built a reputation for clarity, creativity and tenacity in the pursuit of clients’ commercial goals. WHAT DOES AN IP ADVISER BRING TO THE DEAL TABLE? HOW IMPORTANT IS THEIR ROLE? With a combination of legal and commercial expertise an IP adviser helps clients to develop IP structures to achieve business objectives. An IP adviser can help identify when protection is possible as well as help search for prior art / rights so you don’t invest time and money into something which has already been brought to market. For example, a client recently came to us looking to secure patent protection for a new product. However background research showed that patent protection was not possible, but we were able to protect the look and feel of the product by registered design and their company name as a trade mark. WHY ARE IP RIGHTS THE MOST VALUABLE ASSETS FOR ANY BUSINESS? WHY IS A BUSINESS’ IP SO IMPORTANT? IP is crucial to the success of any business since it consists of items created by the business that are unique and provide economic benefit. It is the means for adding value and protecting the business. Exploitation of IP can take many forms from use by the business itself, as the subject matter for a licensing, franchising or joint venture agreement and as an asset capable of being sold. IP can be used as security for loans. DO YOU HAVE ANY COMMENTS OR PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS?
on 1 April 2013. This will give UK IP owners a major reduction in corporation tax on patent related income. Patent filings will increase and IP transactions will become more complex as holding rights will become an important consideration. -----------------------------------------------------------------------Dr Niti Dewan in addition to being a registered Patent and Trademark agent, is also a Medical Graduate. She has been in the field of IPR for over 15 years and specializes in patent drafting, patent searching, analysis and IPR portfolio management. She heads the patents, business development, finance and administration departments at R. K. Dewan & Co. which has its offices in Mumbai, Pune, Delhi, Chennai and Kolkata. -----------------------------------------------------------------------The firm clientele are both domestic and international and comprises associates world over, corporate clients, academic institutions, scientific and research organizations and individuals. The firm’s clients are from diverse fields such as software, electronics and telecommunication, automobile, mechanical engineering, power sector, specialty chemicals, pharmaceuticals, food packaging technology, biotechnology, process equipments, etc. An IP adviser provides insights to the client as to the strength of his trademark or patent and therefore helps the client in getting the best deal for his IP. As a result of due diligence and strategic recommendations, the client is able to understand his stand in an IP negotiation. Therefore the role of an IP adviser is that of a catalyst in providing the best yield with optimum parameters.
Company: Phillips & Leigh Name: Nigel Parnell Email: nigel.parnell@pandl.com Web: www.pandl.com Address: 5 Pemberton Row, London EC4A 3BA, United Kingdom Telephone: +44(0)20 7822 8888
Company: R.K. Dewan & Co Name: Niti Dewan Email: niti_dewan@rkdewanmail.com Web: www.rkdewan.com Address: 1147-B, Mohan Villa, Shivaji Nagar, Pune 411016, MS, INDIA. Telephone: +91-20-66871224
For example: One of our clients wanted to license a technology from a company in USA and was paying quite a hefty sum as royalty per piece. We advised the client to check the legal status and validity of the patents owned by the company in US. It was found that the applications in India and other countries were still pending and some of them were actually opposed. During a validity search, we also found that there were a couple of granted patents in the prior art which could be used to invalidate or oppose the patent applications of the US company. When our client confronted the US company with such information presented in a thoroughly researched and a well documented report, the US company agreed to provide a license at 1/5th royalty per piece.
Company: LG@vocats Name: Stéphan LE GOUEFF Email: slg@vocats.com Web: www.vocats.com Address: 124 Boulevard de la Pétrusse, L-2330 Luxembourg Telephone: (+352) 44 37 37 1
The Patent Box, a UK Government initiative, will come into force
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
REWRITING THE RULES — on Insolvency
The modern corporate world is characterised by complex structures and interconnected global markets within which, risk is ever-present. New risks are around every corner and present a continual challenge for those involved in restructuring and insolvency.
The economic crisis has highlighted many flaws with existing regulation, and concerns have been raised about the effectiveness and timeliness of the operation of the regulatory regime for corporate insolvency. As a result many countries have taken drastic steps to modernise insolvency laws in an attempt to fuel the economy. According to the EU Justice Commissioner Viviane Reding, modern insolvency law is essential for financial stability and for the efficiency of the financial system “It is an essential part of a modern single market and encourages entrepreneurs to take risks, and, if necessary, it provides an orderly way for businesses to close down”. Acquisition International speaks to the experts. The current business environment both domestic and global is beset with risk of all kinds presenting continuous challenges to commercial enterprises, resulting in many of them facing financial distress and insolvency. Most jurisdictions around the world have been revising and rewriting laws to meet with these challenges to establish codes which create effective enforcement and insolvency systems that foster strong credit cultures and promote economic growth, by maintaining a fine balance between restructuring / rescue and insolvency, while being transparent, predictable and provide for speedy and orderly collection and distribution of the properties of the debtors amongst its creditors. The Indian Insolvency regime is made up of bagful of legislations and regulatory notifications including the Companies Act 1956, Sick Industrial Companies Act, Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, DRT Act, Corporate Debt Restructuring guidelines notified by RBI etc. As a result different Courts and forums like the High Courts, BIFR, DRTs, CDR forum etc have somewhat overlapping jurisdictions leading to systemic delays and complexities, which are liable to be misused by unscrupulous defaulting borrowers raising the need for urgent reforms in the
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Insolvency regime. To meet the challenge, the India legislature has promulgated the Companies Second Amendment Act in 2002 for consolidating the plethora of Insolvency laws, establish the NCLT, create a cadre of insolvency professionals, incorporate rules for cross border insolvencies etc. However the amendments could not be notified and another attempt is being made to revamp the entire insolvency regime through the Companies Bill 2011, which is presently under consideration of the Parliament. However, while the legislative concern is evident, much still needs to be done to match up with the best practices being followed in the other parts of the world and create an effective Insolvency regime in India. -----------------------------------------------------------------------DLA Piper is a global restructuring firm, with the largest team of R&I lawyers in the world. The firm provides advice on all insolvency related matters, but particularly cross border corporate restructuring and reorganizations. Graham Ridler is a Consultant with DLA Piper Hong Kong, and lead the Restructuring & Insolvency Team for Hong Kong. -----------------------------------------------------------------------“Our typical clients are Banks, Funds, insolvency practitioners in accountancy practices, and large corporations on both debtor and creditor sides. “Our practice is truly integrated and global. There is a global executive committee which speaks regularly, and the cross border referral of cases is enhanced by the large global spread of the practice. For example, DLA Piper US have been acting on the Chapter 11 proceedings of Trident Microsystems, which has involved the Asian Offices dealing with subsidiaries in seven jurisdictions in Asia. Many US businesses have their manufacturing in China, and when a restructuring of the holding company occurs in the US,
the Asian offices are usually involved in assisting with the group companies in this region. “There have been a number of attempts to introduce new insolvency laws into Hong Kong, dating back at least 15 years. Most recently a consultation paper was released in October 2009. I sat on the HKIPCA sub-committee which reported the Restructuring and Insolvency Faculty’s views on the proposals. The main thrust was to introduce a formal statutory rescue mechanism for Hong Kong. It was proposed that the position of Provisional Supervision be introduced through a statutory process with a moratorium to protect a rescue. One of the major sticking points has been the extent to which the employees would be exempt from the moratorium. The present proposal is that the employees be entitled to the payment of a capped amount of entitlements regardless of the Provisional Supervision, and be free to take action if they are not paid it. This has been heavily resisted by the insolvency professionals. Unfortunately since the various committees reported in 2011 there has been little further progress. “Whilst Hong Kong has no administration or other formal process for the rescue of companies, a practice has grown up of appointing a provisional liquidator to generate a moratorium pending the approval of a scheme of arrangement. However, the section which provided the legislation for the scheme (Section 166 of the Companies Ordinance), was designed for solvent group restructurings and the judiciary has more recently been reigning it the grounds for it to be used. Hence the increasing need for new legislation. “As well as the lack of a statutory rescue procedure, Hong Kong has no law relating to wrongful trading. This means that the directors of a company face no statutory penalty for running a business into the ground. This is turn means that there is little incentive on directors to take prompt or early steps to seek
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
advice when a business is having problems. Often, by the time it reaches the hands of a restructuring professional it is too late to do anything about it. The profession strongly believes that there should be a positive obligation placed on directors to take steps if the business runs into financial problems. The cynical view is that because the Legislative Council in Hong Kong is full of business owners, they are unlikely to approve something which might affect them personally.” -----------------------------------------------------------------------Julie Engwirda is a Senior Counsel of Walkers’ British Virgin Islands office, which advises on a wide range of contentious and non-contentious insolvency proceedings, out of court restructuring and enforcement of security. -----------------------------------------------------------------------WHO IS A TYPICAL CLIENT? Walkers’ clients range from the world’s leading international financial institutions, Fortune 500 companies, private companies, to insolvency practitioners from all the leading firms, creditors, shareholders and directors of BVI companies. HOW ARE YOUR SERVICES SUPERIOR TO THOSE OF YOUR COMPETITORS AND HOW DO YOU STAND APART FROM THEM? Walkers’ BVI office and professionals are consistently ranked in the first tier of leading legal directories. Clients benefit from Walkers’ global presence, with eight offices worldwide the firm is able to offer responsive, round the clock support to clients
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in all time zones. In addition, Walkers offers a full suite of legal services, with experienced finance, corporate, investment funds, private equity, litigation and insolvency and corporate recovery groups. Walkers has a strong transactional and deal track record and an impressive client base – the world’s top 25 largest law firms all refer work to Walkers. WHAT STEPS HAS YOUR JURISDICTION TAKEN TO MODERNISE INSOLVENCY LAWS? HAVE THESE STEPS FUELLED YOUR REGION’S ECONOMY? Comprehensive modern insolvency legislation was enacted in the BVI in 2003 which has made a positive impact on the financial services industry and has served to enhance the reputation of the jurisdiction as being stable and well regulated.
Company: DLA Piper Hong Kong Name: Graham Ridler Email: graham.ridler@dlapiper.com Web: www.dlapiper.com Address: 17/F Edinburgh Tower, The Landmark, 15 Queens Road, Central, Hong Kong Telephone: +85221030808
WHAT (IF ANY) WERE THE MAJOR FLAWS WITH THE PREVIOUS (AND IN SOME CASES, STILL EXISTING) INSOLVENCY LAWS IN YOUR JURISDICTION? The BVI has a thriving hedge funds industry; however some recent rulings from the BVI courts have caused some concern with clients. One area in particular is the waterfall provisions in the Act, and the question of where, in the statutory order of distribution, redeemed members who are due redemption proceeds fall. It is common ground that such claims rank after the discharge in full of creditor claims, however it is not clear whether such claims enjoy priority in the distribution of any surplus. It is anticipated that this issue will be resolved either by a ruling from the Court or by amendment of the Act.
Company: Walkers Name: Julie Engwirda Email: julie.engwirda@walkersglobal.com Web: www.walkersglobal.com Address: 171 Main Street, PO Box 92, Road Town, Tortola, British Virgin Islands, VG1110 Telephone: +1 284 852 2205
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
REWRITING THE RULES — on Insolvency
Ian V Lindsay is a senior partner of Knowles Husain Lindsay Inc., one of South Africa’s leading insolvency lawyers who has been recognised by his peers through various awards. section 138(1); has a conflict of interest of lacks independence or the practitioner is incapacitated and unable to perform the functions of that office and is unlikely to regain that capacity within a reasonable time. Furthermore, business rescue cannot be viewed by directors as an ‘easy way out’: directors who vote to begin business rescue proceedings when it is not justified can also be penalised. In fact, the concept of business rescue puts significantly more pressure on a company’s directors. In terms of the new Companies Act, directors who fail to see to it that their company’s creditors are paid after liquidation can be punished and even declared delinquent.
WHO IS A TYPICAL CLIENT? Knowles Husain Lindsay Inc provides advice of all insolvency related issues (as well as corporate litigation and dispute resolution, commercial transactions and property law.) CAN YOU PLEASE EXPLAIN HOW MODERNISING INSOLVENCY LAWS CAN CREATE FINANCIAL STABILITY AND AN EFFICIENT FINANCIAL SYSTEM? The ‘insolvency culture’ in nations where natural persons and business enterprises do not resort to debt repayment, liquidation and financial restructuring proceedings when bankrupt have shown that they are relatively successful in preserving debtors’ assets (and protecting creditors’ rights) through insolvency laws incentivising debtors to attempt repayment of creditors and remain engaged as productive members of the workforce, The World Bank’s Working Group for the Treatment of the Insolvency of Natural Persons has found. Incentives such as discharge of debts and providing a ‘fresh start’ for responsible debtor conduct, are far more efficacious than traditions penalising and/or stigmatising personal insolvency. The Working Group likewise endorsed the observation that successful natural persons’ insolvency systems are designed with a view to both debtors’ and creditors’ conduct. As the Draft notes, legal rules in such systems serve to ‘sharpen’ lenders and institutional creditors’ attention to responsible lending, for example, by placing a premium on lender conduct avoiding reasonably foreseeable losses. With processes out in place to ensure this, entrepreneurs will be encouraged to take risks; jobs will remain intact; further employment may be a
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possibility; investment will remain protected; financial markets will stabilise, and businesses, if need be, will be closed down in an orderly fashion. Furthermore, a modern insolvency law will help fuel the economy and the efficiency of a financial system as consumer and business insolvency poses a systemic risk to global financial stability. Insolvency law must strike the right balance between several objectives and foster discipline and transparency in financial management. It should firstly try and avoid liquidation of potentially viable companies in facilitating their rehabilitation. When such a rehabilitation proves impossible, it aims to ensure orderly market exit of inefficient entities in protecting creditors’ rights while safeguarding the interests of shareholders and customers.
In terms of the Insolvency Act, the Master may permanently disqualify a person from appointment as a trustee or provisional trustee – he or she can do this and subject only to the overriding power of the Minister of Justice, or the Court’s power on review, the Master may disqualify a person notwithstanding his or her valid election, if the Master is of the opinion that, for whatever reason, such person is not suitable for appointment (e.g. a person under legal disability, a minor, an insolvent and the like – the categories of persons who are not suitable are found under section 55 of the Insolvency Act.). Furthermore, the Master has the power to remove a trustee from office, if he or she is, in the Master’s opinion, no longer suitable to be the trustee of the estate concerned. Section 60 of the Insolvency Act makes provision for the circumstances under which a trustee may be removed, an example being that he or she failed to satisfactorily to perform any duty imposed on him or her by the Insolvency Act. The old Companies Act makes provision for the removal of a liquidator if they Master so believes that the incumbent is no longer suitable to be the liquidator of the company concerned. It further makes provision for the Court upon application by the Master, or an interested person, to have the overriding power to effect the removal for any good cause shown. Section 379 of the old Companies Act are the circumstances under which a liquidator may be removed (e.g. if he or she has become mentally or physically incapable of performing satisfactorily his or her duties as a liquidator; has failed to comply with a lawful demand of the Master and the like.)
WHAT APPROACH DOES YOUR JURISDICTION TAKE TO ENFORCE PENALTIES UPON PRACTITIONERS INVOLVED IN MISCONDUCT? The new Companies Act provides for instances where penalties need to be taken against business rescue practitioners for misconduct. It provides that a practitioner may be removed or replaced in terms of an order of court. In addition any affected person may make a request for the removal of a practitioner, however only a court is authorised to remove a business rescue practitioner. This can be done if the practitioner is incompetent or fails to perform the duties of a business rescue practitioner; fails to exercise the proper degree of care in the performance of the practitioner’s functions; engages in illegal acts or conduct; if the practitioner no longer fulfils the requirements of being appointed a business rescue practitioner as enumerated in
Company: Knowles Husain Lindsay Inc. Name: Ian V Lindsay Web: www.khl.co.za Address: 4th Floor, The Forum 2 Maude Street, Sandown, Sandton, 2196 South Africa Telephone: +27 (0)11 669 6000
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SECTOR SPOTLIGHT:
Double Taxation Agreements
DOUBLE TAXATION — Agreements
Most people are generally familiar with the concept of double taxation. Corporate lawyers and accountants regularly raise the issue when asked by entrepreneurs about choosing the right business entity for a new company (or for an existing company looking to grow and insulate its owners from personal liability). Tax treaties/double taxation agreements prevent double taxation and fiscal evasion, whilst fostering cooperation between the home nation and international tax authorities by enforcing their respective tax laws. Double taxation remains a hot button political issue and new and existing business owners need to be informed as they make critical business decisions regarding incorporation or the creation of some other formal entity. The number of countries who have entered into treaties with each other in order to mitigate the effects of double taxation is on the rise and such treaties may cover anything from inheritance taxes to royalties. The stated goals for entering into a treaty often include reduction of double taxation, eliminating tax evasion, and encouraging cross-border trade efficiency, and it is generally accepted that tax treaties improve certainty for taxpayers and tax authorities in their international dealings. Acquisition International speaks to the experts. -----------------------------------------------------------------------Lolade Ososami is Managing Partner at Abraham & Co. (Solicitors, Advocates and Notary Public) and is in charge of Taxation, Corporate Finance and Joint Ventures. -----------------------------------------------------------------------HOW IMPORTANT IS IT FOR ENTREPRENEURS TO CHOOSE THE RIGHT BUSINESS ENTITY FOR A NEW COMPANY? AND HOW DOES DOUBLE TAXATION AFFECT THEM ON A DAY TO DAY BASIS? An entrepreneur must carefully consider the nature of the entity that best suits its purpose. However the choice of a right business entity is critical to the success of an entrepreneur’s business objectives. For instance, by choosing a limited liability company rather than a sole proprietorship or partnership, an entrepreneur can limit his liability significantly; attract capital; and minimize his tax exposure through proper tax planning. CAN YOU PLEASE EXPLAIN THE BILATERAL AND MULTILATERAL TREATIES IN PLACE WITHIN YOUR JURISDICTION? Nigeria is presently party to nine bilateral treaties but is not party to any multilateral tax treaty as at the date of this report. Of the nine bilateral treaties that have been concluded, seven have been ratified. These are the treaties with the UK & Northern Ireland; France, Belgium, Netherlands, Romania, Canada, and Pakistan. The treaties with South Africa and China are yet to be ratified. WHAT IS THE BEST WAY TO REDUCE THE AMOUNT OF TAX WITHHELD FROM INTEREST, DIVIDENDS, AND ROYALTIES PAID BY A RESIDENT OF ONE COUNTRY TO RESIDENTS OF THE OTHER? The best way to reduce the amount of tax withheld on interest, dividends and royalties paid by a Nigerian company for instance, is for payment to be made to a foreign recipient resident in a treaty country. Under the domestic laws of Nigeria, tax withheld on those payments is 10%, and is the
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final tax payable by the non-resident recipient. The rate of withholding tax will be reduced to 7.5% where the recipient is a resident of a treaty country. WHAT ARE PREDICTIONS REGARDING DOUBLE TAXATIONS AGREEMENTS OVER THE NEXT 12 MONTHS? Nigeria is currently undergoing a tax reform. Part of that reform includes broadening its treaty network. In this regard, treaties have been concluded with South Korea, Sweden and Spain. These treaties are however yet to be ratified into law in Nigeria. It is not certain whether new treaties will be negotiated within the next 12 months. -----------------------------------------------------------------------Peter R. Altenburger, partner at Altenburger: -----------------------------------------------------------------------“Over these last years Double Taxation Treaties (DTT) were mainly used in connection with exchange of information requests and a worldwide thrive to bring back delinquent taxpayers into the system. This thrive has been triggered by the relentless efforts undertaken by the United States and their special emphasis on Tax Information Exchange Agreement (TIEA), which as seen from a U.S. point of view are not considered as treaties but as simple contracts between two governments. The advantage of a TIEA lies in the fact that there is not such thing as ratification of a TIEA and hence the cumbersome procedure of the U.S. Senate Committee does not apply. The TIEA is in full force and effect once it has been signed by both parties. Double Taxation Treaties are – as already the name implies – bilateral conventions which aim at the avoidance of double taxation (and double non taxation). In order to achieve this objective governments are not simply negotiating DTT but they are doing so based on the Model Tax Convention, the fist edition of which was released by the OECD more than 50 years ago. The Model Tax Convention consists of 31 Articles and a great number of commentaries, which are explaining the various articles. The Model and its Commentaries are being periodically updated, at present there is a version, which has been approved by the Council of Ministers in July 2010. While the wording of the single articles has only changed in a few instances, the Commentaries tend to undergo substantial changes form one version to the next. “The Model attempts to bridge double taxation issues by attributing the primary right to tax to either the residence or the source country. “The key provision of the Model applies to “business profits”, which are taxable in the source country if and only if the enterprise has a permanent establishment in that country. For as long as there is no permanent establishment in the source country, business profits can only be taxed in the residence country, where the enterprise is usually subject t to a worldwide income taxation system.
“Bilateral DTT are is essence a replica of the Model Tax Convention and something like a human rights catalogue of international taxation. They are silent but powerful engines which work day and night with the aim of avoiding double taxation issues. Switzerland has at present more than 100 DTT in place, almost all of which are closely following OECD Model Tax Convention.” -----------------------------------------------------------------------Christos Mavrellis is the Senior Partner of one of the largest law firms in Cyprus, Chrysses Demetriades & Co. LLC (the “Firm”). The Firm is engaged in all fields of legal practice with extensive local and international clientele. -----------------------------------------------------------------------International tax planning and assistance to international clients in choosing appropriate jurisdictions and advantageous corporate structures for their international business has been one of the areas of the Firm’s practice for many years. It has been said that there is magic in tax treaties (“DTAs”) as a proper choice of jurisdictions and appropriate application of DTAs may result in substantial tax benefits. Cyprus, although a relatively low-cost country, with only 10% corporation tax and with substantial exemptions from tax on dividends, royalties and interest, under certain conditions, has succeeded to have an extensive network of DTAs. The countries with which Cyprus has DTAs currently exceed 45 and 8 DTAs are under negotiation and expected to be signed and ratified soon. Cyprus DTAs are usually based on the OECD Model Treaty and, in some cases, the relevant provisions, especially those dealing with dividends, interest and royalties, are even more beneficial for Cyprus companies. The DTA which existed between Cyprus and Russia, after the collapse of the Soviet Union has been one of the main factors which has made Cyprus, through the Cyprus companies, the number one investor in the Russian Federation. This treaty has since been amended but the DTA as amended is still very advantageous and the investment pattern continues. Likewise, the DTA with Ukraine is also very beneficial as it provides for payments of dividends, royalties and interest out of Ukraine to Cyprus with no withholding taxes at all. The above examples demonstrate the possible uses of Cyprus companies to avail of the provisions of double tax treaties with other countries as well, including China, India, United Kingdom, USA, Germany, France, just to mention a few. Cyprus attaches high importance in treaty negotiations and a special committee, with the participation of experts from the private sector, headed by the Ministry of Finance, is involved. The Cypriot negotiators aim always to maintain or introduce favourable terms in the DTAs, especially with respect to taxation of dividends, royalties and interest, shipping profits, as well as capital gains on the disposal of shares and securities in general.
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Double Taxation Agreements Business profits are as a rule under the DTAs, in the absence of permanent establishment in the other contracting state, taxable only in the state where the company is a tax resident and for this purpose Cyprus companies are used for business abroad, taking advantage of the low corporation tax of 10%, applicable in Cyprus. The DTAs contain provisions for tax credit on taxes paid in the other country and in some cases the credit, with respect to dividends takes into consideration not only withholding taxes but also taxes paid in the other country by the company paying the dividend. Of course, with respect to dividends this is of academic interest only as Cyprus grants unilateral relief for any taxes paid abroad, whether there is a DTA or not, and in the case of dividends this unilateral relief extends also to underlying taxes paid by the foreign company. At present DTAs with Israel, Estonia, Bahrain, Georgia, Monaco, Spain, Switzerland and Finland under negotiation are expected to come into force in the next 12 months thus adding to the already advantageous position of Cyprus as international business and financial centre. -----------------------------------------------------------------------Carlos Loureiro, Managing Tax Partner at Deloitte Portugal explains Portuguese Double Taxation Agreements: -----------------------------------------------------------------------“Over recent years, Portugal has acquired an extensive network of double tax treaties, 55 of which are already in force, 9 are signed and several other are being negotiated. “This treaty network, the EU integration, together with the Portuguese holding company regime and the incentives available under the Madeira International Business Centre applicable through 2020, make Portugal a potential platform for investment into African and Latin-American countries, and present a linking route for investment carried out through other jurisdictions, such as, for example, Hong Kong or UAE. “In particular, due to favourable treaty and domestic tax rules (e.g., participation exemption) and existing historical links, Portugal is widely used for investment into Portuguesespeaking African countries. Treaties with Mozambique and Cape Verde are already effective, whereas the treaties with Angola and Guinea-Bissau are under negotiation (the latter has already been signed). The network of Portuguese double taxation agreements with African countries also includes treaties with South Africa, Algeria, Morocco and Tunisia, but negotiations with Ethiopia, Gabon and Senegal are in progress. “Recently, Portugal made an effort to extend its double taxation agreements to LatinAmerican countries. The first treaty with Brazil was signed back in 1971, which was later replaced by a new treaty also containing a participation exemption clause for Portugal. The Portuguese Latin-American treaty network, including Mexico, Cuba and Chile, will soon be extended to Barbados, Colombia, Panama, Uruguay (all pending entry into force) and Peru (negotiations are in progress). “In the Middle East and Asian regions, Portugal has already inforce treaties with key growing economies such as China, India or Singapore, and has already signed tax treaties with Kuwait, Qatar, UAE, Japan and Hong-Kong (some of these have just entered into force this year). These treaties will not only prevent double taxation in the cases of reciprocal investments, but could also be used to minimize tax costs in case of investments through these jurisdictions. “Given the expansion of its treaty network, Portugal is now a relevant alternative that should be considered when analysing routes for international investments.” ------------------------------------------------------------------------
ACQUISITION INTERNATIONAL
Gutidze Damenia Chantladze Solutions (GDC Solutions) was established in 2008 by Bela Gutidze, Kakha Damenia and David Chantladze, partners with impressive experience, background and knowledge in order to make possible, find solutions to any kind of problems and challenges that private and government agencies encounter. -----------------------------------------------------------------------We serve largest local and international companies operating in Georgia and major government agencies as well.
by the filing of a tax treaty relief application (TTRA) with the International Tax Affairs Division (ITAD). Continued on next page...
We help our clients from business startup, during their course of work in order to ensure that they choose the right business entity for their business, improve their business performance and reduce tax risks. One of our services is to help clients to resolve questions and issues related to Double Taxation in Georgia. Georgia is a signatory to a Treaty for Prevention of Double Taxation with 37 countries all over the world. The signed and in force treaties are prevailing Georgian tax laws, therefore exemptions granted under these agreements are important for taxpayers having business relations with companies in foreign countries.
Company: Abraham & Co. Name: Lolade Ososami Email: Lolade.ososami@abrahamandco.com Web: www.abrahamandco.com Address: 139B Eti Osa Street, Dolphin Estate, Ikoyi, Lagos, Nigeria Telephone: +234 1 4617684
In principle, Double Taxation Treaty enables exemptions from taxes between two counties if certain criteria are met. Another important factor is granting of an exemption or tax at a reduced rate on certain receipts such as interests, royalties, dividends, capital gains and others that are connected to transactions carried out between parties associated with the Double Taxation Prevention Treaty. Generally, the provision of DTT concluded by Georgia is based on OECD model, however there are some differences between the treaties signed with each county. Only the existence of in force treaties does not grant taxpayers with automatic exemptions. There are certain procedures which should be followed in order to receive such exemptions. In addition to exemptions, under the Treaty foreign resident company receiving taxed income from Georgia can claim repayment of withheld taxes upon submission of requested documentation.
Company: Altenburger Name: Peter R. Altenburger Email: altenburger@altenburger.ch Web: www.altenburger.ch Address: Seestrasse 39, CH-8700 KüsnachtZurich Telephone: +41 44 914 88 88
Under the DTT framework we help our clients in tax structuring, submission of documentation for exemptions or claims. Manabat Sanagustin & Co. is a Philippine partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. “With the continuing acceleration of economic globalization, it is important for companies to know the tax consequences of their cross-border transactions and how to avail of tax relief to avoid simultaneous taxation of these transactions in two jurisdictions. This is where the provisions of double tax agreements or tax treaties between two governments become significant. The Philippines currently has tax treaties with 37 countries, namely: Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Korea, Malaysia, Netherlands, New Zealand, Norway, Pakistan, Romania, Russia, Singapore, Spain, Sweden, Switzerland, Thailand, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, and Vietnam. These tax treaties basically cover income taxes imposed by the domestic laws of the contracting states and provide income tax relief in the form of tax exemption or reduced tax rates on certain types of income, such as dividends, interest and royalties. “The Philippine tax authority, known as the Bureau of Internal Revenue (BIR), requires that any availment of tax exemption or preferential rate pursuant to a tax treaty must be preceded
Company: Chrysses Demetriades & Co. LLC Name: Christos Mavrellis Email: info@demetriades.com Web: www.demetriades.com Address: 13 Karaiskakis Street Limassol 3032 Telephone: +357 25 800 000
Company: Deloitte Name: Carlos Loureiro Email: caloureiro@deloitte.pt Web: www.deloitte.pt Address: Edifício Atrium Saldanha, Praça Duque de Saldanha, 1 - 7º, 1050-094 Lisboa, Portugal Telephone: +351 210 427 514
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SECTOR SPOTLIGHT:
Double Taxation Agreements The TTRA has to be filed before the occurrence of the “first taxable event”, which means the first or the only time when the income payor is required to withhold the income tax or should have withheld taxes on the income payment had the transaction been subjected to tax. Thus, in practice, the BIR requires that a TTRA is filed with the ITAD before any dividend distribution is made. For TTRAs involving capital gains on sale of shares of stock, the application must be filed before the due date of the documentary stamp tax on the said sale. Failure to properly file the TTRA with the ITAD within the prescribed period shall have the effect of disqualifying the TTRA. “A TTRA must be accompanied by general documentary requirements proving the income earner’s tax residency and applicability of the tax treaty invoked, as well as specific documentary requirements prescribed for the type of income covered by the TTRA. If the applicant/filer for the TTRA is the income earner’s local representative in the Philippines, a Special Power of Attorney in favor of the local representative has to be submitted as well. Under the relevant BIR issuance on processing of TTRAs, the ruling confirming the tax exemption or use of preferential tax treaty rate must be available for release sixty working days from the date of receipt of the TTRA or from the date the complete documentary requirements are received by ITAD, whichever comes later. There are cases where confirmatory rulings were obtained within the prescribed sixty-day period, while in most cases the timeline for the processing of TTRAs may be longer. This has caused inconvenience to taxpayers; however, various officers of the BIR have indicated albeit informally that the said government agency may streamline the rulings process.” -----------------------------------------------------------------------Soudki Zawaydeh, Partner at PricewaterhouseCoopers commented: -----------------------------------------------------------------------“Double Tax Agreements (DTAs) plays a very important role in the economic development of Saudi Arabia. They remove tax obstacles that inhibit trade and services and lead to greater trade and investment flows between Saudi Arabia and other countries. Most of Saudi DTAs are bilateral and based on the OECD Model Tax Convention. Currently Saudi Arabia has signed more than twenty two DTAs with a number of key countries and tendency is to continue signing double tax avoidance agreements to allow for more competitive and internationally accepted taxation regime in the Kingdom. Benefits provided by DTAs vary among countries and specific items of income. In some cases, DTAs concluded with Saudi Arabia help eliminate or reduce certain withholding taxes while others provide limited relief from capital gain tax provided that the required conditions are met. The recent practice of the Saudi Tax Authorities requires taxpayers to comply first with the domestic tax regulations and then claim a refund, even though the DTA provides for tax exemption or a reduced tax rate. “In view of the recent developments, residents will need to consider specific DTAs with a view to maximizing the relief and benefit that is made available through the DTAs. Being the first firm to establish specialist team in the region, PwC Saudi Arabia’s priority is to provide you with leading tax knowledge and insights to keep you up to date, as well delivering tax planning and other related services of the highest quality which add value to you and your business. For latest update on Saudi Arabia progress with respect to DTAs, the following table lists and categorizes those countries that currently have concluded or in the process of concluding DTAs with Saudi Arabia: DTAs entered into force France, China, Pakistan, India, Austria, South Africa, South Korea, United Kingdom, Turkey, Malaysia, Russia, Spain, Italy, Greece, Belarus, Uzbekistan, Vietnam, Syria, Netherlands, Japan, Bangladesh, Singapore. DTAs signed but not yet entered into force Tunisia, Romania, Poland, Ukraine, Kazakhstan, Ireland, Malta, Czech Republic. DTAs finalized awaiting signature Senegal, Ghana, Croatia, Morocco, Philippines, Luxembourg, Sri Lanka, Azerbaijan,
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/ July 2012
Ethiopia, Tajikistan, Albania, Bosnia-Herzegovina, Turkmenistan. DTAs under negotiation Iran, Germany, Jordan, Yemen, Finland, Egypt, Mauritius, Venezuela, Hong Kong, Taiwan, Lithuania, Switzerland, Portugal, Sudan, Hungary, Mexico. Proposed to initiate DTA negotiation U.S.A. -----------------------------------------------------------------------Dicky To, Tax Partner and Chan Ka Ho, Tax Director at RSM Nelson Wheeler comment on how Hong Kong is acting as China’s Gateway to the World: -----------------------------------------------------------------------““Go aboard” for investment is China’s national policy for the coming 10 years. Chinese enterprises prefer to set up companies outside China as their international trading vehicle, treasury centers as well as international investment platform. The bilingual convenience, simple and low tax rate regime, the sophisticated banking system, the lack of exchange control and the world class communication infrastructure make Hong Kong the most preferred location to serve the two functions. Deficiency in double tax agreement (“DTA”) network used to be a drawback of Hong Kong companies serving as investment holding companies globally. To serve as China’s global financial centre, the Hong Kong government has been working hard to address this concern. As of 30 June 2012, Hong Kong has entered into DTAs with 25 countries being Austria, Belgium, Brunei, China, Czech, France, Hungary, Indonesia, Ireland, Japan, Jersey, Kuwait, Liechtenstein, Luxembourg, Malaysia, Malta, Mexico, Netherlands, New Zealand, Portugal, Spain, Switzerland, Thailand, United Kingdom and Vietnam. “Hong Kong has one of the most favorable DTAs with China. The reduced withholding tax rates on dividend, interest, royalty and capital gain under China-Hong Kong DTA makes Hong Kong an ideal location for non-Chinese investors setting up intermediate holdings, finance and licensing companies to invest in China on a long term basis. DTAs reduce investors’ uncertainties by means of allocating the taxing rights of different income streams between the treaty partners and Hong Kong. They clarify the tax treatment and consequence of the common international cross-border transactions and minimize the double taxation issues faced by investors. Building “substance” in Hong Kong companies is not costly and therefore risk of being challenged on “beneficial owner” for enjoying DTA benefits shall not be a concern.” -----------------------------------------------------------------------Javier Diaz de Leon is a member of Tron Abogados, S.C. – a Mexican leading law firm specialized in domestic and international taxation matters involving mergers and acquisitions, financial instruments, international joint ventures, project finance, private public investments and legal representation in tax controversy cases. -----------------------------------------------------------------------“Our exclusive focus on tax matters makes our firm the best alternative to provide efficient solutions according to multiple corporate, financial and management goals. We understand the sophisticated industries in which our clients participate; therefore, we are able to evaluate their domestic and crossborder transactions and to anticipate risks for their enterprises from a tax perspective.”
Stock Corporation (SA) or Limited Liability Company (SRL) to other more sophisticated vehicles such as the Public Stock Corporation (SAB), Non-Bank Banks (SOFOMEs) and the Public Investment Promotion Company (SAPI). Trust Structures, which provide pass-through treatment to investors, may be also used for real estate (REITs) and financial ventures. The effects of double taxation are very relevant for the financial goals of Mexican companies or foreign residents doing business in Mexico, because Mexican resident companies are subject to income tax at a general rate of 30% on their worldwide income, whereas foreign residents must also pay income tax when generate an item of Mexican source income, in which case the domestic tax rates oscillates between 4.9% and 40%, or with respect to profits attributable to a Mexican based branch, which are also subject to an income tax rate of 30%. CAN YOU PLEASE EXPLAIN THE BILATERAL AND MULTILATERAL TREATIES IN PLACE WITHIN YOUR JURISDICTION? IN BRIEF, WHAT ARE THE OVERALL AIMS, PROVISIONS AND GOALS OF EACH TREATY. “Mexico has adopted to date more than 40 double taxation agreements and around 25 tax information exchange agreements with other countries. The first group of treaties
Company: Gutidze Damenia Chantladze Solutions Name: Rusudan Sreseli Email: rsreseli@solutions.ge Web: www.solutions.ge Address: 33 a Chavchavadze avenue, Tbilisi 0179 Georgia Telephone: (+995 32) 2421 333
Company: KPMG in the Philippines Name: Maria Myla S. Maralit Email: mmaralit@kpmg.com Web: www.kpmg.com.ph Address: The KPMG Center, 9/F 6787 Ayala Avenue Makati City 1226, Philippines Telephone: +6326210825
HOW IMPORTANT IS IT FOR ENTREPRENEURS TO CHOOSE THE RIGHT BUSINESS ENTITY FOR A NEW COMPANY? AND HOW DOES DOUBLE TAXATION AFFECT THEM ON A DAY TO DAY BASIS? “The choice of entity analysis to conduct business in Mexico is a cornerstone that entrepreneurs must analyze before getting started with a new project. The decision-making process to select the appropriate Mexican business vehicle is generally a corporate, financial and taxdriven exercise aiming at different premises such as corporate governance, limited liability exposure, capital expansion needs and segregation of assets. The Mexican legal system offers different companies candidates, ranging from the traditional
Company: PricewaterhouseCoopers Name: Soudki Zawaydeh Email: soudki.zawaydeh@sa.pwc.com Web: www.sa.pwc.com Address: Riyadh - Saudi Arabia Telephone: +966 1 465 4240
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Double Taxation Agreements provides for preferential withholding tax rates with respect to foreign source income derived by foreign residents and eliminates the double taxation of income through sophisticated foreign tax credit mechanisms. The second group of treaties pursues the effective exchange of information for the prevention of offshore fiscal evasion and the enforcement of tax claims or the investigation or prosecution of tax matters.” WHAT ARE THE KEY BENEFITS OF TAX TREATIES/DTAS? “Foreign investors are generally interested in obtaining tax-free dividends and low tax interest from private equity and venture capital transactions in Mexico. The first benefit may be obtained by relying on the domestic tax provisions; however, the second benefit is reached under specific double taxation agreements. Mexican companies engaged in cross-border activities put also special emphasis on inbound and outbound transactions involving the payment and collection of capital gains, royalties, rental income, management fees and other considerations that may achieve a preferential tax treatment depending on the existence of double taxation agreements.” WHAT ARE THE PROCEDURAL FRAMEWORKS FOR ENFORCEMENT AND DISPUTE RESOLUTION REGARDING DOUBLE TAXATION WITHIN YOUR JURISDICTION? “The benefits of double taxation agreements may be enforced through the Mexican Federal Courts in case of controversy between taxpayers and the Mexican tax authorities. At a higher level, double taxation agreements have also mutual agreement procedures to resolve double taxation difficulties by the competent authorities of Mexico and other countries.” WHAT ARE PREDICTIONS REGARDING DOUBLE TAXATIONS AGREEMENTS OVER THE NEXT 12 MONTHS? “It may be predicted that Mexico will continue to work actively on the negotiation, amendment and implementation of double taxation agreements, but now emphasized on the tax benefits that are required for the financial, energy and oil and gas industries, which are the most important economic reforms of Mexico for the next six years.” -----------------------------------------------------------------------James Dodds is Tax Partner with KPMG in Tokyo, one of the largest tax practices in Japan with more than 500 staff. -----------------------------------------------------------------------HOW IMPORTANT IS IT FOR ENTREPRENEURS TO CHOOSE THE RIGHT BUSINESS ENTITY FOR A NEW COMPANY? AND HOW DOES DOUBLE TAXATION AFFECT THEM ON A DAY TO DAY BASIS? Since Japan has one of the highest corporate tax rates in the world of approximately 38%, it is important for inbound investors to consider how to structure and finance Japanese investments to minimize tax on outbound flows from Japan. For example, a pre-tax profit in a Japanese subsidiary of 100 results in cash received in the overseas parent of between 49.6 and 62 depending on whether a tax treaty can be applied to dividends. CAN YOU PLEASE EXPLAIN THE BILATERAL AND MULTILATERAL TREATIES IN PLACE WITHIN YOUR JURISDICTION? Japan currently has 49 bilateral tax treaties covering income and corporate tax, as well as four treaties covering the exchange of information with other countries. There are also a number of bilateral treaties covering social security. WHAT ARE THE KEY BENEFITS OF TAX TREATIES/DTAS? The most commonly used treaty provisions are those that reduce Japanese tax on dividends, interest and royalties from the domestic rate of 20% to, in some cases, 0%. Some of the treaties also provide an exemption from Japanese tax that may
ACQUISITION INTERNATIONAL
arise when a non-resident sells shares in a Japanese company and realizes a capital gain. HOW DOES A DOUBLE TAXATION AGREEMENT FOSTER COOPERATION BETWEEN THE HOME NATION AND INTERNATIONAL TAX AUTHORITIES? When negotiating tax treaties, the Japanese government considers the cross-border investment flows between Japan and the other country, and what treaty terms would most benefit cross-border investment. For example, where there are large cross-border payments of royalties for the use of intellectual property, a key focus of the negotiations may be to reduce withholding tax on such payments. WHAT ARE THE PROCEDURAL FRAMEWORKS FOR ENFORCEMENT AND DISPUTE RESOLUTION REGARDING DOUBLE TAXATION WITHIN YOUR JURISDICTION? Most of Japan’s tax treaties have provisions for dispute resolution and these are particularly important for transfer pricing cases where the two countries can reach an agreement to avoid double taxation. -----------------------------------------------------------------------Peter R. Altenburger, partner at Altenburger commented: -----------------------------------------------------------------------“Over these last year’s Double Taxation Treaties (DTT) were mainly used in connection with exchange of information requests and a worldwide thrive to bring back delinquent taxpayers into the system. This thrive has been triggered by the relentless efforts undertaken by the United States and their special emphasis on Tax Information Exchange Agreement (TIEA), which as seen from a U.S. point of view are not considered as treaties but as simple contracts between two governments. The advantage of a TIEA lies in the fact that there is not such thing as ratification of a TIEA and hence the cumbersome procedure of the U.S. Senate Committee does not apply. The TIEA is in full force and effect once it has been signed by both parties. Double Taxation Treaties are – as already the name implies – bilateral conventions which aim at the avoidance of double taxation (and double non taxation). In order to achieve this objective governments are not simply negotiating DTT but they are doing so based on the Model Tax Convention, the fist edition of which was released by the OECD more than 50 years ago. The Model Tax Convention consists of 31 Articles and a great number of commentaries, which are explaining the various articles. The Model and its Commentaries are being periodically updated, at present there is a version, which has been approved by the Council of Ministers in July 2010. While the wording of the single articles has only changed in a few instances, the Commentaries tend to undergo substantial changes form one version to the next. The Model attempts to bridge double taxation issues by attributing the primary right to tax to either the residence or the source country. The key provision of the Model applies to “business profits”, which are taxable in the source country if and only if the enterprise has a permanent establishment in that country. For as long as there is no permanent establishment in the source country, business profits can only be taxed in the residence country, where the enterprise is usually subject t to a worldwide income taxation system “Bilateral DTT are is essence a replica of the Model Tax Convention and something like a human rights catalogue of international taxation. They are silent but powerful engines which work day and night with the aim of avoiding double taxation issues. Switzerland has at present more than 100 DTT in place, almost all of which are closely following OECD Model Tax Convention.”
Name: Chan Ka Ho Tax Director Email: khchan@rsmhk.com Telephone: + 852 2583 1249 Name: Dicky To Tax Partner Email: dickyto@rsmhk.com Telephone: +852 2598 5123
Company: RSM Nelson Wheeler Web: www.rsmhk.com Address: 29/F Caroline Centre, Lee Gardens Two, 28 Yun Ping Road, Hong Kong
Company: Tron Abogados, S.C. Name: Javier Diaz de Leon Email: jdiaz@tronabogados.com.mx Web: www.tronabogados.com.mx Address: Prado Sur 555, Lomas de Chapultepec Zip Code 11000, Mexico, D.F., MEXICO Telephone: (52) (55) 5282-4162
Company: KPMG Tokyo Name: James Dodds Email: james.dodds@jp.kpmg.com Web: www.jp.kpmg.com Telephone: 813 6229 8230
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SECTOR SPOTLIGHT: Tax Matters
TAX
— Matters
Nimrod E Mkono speaks to Acquisition International regarding the Double Taxation regulations and how they affect business in Tanzania.
Hon. Nimrod E. Mkono (MP) is the Managing Partner of Mkono & Co Advocates. He is also a Member of Parliament of Tanzania and a member of the Tanganyika Law Society, the Zanzibar Law Society and The Institute of Chartered Secretaries and Administrators, Fellow (FCIS). How are your services superior to those of your competitors and how do you stand apart from them? Mkono & Co is Tanzania’s leading law firm and is recognized as a prominent corporate, commercial and financial practice in the East Africa region. The firm has a dynamic team of lawyers from the U.S, Europe and India.The firm is also recognized by international professional directories and has been ranked in Tier 1 by Chambers Global since 2000 and several of our lawyers are ranked as leaders in their fields. How important is it for entrepreneurs to choose the right business entity for a new company? How does double taxation affect them on a day to day basis? It is essential for entrepreneurs to choose the right business for a new company for a number of reasons. Taxes are not international. There is no separate global tax law that governs cross-border transactions. All taxes are levied under each country’s own domestic law. . The absence of a uniform international definition of a tax base has therefore prompted entrepreneurs to address the issue of what form of a business entity they would wish to set up in order to obtain a better return for their investment. A return on any investment is always determined by the source of income. For example branch profits, dividends, interest, rent, royalties, etc. . Double Taxation Treaties generally avoid and reduce the burden of double taxation in two states on the same tax payer in respect of the same subject matter and for identical period. Tax treaties enable competent authorities of the Partner States to resolve taxes dispute arising from differing interpretations of tax terms the status of the tax payer or an attempt by a contracting State to recover an excessive share of tax revenue. All income generated in Tanzania is taxable regardless of whether the recipient is a resident or a non-resident. Where a person is subject to Tanzanian income taxation as well as comparable taxation on the same income in the country of residence, that person may make a double taxation relief claim. CAN YOU PLEASE EXPLAIN THE BILATERAL AND MULTILATERAL TREATIES IN PLACE WITHIN YOUR JURISDICTION? IN BRIEF, WHAT ARE THE OVERALL AIMS, PROVISIONS AND GOALS OF EACH TREATY? Bilateral and Multilateral Treaties: A bilateral treaty is strictly between two states parties. These parties can be two states, or two international organizations, or one state and one international organization.. On the other hand a multilateral treaty is a treaty to which three or more sovereign states are parties. Some examples of multilateral
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/ July 2012
treaties are the Convention Relating to the Status of Refugees, the United National Convention on the Law of Sea, the Geneva Conventions and the Rome Statute of the International Criminal Court. Tanzania has double taxation treaties with Canada, Denmark, Finland, India, Italy, United Kingdom, Norway, Sweden and Zambia. The aim of these treaties is to mitigate the effects of double taxation and to encourage international trade and investment in Tanzania. However, none of the bilateral treaties reduces the withholding rate for non-nationals below the domestic rate. WHAT ARE THE KEY BENEFITS OF TAX TREATIES/ DTAS? Tax Treaties can relieve taxpayers from being taxed twice on the same income, either by exempting them from taxation in the country where the income is generated so that they are only taxed in the home country, or by providing a foreign tax credit in the home country to compensate for the tax paid in the source country.
levied in the other country. HOW DO YOU LIMIT TAX OF ONE COUNTRY ON BUSINESS INCOME OF A RESIDENT OF THE OTHER COUNTRY? The Tanzanian Revenue Authority administers the tax codes in Tanzania. TRA may grant relief from double taxation upon proof that the taxpayer is subject to comparable tax on the same income in another jurisdiction. Double taxation agreements, where applicable, can also provide relief from double taxation from recipients of business profits. WHAT ARE THE PROCEDURAL FRAMEWORKS FOR ENFORCEMENT AND DISPUTE RESOLUTION REGARDING DOUBLE TAXATION WITHIN YOUR JURISDICTION? Tanzania has general anti-avoidance legislation to discourage the use of double taxation arrangements to avoid paying taxes. For example, specific rules prohibit taxpayers from using an income splitting strategy.
HOW DOES A DOUBLE TAXATION AGREEMENT FOSTER COOPERATION BETWEEN THE HOME NATION AND INTERNATIONAL TAX AUTHORITIES?
Tax disputes are by the Tax Appeals Board, whose decisions may be appealed to Tax Appeals Tribunal and thereafter to the Court of Appeal of Tanzania.
A double taxation agreement operates in one of two ways. First, the agreement might stipulate that the tax paid in the home nation and not in the source country. Second, the agreement could stipulate that the source country takes a withholding tax and the home country gives the taxpayer a foreign tax credit to compensate for the withholding tax already paid on the income.
WHAT ARE PREDICTIONS REGARDING DOUBLE TAXATION AGREEMENTS OVER THE NEXT 12 MONTHS? Tanzania is in the process of negotiating several new double taxation agreements, including those mentioned above with Belgium, Burundi, Iran, Lebanon, Malaysia, Mauritius, Pakistan and Rwanda.
The operation of either type of double taxation agreement requires the two countries involved to exchange information regarding the residence status of the taxpayer and to work together to prevent tax evasion. Can you please explain the negotiation and drafting process within your jurisdiction? What are the key differences when dealing with partial double taxation agreements? Most treaties follow a mode Convention. Each treaty is formed through bilateral negotiations that allow the parties to consider their respective needs. Tanzania does not have partial double taxation provisions, which by definition provide for avoidance of double taxation on certain income only, such as income derived from ships and aircraft. WHAT IS THE BEST WAY TO REDUCE THE AMOUNT OF TAX WITHHELD FROM INTEREST, DIVIDENDS, AND ROYALTIES PAID BY A RESIDENT OF ONE COUNTRY TO RESIDENTS OF THE OTHER? None of the bilateral treaties Tanzania has entered into reduce the rate of withholding tax on interest, dividends or royalties to non-residents below the domestic rates. However, the treaties generally provide a cap on the rate at which these taxes can be
Company: Mkono & Co. Advocates in association with SNR Denton Name: Nimrod E. Mkono Email: nimrod.mkono@mkono.com Web: www.mkono.com Address: 8th Floor, Exim Tower, Ghana Avenue P.O. Box 4369, Dar es Salaam, Tanzania Telephone: (+255 22) 211 8789/90/91
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Malta — Bouncing back
MALTA
— Bouncing back
The latest figures released by the National Statistics Office show that over the course of 2011-12 Malta has had substantial growth in the financial services sector, which has contributed over €1 billion of revenue to the economy.
This figure accounts for almost 15% of GDP and the announcement has brought about international respect and firmly established the region as one of the safest and best run financial centres in the world. Institutional investors are drawn by Malta’s legal and regulatory framework, strong and diversified economy, highly-skilled workforce, infrastructure, market access and balanced financial regulatory regime. There has been tremendous pressure on global financial centres to adhere to new regulation; however few have responded as well as Malta, who has taken a proactive stance in terms of cooperation, transparency and high standards of regulation and it is in the top tier of countries which meet stringent international standards.
range of financial advisory services, we offer the combined experience and resources of offices throughout 24 countries.” -----------------------------------------------------------------------Sovereign Pension Services Limited (“Sovereign Pensions”) may be a recent addition to our global network but we are not newcomers to Malta. Founded in 1987, Sovereign’s Maltese trust and corporate services provider has been established for several years and our new company recognises the benefits of this key jurisdiction. -----------------------------------------------------------------------Sovereign Pensions is a registered domestic pension provider and can also serve the growing international pension market whereby pensions may be transferred to overseas schemes under strict conditions.
Given its hugely important strategic position, a multi lingual population and direct connections to Europe, Middle East and beyond, Malta is well placed to exploit the potential throughout Europe, across the Mediterranean to North Africa, and beyond. By investing still further in Malta, Sovereign has demonstrated its confidence in the country’s future. We expect that investors, particularly non-Europeans, will become more alive to the possibilities, generating exciting business opportunities for all.
Acquisition International speaks to the experts. -----------------------------------------------------------------------Malcolm Meilak is the Managing Director of WTP Advisors Malta. -----------------------------------------------------------------------“Through our full range of accountancy and tax services, we provide a unique insight to the business needs and work with companies and individuals across all sectors to develop and realize their aspirations. We work with local businesses as well as international companies and foreign high net worth individuals. “We help clients raise expectations by working hard to exceed expectations. At WTP Advisors , we work closely with our clients to tightly integrate tax planning into their core strategic plan. This enables them to quickly react to tax-saving opportunities, structure core operations around tax-efficiency concepts, and help ensure compliance with applicable local, national, and international tax administrations. “Through our continuous investment in technology we succeed in maintaining high quality standards and be at the forefront in presenting innovative solutions. We believe that our team is the bedrock of our organisation and fundamental in reaching our goals and the goals of our clients. Further to this, as part of a global network committed to excellence through a diverse
ACQUISITION INTERNATIONAL
Especially beneficial for those living in a country that has enacted a double tax treaty with Malta, Sovereign Pensions will also be able to assist transfers from other EU countries in the future. Sovereign’s clientele is global; clients include asset holding and trading companies and we have a significant presence in the gaming, maritime and aviation sectors. Not part of a wider legal, accounting or banking group, we exploit our independence, diversifying our corporate service offering to the multi-faceted range of financial services available today.
Company: WTP Advisors Malta Name: Malcolm Meilak Email: malcolm@mmeilak.com Web: www.mmeilak.com Address: WTP Advisors Malta, Archbishop P Pace Street, Victoria, Gozo Telephone: 000356 21561216
A Eurozone member, Malta’s independence whose legal system draws on English law is highly advantageous. Enjoying passporting rights, Maltese firms are able to employ nationals from any of 27 EU states but thus far any contagion effect from the global economic crisis has been limited. Service providers use the extensive tax treaty network and attractive corporate tax regime which taken together has resulted in the development of an unbeatable range of sophisticated tax planning services. Maltese regulation is strict but managed in a cooperative spirit. Malta regulatory staff are experienced, time served personnel who enjoy a well-deserved international reputation.
Company: Sovereign Pension Services Name: John Hodgson Email: jhodgson@SovereignGroup.com Web: www.SovereignGroup.com Address: Valletta Buildings 4th Floor South Street Valletta VLT11 Malta Telephone: +356 27 888 132
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SECTOR SPOTLIGHT:
The Cayman Islands — Bouncing back
THE CAYMAN ISLANDS — Bouncing back
The future looks bright for the Cayman Islands as the Government is projecting that the country will likely bounce back from the last two years of economic contraction to see growth this year and up to at least 2014. Growth is expected to be driven by a strong recovery in tourism and a robust performance from the financial services industry. HAS CIMA APPROVED ANY REVISIONS OR NEW REGULATIONS OVER THE LAST 12 MONTHS? ARE THERE ANY DEVELOPMENTS IN THE PIPELINE? CIMA regulations are generally beneficial or at most, not an impediment to business in the jurisdiction. The most material new regulation is the requirement for master funds to register with CIMA. HOW WILL THE REGION’S GROWTH AFFECT INBOUND AND OUTBOUND M&A ACTIVITY OVER THE NEXT 12 MONTHS? There is an increasing divide between institutions that want or don’t want a high profile offshore presence. Certain global institutions and/or institutions that now have government shareholders following bailouts have re-assessed their offshore presence. This could be seen to be more politically driven than economically. Whatever the reasoning, it has provided some acquisition opportunities for other institutions or private buyers. We are actively working on transactions in the private banking and asset management spaces – we need more stock as there are plenty of buyers focusing on offshore. WHAT ARE YOUR PREDICTIONS FOR FUTURE DEVELOPMENTS IN CAYMAN ISLANDS? DO YOU THINK A TOTAL RECOVERY IS FEASIBLE BY 2014?
According to McKeeva Bush, while the economy contracted in 2010, “based on the forecasts made for the local economy, coupled with the supportive actions of the Government for private sector projects, there is the bright and encouraging likelihood of growth within the Islands’ economy”. Acquisition International speaks to the experts. -----------------------------------------------------------------------Lawrence Edwards is the Managing Director of Delta Group Limited. Its main practice areas are Offshore Investment Banking: Corporate Finance, Mergers and Acquisitions, Hedge Fund Establishment and Operation, Wind Down and Fiduciary Services. -----------------------------------------------------------------------He commented “Our team have acted on a number of the offshore financial services industry’s M&A transactions over recent years.” WHAT FACTORS ARE PREDICTED TO PUSH GROWTH THIS YEAR AFTER THE LAST TWO YEARS OF ECONOMIC CONTRACTION?
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There is pent-up demand, cash looking for good opportunities, and private wealth structures that do not want to either be in the US or onshore generally.
The Cayman Islands are generally the offshore financial centre of choice for the Americas. It is and will continue to be ideally placed to provide a gateway to both the developed markets of North America and the developing markets of South and Central American and the Caribbean. As an offshore centre with the presence of significant expertise it will continue to act as an effective catalyst for the region as well as global activity. A total recovery is more than feasible by 2014.
WHAT ARE THE CURRENT CORPORATE TAX RATES WITHIN THE REGION? AND WHAT ARE THE TAX BENEFITS?
The Cayman Islands are a tax neutral jurisdiction – there is no corporate, income, gains, sales or similar taxes. All the very significant tax advantages remain post 2008.
Company: Delta Group Ltd. Name: Lawrence Edwards Email: ledwards@deltagroup.ky Web: www.deltagroup.ky Address: Harbour Place, South Church Street, PO Box 11820, George Town KY1-1009, Grand Cayman Telephone: +345 743 6611
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Cayman Islands — Bouncing back
-----------------------------------------------------------------------Established in 1984, MCS is an Information Technology Consulting and Professional Services company providing independent advice and implementation services. Based in Grand Cayman, but serving offshore financial services jurisdictions throughout the globe, MCS delivers end-toend, client-focused IT Professional Services and Business Technology Solutions. -----------------------------------------------------------------------Chris Lopez, CEO and Founder, MCS commented:
The Financial Services industry in the Cayman Islands has not been immune to the effects of the global economic downturn in recent years and this has certainly affected the ways in which businesses operate.
In economically turbulent times, IT departments need to cut costs, keep IT investments under close control and quickly address new business needs. In short, in times of downturn, IT departments are challenged to do more with less. In the Cayman Islands, we have seen that many Financial Services companies have turned to expert IT services providers such as MCS to embrace this challenge. Technology advancements continue to change the business environment in which we all operate, and new technology can be leveraged to improve performance; from reducing capital expenditure by virtualising hardware or subscribing to cloud services; to efficiency improvements and reduction of fixed costs by implementing information management solutions or streamlining of business processes through collaborative or self-service solutions. In addition to the pressure of reduced budgets, consumers have become more demanding. The maturation of the Internet has led to an environment where we expect to have access to our information 24-hours a day, from any location in the world. We have become used to the availability of online banking, online travel booking, and online information management as a matter of course. Against, this backdrop, it is critical for Financial Services providers to be able to deliver similar functionality to their
clients in order to meet expectations and develop loyalty. Though the challenges have been great, Cayman Islands financial services providers working with MCS have had great success in reducing operating expenditure and improving efficiency whilst providing a better service to their clients. By continuing to leverage investment in technology in uncertain times, companies in the Cayman Islands are truly able to deliver more with less today, and have been able to meet business needs in order to secure their future.
Company: MCS Ltd Name: Chris Lopez Email: info@mcs.ky Web: www.mcs.ky Address: Suite 10, Corporate Plaza, PO Box 2740, Grand Cayman KY1-1111 Telephone: (345) 949 8263
Award winning international legal and fiduciary services Welcome to Ogier
We advise on BVI, Cayman, Guernsey and Jersey Law and associated fiduciary services through our network of offices across the globe. With a proactive and flexible approach we have the expertise to handle the most complex offshore structures across all time zones. To find out more about how Ogier can assist you, please visit us at www.ogier.com or e-mail us at welcome@ogier.com
www.ogier.com Bahrain • British Virgin Islands • Cayman Islands • Dublin • Guernsey Hong Kong • Jersey • London • Luxembourg • Shanghai • Tokyo
ACQUISITION INTERNATIONAL
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SECTOR SPOTLIGHT:
US Domicile for Captive Insurance
US DOMICILE
— for Captive Insurance
Over the course of the last thirty years there has been phenomenal growth in the number of captive insurance companies, primarily driven by the expense or lack of certain types of insurance coverage in the commercial market. Captives have become a vital part of large companies’ risk management strategy, the number of captives being formed has obviously increased and also has the number of domiciles available for their incorporation. The aim of this series is to profile the major hubs, identify the key trends and pinpoint the most active and attractive locations. Captives can now be domiciled and licensed in a wide number of US States, all of which offer various benefits and serve as excellent Captive Insurance domiciles in their own right. Wisconsin is a popular business destination with companies around the world; recognised as one of the leading US centres for captive insurance, it attracts high quality captive business, enjoys a reputation as a high-quality captive domicile and offers a vast range of services. Acquisition International speaks to the experts. -----------------------------------------------------------------------Sheryl Dobson-Wainwright is Premier Managed Care Solutions, LLC (formerly Dobson and Associates, LLC) commented: -----------------------------------------------------------------------“Our company was established in 1998 to provide high quality, customized utilization management, case management and medical expense management services for self-funded insurers in the medical, workers compensation and Captive arenas. Our services include preauthorizations, telephonic case management, face-to-face and specialty case management, wellness programs, disease management programs, international management services, workers compensation support, travel case management, expedited medical reviews, independent physician reviews, disability management, and medical tourism management. “Our company is small enough to offer personalized and customizable services to our clients.
Captives offer the opportunity to stabilize insurance costs and provide better control over the insurable risk of the group. There are also tax advantages that greatly benefit the Captive group. WHAT ARE THE BENEFITS OF DOING BUSINESS IN YOUR STATE? “Utah has eliminated premium taxes for captives licensed in
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the state, so captives only have to pay a flat fee regardless of the size of the captive group. Utah also has a strong business environment and we are in a central location to all parts of the country. Utah offers captive opportunities for pure captives, group captives and reinsurance captives. Information regarding the requirements for captives can be found at www. captive.utah.gov. Basically, the captive must have adequate reserves, submit to a Utah Insurance Department examination which will occur once every three years, complete an annual audit by an independent CPA, and file an annual report. The annual fee is $5,000 per captive, irrelevant of its size. Apart from personal and property taxes, there are no other taxes assessed for captives in Utah.” CAN YOU PLEASE EXPLAIN THE INCORPORATION AND FORMATION PROCESS WITHIN YOUR STATE? “For this I would refer to www.captive.utah.gov or www. utahcaptive.com. Both sites explain the process of formation and incorporation. In Utah, the captive needs to contract with an Insurance Captive Manager that has been approved by the state. The organizers must then meet with the Utah Insurance Department before a Certificate to develop a captive can be requested. After that, the documents of incorporation are then prepared and an application submitted to the Insurance Department. The incorporation documents are submitted to the business offices at the state. Once that has been completed, the application, incorporation papers, final business plan and actuarial forms and financial documents are submitted for final approval. The process usually takes 30 days or less.” -----------------------------------------------------------------------Principal of Ryan, LLC is Kenneth D. Kotch. Ryan, LLC (“Ryan”) was founded in 1991, and currently employs more than 900 professionals worldwide. Ryan’s global practice includes expertise in every major area of state, local, federal and international taxation. -----------------------------------------------------------------------Kotch explained, “We maintain the largest indirect tax practice in North America and the seventh largest corporate tax practice in the United States.”
WHAT FACTORS HAVE CONTRIBUTED TO THE PHENOMENAL GROWTH IN THE NUMBER OF CAPTIVE INSURANCE COMPANIES?
I attribute much of the recent growth to the general “maturation” of the Captive Insurance market. This industry has come a long way in the past two decades. The amount of regulatory and legal guidance currently within the public domain is unprecedented in the history of Captive administration.
CAN YOU PLEASE EXPLAIN THE LAWS AND REGULATIONS THAT GOVERN CAPTIVE INSURANCE WITHIN THE U.S. COMMONWEALTH OF PUERTO RICO? On July 9, 2004, the Puerto Rico Legislature unanimously passed legislation that established a comprehensive tax and insurance regulatory structure to encourage and regulate the formation of Puerto Rico International Insurers to write insurance on foreign (non-Puerto Rico) risks. To attract participants, the Act granted broad exemptions and established a regime of flexible, yet prudent, insurance regulation within the Commonwealth.
WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? Ryan delivers broad expertise across multiple industries. This is extremely important, given the diversity of industries represented in the Captive Insurance marketplace. When clients are seeking authoritative guidance for Captive Insurance representation, they want to be assured that the Captive Manager truly understands the unique elements related to their business operations.
Company: Premier Managed Care Solutions Name: Sheryl Dobson-Wainwright Email: sheryl@PMCSolutions.us.com Web: www.pmcsolutions.us.com Address: 132 W Pierpont, Ste. 200 Salt Lake City, UT 84101 Telephone: 801-924-0401
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
US Domicile for Captive Insurance
CAN YOU PLEASE EXPLAIN THE BENEFITS OF CHOOSING PUERTO RICO OVER DIFFERENT CAPTIVE INSURANCE DOMICILES?
Chief among Puerto Rico’s many benefits as a Captive Insurance domicile is its accredited status under the National Association of Insurance Commissioners’ (NAIC) Financial Regulation Standards and Accreditation Program.
ANY CONCLUDING COMMENTS? In my experience with Puerto Rico as a US Captive Insurance domicile, I have had a very favourable experience with respect to all of these elements.
I would encourage any Captive Insurance participant to consider Puerto Rico as a domicile which consistently addresses the needs for creative and efficient Regulatory solutions within the alternative risk solution market.
Company: Ryan, LLC Name: Kenneth D. Kotch Web: www.ryan.com Address: Three Galleria Tower , 13155 Noel Road Suite 100 Dallas, TX 75240-5090 Telephone: 972.934.0022
The NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories.
Pure Captives • Special Purpose Captives • Industrial Insured Captives • Captive Reinsurers
We Can Guide You On Florida’s New Captive Laws COLODNY FASS TALENFELD KARLINSKY ABATE WEBB
An updated Florida law lowers capital requirements for captives setting up business in the state. Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb can help construct your captive to maximize the benefits of Florida’s recently amended law. For nearly 40 years, we’ve successfully represented the legal and regulatory interests of all types of insurers, including captives, risk retention groups, managing general agencies, reinsurance intermediaries and premium finance companies.
Rated by an international insurance magazine as one of the Top Two U.S. insurance regulatory firms, we have significant experience involving a wide range of licensing and compliance issues. We invite you to learn more about our full-service Florida legal and insurance regulatory team.
www.CFTLAW.com Insurance Regulatory Law • Governmental Consulting • Insurance Litigation For More Information, please contact Mike Colodny (mcolodny@cftlaw.com), Rich Fidei (rfidei@cftlaw.com) or Fred Karlinsky (fkarlinsky@cftlaw.com).
Telephone: +1 954 492 4010 ACQUISITION INTERNATIONAL
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SECTOR SPOTLIGHT:
Forming companies and doing business
FORMING COMPANIES — and doing business
2012 is looking good for entrepreneurs who seem to be making the most of opportunities despite the economic climate; with the highest levels since 2007, record numbers of new companies have been formed in many of the most popular locations around the world. The formation business is booming and the nature of it means that most companies in the industry service an international client base of entrepreneurs and business owners. It’s one thing to read about the advantages of an offshore/foreign company but actually completing the paperwork to register one is completely different and it’s often most effective to engage an experienced corporate services firm that has the knowledge, experience and contacts to manage the processes. Search online for ‘company incorporation’ and a wealth of options are returned, so how to determine the right one? It’s incredibly important to select the right firm as company incorporation requires knowledge and experience to effectively build a corporate structure and achieve business objectives. Acquisition International speaks to the experts.
DOING BUSINESS IN DUBAI -----------------------------------------------------------------------Adrian Oton, Senior Partner Commercial Division, Europe Emirates Group – Dubai Office, commented: -----------------------------------------------------------------------“I am often asked how you create a leading Premium Brand and the truth is there is no secret to it. It is sheer dedication a passion to succeed and appointing a Senior Management Team that do not work just 9 to 5. “Blood Sweat and Tears – are the key elements - Your team must work with you not for you. When you have the above to a fine art do not concentrate on what works and is right, concentrate on what is wrong and why we went wrong and most importantly why did we did not get it right the first time. “Starting a business is a huge amount of work, requiring a great deal of time, so you better make sure that you enjoy what you are about to do or just don’t do it at all. When I started Europe Emirates from an initial idea, I did not set out to build a the best service provider organization in the UAE, the initial idea was that it would cover expenses, there was little strategy and little thought but a lot of passion and an engrained determination to doing it professionally and above all doing it right. “The name was thought up in a matter of minutes, were do we currently operate Europe where are we expanding to Emirates, there’s the name Europe Emirates, little did I know that there was a plan in the back of my mind, the name in itself signified what was about to be built and still to this date signifies the same, we bridged the cultural void and provided and still provide an ever familiar European Service standard to our operations in the Middle East.
ACQUISITION INTERNATIONAL
“This is the secret of how Europe Emirates became the Leading Corporate Services Provider in Dubai, by delivering a fist class service. We are a service company and we provide the best service at value for money prices and this is what sets us above from the Crowd.
WHY DID YOU CHOOSE DUBAI?
We do not provide a so-called Luxury Service at exorbitant pricing, we provide a Premium Service at a reasonable price and our service is equal or above what others who describe themselves as luxury.
UAE looks set to reap the rewards of a recent EU and US ruling under which banks are now forced to reveal information to tax authorities. Financial institutions in the EU and US are now obliged to either disclose tax and bank information to the relevant tax authority, or charge client a hefty withholding tax.
“Europe Emirates is all about doing something to be proud of, bringing qualified dedicated people together and creating something that makes a real difference to other people’s lives, it is not easy to start a company and to survive, you need to do something different to make it’s a success and this is what we have done we have covered a void in the market to provide real premium service by establishing a team of true professionals who are as passionate about the brand as we are and engaging in constant innovation. “As a leader I know what I want to achieve but to achieve this my team also need to know and want to achieve the same thing “That’s why, my motto is – Do not give me a problem, give me the solution. “This empowers them to actually be able to think and implement their thoughts, in fact it is not even a team it’s a family. I try to make sure that we appoint key personnel who share the same vision and in this way we can run a large group of companies in the same way a small business owner runs a small family business.”
Thanks to the EU Savings Directive of 2003 and recent USEU initiatives to wipe out tax havens, the U.A.E became the better place to incorporate offshore companies for various reasons and purposes.
Though the new directive specifically affects EU residents, a number of banks in ‘tax havens’ have also agreed to exchange customer information, including Jersey, Guernsey, the Isle of Man, the Cayman Islands, Switzerland, Liechtenstein, Monaco and San Marino. The reputation of discretion for some of these countries is being eroded. Since July 1, 2005 in order to keep details of their private, bank customers now have the option of paying a withholding tax, which will be levied directly in the country in which their savings are held.
This will be charged at a rate of 15 per cent for the first three years, 20 per cent for the following three years, and 35 per cent from 2011 onwards. The United Arab Emirates has long enjoyed a reputation as a secure, tax-free jurisdiction for international banking and company incorporation. With this latest development from Europe and the US, UAE company registration and corporate and personal banking options are becoming more popular with international businesses and high net worth individuals. Since the UAE are neither a signatory to the relevant directive, nor agreeing to cooperate with the Organization of Economic Cooperation and Development (OECD), it looks set again even further. Continued on next page...
Another important ingredient to our success is we specialise and endorse that in today’s market place, a one-hat fits all quick fix is neither what the client pays for nor what the clients expect. With our strong commitment to the UAE we provide a One Stop Concept for Individuals & Businesses wanting to set up in the UAE, our services are to lengthy to list in this article however visit t our web page www.uae-eu.com or join us on Face Book for Breaking News on Dubai and our offers and promotions.
Company: Emirates Group Name: Adrain Oton Email: adrian@uae-eu.com Web: www.uae-eu.com Address: Level 41 Emirates Tower Sheik Zayed Road, Dubai, UAE Telephone: +9714 313 2891
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SECTOR SPOTLIGHT:
Forming companies and doing business -----------------------------------------------------------------------Gabriele Giambrone is the founding partner of Giambrone Law ILP, an international law firm with offices in Palermo, Rome, Milan, London and Tunis. They provide legal assistance to the Italian and international community. -----------------------------------------------------------------------WHY DO YOU THINK SOME REGIONS ARE WITNESSING SUCH LARGE GROWTH IN FORMATION LEVELS DESPITE THE ON-GOING DIFFICULT CLIMATE? In Italy, as in most countries, noticeable differences can be seen between regions when it comes to commercial activity and growth. Areas such as Lombardy, Lazio and Veneto will always have relatively large growth in formation levels due to the attractiveness of the cities which are located in them – Milan, Rome and Venice respectively. HOW DOES REGULATION IN YOUR JURISDICTION BENEFIT BUSINESS GROWTH? WHAT CAN YOUR JURISDICTION OFFER TO THE PROSPECTIVE COMPANIES. The regulatory environment for companies in Italy is currently much more liberal than it used to be, thereby encouraging business growth. The past 6 months in Italy has been filled with market regulatory reforms, including the introduction of measures to liberalise retail trade, liberal professions and transport services.
HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION? Doing business in Italy can be quite a complex matter. Public authorities are weighed down with bureaucracy and the legal system in Italy is notoriously slow. However, the new government of Italy is currently working hard to reform the market in order to make it easier for Italians and foreigners alike to conduct business with and in Italy.
With the new reforms being put through by the new government, Italy should be able to increase job creation, encourage foreign investment, and therefore strengthen long-term growth. The liberalisation of the market will make Italy increasingly attractive in the coming months.
CAN YOU HIGHLIGHT THE KEY CHALLENGES OF INCORPORATING OFFSHORE/FOREIGN COMPANIES? One of the key challenges of incorporating an offshore or foreign company in Italy is knowing how to navigate the notoriously bureaucracy-heavy system in place. Successfully communicating with the relevant Italian authorities can be difficult, and is even more so if you do not speak Italian. This can lead to particularly grave consequences such as being unable to obtain necessary permits and licences. AS WE SLOWLY RECOVER FROM THE ECONOMIC DOWNTURN, DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS IN TERMS OF DOING BUSINESS IN YOUR JURISDICTION?
Company: Giambrone Law ILP Name: Gabriele Giambrone Email: info@giambronelaw.com Web: www.giambronelaw.com Address: Via Giovanni Bonanno 122 90143 Palermo, Italy Telephone: +39 091 743 4778
SECTOR SPOTLIGHT:
Forming companies and doing business
One service which is quite often requested is that of having fiduciary shares in the company, so that the identity of the beneficial owners is kept completely confidential. Whilst this is definitely possible, it is important to bear in mind that only an authorised fiduciary company, such as GM Corporate & Fiduciary Services Ltd., can offer such services. -----------------------------------------------------------------------Jean-Pie Gauci-Maistre, partner at GM Corporate & Fiduciary Services Limited comments: -----------------------------------------------------------------------“It is very encouraging to note that Malta’s financial sector continues to thrive. This is mainly due to a mix of components, with some of the non-traditional ones taking on added importance.
The legislative and fiscal advantages of Malta are well known and have proven very attractive to investors. However, factors such as climate, lifestyle and geographical location are offering added value to investors, some of which are actually relocating or spending more time in Malta.
“The Maltese Government and private practitioners have gone to great lengths to ensure that specific legislation is enacted in order for the incorporation and maintenance of different entities to take place within a well regulated jurisdiction. As a result investors have the peace of mind that whether it is a foundation, a trust, a protected cell company or a private limited company that is being set up, specific
ACQUISITION INTERNATIONAL
legislation is in place which allows for clarity and certainty.
shareholders upon receiving dividends from the company.
“In accordance with the Maltese Companies Act the minimum share capital of a company registered in Malta is €1,165 of which at least 20% must be paid upon subscription and deposited in a bank account under the name of the Malta registered business.
When dividends are paid by trading companies to the shareholders, these shareholders become entitled to claim refunds of 6/7ths of the Malta tax paid by the company, which translates into an effective rate of Malta tax of approximately 5%.
The general rule is that a minimum of two shareholders are required in order to set up a Malta company, however, the law does cater for single member companies, subject to certain conditions. The shareholders could be either individuals or corporate bodies.
Should distributions be made out of profits earned from passive interest and royalties, a 5/7ths refund may be claimed by the shareholders of the Malta company when distributions are made to them.
“A Maltese registered company is also obliged to have at least one director, which may be either a body corporate or a natural person. Furthermore, a director may also be a shareholder and in certain cases the secretary. However, there are certain restrictions in place, particularly with regard to single member companies.
The refund on distributions would not apply should distributions be made by a company which has claimed any form of double tax relief. In this case other tax benefits would apply. The above obviously just skims the surface, as there are other tax benefits which investors could avail themselves of. However, these would obviously have to be tailored to the specific structure an investor is incorporating or maintaining.”
Once incorporated, a Malta company is required to submit an annual return to the Registrar of Companies and to have all annual financial statements audited. There are also other documents which need to be filed, for example, VAT Returns may need to be submitted as often as every quarter, depending on the trading activity of the company. “Whether it is income derived from their investments and/or trading activities or income derived from Maltese companies or companies registered outside Malta, the local income tax legislation offers a number of incentives to shareholders of Malta companies. Malta Companies are subject to the normal corporate tax rate applicable to all companies registered in Malta, at 35% on their worldwide income. “Malta operates the full imputation system of taxation whereby the tax paid by the company is available as a credit to the shareholders when distributions are made to them. Company tax of 35% is available as a credit to the
Company: GM Corporate & Fiduciary Services Name: Jean-Pie Gauci-Maistre Email: jplegal@gmint.com Web: www.gmint.com Address: 147/1, St. Lucia Street, Valletta VLT 1185, Malta. Telephone: (+356) 21-235-341 Ext. 156
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SECTOR SPOTLIGHT:
Forming companies and doing business
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Business decisions are rarely black and white. Dynamic organisations know they need to apply both reason and instinct to decision making. We are Grant Thornton and it’s what we do for our clients every day. Contact us to help unlock your potential for growth. Š2012 Grant Thornton UK LLP. All rights reserved. Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Services are delivered independently by member firms. Full disclaimer available at grant-thornton.co.uk
SECTOR SPOTLIGHT:
Comprehensive Due Diligence — the key to M&A Success
COMPREHENSIVE DUE DILIGENCE — the key to M&A Success Effective due diligence through every stage of an M&A transaction is imperative and being aware of any potential risks right from the beginning can save prospective buyers an awful lot of time and money further down the line. Comprehensive due diligence enables such individuals to better understand what they are buying before bearing the risks of ownership. Traditional due diligence techniques often only verify the history of the target and projects the future based on that history; correctly applied due diligence digs much deeper and considers all aspects of a business. -----------------------------------------------------------------------Mehmet Akuğur is the founding partner of Akuğur Law Firm dealing mostly with M&A transactions in every stage including legal due diligence as well. “I take part and lead the team during the whole stage of the transactions.” -----------------------------------------------------------------------WHAT AREAS OF DUE DILIGENCE DO YOU SPECIALISE IN? We specialize in corporate, regulatory, environmental, employment and contractual due diligence. We have conducted legal due diligence related to several M&A deals within the last 5 years the total transaction value of which, is worth €7 billion. CAN YOU PLEASE DESCRIBE A TYPICAL CLIENT? I.E. PUBLIC/PRIVATE, SIZE, LOCATION, AGE ETC. HAS THE PROFILE OF YOUR CLIENT CHANGED AS A RESULT OF THE DOWNTURN?
WHAT ARE YOUR PREDICTIONS REGARDING THE APPETITE FOR COMMERCIAL DUE DILIGENCE OVER THE NEXT 12 MONTHS? As M&A transactions are increasing due to the current commercial trend, appetite for commercial and legal due diligence is also likely to increase accordingly. -----------------------------------------------------------------------Mr. Oriol Pla acts as the IP&LEGAL Operations Manager for Knowledge Innovation Market S.L., a company specialized in technological consultancy services such as commercialization of technologies, internationalization, financing, acquisitions, due diligence, technology transfer and business strategies. -----------------------------------------------------------------------WHAT AREAS OF DUE DILIGENCE DO YOU SPECIALISE IN? Our company is specialized in the execution of Market/ Commercial, Technological and Legal Due Diligence, specifically the analysis of start-ups and spin-offs, while Economical (audit and taxes) and Labor Due Diligence is carried out by specialist collaborative partners . As such, KIM is specialized in the execution of Due Diligence to determine the value and protection of technological assets and to ensure the market feasibility of projects and companies PLEASE GIVE A BRIEF SYNOPSIS OF THE FIRM’S COMMERCIAL DUE DILIGENCE HISTORY.
A typical client for our firm is a private company in mid-large size having the intention for growth. The profile of our client has not changed as a result of the downturn.
Since its foundation in 2007, KIM has been contracted to carry out due diligence reports for more than 50 companies and organizations in different sectors.
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS?
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS?
From our point of view, it is certain that having due diligence examination to be done on behalf of the potential buyer will have positive effects on such buyer since due diligence examination and report will cover all the risks, which may affect the buyer’s discretion whether to purchase shares, after the review of contracts, documents and information obtained from the company, which is the subject matter of the due diligence, and shares of which are sought to be purchased.
It is crucial that a buyer carries out due diligence in order to obtain all the relevant information that will allow for a realistic portrayal of the company and to accurately assess its real value. At the same time, it is important for the seller to identify both real and potential risks and to detect existing dysfunctions in order to successfully redress them. If we take a technological company, for example, it is necessary to undertake an analysis of its assets to determine the competitiveness of the company. This One can then review economic projections and determine a range of value consistent with the market price.
CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF LEGAL DUE DILIGENCE AND DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? Importance of legal due diligence is due to the fact that it will constitute basis for share purchase agreement and shareholders agreement. For instance, after determination of risks to be occurred on the potential purchaser, such agreements shall be composed in the way of eliminating such risks by inserting representation and warranties and conditional precedent clauses. WHY IS COMMERCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A? Due diligence is the preliminary stage to the transaction and does not deal with the terms and conditions of the acquisition such as a share purchase agreement. In addition, in some cases, people may think that they have enough information about the counter party to the transaction; which renders due diligence stage as a formality.
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CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF COMMERCIAL DUE DILIGENCE AND DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? Conducting commercial due diligence is required in any M&A operation since it allows for the reviewing, analysis and evaluation of a company’s viability, business plan, revenues or value in the context of projected market conditions for the industry and it identifies the operational risks. KIM uses a successful methodology that permits indentification of the capacities and synergies between companies, projects and technologies in different markets, and informing the client about how to manage these to increase its value. It also allows buyers or sellers to use the information obtained during this period as a tool for negotiating the final terms of the contract price, payment, liability and warranties. WHY IS COMMERCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A?
In our opinion the commercial side is the most important aspect of due diligence. KIM is a specialized agent in the analysis of the potential of a company, a project, a technology or asset, from a market and commercial point of view.
Our team is composed of more than 20 doctorate and master degrees in diverse, multi-disciplinary areas. We successfully combine comprehensive market knowledge and legal expertise in the execution of due diligence. Our main goal is to offer our clients the best/highest quality services to make sure they achieve maximum benefits from due diligence.
Company: Akuğur Law Firm Name: Att. Mehmet Akuğur Email: mehmeta@akugurlaw.com Web: www.akugurlaw.com Address: Çilekli Cad. No:10 Levent, 34330, Beşiktaş, İstanbul Telephone: +9 (0212) 2864828
Company: Knowledge Innovation Market S.L. Name: Mr. Oriol Pla Email: opla@kimglobal.com Web: www.kimglobal.com Address: Tec 22@- Veneçuela 103, 1st floor08019 Barcelona (Spain) Telephone: + 34 93 266 71 38
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Comprehensive Due Diligence — the key to M&A Success
WHAT AREAS OF DUE DILIGENCE DO YOU SPECIALISE IN? Our company is specialized in the execution of Market/ Commercial, Technological and Legal Due Diligence, specifically the analysis of start-ups and spin-offs, while Economical (audit and taxes) and Labor Due Diligence is carried out by specialist collaborative partners . As such, KIM is specialized in the execution of Due Diligence to determine the value and protection of technological assets and to ensure the market feasibility of projects and companies PLEASE GIVE A BRIEF SYNOPSIS OF THE FIRM’S COMMERCIAL DUE DILIGENCE HISTORY. Since its foundation in 2007, KIM has been contracted to carry out due diligence reports for more than 50 companies and organizations in different sectors. WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS? It is crucial that a buyer carries out due diligence in order to obtain all the relevant information that will allow for a realistic portrayal of the company and to accurately assess its real value. At the same time, it is important for the seller to identify both real and potential risks and to detect existing dysfunctions in order to successfully redress them. If we take a technological company, for example, it is necessary to undertake an analysis of its assets to determine the competitiveness of the company. This One can then review economic projections and determine a range of value consistent with the market price. CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF COMMERCIAL DUE DILIGENCE AND DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? Conducting commercial due diligence is required in any M&A operation since it allows for the reviewing, analysis and evaluation of a company’s viability, business plan, revenues or value in the context of projected market conditions for the industry and it identifies the operational risks. KIM uses a successful methodology that permits indentification of the capacities and synergies between companies, projects and technologies in different markets, and informing the client about how to manage these to increase its value. It also allows
ACQUISITION INTERNATIONAL
buyers or sellers to use the information obtained during this period as a tool for negotiating the final terms of the contract price, payment, liability and warranties. WHY IS COMMERCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A? In our opinion the commercial side is the most important aspect of due diligence. KIM is a specialized agent in the analysis of the potential of a company, a project, a technology or asset, from a market and commercial point of view. Our team is composed of more than 20 doctorate and master degrees in diverse, multidisciplinary areas. We successfully combine comprehensive market knowledge and legal expertise in the execution of due diligence. Our main goal is to offer our clients the best/highest quality services to make sure they achieve maximum benefits from due diligence. -----------------------------------------------------------------------Advention was founded eleven years ago and has now performed about six hundred strategic reviews for more than one hundred different private equity funds worldwide as well as for large global corporations. -----------------------------------------------------------------------Advention’s client portfolio includes 80% of corporations and 20% of private equity funds. Corporations include large S&P500like groups as well as medium-sized privately-owned companies. Private equity clients include large international funds as well as funds specialized in mid-caps and small-caps.
THAT CAN ARISE WHEN STEPS ARE MISSED IN THE DUE DILIGENCE PROCESS? “It can simply lead to a misrepresentation of the reality of the situation from a strategic or commercial point of view.” WHAT METHODS AND STRATEGIES DO YOU USE TO COMPILE A COMMERCIAL DUE DILIGENCE PLAN? “We heavily invest time, money and resources in combining the use of traditional secondary public or semi public sources of information along with primary data coming from external interviews with qualified contacts (suppliers, competitors, clients, experts, etc.)” WHAT ARE YOUR PREDICTIONS REGARDING THE APPETITE FOR COMMERCIAL DUE DILIGENCE OVER THE NEXT 12 MONTHS? “The appetite for commercial due diligence over the next 12 months will most likely increase as investors will need to further secure their investment decisions and bankers will also ask for it.”
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS? “Effective strategic due diligence is imperative in M&A transactions because even if you have performed the best legal and financial diligences and yet the business is not there tomorrow, the transaction will then simply prove a failure.” WHY IS COMMERCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A? “It is still too often considered as having a minor impact on the M&A decision and it is also too often considered that the management in place knows better.”
Company: Advention Business Partners Name: Alban Neveux Email: alban.neveux@adventionbp.com Web: www.adventionbp.com Address: 6 rue Anatole de La Forge – 75017 Paris Telephone: +33 6 10 94 33 39
WHAT ARE SOME OF THE MOST COMMON PROBLEMS
July 2012 /
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SECTOR SPOTLIGHT:
Strategic due diligence for the media & information sector
STRATEGIC DUE DILIGENCE — for the media & information sector Effective due diligence through every stage of an M&A transaction is imperative and being aware of any potential risks right from the beginning can save prospective buyers an awful lot of time and money further down the line.
London / England
Comprehensive due diligence enables such individuals to better understand what they are buying before bearing the risks of ownership. Traditional due diligence techniques often only verify the history of the target and projects the future based on that history; correctly applied due diligence digs much deeper and considers all aspects of a business. Claus Werner is Ocean Strategy’s Director with responsibility for the strategic due diligence practice and has overseen the majority of the £8BN cumulative deal value that Ocean has participated in since foundation in 2000. Ocean is the leading specialist media and information strategy consultancy. We advise investors seeking to buy media companies and provide strategic advisory services to leading media owners internationally. Deep insight and operational experience, combined with the very best in analytics, captures the firm’s approach to strategy and M&A for the media and information sector. Total sector immersion makes Ocean rare in a market of generalist providers and enables the company to provide the deep industry knowledge well known to their international client base and the driver of four consecutive years of strong growth. WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS? “Of course the basic confirmation of the market and the business is key to any strategic due diligence, but Ocean’s approach is to really challenge the proposed strategy in the business and add value to the transaction by optimizing the growth strategy in the asset. Ocean can do this because of our deep insight into the sector and ongoing experience working with media owners directly to find and prove growth strategies”.
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CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF COMMERCIAL DUE DILIGENCE AND DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? “In Ocean’s experience, this is the key piece of work in any acquisition. While in part it plays a role confirming the market the target operates within, and the position it occupies, Ocean’s approach emphasises the assessment of the growth strategy for the business, typically challenging the existing strategy for the target and developing an optimised growth strategy for the buyer. As such, good strategic due diligence, with the right implementation post acquisition (where Ocean also often participates) can be transformational.” WHAT ARE SOME OF THE MOST COMMON PROBLEMS THAT CAN ARISE WHEN STEPS ARE MISSED IN THE DUE DILIGENCE PROCESS?
the worlds leading media owners. This ensures we have a deep understanding of the sector and can avoid the typical strategic due diligence pitfalls.” WHAT METHODS AND STRATEGIES DO YOU USE TO COMPILE A COMMERCIAL DUE DILIGENCE PLAN? “While we take insight across media and geographies, and have more than a decade of experience in commercial due diligence, every process is tailored to suit the needs of the buyer.” WHAT ARE YOUR PREDICTIONS REGARDING THE APPETITE FOR COMMERCIAL DUE DILIGENCE OVER THE NEXT 12 MONTHS? “Slow growth in mature markets, some forced sales due to debt burdens and financial pressures, ongoing uplift in high growth markets. Quality of diligence will continue to grow in importance may favour sector specialists like us.”
“Potential buyers often lack detailed understanding of the asset in one of three areas: 1: What is the real position of the asset within its market? Often companies believe they are buying into market leading positions, but digital disruption means that this position may not reflect reality. 2: What are the structural and cyclical impacts on the asset? Frequently the economic cycle can disguise an underlying structural effect. 3: What are the real opportunities for growth? Post-recession, growth strategies which are innovative and seek diversified revenue streams and new positions are key to optimising assets. Ocean’s unique position as media specialists who have both strategic and operational expertise within our skillset, allows us to not only advise buyers, but also work directly with many of
Company: Ocean Strategy Name: Claus Werner Email: claus.werner@oceanstrategy.com Web: www.oceanstrategy.com Address: 19 Buckingham Street, London, UK, WC2N 6EF Telephone: +44(0)20 7451 3720
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Asset Based Finance Industry in the UK
THE ASSET BASED — Finance Industry in the UK
Once thought of as a last-resort, asset-based financing has become a key source of credit for small and mediumsize companies as well as for some larger, publicly traded companies. According to a survey by the Asset Based Finance Association (ABFA), after a record year in 2011, the popularity of asset based finance will continue to grow in 2012. The Chief Executive of the Association, Kate Sharp has suggested that “As other forms of finance become harder to secure, the industry is predicting a strong 9% growth rate in total funding as firms look to secure the capital they need”. Further statistics to back this trend have been released by the Finance & Leasing Association and these show that asset finance for investment in plant and machinery grew in Q1 2012 by 26% compared with Q1 2011. Acquisition International speaks to the experts. -----------------------------------------------------------------------James Marler, is Manager of Asset Based Lending at The Bank of London & The Middle East. BLME has developed its ABL product offering over the last two years to complement its existing suite of asset backed products; namely property development, leasing and trade finance. -----------------------------------------------------------------------HOW ARE YOUR SERVICES SUPERIOR TO THOSE OF YOUR COMPETITORS? We offer a one stop service funding receivables, inventories, plant & machinery and property alongside cash-flow finance, guarantees and letters of credit, all dealt with through the client’s relationship manager. Our terms are competitive since we are a well-capitalised bank. WHAT FACTORS HAVE CONTRIBUTED TO ASSET-BASED FINANCING BECOMING A KEY SOURCE OF CREDIT FOR SMALL AND MEDIUM-SIZE COMPANIES AS WELL AS FOR SOME LARGER, PUBLICLY TRADED COMPANIES? ABL facilities grow alongside burgeoning businesses providing a catalyst for growth whilst not over leveraging the entity in the short term. The amounts advanced reflect the true value of the business as the borrowing base is calculated from the value of the underlying assets. For larger companies, the fact that vast sums of money can be released from the working capital cycle is key to ABL’s attractiveness. DO YOU OFFER ANYTHING UNIQUE THAT YOUR COMPETITORS ARE NOT? FOR AN EXAMPLE – NON PG’S FOR START-UPS, A HIGH FINANCE % ON INVOICES OR ANY CREATIVE, NON-TRADITIONAL FUNDING METHODS. Our corporate banking team is closely integrated and as such clients can take advantage of our ability to interlink products from across our trade finance, leasing and property teams to create complete bespoke financing products suitable to individual needs at very competitive pricing without utilisation fees.
ACQUISITION INTERNATIONAL
HOW DOES THE VALUE OF ASSET-BASED FACILITIES VARY ACROSS BUSINESS SITUATIONS, WHETHER PLANNING FOR AN ACQUISITION, RESTRUCTURING OR JUST IN NEED OF INCREASED WORKING CAPITAL? ABL lends itself to growing entities as it can grow alongside them. Similarly in a restructuring scenario, given good asset cover it can be viable where other forms of financing may not be. In terms of leveraging a buyout, the quantum offered by ABL is now competing with leveraged cash flow finance. CAN YOU PLEASE DEFINE THE MAJOR DEVELOPMENTS AND THE KEY CHALLENGES FACING THE INDUSTRY OVER THE COURSE OF 2012? ABL will continue to become a more mainstream source of funding for SMEs as can be seen happening at present in the US. Facilities will need to adapt to the business models of our clients with new lines added to existing packages to increase flexibility. BLME has offered import guarantees and Letters of Credit in addition to existing ABL lines where it has suited the client’s business. A more in-depth understanding of clients’ businesses is therefore integral to our success. -----------------------------------------------------------------------CEO Philip White, on behalf of Syscap comments on why the goal is still wide open for asset finance in the UK as the cost of borrowing increases: -----------------------------------------------------------------------“With the UK back in recession, it has been well documented by the national media that the banks remain reluctant to lend to small businesses. “The introduction of the new National Loan Guarantee scheme was supposed to help fill the gap by boosting lending to small businesses and make it easier for banks to buy wholesale credit. Yet banks remain as wary as ever to lend to small businesses; the latest data from the Bank of England shows lending is still in decline. “Now it appears that the cost of lending to small businesses is on the rise too, adding to their woes. Recent data shows that small businesses are now paying the highest interest rates in three years on loans of less than £1 million, typically around 40% more than loans between £1 - 20 million, requested by bigger corporations.
“But, as they say, every cloud has a silver lining. With banks turning away small business customers they are seeking alternative financing, which in many ways may be more suitable for businesses than a traditional loan. For example, if an SME is looking to acquire a long term asset such as IT or machinery, they are generally much better off using a lease to fund that investment, rather than paying through the nose to borrow from their bank. This is why leasing has risen 7% in the past year. “With leasing, the lender has security in the asset, which means they can lend at more appropriate rates of interest using more appropriate products for an agreed term, unlike some bank facilities that can be withdrawn on a whim like an overdraft, leasing gives SME’s a little more peace of mind. “It seems too many banks are not looking long term enough when it comes to lending, preferring to shore-up capital for investment in areas they see as more profitable right now rather than investing in the businesses of the future. “While the Government’s National Loan Guarantee scheme shows that they have the plight of SME’s in mind, getting banks to honour their agreements seems to be proving tricky. In the meantime small businesses can look to alternative sources of finance, such as leasing, which offers far more competitive financing options.”
Company: Bank of London & Middle East Name: James Marler Email: james.marler@blme.com Web: www.blme.com Address: Sherborne House, 119 Cannon Street London, EC4N 5AT Telephone: +44 207 618 0060
“Of course, the reasoning for this is that banks need to mitigate the risk of these small businesses failing, but many SMEs being charged these high rates are perfectly viable, with established credit histories. “Businesses, rightly or wrongly, are growing frustrated by their high street banks. We found that an increasing number of small businesses are now taking their complaints directly to the Financial Ombudsman Service (FOS). The most common complaint is that they are struggling to renew a loan or overdraft facility with their bank, or are having them withdrawn at very short notice.
Company: Syscap Ltd Name: Philip White Email: info@syscap.com Web: www.syscap.com Address: Wimbledon Bridge House, 1 Hartfield Road, Wimbledon, London SW19 3RU Telephone: 0208 254 1800
July 2012 /
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SECTOR SPOTLIGHT:
Pension Obligations and Issues in Corporate Transactions
PENSION OBLIGATIONS — and Issues in Corporate Transactions
When buying, selling or restructuring a business there are likely to be potential risks relating to pensions schemes. Pension deficits are widely seen as one of the most important and complex issues for corporate transactions, failure to take adequate care of pension arrangements in a transaction can make or break a deal and turn a good purchase into a costly mistake.
So many businesses and their management teams underestimate how important pension de-risking is. Acquisition International speaks to the experts.
WHY COULD FAILURE TO TAKE ADEQUATE CARE OF PENSION ARRANGEMENTS IN A TRANSACTION POTENTIALLY BREAK A DEAL?
-----------------------------------------------------------------------Andrew Vaughan is a Partner at Barnett Waddingham LLP where he has advised a number of major multi-national organisations in relation to their UK pension arrangements. -----------------------------------------------------------------------WHEN BUYING, SELLING OR RESTRUCTURING A BUSINESS WHAT ARE THE KEY RISKS RELATING TO PENSION SCHEMES?
“The obvious pitfalls are financial, e.g. past service pension liabilities were understated, or future service obligations misunderstood. If such issues arise due to inadequate duediligence then they can certainly stop a deal from stacking up on financial grounds.”
“It is important to understand the future service pension obligations involved and the extent to which an entity may become liable for any deficits in funding for past service pensions. For restructures, it is important to keep an eye on Section 75 issues, which could inadvertently trigger a debt for the funding deficit on a buyout basis if the last active member of a scheme with a particular employer is transferred.
In relation to corporate transactions, our firm advises exclusively on the actuarial pensions issues, rather than trying to also cover the legal, audit, covenant and non-pensions advice in a single sweep.
“Employers need to engage with the trustees of any pension schemes involved in the transactions at an early stage (with confidentiality agreements in place) as they are likely to seek independent advice on the impact on employer covenant and may negotiate for an injection of funds, or contingent guarantees, if they feel there is any risk to future benefit payments.
WHAT MAKES YOU A LEADING PLAYER IN THIS FIELD?
“There are also risks connected with regulatory bodies. The Pensions Regulator can use its “moral hazard” powers to demand financial support to the pension scheme(s) involved.
“Not only does this help to ensure the highest levels of expertise, but we believe this unbundled approach provides our clients with better flexibility to focus on the issues that are most important to their business.”
“The employer may also need to negotiate with the Pensions Regulator (and possibly the Pension Protection Fund) over clearance or any materially detrimental events.”
DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS IN TERMS OF THIS AREA OF EXPERTISE? “We predict that companies will continue to de-risk if market
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conditions facilitate. We expect increased due diligence taking place for transactions. We also expect to see transactions taking place where pension liabilities are increasingly “left behind” with the seller rather than transferred across to the purchaser.” -----------------------------------------------------------------------James Smith is head of de risking services at First Actuarial, he commented: -----------------------------------------------------------------------“Taking account of pension promises in business transactions is essential. Pension promises can have a huge drain on future resources and so should be investigated and taken account of in the price paid for the Company. Proper due diligence will spot potential problems which could cost a significant amount to sort out after the sale. “However, once the transaction is complete, there are actions that can be taken to reduce the risk and the cost of the pension scheme. These include • Changing what benefits are provided in the future • A variety of investment related strategies • Incentive exercises such as offering enhanced transfer values if members transfer their benefits out of the scheme. “At First Actuarial we specialise in de risking solutions for smaller pension schemes. And there are a number of actions that can be taken which are only available to smaller pension schemes. Consider the following: “Buying out benefits on an “impaired life” basis. One way of reducing risk is to buy out the benefits with an insurance company. “However, rather than the cost being based on the assumption that all members of the scheme are in average health, if you ask all members to complete a simple health declaration and reflect members’ health in the buyout, the cost could be significantly
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Pension Obligations and Issues in Corporate Transactions
reduced. It may even be cheaper to buy them out than continue paying them from the scheme. “Making the scheme uniform. Where possible remove benefits that are unusual and which an insurance company won’t like. Remove any large pensions that stand out. This makes the pension scheme more attractive to an insurance company and the insurance company will be keener to offer better terms when it comes to buying out the benefits. “So once the business transaction is complete, take control of the pension scheme rather than letting the pension scheme take control of you.” -----------------------------------------------------------------------Premier is a national employee benefit consulting specialising in advising Trustees and Sponsoring employers on all aspects of pension scheme management. Over the years pensions has moved from being one of the last things to be considered in any form or corporate transaction to being a major part of any deal. Indeed there are now a number of examples of deals that have failed due to the fact that it has not been possible to reconcile the pension issues. -----------------------------------------------------------------------“The Pensions Regulator has focused all Pension Trustees on the Employer Covenant; the ability of the sponsor to support their arrangement. This Covenant is inevitably affected by a corporate transaction. “We have advised a number of trustee boards and companies on these issues. We have recently advised a Company in a recovery situation looking to re-organise to save the business. The support of the Trustees to an easing of the required contributions has saved the employer from liquidation. “Elsewhere we have advised on a corporate demerger where the intention is to leave all of the pension liabilities with one employer which weakened the Covenant. Negotiation of mitigation for the pension scheme was crucial to the success of the deal. Whilst advice once a deal has been proposed is critical we have also advised a number of clients on de-risking their pension arrangements ahead of any potential transaction to reduce risk and ease the process. “Our experience ranges across all types of scheme and employer but one factor common to them all is the need to get good advice early in the process. We look to ensure that all parties are ready for a transaction well in advance of any being proposed. Feel free to call us for a confidential and free view on what you should be doing.” Robert Hunt is Head of Corporate Solutions at Xafinity Consulting. “We provide advice for buyers, sellers and Trustees in areas such as Price Negotiation, Due Diligence, Liability Management and exit strategy.” -----------------------------------------------------------------------HOW DOES YOUR FIRM STAND OUT FROM LOCAL COMPETITORS IN TERMS OF THE SERVICES YOU OFFER? -----------------------------------------------------------------------“The key to any transaction is understanding and quantifying the risks. We provide advice using Model Solutions, our actuarial software. This enables clients to make more informed decisions by modelling and understanding their scheme risks through the presentation of relevant scenarios pictorially and in real time.
ACQUISITION INTERNATIONAL
WHEN BUYING, SELLING OR RESTRUCTURING A BUSINESS WHAT ARE THE KEY RISKS RELATING TO PENSION SCHEMES? “The main risk is not appreciating and hence quantifying the risks a DB pension scheme can expose them to, for example, risk associated with investment return, inflation, longevity, and data.” WHY ARE PENSION DEFICITS WIDELY SEEN AS ONE OF THE MOST IMPORTANT AND COMPLEX ISSUES FOR CORPORATE TRANSACTIONS?
Pension scheme liabilities can be large and volatile. A small change in bond yields can have a large impact on pension liabilities; this can significantly impact on a company’s purchase price. Pensions is complex because of the many ways the value of liabilities can be assessed, all of which may have a different purpose and require different assumptions. HOW DO YOU AND YOUR TEAM DE-RISK PENSION SCHEMES? AND HOW DO THE SERVICES YOU OFFER DIFFER WHEN DEALING WITH DIFFERENT SIZED COMPANIES? “Progressively moving investments from ‘real’ assets to matching assets, buying-in/out scheme benefits, enhanced transfer value (ETV) exercises, pension increase exercises etc. These are highly dependent on economic conditions. With Model Solutions companies can monitor funding levels on the key liability measures to identify when a particular de-risking strategy may be appropriate.”
Company: Barnett Waddingham LLP Name: Andrew Vaughan Email: corporateconsulting@ barnett-waddingham.co.uk Web: www.bwllp.co.uk/corporate-consulting Address: Cheapside House, 138 Cheapside, London, EC2V 6BW Telephone: 020 7776 2200
Company: First Actuarial Name: James Smith Email: james.smith@firstactuarial.co.uk Web: www.firstactuarial.co.uk Address: 182 High Street, Tonbridge, Kent TN9 1BE Telephone: 01732 375 672
Company: Premier Name: John Reeve FIA BSc Email: John.reeve@premiercompanies.co.uk Web: www.premiercompanies.co.uk Address: Corinthian House, Lansdowne Road, Croydon CR0 2BX Telephone: 07971 890440
WHAT MAKES YOU A LEADING PLAYER IN THIS FIELD? “Our understanding of the issues and our use of innovative modeling tools to quantify and help mitigate pension scheme risk .” DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS IN TERMS OF THIS AREA OF EXPERTISE? “Many de-risking strategies are unlikely to be implemented until economic conditions improve, however many schemes will put processes in place so that they can take advantage of any improvements. The secret is to plan ahead and to be in a position to move quickly when the time is right!”
Company: Xafinity Consulting Name: Robert Hunt Web: www.xafinity.com Address: Head Office 42-62 Greyfriars Road Reading Berks RG1 1NN Telephone: +44 (0) 118 958 3683
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SECTOR SPOTLIGHT:
Doing business around the world
DOING BUSINESS — around the world CYPRUS Banking sector problems, weak tourism from the EU and the need for sharp public sector cutbacks rule out any return to growth this year and a return to recession is now expected. Although deficit reduction targets for 2012-14 will be missed, cost cuts now being enforced will help to revive tourism growth after a bad first quarter, limiting the slide in GDP to just over 1% this year. The government is committed to retaining the 10% corporate tax rate and tax treatment for finance and shipping that ensures a large services surplus. But other tax rates are being forced up and the trade gap means a persistent current account deficit, imposing a financing constraint that will limit GDP growth in 2013-14. Cyprus is connected to Greece through its banking system which has largely been downgraded due to heightened risks in Greece.
Cypriot banks are estimated to have €4.2 billion of exposure to Greek sovereign debt and a Greek default would cause serious problems for Cyprus. Monetary conditions are tightening as banks limit lending while they deal with the effects of the Greek debt write-off, and emergency sales will keep the property market subdued. The government budget deficit is estimate to fall to 4% of GDP in 2012 from an estimated 6.5% in 2011, but will be higher than the government’s 2.8% target. Acquisition International speaks to the experts. Anastasia Papadopoulou is Partner at Tassos Papadopoulos & Associates LLC, one of the leading law firms in Cyprus providing a full range of legal services. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? Our firm has lawyers trained in many different countries and legal systems and as such has always been a very international business based firm. Further to that, the clientele of the firm includes local and international banking institutions, semi-governmental organizations including the Cyprus Stock Exchange, municipalities and other local authorities, individuals, local and international building and engineering contractors, publicly listed companies, investment firms and insurance companies. HOW HAS CYPRUS COPED WITH THE ON-GOING DEBT CRISIS IN EUROPE AND WHAT AFFECT THIS HAS HAD ON THE ECONOMY? Tourism has not faced such a downturn since we receive tourists from destinations outside of Europe such as Russia.
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Tourism is the one industry that has assisted our economy in the past years but because of increased debt and the banking sector problems Cyprus has just applied for assistance to the European Union Fund. WHAT METHODS HAVE THE GOVERNMENT PUT IN PLACE TO REDUCE THE BUDGET DEFICIT AND ENCOURAGE GROWTH? There is in place a moratorium on new positions for any government positions. Further, civil servants are now contributing more to the pension fund, and there is also a freeze of salary increases. Cyprus will be negotiating new measures with the European Assistance Fund. WHAT IS CYPRUS CURRENTLY DOING TO IMPROVE ITS BUSINESS ENVIRONMENT IN 2012? WHAT METHODS AND INCENTIVES HAS THE GOVERNMENT PUT IN PLACE TO MAKE ATTRACT FOREIGN INVESTORS? It had maintained the tax system as is and in fact is considering further tax incentives such as tax-free revenues from intellectual property rights. WHAT METHODS HAVE BEEN PUT IN PLACE TO PROTECT THE ECONOMY IN 2012? AND WHEN DO YOU THINK THE CYPRIOT ECONOMY WILL RETURN TO GROWTH?
international operations, or alternatively wanted to divest certain parts of their group of companies. In addition, Solveigh has been involved in several flagship transactions in the market including Management Buy Outs in a variety of sectors.
In 2004, following the need of Global M&A partners to get access to China, Solveigh decided to develop an own practice in China, jointly with local partners in Hong Kong and Beijing. In 2011, a next step was taken to further expand the team in China. Business developed so well that since 2012 the center of gravity of Solveigh has moved to Hong Kong and the largest part of its team is located there, supported by a representative office in Beijing.
This will be much clearer once the terms for the loan from the European Fund will be decided which will hopefully before the end of the year.
NETHERLANDS Netherlands GDP is expected to contract 0.8% in 2012 as opposed to last year’s growth of 1.3%. This is largely due to the Dutch economy’s heavy reliance on exports to other Eurozone countries. Exports in The Netherlands account for about 77% of the GDP, of which 60% goes to Eurozone nations only. This is a big blow to the economy as almost the entire Eurozone has curbed government and public spending to deal with the economic crisis. A recovery is expected toward the end of 2012 and growth should return to a predicted 1.2% in 2013 and 2.0% in 2014. Consumer confidence declined to an all-time low as of April 2012, according to a CBS survey. Unemployment is at 5.9%, which is relatively low compared with other EU nations, while inflation is at 2.4%. Also, the government debt is much lower than other Euro zone nations at 66% of GDP. No surprise then that Netherlands is one of the only four nations enjoying an AAA rating from credit agencies. One ray of hope is Germany, the number one Dutch importer. Germany’s improving economic conditions may revive Netherlands’ foreign trade again. Nevertheless, clouds of uncertainty still loom over the Netherlands’ economic fate. Solveigh is an investment banking advisory firm that has developed towards an exclusively focused specialist for cross border strategic M&A between China and the Western world. The firm was founded in 1998 in the Netherlands by Ernst Jan Kruis and shortly after became a partner-firm in Global M&A, one of the leading international partnerships for cross border M&A with presence in over 40 countries to date. Since its incorporation, Solveigh has served a growing number of multinational firms that wanted to further expand their
Company: tassos papadopoulos & associates LLC Name: Anastasia Papadopoulos Email: apapadopoulos@tplaw.com.cy Web: www.tplaw.com.cy Address: 2 Sofouli street, Chanteclair Building, 1096 Nicosia, Cyprus Telephone: +357 22 88 99 99
Solveigh’s Dutch Office: Westersingel 106, 3015 LD Rotterdam. Contact: Debora Op den Brouw, T: +31 10 2381800, dopdenbrouw@solveigh.nl. Solveigh’s Dutch Office: Hong Kong office: Suite 2001, 20/F, Queen’s Place, Queen’s Road Central, Hong Kong. T: +852 3695 5001. Contact: Ernst Jan Kruis, ejkruis@solveigh.com Beijing office: Contact Melonie Tan, mtan@solveigh.com, T: +86 186 0112 8963, Web: www.solveigh.com
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SECTOR SPOTLIGHT:
Doing business around the world
The Dutch office in Rotterdam is focusing on support to Dutch and European clients with an interest to invest in China and simultaneously for Chinese clients willing to expand in Europe. Key industries served are Energy and Resources, Food and Agricultural markets, Technology driven companies and Luxury goods. Since 2012, the largest part of Solveigh’s team is Chinese. Over the years a sound trackrecord has been developed which is available at request.
DOING BUSINESS IN SINGAPORE According to the 2012 World Bank’s Ease of Doing Business Index, Singapore ranks 1st in the world for the 6th consecutive year due to factors such as the ease of starting a business, dealing with construction permits, the ease of trading across borders and protecting investors. Although the cost of doing business in Singapore is on the increase due to inflationary pressures, they are still significantly lower than the GCC. Additionally, Singapore’s sophisticated business infrastructure and connectivity, stable political environment and sound fiscal policies are some of the reasons why foreign entrepreneurs choose Singapore as their preferred company setup location. The Ministry of Trade & Industry recently reported that the economy grew 1.6% yearon-year in the first quarter of 2012, unchanged from the Government’s advance estimate, and that gross domestic product was 10% higher in January through March than in the preceding three months. Asian economies have better immunity to Eurozone’s fiscal issues when compared with so many other regions generally speaking, Singapore is certainly well-placed to generate acquirers for the future where the cash available to the biggest corporates has grown 72% within recent years. Acquisition International speaks to the experts. Established in 2008, TJCLC is a corporate and commercial boutique law firm specialising in the niche area of broadbased high-value regional cross-border practice whilst offering quality conveyancing and real estate legal services. TJ Cheng is the founder and the director of TJ Cheng Law Corporation. Our corporate clientele includes state-owned corporations, multinational oil and energy conglomerates and public-listed companies in the manufacturing and trading, petroleum and chemicals, energy, natural resources and mining industries. Our wide spectrum of conveyancing clients range from corporations to individuals. WHAT FACTORS HAVE CONTRIBUTED TO SINGAPORE RANKING 1ST IN THE WORLD FOR THE 6TH CONSECUTIVE YEAR ON THE 2012 WORLD BANK’S EASE OF DOING BUSINESS INDEX? “Global businesses will find it advantageous to site their headquarters in Singapore. Strong trade and investment makes Singapore the most competitive Asian country (Global Competitiveness Report 2008). The World Bank also ranks the Republic as the world’s easiest place to do business (Doing Business 2009 report). By situating their international HQs here, companies benefit from Singapore’s network of over 50 comprehensive Double Taxation Avoidance Agreements. They also gain from Singapore’s many free trade agreements and the 35 Investment Guarantee Agreements. These FTAs have enable Singapore to establish a network to countries that contribute at least 60% of global GDP. Companies can always rely on protection of their ideas and innovations through Singapore’s rigorous enforcement of its strong intellectual property laws.
ACQUISITION INTERNATIONAL
Singapore is incentivizing entrepreneurs to acquire and register Intellectual Property Rights (IPRs) via the Productivity and Innovation Credit (PIC) Scheme. Under the PIC scheme, the owner of a Singapore-registered company will automatically enjoy 400% tax savings or a 60% cash payout should he register or acquire intellectual property such as trademarks and patents. Singapore is a leading provider of services such as international banking, trade finance, maritime finance, insurance, treasury operations, and asset and wealth management within the region. Singapore is the fourth largest foreign exchange trading centre in the world. Singapore is also as an optimal destination for the centralisation of services or “shared services”. WHY ARE COSTS OF DOING BUSINESS IN SINGAPORE ON THE INCREASE? AND WHY ARE THEY STILL DUE TO STILL SIGNIFICANTLY LOWER THAN THE GCC? “Increase in general cost of constructions and building materials, increase in rentals, inflationary pressures, declining labour pool, ageing population. “ WHAT ARE THE KEY REASONS FOR FOREIGN ENTREPRENEURS CHOOSE SINGAPORE AS THEIR PREFERRED COMPANY SETUP LOCATION? “Ease of incorporation involving few administrative procedures, no more than a few days and minimal costs. Further, Singapore is known for integrity, quality, reliability, productivity, rule of law, and enforcement of intellectual property rights. It also has competitive tax rates and tax laws. These assets are essential for the proliferation of business.” WHY DO ASIAN ECONOMIES HAVE BETTER IMMUNITY TO EUROZONE’S FISCAL ISSUES?
of unemployment fewer people are paying income tax and France’s welfare spending is up to 28.4% of GDP. Its public spending is the second highest in Europe at 56.2% of GDP in 2011. Debt amounts to a relatively high 85.8% of the country’s gross domestic product and is due to rise to 89% this year. Ludovic Lemoine is the Relocation Manager for Grospiron Relocation Services (GRS). The firm has membership to the following associations: EURA, ERC, and ONE GROUP. PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS. GRS provides relocation services since 10 years. We preciously deal with our Clients providing them the best quality service level they expect to fully satisfy their employees. Working with our clients since the beginning of a project is the goal we reached sharing our expertise and participating on their “cost reduction” policy. So, we provide our clients with all inbound and outbound destination services such as home finding, schooling, short term accommodation, immigration, bank account opening, intercultural training, language training… We tend to make strong an long term partnership with all our providers. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? Our staff does not only come from other relocation o moving companies but they work with us since a long time participating on many business plan. They are also very sensitive on cultural aspect and communication side which make the difference as a service delivery company. We are now the only company on the way for ISO 27001 certification on our activity and this is thanks to the involvement of the whole company. Quality, Trust and Strength are our dedications. The most important element is to know how to deliver a service.
“According to recently released data from Fitch Ratings, Asian economies have better immunity to Eurozone’s fiscal issues than other regions as they have 1) limited exposure to European banks and 2) are more dependent on trade of consumer exports than they are of foreign bank lending.” IN YOUR OPINION HOW DOES SINGAPORE FARE WHEN COMPARED WITH ITS NEIGHBORING COUNTRIES? “One of the top economies in the SEA region due to strong fundamentals, business and legal infrastructure, ease of doing business and consequent capital inflows into the country. It is a resilient economy which bounced back almost unscathed from the Lehman financial crisis.”
FRANCE France’s economy grew 1.7% in 2011, slightly faster than the 1.5% euro zone average boosted by strong corporate investment. The European Debt crisis has contributed to slowed growth in 2012 which is predicted to stagnate in the first two quarters of the year and grow just 0.5%. Double-digit unemployment, chart-topping public spending, and rising labour costs are all contributing to a bleak economic outlook. The current political situation will also keep growth subdued for the time being. The new government and President will likely need to implement further fiscal changed to address the economic stagnation. Fiscal tightening across Europe has weighed down on external demand for French goods. Consumer spending will be constrained by the on-going rise in unemployment and is expected to increase only 0.3% in 2012. Job vacancies have fallen and unemployment is on the rise passing 10% peak during the 2009 crisis. With high levels
Company: TJ Cheng Law Corporation Name: Cheng Tim Jin Email: tj@tjlawcorp.com Web: http://tjlawcorp.com Address: Neil Road 23A Singapore 088815 Telephone: (+65) 6223 3286
Company: Grospiron International Name: Ludovic Lemoine Email: l.lemoine@grospiron.com Web: www.grospiron.com Address: Offices in Lille, Lyon, Marseille, Nice, Paris and Toulouse Telephone: + 33 1 48 14 42 42
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SECTOR SPOTLIGHT:
Doing business around the world
LUXEMBOURG While the rest of euro zone is struggling to get past the on-going economic downturn, Benelux (Belgium, Netherlands, and Luxembourg) is one of the few regions that are staying afloat. The only country in the Benelux region, which is recording a positive growth rate and forecast this year, is Luxembourg. Declining exports due to the debt crisis in Europe have slowed down the economy with a projected growth rate of 0.7% in 2012. However, growth is expected to rise to 3.1% in 2013. Government debt is the lowest among the three at 18.9%. Luxembourg is in a better position vis-à-vis other nations in the Eurozone.
Luxembourg is somewhat slow to attract foreign investment primarily because of high labour and manufacturing costs, as well as difficulty in property registration and financing options. Being the second largest nation in fund management, after the US, Luxembourg is expected to grow its financial services along with business services.
Business services are also expected to normalize the unemployment rate, which is currently estimated at 5.5% for 2012. On the whole, Benelux with its encouraging indicators of financial recovery may induce the revival of the European Union’s economy towards the second half of 2012. Bonn Steichen & Partners is a full service Luxembourg law firm committed to providing the highest quality legal services. With in excess of 50 professionals we offer a wealth of knowledge and experience in all aspects of Luxembourg law. Alain Steichen is Managing Partner of Bonn Steichen & Partners. WHAT FACTORS HAVE CONTRIBUTED TO LUXEMBOURG’S ECONOMY REGARDING A POSITIVE GROWTH RATE THIS YEAR? “On a general level, contributing factors would be similar to those that make Luxembourg an attractive location for business and investment in the first place. Such factors would include Luxembourg’s regulatory environment, its stable economic, social and political environment, service provider considerations and local infrastructures, its proximity to various markets and highly educated workforce amongst others. “Specifically however, the investment fund industry has endured the euro area sovereign debt crisis and remained stable. While experiencing losses in 2011 mainly due to euro area related market turbulence, it has largely recovered, with assets under management surpassing €2 trillion in early 2012 (Source: IMF Public Information Notice No. 12/67 dated 3 July 2012).
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“Similarly, whilst private equity deal activity decreased in 2009, a trend of increasing volume and quantity of transactions in the private equity market continued throughout 2010 and 2011. Whilst 2012 continues to bring a challenging economic climate, private equity as an asset class still performs well and remains attractive. “In terms of financial stability, increases in the staff and resources of the financial regulator, the Commission de Surveillance du Secteur Financier (“CSSF”) have enabled it to conduct more frequent on-site inspections and increase enforcement actions. The financial industry has recognised the value of strong supervision for financial stability as well as the constructive dialogue with supervisors. Luxembourg has also made progress in improving its regulatory frameworks, notably by sharply reducing the deposit guarantee’s payout period. “Another point to note is that Luxembourg’s budget remains on a very rigorous policy which controls public expenditures. This budget should allow the country to recover its economy, which, in spite of all, is still very dependent on the global economy.”
SWEDEN Sweden is the second most competitive country in the world and fourth in the world on the Democracy Index. Sweden’s GDP Grew by 4.0% last year well above the Eurozone’s 1.5% expansion, however growth slowed at the tail end of the year as the European downturn started to take effect on the regions exports. Exports have played a key role in growth and subdued demand from Europe is contributing to a predicted slowdown in growth this year to 0.6%. This year domestic demand growth is expected to be subdued. A weaker labour market and low consumer confidence will dampen consumer spending, while high oil prices and falling house prices will weigh on investment prospects.
The Swedish economy appears resilient to the current crisis however it remains exposed should external conditions continue to deteriorate. The nation’s decision to not use the euro has shielded them from the Eurozone sovereign debt crisis to a large extent. Sweden’s economy was initially hard-hit by the global financial crisis in 2008, however recovered from recession in the second quarter of 2009 and quickly saw its economy boom and achieving one of Europe’s strongest growth rates. Throughout 2011 the Swedish government developed a strong financial position which will be beneficial in tacking this slowdown this year. Sweden’s central bank lowered its main rate last month to 1.5 percent and predicted it will keep it unchanged over the next year to keep inflation close to its 2 percent target. Acquisition International speaks to the experts… Taus Wolfsberg is a Partner at KPMG Transaction Services and Head of KPMG’s Private Equity group in Sweden.
KPMG Transaction & Restructuring is a full range M&A and Transaction advisory organization with expertise within M&A, Valuation, Financial/ Commercial/Operational/ Tax/Pension due diligence, Capital Market/IPO related work as well as M&A Tax and structuring services. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We have a strong transaction advisory track record within with both the Private Equity and Corporate transaction environment with a wide and integrated service offering. WHAT FACTORS CONTRIBUTED TO SWEDEN’S GDP GROWING BY 4.0% LAST YEAR WELL ABOVE THE EUROZONE’S 1.5% EXPANSION? Sweden has strong industrial and manufacturing traditions with a notable presence of international companies, which benefitted from their global reach. Also, the Nordic IT, telecom, service/facility and healthcare sectors have demonstrated a healthy development. Coupled with a relatively stable political and economic climate, a high level of education, a good IT
Company: Bonn Steichen & Partners Name: Alain Steichen Email: mail@bsp.lu Web: www.bsp.lu Address: 2, rue Peternelchen | Immeuble C2 L-2370 Howald | Luxembourg Telephone: +352 26025-1
Company: KPMG AB, Stockholm Office Name: Taus Wolfsberg Email: tauswolfsberg@kpmg.se Web: www.kpmg.se Address: P.O.Box 16106 SE-103 23 STOCKHOLM, Sweden Telephone: +46 8 723 91 00
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing business around the world
infrastructure and a focus on R&D, has been supporting the GDP growth and also continued to make the Nordic region a very attractive market to invest in. HOW HAS THE EURO DEBT CRISIS AFFECTED THE SWEDEN’S STRONG EXPORT LEAD ECONOMY? Generally, it seems that most of the large corporate companies were well supported by their financing sources when addressing their longer term financing needs already when the financial crisis came in 2008, so from a financing perspective these companies were less affected by the Euro debt crisis. From a trading perspective, exporting companies is obviously affected by movements in currency exchange rates both in terms of revenue/demand and earnings and a slowdown in GDP growth in Europe and the rest of the world.
In terms of M&A, small and Mid-market private equity deals in the region have mainly been underwritten by local banks, which compared to their European and American counterparts probably have suffered smaller losses. And there has been only a limited number of larger deals in Sweden over the past year.
WHAT ARE YOUR THOUGHTS REGARDING THE PREDICTED RECOVERY IN 2013? DO YOU THINK THIS FEASIBLE? Generally, we would expect a 2013 broadly in line with the development over the past 6-12 months with generally lower growth rates which could be further adversely affected by the Euro debt crisis depending on have solved for individual countries. In terms of M&A, we would expect a still challenging although improving M&A market. Until markets including the stock market show signs of stabilizing, the inter-bank lending market normalizes and the prices are coming somewhat further down, banks appears unlikely to loosen the belt on lending significantly (and the prices for acquisition financing could likely increase in the short/medium term). When they do, however, many Nordic players have substantial dry powder available (both existing and new funds) and are therefore well positioned to pursue investment opportunities arising in the aftermath of an economic downturn/Euro crisis period. But until then we are likely to continue to see an increase in deal flow from distressed vendors as well as take-privates. M&A seems to continue to be on the Corporate agenda which will also drive activity. Additionally, a number of PE portfolio companies will come to market in 2013 and there appears to exist a number of corporate spin-off opportunities which could materialize over the next few years. So overall, we would
ACQUISITION INTERNATIONAL
expect an improved M&A environment in 2013 and onwards compared to recent times.
SWITZERLAND Switzerland’s Gross domestic product is likely to increase by 0.8% this year and 1.8% in 2013. The export-led economy is expected to remain subdued as European demand remains weak due to the slowdown from the debt crisis. Countering this affect, demand from Latin America and Asia are on the rise and growth is expected to accelerate in 2013 as global demand strengthens. Despite the strong franc demand for Swiss products remains and exports are predicted to climb 1.3% this year and 4.5% in 2013. The domestic economy is in relatively good shape with low unemployment at just 3.1% contributing to increased consumer spending which is expected to grow by 1.3% in 2012. Since the onset of the financial crisis, investors seeking a safe haven have piled into the franc, squeezing margins for Swiss exporters and prompting the Swiss National Bank to cap its value at 1.20 to the euro last September. Although some had predicted a recession due to the strong franc, the economy has so far escaped contraction. With interest rates keeping mortgage rates and the continued migration of well-qualified workers into Switzerland construction and property prices are likely to remain buoyant. Monitor Clipper Partners was founded with a vision to help profitable, middle-market companies maximize their business. Their investors include leading public and corporate pension funds, financial institutions, insurance companies, college endowments and affluent individuals.
Group (a large international strategy consulting firm), to support company management on day-to-day operating issues as well as long-term strategic positioning. This combination of financial, operational, and strategic expertise make MCP an ideal partner in almost any setting. MCP can also leverage the extensive international experience of its principals, as well as Monitor’s global resources and skill base, to pursue investments outside of the United States and help domestic companies pursue international expansion. With consulting operations in 23 countries worldwide, Monitor is able to assist MCP in understanding local markets, identifying opportunities and evaluating risks.
MCP has an office in Zurich, is currently expanding its investment program in Europe and has completed five transactions to date outside of North America – Technal in France, Codere in Spain, Reverse Logistics in Germany, CMC in Denmark and Microgame in Italy.
Monitor Clipper understands the strategic, operational, financial and market issues that confront today’s corporate executives based on decades of first-hand experience building businesses. They help accelerate the growth of their portfolio companies by providing hands-on strategic, operational, analytical and financial support as well as access to a broad array of regional and industry-specific resources. Redefining Potential is at the heart of what they do. Too often, businesses are managed without the resources – capital, strategic vision or relationships – necessary to maximize opportunities and achieve sustainable competitive advantage. These are the situations that they seek, where their ability to provide capital, counsel and support can unlock an enterprise’s full potential, driving superior equity returns for shareholders and enabling managers to attain new, exciting milestones in performance and growth.
MCP is a value-added investor capable of providing financial, operational, analytical and strategic support to its portfolio companies on an as-needed basis. MCP is able to leverage both the experiences and capabilities of its professional staff, as well as its relationship with Monitor
Company: Monitor Clipper Partners Email: mcp@monitorclipper.com Web: www.monitorclipper.com Address: Monitor Clipper Partners, GmbH Mühlebachstrasse 173 8034 Zürich, Switzerland Telephone: +41 (0)44 389 71 50
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Doing business around the world
PORTUGAL Portugal’s economy is expected to contract 3.3% this year flowed by growth of 0.3 per cent in 2013. Portugal is pressing ahead with its economic adjustment programme including across the board tax hikes and spending cuts, and has made encouraging progress in recent months. Exports grew 13.5% in value in 2011. Export growth is expected to slow in 2012, but should pick up pace gradually from 2013 as the Euro crisis stabilises and structural reforms start to kick in, boosting competitiveness. 20% of Portuguese exports go to Spain which is facing its own recession which poses some risk of contagion across the Iberian Peninsula.
On the domestic front, the principal danger is that the austerity programme being implemented to tackle the debt crisis will fatally undermine the growth the country needs to boost tax revenues and reduce social spending. However, the past month has seen some positive news. The debt agency successfully issued 18-month Treasury bills at a lower yield than the previous auction and the EU/ IMF authorities in their latest review were satisfied with the government’s progress in implementing the necessary economic reforms, resulting in the immediate disbursement of the next tranche of funds. The growth outlook remains very weak and the challenges ahead are enormous. So it is still unlikely that the country will be able to return to financial markets by mid-2013.
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ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing business around the world SPAIN
The Spanish economy is in recession for the second time in three years as the damage from the property bust persists. Spain’s GDP contracted 0.3% in the 4th quarter of 2011, but grew 0.3% on an annual basis. Spain appears to be locked in a worsening debt trap, with high levels of debt in both the public and private sectors. Financial markets are beginning to wake up to the fact that the outlook for Spain appears bleak. The Spanish government has recently announced a tough package of fiscal austerity measures in its budget for 2012. Given the dire economic and financial situation Spain is looking to lower its budget deficit to 5.3% of GDP this year. Spain’s unemployment rate is the highest in the EU at 23.6%. This is undermining consumer demand, contributing to falling house prices, threatening budget stability plans and sapping support for the government. Conditions are set to deteriorate further, imperilling the country’s social security system.
Recent labour market reforms aim to address this and demonstrate commitment to creating a more competitive economy and labour market. As part of its efforts to win back the confidence of foreign investors, the government said on April 27th it would shift the burden of taxes onto consumption and reduce levies on employing workers. Rising exports have contributed to growth as they have in recent quarters, but not enough to offset deleveraging in the economy.
ACQUISITION INTERNATIONAL
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SECTOR SPOTLIGHT:
Doing Business in Turkey
DOING BUSINESS — in Turkey
Despite the economic crisis in neighbouring Europe, Turkey’s economy was the second fastest growing economy in the G20 behind China with growth of 8.5% in 2011 following growth of 9% in 2010. Turkey remained strong throughout the financial crisis of 2008 and is expecting growth of 2 – 2.5%. Over the past decade Turkey has implemented bold economic reforms, these have created a stable environment for growth and coupled with the country’s strategic location between Europe, Asia and the Middle East, have contributed to making Turkey the 16th largest economy in the world. High inflation and the large current account deficit are a growing concern. The deficit has narrowed in recent months but still stands at 10% of GDP and the central bank expects that inflation will be down to 6.5% by the end of the year. This is achievable but it will depend on policy staying tight or even tightening further to ensure that inflation does not rise. Turkey’s Inflation rate had dropped from an average 75% in the 1990s to 11% today, public debt had been halved, and banking sector reformed. One key concern for Turkey is the nation’s unemployment rate, which sits at 10.3%. This is linked to a number of issues such as high labour costs and lack of competitive advantage in the labour market. -----------------------------------------------------------------------Öznur Öztürk works for Independent Accountants, which is an Accounting, Tax and Legal Advisor Service Company. His is a Partner of the Outsourcing Department. The firm is a member of TURMOB which is CPA Associations in Turkey. -----------------------------------------------------------------------Following the closedown of the Outsourcing department of Ernst & Young in Ankara in 2004, IA was launched under my leadership as the Department Manager. Employing over fifteen professional personnel with foreign language skills, IA offers service primarily for foreign capital organizations and companies in frame of the financial advisors act and legal arrangements applicable in Turkey. IA offers payroll, bookkeeping, reporting, tax counseling and legal counseling services for foreign capital organizations from the establishment until liquidation and winding-up processes in line with the Commercial Law, Tax Law and Tax Agreements. We also provide Executive Board Membership, Management, Audit, or agency services through any power of attorney for any foreign capital companies upon their demand. We provide our customers the best of the best with our hardworking and experienced employees. Strategically, we are connected to Europe, Asia and the Middle East. This is an important location and has enabled Turkey to grow very fast. WHAT IS TURKEY CURRENTLY DOING TO IMPROVE ITS BUSINESS ENVIRONMENT IN 2012? WHAT METHODS AND INCENTIVES HAS THE GOVERNMENT PUT IN PLACE TO MAKE ATTRACT FOREIGN INVESTORS? “To improve its business environment in 2012, Turkey is applying safe economic policies for the foreign investors. We can also mention the fact that we have stabilized inflation, enabled foreign capitalized companies to establish and applied law taxes in line with other countries in Europe and Asia. Under favour of new banking law and regulations, Turkey has become one of the major recipients of Foreign Direct Investment. Occasionally, structural reforms have the purpose of increasing the role of the private sector in Turkish economy. Today Turkey predicts to bring the level of per capita income to 25 thousand dollars in 2023 and that means a great opportunity for foreign investors.”
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-----------------------------------------------------------------------Nadia Cansun is partner of Bezen & Partners, also a member of the Law Society of England and Wales and Merve Akkuş, associate in Bezen & Partners, also a member of the Istanbul Bar. -----------------------------------------------------------------------Bezen & Partners have extensive experience in complex crossborder transactions, gained through their employments in magic circle law firms and Turkish Governmental Authorities. Bezen & Partners have both foreign and local qualified lawyers. Bezen & Partners has benefited from the economic growth of Turkey which is the second fastest growing economy behind China. The stable political environment, its young population and the strongly regulated banking system has contributed to such growth. An important example of the strategic location of Turkey and its natural bridge from east to west is the Baku Tbilisi Ceyhan Petroleum Pipeline, which allows the transmission of the Caspian petroleum to the rest of the world through the Ceyhan Marine Terminal. The current business environment of Turkey shows great potential with the proposed privatisation programmes and the keen level of interest from foreign investors. The difficulties faced by foreign banks in funding such large projects given the broader economic climate have led to an inevitable slowdown in the privatisation programme. In order to encourage foreign investment, the Turkish Government has introduced a new incentive package which provides a wide range of incentives on a regional basis. The new incentive package also provides for government incentives for asset management companies founded in Turkey and the international funds run by these companies. A new Turkish Commercial Code which is the most important legislation for businesses has recently been enacted replacing the previous code dating from 1956. These changes are generally welcomed and were much needed. However, the lack of clarity in the new legislation in certain areas, inadequate secondary legislation and as yet, no established market precedent will inevitably result in a period of uncertainty as the market practice adapts to the new regime. -----------------------------------------------------------------------Kemal Yamankaradeniz is a European and Turkish patent attorney and trademark attorney. He advises on IP portfolio management, trademark and patent protection and enforcement. He is a founding member of AIPPI Turkey, LES Turkey and UPB and delivers lectures in many universities and business associations. He has acted as the first president of UPB and the first president of the Trademark and Patent Attorneys Assembly under TOBB. -----------------------------------------------------------------------We predict that as the global economy races towards an information-based economy and now involves much severe competition, intellectual property will continue to play an increasing role as the driving force behind future merger and acquisition activity. Since Turkey becomes a rising star at the Europe-Asia bridge, at this point, protection and enforcement of IP rights in Turkey are of great importance. Turkey is
increasingly attracting the attention of trademark owners. In 2011, almost 120,000 trademark applications were filed and Turkey has been ranked number one for trademark applications in Europe, ahead of France, Germany and the UK. However, on the other hand, it is unexpected to see that foreign companies do not take advantage of patent protection as much as the domestic applicants did in Turkey since the annual filing total number was about 10,000. Meanwhile, it is worth noting that a new Intellectual Property law package is expected to be issued in a few months. On the other hand, the Ministry of Justice recently announced a new judicial reform package that, among many other things, introduces extra measures to lighten the heavy workload of the judiciary and to produce a “revolutionary outcome” under which the average length of trials would drop to one year for civil proceedings, and to 18 months to two years for criminal proceedings, including their appeals, within a period of about two years. Further details and the effect on trademark proceedings will be understood when the package is fully effected. -----------------------------------------------------------------------Mr. Murat Eryurekli, founder and managing partner of ELO has worked at the Capital Markets Board (“CMB”) of Turkey for 5 years and at a major Turkish law firm, as partner, for 7 years and established ELO in 2004. Mr. Mustafa Ünal, partner, worked at the corporate finance department of the CMB for 11 years and joined ELO in 2008. -----------------------------------------------------------------------ELO has 10 lawyers (including the partners) and 4 administrative staff. ELO represents numerous international and domestic banks, financial institutions and multinational corporations doing business in Turkey with a focus on capital markets and securities, corporate law and contracts, M&A transactions, banking & finance, competition law and employment law. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We assist the clients to structure various types of complex capital markets transactions, commercial contracts and corporate governance matters. The firm delivers high quality advice and execution on strategic corporate finance and structured financing transactions. WHAT FACTORS CONTRIBUTED TO TURKEY’S ECONOMY GROWING THE SECOND FASTEST GROWING IN THE G20 BEHIND CHINA WITH GROWTH OF 8.5% IN 2011 FOLLOWING GROWTH OF 9% IN 2010? Turkey has been implementing economic reforms since from 2001 to control high inflation and to provide a sound banking and finance infrastructure. In addition, Turkey has liberalized its investment environment and law, labor laws and very recently amended the Turkish Commercial Code to provide a more transparent and compatible business environment for the corporations.
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business in Turkey CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT IN TURKEY AND THE RISKS IT FACES IN 2012? The business people, after taking lessons from the global crash, now act more cautiously and focused on productivity and new investment areas. Still, in parallel to the global risks, Turkish companies or multinationals in Turkey try to achieve a sustainable and controllable growth. HOW HAS TURKEY’S STRATEGIC LOCATION AND CONNECTIONS WITH EUROPE, ASIA AND THE MIDDLE EAST BENEFITED THE COUNTRY? As an emerging market with a highly dynamic and young population and a stable economy Turkey is more promising than anywhere else in the world in terms of new investments. Thus, there are many worldwide industry giants investing in Turkey. For instance, General Electric has very recently announced that it will invest USD900 million in the next 3 years in Turkey, mainly in energy sector. -----------------------------------------------------------------------Sinan Borovalı is Partner at KYB Karataş Yıldız Borovalı Law Firm. -----------------------------------------------------------------------KYB renders business law to multinational and local clientele especially in all aspects of M&A, Competition, Banking and Finance and Real Estate fields, as well as in a wide range of areas including corporate law, cross border tax structuring, IT laws and regulations, commercial law, structured finance, securitization, capital markets, private equity, venture capital, investment funds, real estate, real estate investment companies (REIT), construction and zoning, competition & antitrust, antidumping, IP laws and regulations and licensing, administrative law, privatization, employment and litigation. Our wide experience with reasonable rates, provides excellent access to the respective partner. Most importantly, we listen to our clients and provide solutions rather than outlining the legal barriers and problems. We are aware that professional clients require a legal and feasible structure for their commercial projects. They are un-interested in hearing why it cannot happen due to an arbitrary measure like paragraph “x” on article “y” of communiqué no. “z”. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT IN TURKEY AND THE RISKS IT FACES IN 2012? Interesting, safe and still far more under its potential. In the short term, the political and economic situations of the neighbours of Turkey in the east and in the west might adversely affect Turkey’s economic environment. In the long term, Turkey’s current account deficit and the size of its foreign borrowing never seems to decrease appreciably.
Ali Sedat Özkazanç is Managing Director of MNG Airlines, a cargo airline established in 1996 based in Istanbul, Turkey. “Our current MNG fleet consists of totally owned 4 Airbus A300B4-200, 2 Airbus A300-600 and 2 Boeing 737-400 freighters. MNG ordered 4 brand new Airbus A330-200F freighters with deliveries in 2012, 2013, 2015 and 2016. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? MNG Airlines has its own cargo & ramp self-handling activities with its import & export warehouses at Istanbul Ataturk Airport. It is therefore able to serve all of its operational activities under one umbrella. That expertise brings service quality and quick response to customers’ needs. I BELIEVE THAT YOU HAVE FOUR A330FS ON ORDER; WHEN ARE YOU EXPECTING TO TAKE DELIVERY AND ANY OTHER FLEET EXPANSIONS PLANNED? MNG Airlines’ marketing strategy coupled with the current economic conditions associated with the fleet expansion plan dictates an interim strategic fleet renewal program. We therefore ordered four A330F. The first one will join the fleet on the third quarter of 2012, the second one will join on third quarter of 2013 and the rest will be with us in 2015 & 2016. ON WHICH ROUTES WILL THEY PLAN TO BE EMPLOYED ? MNG’s main market strategy is to become the most competitive logistic systems provider by using its know-how, experience and adequate fleet. According to market indicators and economics, expansion of routes are a necessity, therefore our expansion plan has already started covering North Africa & Far East destinations. With the participation of A330Fs we will continue to develop our productivity and service quality to our customers. DO YOU THINK GROWTH IN THE CARGO SECTOR WILL CONTINUE? IS THE GROWTH SUSTAINABLE? Fierce competition exists and is on the rise in the Turkish air-cargo market and this competition is developing all the companies in this market to increase efficiency. As all the economic situations and indications show, the uptrend in Turkish airfreight market will continue throughout the whole of 2012 in line with overall economic growth, which is estimated at between3~4%. ’Turkey offer a stable environment and fast growth, this indicates confidence which many in the industry have with regards to its prospects as a near-sourcing location for the European Union as well as an important consumer market in its own right.All those strategic advantages enlarges the market size and growth attractiveness in Turkey foreign trade’’ says Serkan EREN - MNG Airlines Special Projects Manager. “
WHAT IS TURKEY CURRENTLY DOING TO IMPROVE ITS BUSINESS ENVIRONMENT IN 2012? WHAT METHODS AND INCENTIVES HAS THE GOVERNMENT PUT IN PLACE TO MAKE ATTRACT FOREIGN INVESTORS? Recently the government released the new investment incentive packet. Accordingly Turkey is divided into 6 investment zones starting from developed areas to the less developed ones. Istanbul will be within the first zone and Diyarbakir will be in the sixth zone. The sixth zone will benefit from the full incentive while lesser zones will benefit from moderate incentives. They are as follows: no customs duty for the imported machinery, social security premium relief up to 7 years, new allocation of land, VAT exemptions, finance repayment interest support and corporate tax relief (eg, 1st zone 10 to 15% and 6th zone 35 to 45 %). ------------------------------------------------------------------------
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Company: Sarı & Kılıc Attorneys at Law Name: Ilknur Demir Email: ilknurdemir@sarikilic.com Web: www.sarikilic.com Address: EGS Business Park Bloklari B3 Blok Kat 4 No 187 Yesilkoy ISTANBUL 34830 TURKEY Telephone: +90212 465 7950
Company: MNG AIRLINES Name: Ali Sedat Özkazanç Email: medya@mngairlines.com Web: www.mngairlines.com Address: MNG Airlines WOW Convention Center IDTM 34149 Yesilkoy / Istanbul / Turkey Telephone: 0090 212 468 05 00
Company: Bezen & Partners Name: Nadia Cansun Email: info@bezenpartners.com Web: www.bezenpartners.com Address: Eski Büyükdere Caddesi No: 14 Park Plaza Floor: 12 No: 29 34398 Maslak Istanbul Telephone: +90 (0) 212 366 68 68
Company: Eryurekli Law Office Name: Murat Eryurekli Email: meryurekli@elolaw.com.tr Web: www.elolaw.com.tr Address: Veko Giz Plaza, Meydan Sk. No:3 K:22 Maslak, 34398 Istanbul / Turkey Telephone: +90 212 365 9600
Company: KYB Karataş Yıldız Borovalı Law firm Name: Sinan Borovalı Email: sinan.borovali@kyblaw.com Web: www.kyblaw.com Address: Macka caddesi 22/1, Tesvikiye 34367 Istanbul, Turkey Telephone: +90 212 343 84 24
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SECTOR SPOTLIGHT:
Doing Business in Turkey -----------------------------------------------------------------------Ilknur Demir is an associate attorney at Sari & Kılıc Attorneys at Law and she has been a member Istanbul Bar Association since 2008. -----------------------------------------------------------------------Sarı & Kılıc Attorneys at Law was founded in 1990 in Istanbul by Huseyin Sarı and Semra Kılıc Sarı and its main areas of expertise are litigation, legal consultancy and enforcement proceedings. The founders of Sarı & Kılıc have been practicing law for 25 years continuously. Sarı & Kılıc consists of two main departments. Debt Collection Department offers legal assistance to the clients to collect their secured and non-secured debt either on behalf of banks or corporates; while Corporate Department provides its clients with legal consultancy services from the legal problems that a company may face during its dayto – day operations to international and national transactions and representation of the clients before the courts or any other relevant authorities. By 2010 the number of our associates has reached twenty and in total the number of the employees has exceeded sixty. Sari & Kılıc renders legal services to its clients with an aim of providing the best legal solution for their legal problems. It employs the result-based approach and understands the internal and external goals of our client companies, and tailors our legal solutions to help further those goals. With its dynamic and experienced team, it offers the best legal solutions to its clients that fit the best with clients’ needs. Additionally, Sarı & Kılıc has more than ten partner offices that it works with close corporation located elsewhere in Turkey in case any legal action needs to be taken in other parts of Turkey. This also enables our clients to receive the fastest and the most effective legal solution. -----------------------------------------------------------------------Öznur Öztürk works for Independent Accountants, which is an Accounting, Tax and Legal Advisor Service Company. She is a Partner of the Outsourcing Department. The firm is a member of TURMOB which is CPA Associations in Turkey. ------------------------------------------------------------------------
PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS. Following the closedown of the Outsourcing department of Ernst & Young in Ankara in 2004, IA was launched under my leadership as the Department Manager. Employing over fifteen professional personnel with foreign language skills, IA offers service primarily for foreign capital organizations and companies in frame of the financial advisors act and legal arrangements applicable in Turkey. IA offers payroll, bookkeeping, reporting, tax counseling and legal counseling services for foreign capital organizations from the establishment until liquidation and winding-up processes in line with the Commercial Law, Tax Law and Tax Agreements. We also provide Executive Board Membership, Management, Audit, or agency services through any power of attorney for any foreign capital companies upon their demand. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We provide our customers the best of the best with our hardworking and experienced employees. Strategically, we are connected to Europe, Asia and the Middle East. This is an important location and has enabled Turkey to grow very fast. WHAT IS TURKEY CURRENTLY DOING TO IMPROVE ITS BUSINESS ENVIRONMENT IN 2012? WHAT METHODS AND INCENTIVES HAS THE GOVERNMENT PUT IN PLACE TO MAKE ATTRACT FOREIGN INVESTORS? To improve its business environment in 2012, Turkey is applying safe economic policies for the foreign investors. We can also mention the fact that we have stabilized inflation, enabled foreign capitalized companies to establish and applied law taxes in line with other countries in Europe and Asia. Under favour of new banking law and regulations, Turkey has become one of the major recipients of Foreign Direct
Investment. Occasionally, structural reforms have the purpose of increasing the role of the private sector in Turkish economy. Today Turkey predicts to bring the level of per capita income to 25 thousand dollars in 2023 and that means a great opportunity for foreign investors.
Company: Independent Accountants Name: Öznur Öztürk Email: oznur.ozturk@ia.com.tr Web: www.ia.com.tr Address: Mustafa Kemal Mah. 2152. Sok. Kent İs Merkezi K:3 D:6 Sogutozu/Cankaya/Ankara/ TURKEY Telephone: +903124469205
Company: Destek Patent Inc. Name: Kemal Yamankaradeniz Email: kyk@destekpatent.com.tr Web: www.destekpatent.com.tr Address: Ahi Polaris Street Plaza. No: 21 Kat: 17 34 398 Maslak - Istanbul, Turkey Telephone: 90,212,329 00 00 90,212,346 02 64
SECTOR SPOTLIGHT:
Doing Business in Turkey
ACQUISITION INTERNATIONAL
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SECTOR SPOTLIGHT: Doing Business in Itlay
DOING BUSINESS — in Italy
After almost a decade of virtual economic stagnation, Italy’s main banking association has forecasted a 1.4% contraction in GDP this year. This is largely due to the policies prevalent in Italy, which discourage competition and inhibit the nation’s growth. Economic growth is expected to return in 2013 by just 0.5% and continue to grow to 1% in 2014 and 1.2% in 2015. The Italian economy is in a destabilized state due to the lack of market reforms, an efficient bureaucracy, high corruption, heavy taxes and a high public deficit. Italy’s debt of 1.9 trillion euro along with its dwindling economy, have made the nation vulnerable to diminishing investors’ confidence even as the government tries to implement parliamentary reforms and restrain public
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spending. According to Rome-based National Institute of Statistics (Istat), unemployment is at an 11 year high of 9.3%. Industrial orders declined by 12.3% in February, whereas sales dropped by 1.5%. Italian industrial production plunged 6.8%. Italian business confidence plummeted in April as industrial output shrank 2.3% in the first quarter. Italy’s Prime Minister Mario Monti also conceded that it will not be able to achieve a balanced budget until 2015. The government has decided to
curb its public spending by 4.2 billion euros in order to achieve its budget deficit targets. With this move, Italy hopes to avoid the earlier planned VAT hike from 21% to 23%, fearing that such a hike would only aggravate recession.
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Doing business in Italy
DOING BUSINESS — in Italy
Established by Umberto Belluzzo in 1982, it advises clients in all aspects of business activity and development. All our professionals work in synergy to offer interdisciplinary consultancy in the fields of Tax, Legal, Accounting and Estate Planning. With an average growth rate of 1% over the boom years, the Italian economy has visibly underperformed since the introduction of the euro, both relative to its peers and relative to the nineties. Studies show that in the last decade, the three most important measurable growth factors actually improved in both absolute and relative terms (Gross (2011):
PICTURE 2. CHANGE IN FISCAL PRESSURE IN OECD COUNTRIES
On the tax side, one of the most innovative measures introduced by Mr Monti’s Government is the Allowance for Corporate Equity (ACE – surprisingly named in Italian as “Aiuto alla Crescita Economica”). Under this scheme, the “normal” return to new capital will be fully deductible from the corporate income tax (IRES) and the personal income tax (IRPEF) for unincorporated business. This mirrors the treatment for debt financing whereby passive interest is fully deductible. The deductible normal return will be calculated as (coefficient for notional return* Δ own capital (if positive)). The coefficient is fixed at 3 per cent for the first three years.
• Investment in physical and human capital; the former being high and the latter, improving. • Structural indicators in terms of product and labour market regulation (all improving absolutely and relative to Germany according to OECD indicators). • Investment in R&D (improving). The only factors that have deteriorated absolutely and relative to the core of the Eurozone are indicators of governance – corruption, government effectiveness, and rule of law (Gross (2011). Currently, Italy consistently scores far below other developed economies according to World Bank rankings on ease of doing business. Further, Italy holds a lowly rank for the ease of paying taxes and the ease of enforcing contracts. Source: OECD Revenue Statistics. It is going to take a long time before the cultural and therefore the political and institutional environment changes as the electorate is not yet sensitive enough to these issues. Another drag on growth is the high fiscal pressure that characterises Italy: not only is the ratio of tax revenues over GDP high in relative terms (see picture 1), it has also been increasing since the mid-nineties, as showed in the picture 2 below. The Bank of Italy forecasts a tax burden (total tax revenues over GDP) of 45 per cent in the next three years, up from 42.6 per cent in 2010, a high figure both historically and internationally.
PICTURE 1. FISCAL PRESSURE IN OECD COUNTRIES
non-operating shell companies and taxed at 38 per cent on a deemed income.
The current Italian fiscal environment could be described along three dimensions: some effort to encourage growth, an increased overall tax burden, and a larger effort to contain evasion and avoidance. In the last five months of 2011, the need for consolidation of Italian public finances has produced two extraordinary Budget Laws by Government. Both measures are focus on increased tax revenues. The Government is currently preparing a spending review targeted at reducing inefficiencies in public spending. In the last 30 years, the cost of producing public services has increased by 30% more than the cost of producing private services. The amounts the Government is planning to tackle are large: the production of public services costs around EUR 300 billion when total public spending is EUR 650 billion.
The regional Tax on Productive Activities (IRAP) becomes fully deductible from IRES and IRPEF but only for its labour cost component. Also, businesses hiring female employees and employees under 35 years of age will be able to deduct from IRAP 10,600 EUR for each female and each young employee (15,200 in the South of Italy). The aim is to ease the cost of labour. A tax credit of 19 per cent has been introduced for individuals with taxable income over 100,000 EUR and investing in startups and (or) in venture capital funds. The annual investment limit for individuals is set to 1 million EUR. The investment must be held for the three years to qualify. Some businesses are excluded: holding companies and real estate companies. Launched under the previous Government, Research and Development (R&D) tax credits have been defined as follows: 12 per cent for expenses up to 1 million EUR and 5 per cent above that. References Daniel Gros, What is holding Italy back, VoxEu.org , 9 November 2011. http://www.voxeu.org/index.php?q=node/7246
Mr Monti’s Government has also enacted measures to combat the widespread tax evasion. The IMF calculates that in the 21 OECD countries in 1999–2001, Greece and Italy had the largest shadow economies. Measures include a lowered limit for cash transfers and an obligation to provide a tax identification number on purchases above 1,000 EUR (down from 2,500 EUR), administrative and fiscal benefits for enterprises deciding to become transparent for fiscal purposes to the Italian Tax Authorities, and finally the commitment of not enacting tax amnesties.
Source: OECD Revenue Statistics.
ACQUISITION INTERNATIONAL
There have also been efforts to contain tax avoidance. New regulations provide that shell companies pay the corporate income tax at a rate of 38 per cent (instead of the standard 27.5 per cent). Companies reporting losses for three subsequent years or for two subsequent years and income below a certain threshold for the third year will also be considered
Company: Belluzzo&Associati Name: Luigi Belluzzo Email: studio@belluzzo.net Web: web.belluzzo.net Address: Via Montenapoleone, 23 – 20121 Milan Telephone: +39 02 365 69 657
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SECTOR SPOTLIGHT: Resolving disputes in...
RESOLVING DISPUTES IN... — The Banking & Investment Industry
Financial services and banking disputes have been a major consequence of the global economic downturn and at the top-end of the scale they involve claims for vast sums of money.
In this seemingly on-going uncertain and volatile financial market, the level of risk faced by banks, other financial institutions and borrowers remains high, and not only is there a growing potential for disputes but increased regulation to navigate.
Top of the agenda for the major institutions has been access to the finest legal teams and dispute resolution experts who have a wide range of experience in resolving high-value and complex financial services disputes. These teams have to be abreast of the latest business, legal and regulatory developments in financial services and expert in all areas of dispute resolution, from early stage negotiation right the way through to litigation in the High Court.
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Mr. Tevfik Adnan Gür is the founder of GÜR LAW FIRM. GÜR incorporates experience, expertise and a rigorous level of professionalism and provides legal service to both international and domestic clients with a well organized and specialized legal team and a support staff. Our firm has been active for long years of time and achieved many groundbreaking rulings by which it has obtained considerable success and thus reputation before the courts. It has found this method to be highly effective not only in terms of cost and time, but also in terms of preserving positive relationship of its clients with the party in dispute.
well as the negotiation, drafting and documentation. Our foreseeable advices include preparing agreements, drafting arbitration clauses, advising on restructurings, acting within the framework of legal regulations. An increase in the number of banking disputes is expected during the 12 months. Furthermore, currency risk may have a notable effect in the financial sector. As to the legal developments, the new Turkish Code of Obligations and the new Turkish Commercial Code has entered into force on 1 July 2012.
GÜR has numerous local and international clients various sectors consisting of mainly banking, finance, maritime, shipyard management, energy, tourism, hotel management, automotive, heating industry, steel sector, construction, petrol, mining operations, transport, logistic, advertising, aviation, franchise, insurance, technology, food, agriculture, textile, media, sport, entertainment and retail business. GÜR is capable of providing fast and effective services in connection to all aspects of banking and investment industry. GÜR Law Firm determines legal procedures to be followed by evaluating needs and expectations of the client separately for every single case. In case of domestic and international leading matters, our firm assists clients with all aspects of the deal structure as
Company: Gür Law Firm Name: Tevfik Gür Email: tevfik@gurlaw.com Web: www.gurlaw.com Address: Sümbül Sok. No:61, 34330 Levent/Istanbul-TURKEY Telephone: +90 212 325 9020 Fax: +90 212 325 9023
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Resolving disputes in...
RESOLVING DISPUTES IN... — The Global Energy Sector
The international energy sector is extremely volatile from both a political and economic point of view and with the industry frequently giving rise to complex and high-value disputes; companies operating within the sector are faced with one of the most contentious business environments around. Acquisition International speaks to the experts. -----------------------------------------------------------------------Justin Michaelson is the Head of the International Arbitration practice in London at SJ Berwin. He has represented clients before both institutional and ad hoc arbitral tribunals in relation to disputes relating to the energy and infrastructure sector. -----------------------------------------------------------------------WHO DO YOU TYPICALLY ACT FOR? WHO IS ARCHETYPAL CLIENT? We act for multinational corporations, governments, sponsors, lenders and consortia on all aspects of energy and infrastructure projects. Our knowledge and experience within the industry coupled with our transactional, corporate, finance and regulatory experience enable us to facilitate energy related disputes in international markets. WHY IS THE INTERNATIONAL ENERGY SECTOR ONE OF THE MOST CONTENTIOUS INDUSTRIES OUT THERE?
SECTOR? AND HOW DOES THIS CHOICE VARY ACROSS INDUSTRIES AND DIFFERENT TYPES OF DISPUTE?
where parties have to sell at the local price due to export restrictions.
Cost-effective management of energy disputes starts at the contract drafting stage. Whilst much depends on the specific energy transaction, parties should consider various dispute resolution techniques including negotiation, mediation, expert determination and dispute boards throughout the project life. Each of these ADR methods, in various combinations, may resolve the dispute.
WHY ARE SO MANY DISPUTES SIMPLY UNAVOIDABLE WITHIN THE ENERGY MARKET?
-----------------------------------------------------------------------Murat Yazici is the managing partner of Yazici Law Offices, which specializes in international oil and gas transactions, other energy (renewables, hydroelectric, etc.) deals, infrastructure and construction projects, corporate law, mergers and acquisitions, international commercial arbitration, and commercial litigation. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE?
As the sector moves through rapidly changing times, the major players in the market look to protect its own position. Producers cut production to inflate prices, multinationals look to new markets and governments look to alternative energy sources. With changes afoot and margins being squeezed, parties need to act quickly to avoid becoming victims. The upstream exploration and production end provides a good example.
Yazici Law Offices is a very established law practice that has had an international perspective since its foundation in 1989. As a firm, we have been involved in most of the major oil and gas and pipeline projects in Turkey.
WHY IS THE INTERNATIONAL ENERGY SECTOR EXTREMELY VOLATILE FROM BOTH A POLITICAL AND ECONOMIC POINT OF VIEW?
The international energy sector is competitive as any sector involving such extreme risks and rewards would be. It also requires government involvement at one stage or another and therefore one has to be cognizant of its counterparties’ longterm priorities.
Recent energy shortages have led to surging prices which drives multinationals to seek out new territories and alternative energy sources. Given that much of the exploration and production now involves off-shore facilities, such activity inevitably attracts the attention of sovereign states claiming the seabed or shelves as their own. WHAT ARE KEY CHALLENGES WHEN RESOLVING ENERGY DISPUTES AND HOW CAN THEY BE AVOIDED? Energy players undertake high value/risk transactions at the cutting edge of technology. Understanding technical challenges in a heavily regulated industry together with the progressive development of reserves is one of the key challenges. WHY ARE SO MANY DISPUTES SIMPLY UNAVOIDABLE WITHIN THE ENERGY MARKET? Despite best business practices, disputes are often unavoidable. Energy disputes often arise from project delays or the complex, technical nature of the specifications. Understanding risk allocation under the contract is key IN YOUR OPINION WHICH METHOD OF ADR IS MOST THE COST-EFFECTIVE AND SUITABLE TO THE ENERGY
ACQUISITION INTERNATIONAL
Generally, governments want their oil to be extracted on the basis of a concession scheme. However companies find that the conditions that they have started off with may change considerably over time. Especially after a company satisfies the main initial investment requirements, governments may try to change the terms to their benefit (reducing incentives and increasing the government share, etc.) This is a main source of dispute.
WHY IS THE INTERNATIONAL ENERGY SECTOR ONE OF THE MOST CONTENTIOUS INDUSTRIES OUT THERE?
HOW HAS AN INCREASINGLY REGULATED BUSINESS ENVIRONMENT AFFECTED THE TYPE AND VOLUME OF WORK YOU CONDUCT ON BEHALF OF YOUR CLIENTS? The Turkish market has gone through major regulation over the last decade with the establishment of the Energy Market Regulatory Authority, and passing of legislation and subsequent regulation on electricity generation, distribution, oil and gas mid-and down-stream markets. This has changed the nature of our work in some respects. From an oil and gas perspective, we are in the forefront of the lobbying efforts for new legislation as we are considered experts in the field. In that context, the need for new legislation has added a new dimension to our work rather than new regulation per se. WHAT ARE KEY CHALLENGES WHEN RESOLVING ENERGY DISPUTES AND HOW CAN THEY BE AVOIDED? Aside from country risk and various contract risks, perhaps the main challenge is technical, i.e., identification and exploitation of the reserves. Also we see cases in our international deals
Company: SJ Berwin Name: Justin Michaelson Email: justin.michaelson@sjberwin.com Web: www.sjberwin.com Address: 10 Queen Street Place, London, EC4R 1BE Telephone: +44 0(2)0 7111 2201
Company: YAZICI LAW OFFICES Name: MURAT YAZICI Email: myazici@yazicilawoffices.com Web: www.yazicilawoffices.com Address: Piyade Sok 18/10 Çankaya, Ankara 06540, Turkey Telephone: (90) (312) 4425083
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SECTOR SPOTLIGHT: Resolving disputes in...
RESOLVING DISPUTES IN... — The Real Estate Industry
Disputes in the acquisition, management and disposal of all types of property are extremely common and the resolution of these disputes is an unavoidable reality in today’s property landscape. Many companies hold property as one of their most important assets, but it’s often not the core focus of the business; so any disputes are often referred straight to an experienced lawyer to save both time and money. Property disputes are intricate, diverse and extremely technical therefore it’s essential to find a legal team that takes the time to understand the business’ needs, but that can also act quickly, offering clear, tactical advice. Property disputes affect all sectors of the economy including residential and commercial developers, retailers, investors and other land owners, and public authorities; further the range of conflicts is vast and disputes have to take into account all parties from the landlord to the tenant–therefore effective settlement requires strength in many areas of the law and technical expertise across the full range of traditional and alternative dispute resolution techniques. Acquisition International speaks to the experts. -----------------------------------------------------------------------Hamala Kluch Víglaský is one of the Slovak’s most prominent banking and finance, M&A, corporate and real estate law firms. They have long-standing client relationships with premier financial institutions, Slovak Top Ten companies and other leading corporations, government entities and individual private clients and have earned a reputation for crafting innovative business and financial solutions and for developing precedent-setting legal strategies to achieve their clients’ goals. Speaking with AI was Partner Martin Kluch. -----------------------------------------------------------------------WHY IS THE INTERNATIONAL PROPERTY SECTOR ONE OF THE MOST CONTENTIOUS INDUSTRIES OUT THERE? The basic issue of international property sector is that each country has its own regulation of the building process. If the developer does not know the administration procedures and requirements for obtaining the necessary permits or fails to comply with requirements set for example by the building permit, it may result not only in multiple breaches of law but also in discontinuance of the development project and breach of contracts not only with suppliers of the developer, but also with prospective buyers or lessees of a real estate. WHAT ARE SOME OF THE MOST COMMON ISSUES AT THE SOURCE OF CONFLICTS? The most common issues at the source of conflicts are problems with identifying the owner of real estate, failure to comply with conditions and requirements set by the zoning decision and failure to meet the terms of construction and related breaches of contracts. WHAT ARE KEY CHALLENGES WHEN RESOLVING PROPERTY DISPUTES AND HOW CAN THEY BE AVOIDED? The key challenges in resolving property issues are lack of information on the ownership of the property, lack of appropriate documentation and disadvantageously conceived contracts, which may be avoided by previous real estate due diligence.
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IN AN INDUSTRY WHERE CONFLICTS ARE VAST AND DISPUTES OFTEN INVOLVE A MULTITUDE OF PARTIES, HOW IMPORTANT IS IT TO HAVE EXPERTISE ACROSS THE FULL RANGE OF DISPUTE RESOLUTION TECHNIQUES? HOW WELL EQUIPPED IS YOUR TEAM IN THESE AREAS?
IN AN INDUSTRY WHERE CONFLICTS ARE VAST AND DISPUTES OFTEN INVOLVE A MULTITUDE OF PARTIES, HOW IMPORTANT IS IT TO HAVE EXPERTISE ACROSS THE FULL RANGE OF DISPUTE RESOLUTION TECHNIQUES? HOW WELL EQUIPPED IS YOUR TEAM IN THESE AREAS?
In Slovakia, arbitration is used only in the cases of bigger projects. Further, while many smaller projects and developers rely on general Slovak courts, our experienced team of attorneys is well equipped to handle both arbitration as well as general court dispute resolution.
Naturally it is extremely significant to emphasize the importance of the dispute resolution techniques and mechanisms in any transaction and to be prepared for every possible scenario or outcome. We are ready to offer the most suitable solutions to our clients ranging from simple defensive mechanisms to complete dispute resolution systems.
IN YOUR OPINION WHICH METHOD OF ADR IS MOST THE COST-EFFECTIVE AND SUITABLE TO THE PROPERTY SECTOR? The most suitable ADR for the property sector is the arbitration, because it is cost-effective and faster than judicial proceedings at general courts. -----------------------------------------------------------------------Dr. László Szécsényi is the founder and senior partner of Szécsényi and Partners Law Firm, Budapest, Hungary. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We have the practical advantage of a large international firm. Having been around for over a decade, we serve large international companies on the highest possible level. Our good relations also remained from the preceding period of the firm and we never take for granted our international networks. Being an independent law firm, our clients can keep their transaction costs low as we are able to promptly adapt their needs and expectations. WHY IS THE INTERNATIONAL PROPERTY SECTOR ONE OF THE MOST CONTENTIOUS INDUSTRIES OUT THERE? The property sector, especially the real estate development, is a very sensitive and complex industry with large capital stakes involved where conflicts might easily be sparked. Also external effects such as politics and economic matters can heavily influence the market. WHAT ARE KEY CHALLENGES WHEN RESOLVING PROPERTY DISPUTES AND HOW CAN THEY BE AVOIDED? The best way to avoid conflicts is timely identification of possible conflicts before the signing of the agreement and providing solutions for that situation within the agreement. Beyond this, in order to avoid conflicts in the transaction, proper contractual terms need to be agreed with adequate discussion and resolution mechanisms. Nevertheless, talking about disputes a lot depends on the parties and their attitude towards the matters arisen, especially the willingness to compromise and to settle the dispute in the proper manner.
IN YOUR OPINION WHICH METHOD OF ADR IS MOST THE COST-EFFECTIVE AND SUITABLE TO THE PROPERTY SECTOR? The use of ADR solutions depend on the type of the dispute. Experts (architects, technicians, accountants) are often involved in mitigation of disputes. In case of pure legal disagreements sometimes a well prepared writ might bring the other party to accept the claim without having high procedural costs. -----------------------------------------------------------------------Dr. László Szécsényi is the founder and senior partner of Szécsényi and Partners Law Firm, Budapest, Hungary. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We have the practical advantage of a large international firm. Having been around for over a decade, we serve large international companies on the highest possible level. Our good relations also remained from the preceding period of the firm and we never take for granted our international networks. Being an independent law firm, our clients can keep their transaction costs low as we are able to promptly adapt their needs and expectations. WHY IS THE INTERNATIONAL PROPERTY SECTOR ONE OF THE MOST CONTENTIOUS INDUSTRIES OUT THERE? The property sector, especially the real estate development, is a very sensitive and complex industry with large capital stakes involved where conflicts might easily be sparked. Also external effects such as politics and economic matters can heavily influence the market. WHAT ARE KEY CHALLENGES WHEN RESOLVING PROPERTY DISPUTES AND HOW CAN THEY BE AVOIDED? The best way to avoid conflicts is timely identification of possible conflicts before the signing of the agreement and providing solutions for that situation within the agreement. Beyond this, in order to avoid conflicts in the transaction, proper contractual terms need to be agreed with adequate discussion and resolution mechanisms. Nevertheless, talking about disputes a lot depends on the parties and their attitude towards the
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Resolving disputes in...
matters arisen, especially the willingness to compromise and to settle the dispute in the proper manner. IN AN INDUSTRY WHERE CONFLICTS ARE VAST AND DISPUTES OFTEN INVOLVE A MULTITUDE OF PARTIES, HOW IMPORTANT IS IT TO HAVE EXPERTISE ACROSS THE FULL RANGE OF DISPUTE RESOLUTION TECHNIQUES? HOW WELL EQUIPPED IS YOUR TEAM IN THESE AREAS? Naturally it is extremely significant to emphasize the importance of the dispute resolution techniques and mechanisms in any transaction and to be prepared for every possible scenario or outcome. We are ready to offer the most suitable solutions to our clients ranging from simple defensive mechanisms to complete dispute resolution systems.
estate transactions and the need for specific legal advice. IN AN INDUSTRY WHERE CONFLICTS ARE VAST AND DISPUTES OFTEN INVOLVE A MULTITUDE OF PARTIES, HOW IMPORTANT IS IT TO HAVE EXPERTISE ACROSS THE FULL RANGE OF DISPUTE RESOLUTION TECHNIQUES? HOW WELL EQUIPPED IS YOUR TEAM IN THESE AREAS? “It is imperative to have a flexible and dynamic team, with experience in a wide range of matters who are able to seek out the most appropriate means to resolve the dispute. My team fits the bill perfectly!
Company: Hamala Kluch Víglaský Name: Martin Kluch Email: office@hkv.sk Web: www.hkv.sk Address: Hamala Kluch Víglaský s.r.o. Poštová 3, 811 06 Bratislava Slovak Republic Telephone: +421-2–5441 0160
IN YOUR OPINION WHICH METHOD OF ADR IS MOST THE COST-EFFECTIVE AND SUITABLE TO THE PROPERTY SECTOR? The use of ADR solutions depend on the type of the dispute. Experts (architects, technicians, accountants) are often involved in mitigation of disputes. In case of pure legal disagreements sometimes a well prepared writ might bring the other party to accept the claim without having high procedural costs. -----------------------------------------------------------------------Véronique Hoffeld, Partner, Loyens & Loeff heads the Commercial & Litigation department. My team specialises in litigation & arbitration; real estate; employment; IP; bankruptcy & restructuring and food law. Véronique has a special interest in real estate transactions and real estate litigation. -----------------------------------------------------------------------“We work with our Dutch and Belgian colleagues to provide a joint response for Benelux disputes. My team’s varied experience enables them to quickly assimilate complex issues and find innovative solutions. We act for local and international companies, in particular companies with a presence throughout the Benelux. The high value of real estate means that the various parties are highly focused on achieving their desired result, predictably leading to conflicts. We have most recently seen disputes concerning supermarkets, public buildings and large office premises, due to the complex nature of the real estate.
Company: Szécsényi és Társai Ügyvédi Társulás Name: László Szécsényi LL.M. Email: l.szecsenyi@szecsenyi.com Web: www.szecsenyi.com Address: H-1024 Budapest, Buday László u. 12. Telephone: + 36 1 345 45 35
Company: Loyens & Loeff, Avocats à la Cour Name: Véronique Hoffeld Email: veronique.hoffeld@loyensloeff.com Web: www.loyensloeff.lu Address: 18-20, rue Edward Steichen, L-2540 LUXEMBOURG Telephone: +352 466 230
The most common issues in Luxembourg are regulatory changes, financing difficulties and construction problems. We find that resolving the case within a satisfactory timescale for the client’s specific needs is our key challenge. We always give our clients a clear overview of the framework and time-scale of legal proceedings in Luxembourg to manage expectations at the initial stage. Current major challenges are obtaining secure financing for real estate transactions and the increased regulatory burden concerning the prioritization of residential housing. In my opinion, increasing financial pressure is likely to cause an increase in real estate disputes.
Company: Macroberts LLP Web: www.macroberts.com Address: Capella, 60 York Street, Glasgow G2 8JX, Scotland, UK Telephone: +44 (0)141 303 1100
Increasing regulation has affected the time frames for real
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
Q2 MID-YEAR — Review Private Equity-Backed Buyout Deals and Exits Rebound. Deal flow increases 37%; exit value surges 65% from Q1 2012 There were 705 private equity-backed buyout deals in Q2 2012, valued at an aggregate $60.4bn – a 37% increase in deal value from Q1 2012, and a 6% increase from the $56.8bn in Q4 2011. In addition, 293 private equity-backed exits were announced in Q2 2012, with an aggregate value of $77.7bn – a significant rise from the $47.2bn in exit value seen in the previous quarter. The number of deals announced during Q2 2012 has remained virtually unchanged from the previous quarter, indicating this rise in both private equity-backed buyouts and exits has resulted from an increase in large-cap activity.
OTHER KEY FACTS: Despite the increase in Q2 2012, private equity-backed deal flow for H1 2012 stands at $104.4bn, down 25% from H1 2011. North America witnessed 369 buyouts valued at $32.8bn in Q2 2012, a 44% increase in deal value from the previous quarter, making the region once again the most prominent area for PEbacked buyouts globally. European deal flow increased by 33% to $16.9bn during Q2 2012, from $12.7bn in Q1 2012; however, deal flow in the region remains significantly below the average of $24bn in deals per quarter during 2011. Deal flow in Asia and Rest of World climbed by 25% to $10.7bn in Q2 2012 from the Q1 total, nearing the post- Lehman high of $11bn in Q1 2011. 44% of all deals in Q2 2012 were leveraged buyouts, with almost two-thirds of all capital invested in the quarter attributed to this deal type. One-third were add-on deals, while public-to-private deals represented 8% of the number and 20% of the aggregate value of all deals during Q2 2012. Over half of all deals in Q2 2012 were valued at less than $100mn, with 75% of deals falling into the small-cap bracket of less than $250mn. Mid-market deals accounted for 18% of the number and 32% of the aggregate value of deals in the quarter. Deals valued at over $1bn in size made up 9% of the total number of deals in Q2 2012. In the previous quarter, deals of this size made up just 4% of the total.
The industrials sector was once again the most prominent area of buyout activity in relation to number of deals, with 22% of all transactions in this sector. The consumer sector represented the largest industry in relation to the value of deals, representing 29% of deal value. Three of the 10 largest buyout deals announced occurred in the sector, including the largest of the quarter – the $2.69bn recap of Party City Corporation by Thomas H Lee Partners. “During Q2 2012, we have witnessed a surge in both PE-backed buyout and exit activity in comparison to the previous quarter, with $60.4bn in deals and $77.7bn in exits announced during the quarter – a significant 37% and 65% rise in deals and exits respectively, in comparison to the weak deals data reported in Q1 2012. These Q2 2012 figures bring deal flow in line with the levels of activity witnessed in the second half of 2011, while exit activity reported its strongest quarter since Q2 2011. “This upturn in both deal and exit flow during Q2 2012 has been partly fuelled by an increase in large-cap activity, with 21 deals valued at over $1bn announced during Q2 2012 (vs. 8 in Q1 2012) and 26 exits valued at over $1bn (vs. 12 in the previous quarter), as private equity firms and corporate buyers continue to have access to large amounts of dry powder and cash reserves to invest with. “However, it is important to note that despite this increase in activity during the quarter, deal flow for H1 2012 is down 25% from the same period during the previous year, and the Q2 2012 figures remain below the average quarterly deal flow witnessed during 2011, a clear indicator of the difficult deal environment that has presented itself in 2012, particularly in the opening months of the year.” Manuel Carvalho, Manager - Private Equity Dealsin the field. In that context, the need for new legislation has added a new dimension to our work rather than new regulation per se.
-----------------------------------------------------------------------VSG has a commitment to all of its clients, placing special emphasis on their company motto “all the clients are very important to us”. They always re-pay the trust deposited on them, with service and personalized attention from each one of the partners. Responses are always prompt and conscientiously tailored to each particular case. ------------------------------------------------------------------------
and Civil Lawsuits, with VSG as main contact, being responsible for the case presented by the client.
VSG has a vast experience in the following areas: Corporate, Community Relationships, Foreign Investments, International Agreements, Immigration, Explosives Permits, Legal Auditing, Drafting and opinions for the registry of Corporations in Foreign Stock Markets and Auditing drafting and legal opinions to obtain financings.
The life of VSG is closely linked to the experience gained during more than 20 years of professional attention to their clients. Throughout the over 20 years of professional activity, they have always offered a personal, efficient and timely attention to their clients.
Likewise, with the aid of associate firms, VSG offers its clients support in other areas such as Mercantile, Environmental, Tax
Their team is a group of people who are committed, loyal and in constantly looking to develop professionally. Their intention is to become a leader firm in all of the areas the cover.
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VSG is an attorney firm established in Mexico City by a team of professional lawyers who are completely devoted to their clients. The most important values for VSG are based on the professionalism, loyalty and trust towards clients that comprise service, trust, friendship and professionalism, always with the intention to maintain a long-term relationship with all clients.
Company: VÁZQUEZ, SIERRA & GARCÍA, S.C. Name: ALBERTO M. VÁZQUEZ Email: avazquez@avazquezabogados.com Web: www.avazquezabogados.com Address: PASEO DE LAS PALMAS 755-902, COL. LOMAS DE CHAPULTEPEC, C.P. 11000 MÉXICO, D.F. Telephone: 52 (55)5540-3020
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-----------------------------------------------------------------------A.T. Kearney has played an integral role in more than 200 mergers worldwide over the past five years. As merger specialists, they guide companies through all stages of the merger integration process, including strategy development, due diligence, pre-merger planning, and post-merger execution. -----------------------------------------------------------------------While each merger is one of a kind, with its own unique challenges and objectives, there are certain characteristics that set leaders apart from the rest. A.T. Kearney’s soon-to-bepublished, data-driven study of over 1,800 deals in the past 5 years has identified clear and consistent actions that leaders are taking, some of which include:
The numbers of transactions have decreased due to the restrictions in the banking sector which is imposed by the United States and the EU sanctions as a result of which business are shifting away from Western and European countries to mainly Asian countries such as China and India.
• Set and publicly announce clear synergy targets. In the case of leading companies, over half of the time these targets exceeded 5% of the COGS of the acquired company. • Track and publicly report on progress. Over two thirds of leading companies reported progress, while less than thirty percent of lagging companies did so. • Target synergies from a broad range of value levers. Over half of leaders have included synergy goals from Operations, SG&A, Procurement and top-line growth.
WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012?
Their study will also shed light on best practices taken by leading companies in their integration efforts that led them to exceed synergy targets and achieve integration success. About their approach: A.T. Kearney’s due diligence approach helps their clients establish the fact base to confidently estimate and disclose publically their synergy targets. Once the deal is announced, they help companies plan the integration and put in place the tools and processes that will allow them to manage and track progress, and report to the market. Most importantly, they combine their M&A expertise with broad industry experience and renowned capabilities in growth strategy, manufacturing, supply chain, procurement, technology, and back-office support. All of these capabilities are critical for tailoring approaches that allow clients to exceed their synergy targets. In sum, they help clients execute against the complex challenges involved in the journey of acquiring or divesting businesses and, as a result, increase the probability that their M&A transactions will create value. -----------------------------------------------------------------------Legal counsel at Iranian-based Atai & Associates is Kourosh Atai. He explains his main area of expertise as being, “due diligence practice and cross border transactions.” -----------------------------------------------------------------------HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S? I acted for a German company selling its shares in its Iranian investment which was worth of Euros 5 Million. I also advised an Iranian insurance company on the purchase of software license agreement from a Bulgarian company which was worth USD 3 Million. I was also involved in another deal regarding the purchase of a software license by an Iranian company from the UK which was worth of USD 4 Million. HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? We endeavour to provide timely and punctual services to our clients and structure deals to meet individual transactions. Our main goal is to provide creative solutions and overcome legal obstacles for commercial transactions which are affected by current political circumstances and sanctions imposed on the foreign investors in Iran. WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011?
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WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? In 2011 the beverages, food and snack industry enjoyed growth, however in 2012 the housing and construction sector attracted interest from investor.
The new customs regulation is to favour the local production factories. So it is expected that the volume of import will decrease for the goods which are also being produced in Iran. What effects/challenges (if any) has your firm experienced due to the Eurozone crisis?
Name: David Hanfland Lead Partner, Mergers & Acquisitions Email: david.hanfland@ atkearney.com Telephone: 312-223-6427 Address: 222 West Adams Street, Chicago, IL 60606 Name: Rodrigo Slelatt Principal, Mergers & Acquisitions Email: rodrigo.slelatt@ atkearney.com Telephone: 212-350-3142 Address: 7 Times Square, New York, NY, 10036
The Eurozone crisis did not have any effects in Iran. The only reason which caused companies to liquidate and leave the market was the sanctions imposed and this is why the last year we had a high volume of liquidation of the European companies. -----------------------------------------------------------------------The Partners of Avellum Partners – Glib Bondar, Kostiantyn Likarchuk, and Mykola Stetsenko – speak about recent trends and developments in Ukraine. -----------------------------------------------------------------------WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN UKRAINE THIS YEAR? HOW HAS H1 2012 COMPARED TO 2011? Glib Bondar, “Capital markets are closed for Ukrainian issuers (at least for the near future) so we do not see much activity on that front. However, in contrast to Q1 2011, when we were extremely busy with equity and debt capital markets work, we are now busy with M&A, corporate restructuring work and bank lending.
Company: Atai & Associates Law Firm Name: Kourosh Atai Email: Kuorosh.Atai@ataiassociates.com Web: www.ataiassociates.com Address: ATAI & ASSOCIATES Attorneys at Law, No. 4 (Former 8) 14th Street Khaled Islamboli Avenue (Vozara) P.O.Box 15875-1633 Tehran 15117 Iran Telephone: 0098 (021) 88721858
WHAT DO YOU SEE IN TERMS OF FOREIGN INVESTMENT IN 2012? Mykola Stetsenko, “We expect M&A activity to remain on the rise as some businesses will continue to consolidate, while others will continue to sell their non-core assets.We also expect that the Ukrainian Government will continue with large privatizations and this will lead to additional deal flow and even some acquisition finance transactions. WHAT FACTORS ARE ATTRACTING COMPANIES AND WEALTHY INDIVIDUALS TO DO BUSINESS IN THE UKRAINE? WHAT ARE THE KEY BENEFITS? Kostiantyn Likarchuk, “Ukraine is a growing market with a lot of potential. It is the second-largest country in Europe (after Russia) and has a relatively undeveloped market. Consumer spending is steadily increasing. The country has top-quality agricultural potential plus very strong heavy industry and machinery manufacturing capabilities. HOW EASY IS IT TO DO BUSINESS IN UKRAINE – FOR EXAMPLE ATTRACTING NEW INVESTMENT, SETTING UP A NEW BUSINESS, GETTING ACCESS TO BANKING AND CREDIT FACILITIES? Glib Bondar, “Despite certain positive steps towards improvement of the overall legal environment (including simplification of new company registration and liquidation procedures, strengthening creditors’ rights protection, light liberalization of currency control, etc.), foreign businesses are still likely to face certain challenges unknown in more
Name: Mykola Stetsenko Managing Partner Email: mstetsenko@ avellum.com Telephone: +380 44 220-0335 Name: Kostiantyn Likarchuk Partner Email: klikarchuk@ avellum.com Telephone: +380 44 220-0335 Name: Glib Bondar Partner Email: gbondar@avellum.com Telephone: +380 44 220-0335 Company: Avellum Partners Web: www.avellum.com Address: 19-21 B. Khmelnytskoho Str., 01030, Kyiv, Ukraine
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
developed economies or even in most emerging markets, such as generally high new business “entry” costs, strict currency control, and a weak court system. WHAT ARE THE RISKS INVESTORS FACE WHEN BUYING ASSETS IN UKRAINE? WHAT STRATEGIES AND MEASURES CAN THEY ADOPT TO ENSURE THAT THEY GET A FAIR PRICE FOR ASSETS BOUGHT IN UKRAINE WHILE MINIMIZING RISKS OF POTENTIAL PROBLEMS RELATED TO SUCH ASSETS? Stetsenko, “The main risks are related to the general regulatory environment and bureaucracy. One should deal with this by hiring Western-educated or trained management and engaging in active dialogue with the Government. Another risk is the unpredictable court system. Minimizing risks in this area can be done through proper internal controls and regular external legal audits.” -----------------------------------------------------------------------Bar-Zvi & Ben-Dov provides the range of services typical of the largest law firms, delivered in accordance with a “boutique firm” work ethic that stresses cost efficiency, timelines and personal commitment. -----------------------------------------------------------------------The importance of the due diligence processes in international M&A transactions cannot be overrated. Especially so, when an Israeli entity is being purchased. The uniqueness of the Israeli law results inter alia from the fact that the Israeli legislation can be viewed as a form of a hybrid doctrine, combining influences from the British law with the constant inspiration it receives from the current US and EU law, and with rulings by the Israeli courts, which have added a certain unique “flavour”, among others in terms of protecting employees and creating labour law instructions applicable to M&A transactions.
Furthermore, the Israeli law requires that the employer will transfer mandatory payments to the employee’s pension fund (currently up to 5% of the employee’s salary), and it is customary that the company would maintain, for mid-level and senior employees, an education fund to which the company donates 7.5% of the employee’s salary, in addition to all the other sums mentioned above. Another matter which is common in M&A agreements but is relatively hard to enforce in Israel is the noncompete requirement. It is imperative that a foreign purchaser will understand that in order to enforce a non-compete period longer than six months, certain elements must be considered (including substantial specifically designated payments), and that even those six months are not to be taken for granted, as they are not often enforced.
-----------------------------------------------------------------------Fabio Trevisan is Partner at Bonn Steichen & Partners specializing in litigation, arbitration, real estate, commercial, bankruptcy and insolvency. -----------------------------------------------------------------------WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION?
In a recent transaction in which Bar-Zvi & Ben-Dov were representing an Israeli target entity, which was purchased by a European conglomerate, the purchaser’s due diligence of the company was not sufficiently thorough, resulting in substantial difficulties to conclude the transaction, in terms of remuneration to senior employees.
The investment fund industry has endured the euro area sovereign debt crisis and remained stable. While experiencing losses in 2011 mainly due to euro area related market turbulence, it has largely recovered, with assets under management surpassing €2 trillion in early 2012 (Source: IMF Public Information Notice No. 12/67 dated 3 July 2012).
In Israel, the rights accumulated by an employee, regardless of the employee’s position in the company and of the question whether or not the employee is also a shareholder of the company, continue to accumulate despite of the change in ownership.
WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011?
On the other hand, such an arrangement also allows the employee to receive the funds in case he resigns, a situation that otherwise would not have entitled him to any compensation.
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Luxembourg’s budget remains on a very rigorous policy which controls public expenditures. This budget should allow the country to recover its economy, which, in spite of all, is still very dependent on the global economy. Continued on next page...
When Bar-Zvi & Ben-Dov take all this into consideration, the purchaser has to be aware of the cost of employment in Israel, and of the limitations which may apply, and which differ from those applicable in Europe. For senior and mid-level employees, for example, the cost of employment may be up to 22% higher than the cost originally anticipated.
We focus on achievements and favour team working so that our lawyers support one another to achieve a common goal: creating value for the client. In order to best serve our clients from various different industries, our lawyers within different practice groups regularly work together, sharing information and expertise in order to provide advice tailored specifically to our clients’ needs.
However, the Israeli law allows the employer and the employee to agree on entering a special arrangement, according to which the employer transfers payments equal to 8.33 percent of the employee’s monthly salary to a specific fund, and then when the employee is let off, he is awarded with severance payments of whatever sums have accumulated in such fund, regardless of his last salary.
WHAT ARE THE CURRENT PRIORITIES WITHIN YOUR REGION? PLEASE PAY REFERENCE TO ENTERING NEW MARKETS, INTRODUCING NEW PRODUCTS AND MAINTAINING HIGH CASH BALANCES.
Moreover, limitations also apply to the assignment of intellectual property by the employee to the company, similar to those which apply in certain states of the United States.
The customary due diligence process often includes investigation of the target company and its assets, which include the physical assets, the intangible assets, and the workforce. The workforce itself is comprised of the corporate leadership and the remaining, subordinated, staff and employees. The investigation of the company’s debts, corporate resolutions, financials, and other assets, is in many ways similar to a due diligence process in other countries, subject naturally to the implications of the Israeli law. Labour law, however, is a unique field which has to be even more carefully scrutinized.
This is different than in many other legal systems, and thus if for example, an employee that has been working for the company for three years before the M&A, is let off one year following the acquisition of the company by the purchaser, such an employee shall be awarded with full compensation due for four years of employment, i.e. four times his recent salary.
for alternative funds managers seeking to access a wider international marketplace (i.e. hedge funds, private equity and real estate funds).
HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED?
Company: Loyens & Loeff, Avocats à la Cour Name: Véronique Hoffeld Email: veronique.hoffeld@loyensloeff.com Web: www.loyensloeff.lu Address: 18-20, rue Edward Steichen, L-2540 LUXEMBOURG Telephone: +352 466 230
A recent Eurostat report has shown that Luxembourg leads the other EU member states in terms of being the main recipient of investment inflows from foreign direct investments (“FDIs”) from outside the EU. Similarly, the report ranked Luxembourg number one in FDI outflows. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER? Luxembourg contains a unique concentration of investment fund industry experts in all aspects of product development, administration and distribution with many funds lawyers, service providers and audit firms hugely experienced in the industry. Luxembourg has developed a first class reputation in the investment management industry. The experience gained by Luxembourg as the gateway to cross border distribution of retail funds provides significant potential
Company: BONN STEICHEN & PARTNERS Name: Fabio Trevisan Email: ftrevisan@bsp.lu Web: www.bsp.lu Address: 2 rue Peternelchen, L- 2370 Howald Luxembourg Telephone: +352 26 0 25 1
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-----------------------------------------------------------------------The CKLB Fiduciary Group is head-quartered in Mauritius. Founded in 1998 by experienced practitioners from the Accountancy and Legal professions with first hand exposure in the financial services industry, the company provides multijurisdictional company formation, corporate and accounting services, Family offices and private wealth structuring, international cross border structuring and management and Private Equity Fund establishment and Fund Administration services. The group has since developed a successful team of like-minded professionals with the objective of ensuring client satisfaction at all levels in different locations. CKLB has offices in Mauritius, Hong Kong, Seychelles and long standing professional relationships with associates in London, Guernsey, Switzerland, Singapore, Shanghai and other important financial centres.
to recommend an appropriate professional Advisor, however, they advise the client on the general tax position of the entity they manage and administer in Mauritius in particular where the entity is benefiting from Tax Treaties.
-----------------------------------------------------------------------CKLB is independently owned and of medium size. They pride themselves in their ability to remain committed to providing a personal and tailor-made service to clients. They understand well the particular requirements and needs of clients and the key to their successful development has been a commitment to satisfying these needs at high standard. Their varied client base includes HNW / Ultra HNW Individuals, private companies as well as companies listed on major stock exchanges such as London, New York, Singapore and South Africa.
Additionally, Danubia has several awards as “IP Law firm of the year”, “best IP law firm in Hungary”, etc.
With a team of highly qualified and experienced professionals in different jurisdictions, CKLB provides a one stop shop service to its clients. From assistance on initial planning and structuring to the establishment of the structure and provision of a comprehensive array of business support services, CKLB provides a high quality and tailor made service to its clients.
Danubia has been representing several big Pharma companies in enforcing their Hungarian IP rights, and the past period has brought them several decisions of preliminary injunctions and favorable decisions in patent nullity proceedings initiated by the sued companies as defense. Enforcement of foreign client’s right has been successful also in the mechanical and electronic fields.
They work closely with their clients and clients’ advisors and provide legitimate structuring solutions to optimize their particular circumstances. CKLB do not provide Tax advice in the clients’ country of residence / domicile. Therefore, they recommend that the clients take appropriate advice from their Tax or Legal advisors or alternatively. They would be pleased
The number of IP litigations (both patents and trademarks) has been increased in 2012 and their success rate is high, clients have been satisfied with the professional quality and the services they have received, and especially because of the reasonable prices combined with such services.
-----------------------------------------------------------------------Danubia Patent and Law Office is the oldest and largest Intellectual Property Law firm in Hungary and it has been active for over 60 years. -----------------------------------------------------------------------Danubia has been voted as number1 or tier 1 law firm for Hungary by the independent surveys organized by the Magazine Managing Intellectual Property in each year since the surveys have started in 1997. This qualification has been equally awarded for both patent and trademark prosecution and enforcement.
In the prosecution field they are proud that they could be of service for a large Chinese Research Institute active in mobile telecommunication to represent all their European patent applications and they have been entrusted also with the coordination of the US filings of the same applications. A further special pride is that Danubia represent ZTE Corporation in all its recent patent litigation proceedings in Hungary.
Company: CKLB International Management Ltd Name: Christian Li Email: christianli@cklb.com Web: www.cklb.com Address: Felix House, 24 Dr Joseph Riviere Street, Port Louis, Mauritius Telephone: +230 405 8800
Company: Danubia Patent and Law Office Email: central@danubia.hu Web: www.danubia.hu Address: 16 Bajcsy-Zsilinszky út, Budapest, H-1051 Telephone: (+36 1) 411-8700
More than just another service provider, the CKLB Financial Services Group provides unparallel professional services by delivering tailor made solutions to clients. A people business with highly qualified professionals who understand well the requirements of private and corporate clients worldwide. Multi jurisdictional Company Formation Corporate Management, Administration and Secretarial services Corporate and Back Office Accounting Establishment of Trusts and Trustees Services Private Equity Fund structuring, Formation and Administration services Private Wealth structuring & Family Offices International Cross border Corporate structuring International Capital Market and Brokerage services P.O Box 80, Felix House
24 Dr Joseph Rivière Street, Port Louis, Mauritius
405 8800
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405 8818
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
Their practice before the EPO and before the OHIM has been steadily increasing and they have several EP- and CTM-related opposition cases, one of them has just been won in the recent period before the Opposition Board of the EPO. In Hungary the great forthcoming challenge will be the introduction of the Unitary Patent System. -----------------------------------------------------------------------Gabriele Giambrone is the founding partner of Giambrone Law ILP, an international law firm with offices in Palermo, Rome, Milan, London and Tunis. They provide legal assistance to the Italian and international community. -----------------------------------------------------------------------WHY DO YOU THINK SOME REGIONS ARE WITNESSING SUCH LARGE GROWTH IN FORMATION LEVELS DESPITE THE ON-GOING DIFFICULT CLIMATE? In Italy, as in most countries, noticeable differences can be seen between regions when it comes to commercial activity and growth. Areas such as Lombardy, Lazio and Veneto will always have relatively large growth in formation levels due to the attractiveness of the cities which are located in them – Milan, Rome and Venice respectively. HOW DOES REGULATION IN YOUR JURISDICTION BENEFIT BUSINESS GROWTH? WHAT CAN YOUR JURISDICTION OFFER TO THE PROSPECTIVE COMPANIES. The regulatory environment for companies in Italy is currently much more liberal than it used to be, thereby encouraging business growth. The past 6 months in Italy has been filled with market regulatory reforms, including the introduction of measures to liberalise retail trade, liberal professions and transport services. HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION? PLEASE TOUCH ON ACCESS TO BANKING AND CREDIT FACILITIES AND LOCAL CORPORATION TAXES WITHIN YOUR ANSWER. Doing business in Italy can be quite a complex matter. Public authorities are weighed down with bureaucracy and the legal system in Italy is notoriously slow. However, the new government of Italy is currently working hard to reform the market in order to make it easier for Italians and foreigners alike to conduct business with and in Italy. CAN YOU HIGHLIGHT THE KEY CHALLENGES OF INCORPORATING OFFSHORE/FOREIGN COMPANIES? PLEASE EXPLAIN HOW YOU OVERCOME THESE CHALLENGES WITHIN YOUR ANSWER. One of the key challenges of incorporating an offshore or foreign company in Italy is knowing how to navigate the notoriously bureaucracy-heavy system in place. Successfully communicating with the relevant Italian authorities can be difficult, and is even more so if you do not speak Italian. This can lead to particularly grave consequences such as being unable to obtain necessary permits and licences. AS WE SLOWLY RECOVER FROM THE ECONOMIC DOWNTURN, DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS IN TERMS OF DOING BUSINESS IN YOUR JURISDICTION? With the new reforms being put through by the new government, Italy should be able to increase job creation, encourage foreign investment, and therefore strengthen longterm growth. The liberalisation of the market will make Italy increasingly attractive in the coming months. -----------------------------------------------------------------------Golden Gate Business provides high quality advice and execution expertise in M&A transactions (both sell side and buy side). The firm works with dedication and seniorlevel commitment to help clients to achieve their strategic objectives and enhance value of their businesses. Anatole Klepatsky is the CEO.
WHAT ARE THE KEY STRENGTHS OF YOUR TEAM? HAVE YOU WON ANY AWARDS/ACCOLADES RECENTLY? Our multi-disciplinary team is assembled to meet any needs our clients have. Our key strengths are: our knowledge and experience; our in-depth understanding of local industries, markets and regulatory environment; our access to key industry players and extensive network of relationships and our strong expertise in M&A transactions execution from origination to closing. Our transaction on the sale of Sandora was named best M&A deal in Ukraine in 2007. WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION?
We have more than a decade of experience in M&A consulting with successfully completed projects at the total amount of over USD 1,5 bn. Understanding the interests of international buyers and expectations of local entrepreneurs allows us to be successful in the Ukrainian M&A industry. HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S? Yes. We’ve closed 2 very complex transactions in the first half of 2012, but they are confidential for the time being. HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? GGB performs as a deal lead manager, carrying on negotiations, coordinating cooperation of legal advisors and auditors, interacting with industry experts, etc., with a view to make the company more attractive for seller and increase shareholders’ value or in case of buy-side – capitalizes on wide relationships network, access to key decision-makers and knowledge of the local market.
Company: Giambrone Law ILP Name: Gabriele Giambrone Email: info@giambronelaw.com Web: www.giambronelaw.com Address: Via Giovanni Bonanno 122 90143 Palermo, Italy Telephone: +39 091 743 4778
WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011? In the 1st and 2nd quarters of 2012 several large-scale privatization processes were held in the Ukraine. The buyers were local financial groups, pursuance to continue industry consolidation started earlier. The total amount of deals reached more than USD 600 mn. On the contrary to the 1st quarter of 2011, which was marked by significant IPO activity of Ukrainian companies (especially at Warsaw Stock Exchange), in 2012 none of Ukrainian companies listed its shares at European stock exchanges. Continued on next page...
Company: Golden Gate Business Name: Anatole Klepatsky Email: aklepatsky@ggb.com.ua Web: www.ggb.com.ua Address: 19-A, Kudryavska str., Kyiv, 04053 Ukraine Telephone: +380 (44) 201 20-10
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Q2 ENVIRONMENT FOR M&A IN THE MENA REGION Karim A. Souaid is founder and managing partner of Keystone Equity Partners, a specialist buyout firm that focus on mid-sized companies in the GCC markets. -----------------------------------------------------------------------The environment during Q2 remains poor and suppressed by the global financial crisis. Investors’ confidence is shaken and pricing mismatch between sellers and buyers prevail. Regional stock markets are barely ticking with any signs of IPOs. However, real challenges reside in other aspects of doing deals. They are encapsulated in the acronym: ‘ICOL’ which stands for : Information is poor in terms of quality and of historical records (i.e., financial statements covering several years preceding the acquisition date). Buyers must watch out for creative accounting or tampering with books for tax avoidance. Forensic accounting is often required to re-constitute corporate accounts and bring them into the IAS age. Comparable transactions are rare commodities. M&A activity is absent from public markets, and financial terms of private transactions remain muted. Public companies bear no similarities to privately held ones since large banks, telcos, real estate and petrochems dominate regional stock markets. Ownership barriers abound. Local laws set limits on foreign ownership (49% of total capital stock). That leaves buyers in possession of substantial stakes but of inconsequential influence over a target’s future direction and management. Where majority ownership is exceptionally allowed (e.g., free zones) founding shareholders still resist ceding control to new investors, except at exorbitant premiums. Leverage finance based on future cashflow streams of a target is not common. Leverage from banks is available only when supplemented by personal guarantees or tangible collateral (i.e., real estate). That renders any leveraged acquisition more akin to an equity investment accentuated in the case of personal guarantees by no limitation on liabilities in case of default. The above should not be viewed as a repellant to doing M&As in the MENA region but rather as a useful map for corporate landmines that practitioners must, at times, avoid, circumvent or overcome. The author is founder and managing partner of Keystone Equity Partners which the general manager of GrowtGate Capital Corporation, a specialist buyout firm that focus on midsized companies in the GCC markets. -----------------------------------------------------------------------Knox House Trust is an independent, privately owned Trust & Corporate Services Provider. -----------------------------------------------------------------------Knowledge, experience and expertise are at the core of business Knox House Trust Limited. Applying this excellence through understanding clients’ circumstances enables them to deliver bespoke solutions that are supported by outstanding service. It is the reason why they can enjoy long standing relationships with their clients and their advisors. They offer advice in the following areas; Trusts and Fiduciary Services, Offshore Companies, Private Trust Companies, Family Office, Wealth Structuring, International Tax Mitigation, Residence and Domicile Planning, Tax Advisory Services for Sportspersons, Aircraft & Yacht Registration and Management and Estate and Succession Planning. -----------------------------------------------------------------------Founded in 1981 by Mr Andreas Afxentiou Georghiou, A.A. GEORGHIOU LLC acts in accordance with the Laws of Cyprus. They specialize in Corporate, Contract, Business, Banking, Tax and Real Estate Law, and Tax Planning, International Trusts, Asset Protection and Fiduciary Services. ------------------------------------------------------------------------
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The Advocates – Legal Consultants of the Law Firm are fully licensed professionals and authorized introducers of clients to the Banks. They are regulated by the Cyprus Bar Association, the Central Bank of Cyprus and the Unit for Combating Money Laundering of Cyprus and also are bound by the regulations of the Organization of Economic Co-Operation and Development (OECD) and the Financial Action Task Force (TATF). With its Advocates – Legal Consultants and qualified bilingual and multilingual personnel and associates, and its almost 30-year experience, in cooperation with the selected Bankers, Accountants-Auditors, Stockbrokers, Insurers, Land Developers, Translators and other professionals, in Cyprus, and abroad, the Law Firm provides high level specialized professional services fully satisfying the needs of numerous individuals and legal entities, worldwide and it is well known and respectable internationally. Their vision has always been to be the best and the leading Law Firm in the specialized fields of legal services we provide within their expertise. Their mission is the legal safeguarding of the interests provision of the specialized judiciary and extra judiciary personal service.
protection and the effective of our clients, as well as the legal advices and qualitative services with immediate and
The Law Firm has established a reputable local and international identity and its clientele consists of the following categories of legal and individual entities; Financial Institutions; Commercial Banks; Offshore Banks; Cooperative Banks; Foreign Banks; Local Companies; Offshore Companies; International Business Companies; Aviation Companies; Investment Companies; Stockbrokers and Businessmen & Investors. -----------------------------------------------------------------------Cristina Elena is CEO of LEGAL RECOVERY IPURL, specialists in insolvency and arbitrage. -----------------------------------------------------------------------WHAT ARE THE KEY STRENGTHS OF YOUR TEAM? HAVE YOU WON ANY AWARDS/ACCOLADES RECENTLY?
Company: Keystone Name: Karim A. Souaid Web: www.keystone-ep.com
Our team offers the combination of legal insight, outstanding professional competence, courtroom experience, industry knowledge and practical business sense needed to help our clients prevail in their most complex cases. As an official recognition of the outstanding quality of our performance, the firm represents Romania in some of the most prestigious international professional alliances and organizations. I am included on the list of arbitrators of the Court of Commercial and Maritime Arbitration at the Chamber of Commerce, Industry, Navigation and Agriculture of Constanţa. Further, I am included on the list of arbitrators at the Court of International Arbitration of the Chamber of Commerce and Industry of Romania and as Insolvency practitioner of UNPIR; Specialist in foreign investment field.
Company: Knox House Email: enquiries@khtlimited.com Web: www.khtlimited.com Address: 16 – 18 Finch Road Douglas, Isle of Man, IM1 2PT Telephone: +44 (0) 1624 631710
By a decision dated April 2011, I have been conferred the status of Associate Researcher at the Department of public rights “Vintila Dongoroz” at the Institute of Legal Research Institute “Academician Andrei Radulescu” of the Romanian Academy. I am also Vice-President of the Professional Association for Consumer Protection. I participate in national and international seminars specializing in investment dispute settlement as well as in scientific sessions on the themes of public authority functions and responsibility of the state in foreign investment. I am a Member of the Editorial Board of Review and have written numerous articles published in professional magazines which are sometimes reported in some specialized seminars. I regularly participate in conferences and international seminars such as the Institute for Legal Research, Romanian Academy, Bucharest, Wallachia University of Targoviste, International Law Association, and the Austrian Arbitration Association.
Company: A.A. GEORGHIOU LLC Email: LawFirm@AAGeorghiouLLC.com Web: www.AAGeorghiouLLC.com Address: 6 HALKIDIKIS STREET 1ST FLOOR OFFICE 1 7101 ARADIPPOU LARNACA CYPRUS Telephone: (357) 24813980
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION? We act as Partners in Trust. We draft legal opinions, due diligence reports and memorials on real estate legal status. We also Draft sale-purchase pre-agreements, agreements, lease agreements, mortgage agreements and assistance before the notary public in signing and authenticating all types of agreements. Further, we assist in the negotiations and provide commercial intelligence services. -----------------------------------------------------------------------Mike Hinchliffe is Director at Merrill DataSite, specialising in virtual data room solutions for due diligence projects, including M&A and Private Equity transactions, IPOs and Fundraising, IP licensing and document warehousing. -----------------------------------------------------------------------WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION? We have over 10 years’ experience in setting up virtual data rooms for due diligence projects of all types and sizes. The Merrill DataSite team has managed over 23,000 projects, comprising half a billion pages of confidential documentation for our clients across the world and we use this wealth of experience on every new project we undertake. Our depth and breadth of experience gives customers – old and new – security and confidence that we have the expertise and ability to support their transaction from inception to closure. HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S?
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Many of the largest deals we work on are cross-border transactions, such as those mentioned in the reports above, which Merrill DataSite is ideally suited to because of the 24/7 nature of our customer service team’s availability and the availability of our technology platform, which is accessible to users from anywhere in the world, at any time of the day or night and in eight different languages. Recent examples of large complex deals include sale if Misys to Vista Equity Partners, several disposals for BP, and the sale of C&W to Vodafone. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012?
Company: Merrill DataSite Name: Mike Hinchliffe Email: Michael.Hinchliffe@merrillcorp.com Web: www.datasite.com Address: Merrill Corporation, 101 Finsbury Pavement, London, WC2A 1ER Telephone: +44 (0)207 422 6256
What we’ve witnessed is that the sectors that have seen most activity over the last 6months in terms of deal volumes have been Industrials and Chemicals (24.4%), Consumer (17%) and Business Services (11.3%). This doesn’t represent a huge amount of change over previous years in terms of where deals are happening, so while there might be fewer deals getting done in Europe overall, we haven’t noticed a significant shift in where they’re emanating from in terms of sector. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER? Merrill DataSite has continued to grow its international business in 2012 and we have continued to see significant deal flow in the market. What we are also seeing however, is a lower percentage of deals reaching completion; and the deals that do get done are taking much longer. While there may be volatility in the global markets and an increasing number of distressed assets for sale, this presents opportunities for buyers and investors with cash in reserve and healthy balance sheets.
Company: Occam Associates Name: Linda Milestad Email: linda.milestad@occam.se Web: www.occam.se Address: Regeringsgatan 38, SE-111 56 Stockholm Telephone: +46 8 4630700
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q2 Mid-Year Review
-----------------------------------------------------------------------Occam experiences continued optimism in the shadow of the Euro crisis -----------------------------------------------------------------------This first half year of 2012 has seen continued market activity in Sweden with several transactions during Q2, despite rising concerns resulting from the Euro crisis. “We see an optimism in the Swedish private equity market. The Swedish economy is unusually strong and there is a need for corporate transactions driven partly by a pent-up need for both private equity companies and industrial shareholders wanting to realise their investments, and partly by newly raised private equity funds looking for interesting targets,” says Linda Milestad, Manager at Occam Associates. “Many fine companies are thus expected to reach the market in the next few years.” However, with uncertainty surrounding both the market conditions as well as the access to capital, greater demands are being placed on the analysis and evaluation of acquisition candidates’ commercial buoyancy, financial status and future potential. At the same time it is becoming even more important to actively work with current investments to realise the full development potential in fund portfolios. Occam has experience from more than 80 commercial and operational due diligence processes and over thirty projects involving portfolio companies and work with customers prior to, during and after the acquisition process as well as provide support at time of exit. The strength of Occam’s offer lies in the approach, whereby a pragmatic process, a high level of flexibility and responsiveness to clients’ specific needs forms the basis for the services along with professional, fact-based analyses. Occam has a broad industry experience and a geographical focus on the Nordic countries, where many acquisition targets are located or have their origins. However, the analyses performed are often international in nature to match the companies’ often global market coverage. Linda Milestad is Manager and responsible for Occam Associates’ Private Equity practice together with Bo Johannisson. She joined Occam in 2006 and is specialised in private equity, strategy and organisation. Occam Associates is a strategy consulting firm that was founded in 2001 and is based in the Swedish capital city of Stockholm. Our mission is to help our clients achieve solid business results while at the same time supporting them in building stronger and more capable organisations. -----------------------------------------------------------------------PT AsesoresFinancieros have a multidisciplinary team with extensive expertise in various business sectors, allowing them to be a global view firm. -----------------------------------------------------------------------Their experience covers a wide range of multinational companies. Due to the financial strength that Mexico has developed in recent years, Foreign Direct Investment (FDI) has increased with the arrival of companies in the country, arriving with broader needs of consultants to provide specialized services to the complex tax and financial issues faced. This is a challenge that forces the firmto constantly keep up to date in respect ofthe local, federal and international affairs which affect finances and investments of their clients. Participating in the global arena, they can expect to have enhanced economic activity in general during the fiscal year 2011. The economic recovery in the first months of the year has been framed by the crisis of European countries with implications for exchange rate parity mainly affecting the exchange rate of the Mexican peso. For the second quarter of 2012, Argentina decided to emphasize the disagreement in the preferential duties agreement of vehicles (Economic Complementation Agreement 55, in force since 2003). Argentina’s unilateral decision has already had an impact and affects a variety of vehicles from both countries with duties of 20 to 35%. The firm expects there to be a long
ACQUISITION INTERNATIONAL
process of renegotiation between the two countries to reach new agreement preferential duties.
personal, actual experience allows them to really understand and get excited about their clients’ needs and opportunities.
Finally, they project an interesting process to create agreement on political reforms that could be approved nationally on the fiscal side, to achieve further simplification in determining payment of corporate taxes to encourage reinvestment of profits. The firm believes that the economic recovery in Mexico will continue to the end of the year, by which time they will be at the same levels as before the 2008 crisis.
-----------------------------------------------------------------------Taxways is registered with the Polish Ministry of Finance as a tax advisory company in Warsaw. Their company specializes in tax planning and tax risk management. -----------------------------------------------------------------------They represent their clients before tax authorities during tax investigations and finally before the courts. If it comes to the tax investigations, due to their assistance, Polish administrative courts often overthrow decisions issued by the tax authorities against taxpayers. From the perspective of their clients, the most complex and time consuming transactions consist of intra-community delivery of goods such as electronics or steel.
Company: PT Asesores Financieros Name: C.P. Fabiel Paredes Email: fparedes@ptasesoresfinancieros.com Web: www.ptasesoresfinancieros.com Address: Rufino Tamayo 7-101, Pueblo Nuevo 76900, Querétaro, México Telephone: +52 (442) 225 3271
These are the transactions generating the highest level of tax risk as well. Taxways main task is to protect the clients against that kind of risk. First of all, the clients should meet high level due diligence requirements to identify both suppliers and products. This is because missing trader may cause tax troubles to the honest entrepreneur. Because of general economic problems, they watch intensely the activities of tax authorities. As a result of the ever-increasing complexity of tax laws, the innocent entrepreneur very often is exposed to tax risk. Therefore, professional assistance becomes necessary particularly with respect to different intra-community commercial operations and Taxways can ably provide this. -----------------------------------------------------------------------Q2 Mid-Year ReviewWilson Partners Corporate Finance is the specialist corporate finance advisory division of Wilson Partners Limited. Adam Wardle is Director and Head of Corporate Finance. -----------------------------------------------------------------------Generally they work with shareholders and entrepreneurial management teams of owner managed businesses, usually with a turnover between £2m to £100m that are intending to embark on one or more of 6 critical needs; Selling the business; Acquiring a business; Management Buy Outs; Fundraising – Equity/Debt; Transaction Support and Non-Executive Board Strategy. Following on from a very busy and successful Q1 completing 3 transactions (including the sale of Davis Tate to LSLi Plc), in Q2 they have seen and engaged with some exceptional opportunities where they believe they can add value to shareholders and owner managers. However, the lack of generally available liquidity continues to be challenging, but good businesses are still being sold for sensible multiples and good businesses with a credible and deliverable story for growth can be funded. Over the past few years certainly the sources of funding have changed and this is in part why it is critical, as advisors, to have deep relationships in the debt and equity markets, but also of importance are the alternate funding sources like family offices, angel investors and corporate investors in order to align investor/lender preferences with the opportunity. As an owner managed business, their core principle is to create shareholder value for their clients by the work that they do and so the transaction itself is often just the start of the journey. Their Directors have had entrepreneurial careers in their own right having started up, funded, invested, grown and sold businesses outside of practice in the real world and that
Company: Taxways sp. z o.o. Name: Marek Bytof Email: mbytof@taxwaysgroup.com Web: www.taxways.pl Address: Plac Przymierza 6, Warsaw Telephone: +48 22 617 71 73
LEGAL RECOVERY IPURL
Company: LEGAL RECOVERY IPURL Name: CRISTINA ELENA CANDEA, CEO Email: cristinacandeaccir@gmail.com Web: www.legalrecovery.ro Address: ROMANIA, PIPERA-VOLUNTARI, STREET TITU MAIORESCU NO 34 E, VILA NO 7, ILFOV Telephone: 00403198367
Company: Wilson Partners Limited Name: Adam Wardle Email: adam.wardle@wilson-partners.co.uk Web: www.wilson-partners.co.uk Address: 5a Frascati Way, Maidenhead, Berkshire, UK, SL6 4UY Telephone: +44(0) 1628 770 770
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
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CASE STUDY: ASSET MANAGEMENT DISTRIBUTION What you need to succeed in the Swiss financial marketplace -----------------------------------------------------------------------Switzerland’s large asset base, combined with relatively open fund architecture, is drawing fund managers from the UK. Market entry is easier with a targeted sales strategy and outsourcing partner like ACOLIN, who can open doors to investors.
At year-end 2010, assets under management in Switzerland totalled around Sfr 5,500 bn, of which slightly more than half were invested by foreign clients. This short review which will help you assess whether distribution in Switzerland is an option and how you might go about it.
HOW SHOULD I REGISTER MY PRODUCTS? While Switzerland is not a member state of the EU, fund managers can choose to register their Ucits funds for public distribution in Switzerland. Private placements with institutional investors are still possible with non-UCITS funds, however, pension funds and wealth managers in particular have stepped up their demands as to the regulation of funds they would invest in.
ACOLIN helps asset managers to develop new markets for UCITS funds – cost-effectively and quickly.
HOW CAN I SEGMENT THE SWISS MARKET? Pension fund managers have different requirements and incentives to portfolio managers in private banks. Differentiating between wholesale (into wealth management) and institutional clients is essential for any business plan. WHICH PRODUCTS WILL SELL IN SWITZERLAND?
As your outsourcing partner ACOLIN acts as Swiss Legal representative, provides instant access to major distributors and platforms, offers fund data and trailer fee management and tailor-made sales and marketing support. You can entirely focus on fund management and relationship management with professional investors.
Currently, there is a lot of demand by Swiss investors for global asset allocation modules. Also, many clients are searching for a substitute for fixed income strategies which reduce volatility, and Switzerland has traditionally been a hub for Emerging Markets. IS CROSS-BORDER DISTRIBUTION AN OPTION? You will need to hire a well-connected sales professional based in Zurich or Geneva. To build awareness and create interest for your products, you will need about a year. If you target retail clients, you will have to invest in branding and establishing a reputation.
Company: ACOLIN Fund Services AG Name: Daniel Haefele Email: daniel.haefele@acolin.ch Web: www.acolin.ch Address: Stadelhoferstrasse 18, CH-8001 Zurich Telephone: +41 (0) 44 396 9693
distributing success ACOLIN - your partner for fund distribution What we do • • •
Registration and legal representation of your funds in Switzerland Distribution channel and commission management Marketing and sales support
Why choose ACOLIN • • • •
Reduces your costs of market entry Shortens the time to market Provides access to major distribution channels in Europe Opens the door to institutional and wholesale investors
www.acolin.ch www.acolin.co.uk
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ACOLIN is the first independent fund distribution service provider, based in Switzerland with offices in Luxemburg, London and Madrid, operating crossborder into European markets. For fund managers based in the United Kingdom and Ireland, we provide local assistance for designing the best distribution strategy and ongoing support.
ACOLIN (UK) Limited Lorcan Murphy, Managing Director +44 (0) 203 397 2722 lorcan.murphy@acolin.co.uk
ACOLIN Fund Services Daniel Haefele, CEO +41 (0) 44 396 9693 daniel.haefele@acolin.ch
ACQUISITION INTERNATIONAL
DEAL DIARY: Deal index
DEAL DIARY — Deal index 74
MONTAGU PRIVATE EQUITY TO SELL BSN MEDICAL TO EQT
81
3I DIVESTED ITS 49% EQUITY STAKE IN THE BUSINESS TO INGMAN GROUP
87
PROCURITAS CAPITAL INVESTORS IV DIVESTS DÄCKIA HOLDING AB
75
SUNSTONE CAPITAL INVESTS IN ADENIUM BIOTECH
81
HENRY COMPANY ACQUIRED BY INVESTORS LED BY GRAHAM PARTNERS
87
CAMECO ACQUISITION OF NUKEM
75
ANGLIAN MEAT PRODUCTS MANAGEMENT BUY-OUT, BACKED BY BARCLAYS BANKS
81
ON24 ACQUIRES IMASTE
87
NG INFRA OÜ ACQUIRED
75
SAINBURY’S ACQUISITION OF ANOBII
82
ENCORE INVESTS IN TESTING EQUIPMENT COMPANY
88
ARGOS ACQUIRES A SWISS SCHOOL
76
ARMATIS AND LASER MERGER
82
HONG KONG STOCK EXCHANGE AGRESS TO BUY LME FOR $2.1 BLN
88
DPA GROUP ACQUISITION OF BENKIS INTERIM PROFESSIONALS
76
DIANA ACQUIRES THE WHOLE OF ARÔMES DE CHACÉ
82
MAKIELAB BANKS $1.4M TO 3D-PRINT AVATARS INTO REAL, UPGRADEABLE COLLECTABLES
88
AVEVA ACQUISITION OF BOCAD
76
DAVY ACQUIRES BLOXHAM ASSET MANAGEMENT
83
PEP ACQUIRES NESTLE’S PETERS ICE CREAM
89
EPURON ACQUISITION OF COTTBUSER HALDE WIND PARK
77
AVEVA ACQUISITION OF BOCAD
83
GIMV IS SELLS ITS MAJORITY INTEREST IN ICT SERVICE PROVIDER OGD
89
DUROBOR AND SOBODEC MERGER
77
SERCO ACQUIRES VERTEX’S UK PUBLIC SECTOR BPO OPERATIONS
83
SMART BALANCE ACQUISITION OF UDI’S HEALTHY FOODS, LLC
89
ACQUISITION OF MAJOR STAKE IN RUSSIAN POWER PRODUCER ENEL OGK-5
77
PHOENIX INVESTS TO SUPPORT THE CONTINUED GROWTH OF CLOSERSTILL
84
COLFAX ANNOUNCES ACQUISITION OF SOLDEX SA
90
LEAPFROG INVESTMENTS ACQUISITION OF EXPRESS LIFE INSURANCE
78
S’AFRICAN FIRM INVESTS $250M PENSION FUND IN ECOBANK
84
ODIN EQUITY PARTNERS ACQUISITION OF A MAJORITY STAKE IN SSG A/S
90
INDUSTREA LIMITED ACQUIRED
78
ABSA STAKES R10BN ON EDCON STORE CARD DEBT
84
DE HOGE DENNEN ACQUIRES A MAJORITY INTEREST IN TALENT&PRO
90
ACQUISITION OF HANSEATISCHE CHOCOLADE
78
SILVERDELL AGREES ACQUISITION OF EDS GROUP HOLDINGS
85
TAM S.A MERGE WITH LAN AIRLINES
91
HOMAIR VACANCES REORGANISATION
79
EFG HERMES’ INFRAMED INVESTS USD 100 MN IN THE EGYPTIAN REFINING COMPANY
85
TEAVANA HOLDINGS ACQUIRES TEAOPIA LIMITED
91
CORPFIN CAPITAL ACQUISITION OF KIWOKO
79
LGC’S £80M FINANCING ROUND
85
SUCCESSFUL RESTRUCTURING BY TRANSFER OF NDT SYSTEMS & SERVICES AG
91
JONCOUX GROUP ACQUISITION OF MK
79
EQUISTONE INVESTS IN FIRCROFT
86
TESCO ACQUIRES HUGE STAKE IN WE7
80
AMBIENTA ACQUIRES A 35% STAKE IN FOUNDOCEAN
86
DIAGEO TO ACQUIRE YPIÓCA THE LEADING PREMIUM CACHAÇA BRAND IN BRAZIL
80
GROWTH CAPITAL PARTNERS INVESTS IN UK’SLEADING SKI AND CRUISE AGENT
86
AAC CAPITAL PARTNERS BENELUX NEW GROWTH PARTNER SALAD SIGNATURE
80
H.I.G ACQUIRES COMVERGE, INC.
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DEAL DIARY:
M&A from around the world MONTAGU PRIVATE EQUITY TO SELL BSN MEDICAL TO EQT Montagu Private Equity announced the sale of medical supplies manufacturer BSN medical to EQT for an enterprise value of around €1.8 billion. BSN, with close to €700 million in sales and approximately 4,000 employees, is one of the world’s leading suppliers of wound care, compression therapy, and orthopaedic products. Sylvain Berger-Duquene, Director at Montagu, said,
We are very proud to have partnered with BSN over the past 6 years. Under Montagu’s ownership, BSN has grown its sales by over 30%, made 5 acquisitions, strengthened its product portfolio, and invested heavily in its R&D capabilities, manufacturing network, and people. Dr. Claus-H Wiegel, CEO of BSN, said,
For over 6 years, Montagu has been an excellent partner that has actively supported the strategy of the group, enabling us to optimize BSN’s profile, market position and geographic reach. I am particularly proud of the progress the Company has made in strengthening its market leadership during this time, and we look forward to working with EQT to deliver the next phase of BSN’s growth story. Throughout the due diligence process, Merrill DataSite allowed for the efficient exchange and review of over 100,000 pages of confidential information related to the transaction, also tracking disclosure, providing deal intelligence and facilitating the execution of a successful deal. Anna Scott, Regional Director for Merrill DataSite said,
Merrill DataSite has worked closely with BSN on numerous projects and is a trusted provider to the Life Sciences industry. MONTAGU PRIVATE EQUITY DISPOSAL OF BSN MEDICAL TO EQT Legal Adviser to the Vendor
URS provided vendor environmental and health & safety due diligence support, led by Nicholas Howard, Transactions Practice Leader and Dr Phil Tyson, Associate Director. URS reviewed BSN’s global portfolio, prioritising issues for detailed assessment based on known operations, issues and strategic importance, and hosted bidder Q&A sessions Preparing vendor due diligence work covering finance, taxation and IT was Ian Pontefract, KPMG partner. He commented,
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M&A from around the world SUNSTONE CAPITAL INVESTS IN ADENIUM BIOTECH
ANGLIAN MEAT PRODUCTS MANAGEMENT BUY-OUT, BACKED BY BARCLAYS BANKS
Sunstone Capital is investing DKK 11 million in Adenium Biotech, a Danish biopharmaceutical company spun out from Novozymes in 2011. This is the second investment from Sunstone Life Science Ventures Fund III.
Anglian Meat Products MD Craig Taylor has bought the family business in a multi-million management buy-out, backed by Barclays Banks, and is now sole owner. The UK’s largest frozen pet food manufacturer appointed Sheffieldbased Strategic Corporate Finance to put together the multi-million pound funding deal underpinning the takeover. The funding was structured and secured by Strategic Corporate Finance and made use of the government-backed National Loan Guarantee Scheme. Craig told pbwnews: “I’m absolutely delighted, and it’s business as usual – it’s us getting on and doing the same good things that we have always done. It’s great news for the business.” Based in Norfolk, Anglian Meat Products was established in 1981 by Craig’s father, Richard, and today leads the way in the production of raw pet food, with more than 20 refrigerated vans servicing the whole of the UK from four specialist cold store centres in Norfolk, Bristol, Leeds and Scotland. Its brands, Prize Choice and Natures Menu, have commanded a strong following among pet owners who want to feed their pets a natural, raw diet. Recent launches include lifestage raw foods for puppy, active and senior/light in the Natures Menu frozen ranges. The company has also seen its export market grow from nothing in just four years to cover much of northern and eastern Europe including
Adenium Biotech is a spin-off from Novozymes and was established in 2011 with financing from Novo Seeds. The company works on developing the compound Arenicin, which is secreted from lugworms. Arenicin is the lugworms’ defense against invasive bacteria. The compound has shown effectiveness against multi resistant gramnegative bacteria – the bacteria, that cause the biggest problems in hospitals today. Adenium Biotech has raised a total of DKK 22 million from Novo Seeds and Sunstone Life Science Ventures Fund III, and with the new capital injection, there is financing to complete a comprehensive screening program. “With an investment from Sunstone of DKK 11 million we can now complete the next phase of our development program and chose the Arenicin-variant, that is most promising for further testing in humans”, Dr. Peter Nordkild, CEO of Adenium says. www.jusmedico.com Jan Bjerrum Bach jbb@Jusmedico.com
SAINBURY’S ACQUISITION OF ANOBII Sainsbury’s moves into e-book space with acquisition of majority stake in online books platform Anobii. Sainsbury’s has today announced the acquisition of HMV Group plc’s shareholding in Anobii Limited, a social network and online retailer of e-books. As a result of the transaction and Sainsbury’s investment in the future development of the business, it is anticipated that Sainsbury’s will have a 64% stake in Anobii. The investment in Anobii is a further step in Sainsbury’s strategy to deliver digital services to support the growth of its online channel and commitment to multichannel retailing. The acquisition supports Sainsbury’s drive into the growing online and digital entertainment market following the launch of Sainsbury’s Entertainment in November 2010, the acquisition of online entertainment company Global Media Vault Ltd in October 2011 and the launch of its music download service earlier this year. Sainsbury’s purchased HMV Group plc’s stake in Anobii Limited for £1. GP Bullhound, the technology investment bank, acted as the sole financial advisor to HMV on the transaction.
Holland, Ireland, Denmark, Norway, Finland and Poland, as well as in China and New Zealand. Last year, its export business was worth £350,000 – it aims to hit the £500,000 mark this year. Andrew Coates, MD of Sheffield-based Strategic Corporate Finance, said: “Anglian Meat Products is a quality business which attracted much interest from funders. The deal adds further evidence to the fact that for the right deals, banks are willing to lend.” Clayton & Brewill provided accountancy and tax advice on the deal while the shareholders received legal advice from the Nottingham office of Shakespeares. Craig was advised by Stephenson Smart Chartered Accountants and Leathes Prior Solicitors
SUNSTONE CAPITAL INVESTS IN ADENIUM BIOTECH
ANGLIAN MEAT PRODUCTS MANAGEMENT BUY-OUT, BACKED BY BARCLAYS BANKS
SAINBURY’S ACQUISITION OF ANOBII
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M&A from around the world ARMATIS AND LASER MERGER Activa Capital organises the merger of Armatis and Laser Contact to create a leader in French Call Centre outsourcing. Activa Capital merged Armatis and Laser Contact, major French call centre companies, to create the leading independent French onshore call centre company with combined sales of over €200 million and 14 call centres. Activa Capital will become lead majority shareholder of the combined group alongside CM-CIC LBO Partners, Omnes Capital, CDC Entreprises, Ouest Croissance and Multicroissance. The merger of Armatis and Laser Contact creates a company with the critical mass to truly benefit from the structural growth in customer call centres. “The increase in the volume of calls during the last years confirms the economic interest and growing role of call centre outsourcing especially within the bank and insurance sectors in addition to public services”, explains Denis Akriche, CEO of Armatis. The group intends to make further acquisitions both in France and overseas. “The management team appreciated Activa Capital’s combined know-how in corporate spin-outs and build-up acquisitions both of which are useful to the company”, commented Olivier Nemsguern, a Partner at Activa Capital. GE Capital France provided the working capital financing to Armatis and Laser Contact, with the team being led by Thierry Martet (pictured), director in the GE structured finance division. He commented: “The deal was challenging due to the concomitant double acquisition by the PE sponsor and also the need to commit ourselves over a longer maturity than usual. This transaction provides a new example of the ability to combine a “standard” acquisition debt package with our asset-based solution for working capital purposes. We are delighted to work alongside Activa Capital and Armatis/Laser management.”
DIANA ACQUIRES THE WHOLE OF ARÔMES DE CHACÉ
DAVY ACQUIRES BLOXHAM ASSET MANAGEMENT
DIANA announced the acquisition of the whole of Arômes de Chacé. Founded in 2005 and based in the Loire Valley, ADC is a 50/50 joint venture between Diana and Chaucer Foods. The company produces high quality mushroom extracts (concentrates and powders) for different applications in the agro-food industry (soups, sauces, ready meals, etc.). ADC’s inclusion in the Group allows Diana to reinforce its expertise in natural solutions dedicated to emphasising the taste and texture of food and adding the intense flavour of mushroom.
Bloxham Asset Management has been sold to Dublin-headquartered Davy Stockbrokers as an investigation into “financial irregularities” at parent company Bloxham continues.
This is helping DIANA to develop its capacity to meet its customers’ needs by combining excellent control of high quality product sourcing and the development of new solutions, thanks to market proximity and partnership approaches established by ADC. “For DIANA, this operation is an excellent opportunity to strengthen its expertise in one of its areas of excellence, i.e., “Flavouring Foodstuffs”. Thanks to the high quality of ADC products and its close association with its customers, we will be able to extend our range of authentic mushroom-based culinary solutions to meet our customers’ expectations even better. Also, we are well aware of the expertise and professionalism of the ADC people, and know that we can count on their commitment to DIANA’s growth project,” says Jean-Yves Parisot, CEO of DIANA’s food division. DIANA is a world leader in natural functional solutions for the agro-food, pet food, nutroceutical, aquaculture and cosmetics industries, and technology leader in plant cell culture, dedicated to the production of active ingredients for food, cosmetics and health. DIANA is improving the sensorial and nutritional performance of its customers’ products thanks to its unique biosciences expertise, and helping them conquer new markets. Of its 1500 employees, almost 15% are dedicated to R&D. In 2011, the group reported turnover of €392 million, three-quarters of which in exports.
Investing in the deal was Martial Lauby, Partner at Christopher Underwood. He confirmed, “We invested in the deal for our Mezzanine fund of funds, Selected Mezzanine Funds I, which was raised in 2008.”
ARMATIS AND LASER MERGER
DIANA ACQUIRES THE WHOLE OF ARÔMES DE CHACÉ
A statement released by Davy said its team, led by Pramit Ghose, will transfer to the company with immediate effect. Assets run by the team currently exceed €700m in value. The transaction, which has been agreed in consultation with the Irish Central Bank, follows the discovery of issues in the internal finances of Ireland’s oldest stockbroker Bloxham last week. Issues relate to the reporting and accounting of the firm’s income and no client funds are involved or at risk, according to a statement from the group. Assets managed by Bloxham Asset Management continue to be held on the balance sheets of either Irish Life or New Ireland. Tony Garry, chief executive of Davy, said: “The transition to Davy is a very positive development for Bloxham’s asset management clients who will continue to be serviced by the same award winning team, but as part of a much larger and well capitalised business.” Bloxham, a 150-year-old stockbroking firm, was ordered to cease trading by the Central Bank on Friday (25 May 2012) and is suspended from the Dublin trading floor for alleged accounting irregularities. The Central Bank said “At 5pm last Friday, the Central Bank imposed directions on Bloxham to cease all regulated activities, with immediate effect. “Early this morning, Bloxham agreed to transfer all private client and fund management business to Davy. The Central Bank will continue its own investigation into the financial irregularities at Bloxham.” This transaction was jointly led by Bryan Bourke and Shane O’Donnell at William Fry Solicitors. Both are partners in the Corporate Department. Bourke commented, “This transaction involved the acquisition of two business divisions. An agreement to acquire the private client division was signed in March with a completion scheduled to take place in June. The addition of the fund management division arose only after the Central Bank became involved - so the deal was concluded in a very tight time-frame.”
DAVY ACQUISITION OF BLOXHAM ASSET MANAGEMENT Legal Adviser to the Purchaser
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M&A from around the world AVEVA ACQUISITION OF BOCAD AVEVA (LSE:AVV) has announced the acquisition of the Bocad group of companies (“bocad”). This strategic acquisition includes all companies in the Bocad group, bringing to AVEVA all IPR, employees, contracts and assets. AVEVA will establish a new Structural Design Centre of Excellence across Bocad’s two main offices in Bochum, Germany and Ocquier, Belgium where it will continue to develop and support the Bocad software products.The software developed through the Centre of Excellence will be tightly aligned with the AVEVA PDMS and AVEVA Marine solutions and will be sold through the AVEVA global sales force. The new combination will create a world-class engineering design offering for the plant, marine and fabrication markets. Extensive evaluation by AVEVA identified the Bocad software solutions as the most versatile structural design applications on the market today. The flexibility, capability and richness of functionality make it the first choice for a number of industrial design markets. Richard Longdon, Chief Executive, AVEVA commented, “I am delighted to welcome the Bocad team and software solutions to AVEVA. We are continually looking to strengthen our product portfolio with industry-leading solutions and Bocad easily demonstrated best-in-class. This acquisition further extends AVEVA’s position as a leader in the 3D design market and will be excellent news for our customers and expand AVEVA’s opportunity to capture even greater market share from our competitors.”
SERCO ACQUIRES VERTEX’S UK PUBLIC SECTOR BPO OPERATIONS
PHOENIX INVESTS TO SUPPORT THE CONTINUED GROWTH OF CLOSERSTILL
Serco Group plc (Serco), the international services company, announced that it has acquired Vertex Public Sector Limited, the UK public sector operations of Vertex Data Science Limited, for cash consideration of £55.5m. The acquisition brings additional skills and capabilities to support expansion into new areas of middle and back office support and adds further scale to our recently created Global Services division.
Phoenix Equity Partners has invested in CloserStill, a business-tobusiness exhibition organiser, in a transaction which values the business at circa GBP25 million.
Vertex Public Sector provides high quality Business Process Outsourcing (BPO) services to UK local and central government. Major customers in local government include Westminster and Thurrock councils, and in central government include the Child Maintenance and Enforcement Commission (CMEC) and Job Centre Plus. Its 3,000 employees handle approximately 4.5 million citizen interactions a year. The business provides multi-channel contact centres, shared transactional services and ICT services. In particular, it brings deep skills and capabilities in areas such as HR and payroll, revenues and benefits, complex case management and administration services. The pro forma financial result for the year to 31 March 2012 for Vertex Public Sector Limited was approximately £110m of revenue and £8m of adjusted operating profit.
Phoenix’s investment, together with an ongoing investment by NVM, marks an exciting new phase in CloserStill’s development. CloserStill has delivered substantial growth over the last three years, both in its organic business and acquired brands. The company has a portfolio of ten major exhibitions in the UK, principally in the healthcare and technology sectors, including the London Vet Show, the Pharmacy Show, the Dentistry Show, Learning Technologies, nextgen, and the recently launched, Clinical Pharmacy Congress. Center says: “It`s been a brilliant journey and huge fun so far with our friends at NVM and with a team of people here that can move mountains. Phoenix has an enviable pedigree and, with their backing, we can now paint our pictures on even bigger canvasses – the adventure continues.” Kevin Keck, a Partner at Phoenix, says: “We see great opportunities for CloserStill to grow rapidly both in the UK and internationally. We have been focused on making an investment in the exhibition sector for some time and we are delighted to be investing alongside the outstanding CloserStill team.” Peter Hodson, a Partner at NVM, says: “We have really enjoyed working with the CloserStill management team during the last six years; so much so, we were keen to roll over and be part of the journey in the next phase of the company’s growth, alongside Phoenix.”
Jan-Henning Strunz led the team at MATRAY, MATRAY & HALLET S.C acting on behalf ofBSI (Bocad Service International) S.A. Jan commented: “On the one hand, the challenge has been the purchase of the German Bocad group by a German company which has been sold to Aveva. This deal was subject to German Law. On the other hand, the Belgian company BSI has been sold to Aveva. This deal was subject to Belgian Law. So, two different laws had been applicable to the deal. Being German and Belgian lawyer, I had no problems to overcome this challenge.”
Yvonne Costello, Associate Partner led the team at Kerman & Co LLP, says: “Advising CloserStill, our long standing client led by Andy Centre, in securing Phoenix’s investment should ensure the company’s continued dynamic growth.”
AVEVA ACQUISITION OF BOCAD
SERCO ACQUIRES VERTEX’S UK PUBLIC SECTOR BPO OPERATIONS
PHOENIX INVESTS IN CLOSERSTILL
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M&A from around the world S’AFRICAN FIRM INVESTS $250M PENSION FUND IN ECOBANK
ABSA STAKES R10BN ON EDCON STORE CARD DEBT
SILVERDELL AGREES ACQUISITION OF EDS GROUP HOLDINGS
Ecobank Transnational signed a 250 million dollars agreement with the Public Investment Corporation of South Africa.
ABSA took over retailer Edcon’s store card book for R10bn — its largest investment since parent Barclays bought a controlling stake more than five years ago.
Silverdell PLC the environmental support services group has announced that it has agreed the “transformational” acquisition of EDS Group Holdings Ltd (EDS) for an initial consideration of £15m.
The agreement was PIC’s investment on behalf of government employment pension fund (GEPF) in ETI’s common equity. Mr. Arnold Ekpe , Group Chief Executive of ETI, signed for Ecobank while Chairman of PIC and Deputy Finance Minister for South Africa, Mr. Nhlanhla Musa Nene and Chief Executive Officer of PIC, Mr. Elias Masilela signed for PIC. Under the terms of the agreement, the 250 million dollars seed fund will amount to 3,125,000 shares in Ecobank or 19.58 per cent of the bank’s total outstanding shares. The investment will also enable PIC to become a board member of ETI.
Absa CEO Maria Ramos said the group would have the responsibility for credit, management of fraud, risk, finance, legal and compliance operations of the store card business. Edcon would retain customerfacing activities, including sales and marketing, customer services and collections. Edcon and Bain Capital engaged First Annapolis over two years ago to begin a strategic review that led to the transaction announced in June. For Edcon, the sale of the ZAR10 billion consumer receivable portfolio is a strategic transaction that substantially reduces their balance sheet and allows for debt retirement.
Ekpe said that the GEPF transformation as a shareholder of Ecobank will leverage the bank’s reputable local and international shareholders and gradually bring ETI’s equity capital raising programme to an end. “Our unparalleled presence across sub-Saharan Africa and our knowledge of local markets will also facilitate the GEPF’s investment plan for Africa,” Ekpe said.
The private label credit program is a critical component of the Edcon retail value proposition, however, so the transaction was predicated on a long term relationship whereby Absa will continue to provide access to credit for Edcon customers and Edcon will continue to provide all customer facing operations. First Annapolis has structured numerous partnership programs between large retailers and banks in North America, Europe and other parts of the world and was the lead advisor to Edcon and Bain on the transaction.
“With this one investment, we will be immediately optimising our footprint on the rest of the continent, an action that would otherwise
Robert Lime, Partner, led the deal team from First Annapolis working with executives from Edcon and Bain Capital, as well as the other
require multiple investments and huge effort as well as resource allocation,” he said.
legal and accounting advisers to overcome obstacles and achieve a successful transaction.
Ernst & Young’s Transaction Advisory Services partners, Matthew Lee and Anil Khimjee led the due diligence and valuation teams respectively, providing advice to the PIC. Colin Schopbach, regional director, Merrill DataSite, was the lead on this project for virtual data room provision, essential throughout the due diligence phase of this project. Colin worked with Ecobank to establish their VDR.
Roula Hadjipaschalis, Director of Corp Tax at KPMG advised Edcon on tax matters related to the sale of their store credit card business. She explained, “We identified and dealt with various issues towards the successful conclusion of the deal whilst remaining mindful of tax and regulatory requirements necessary for it’s sustainability in the future.”
Bowman Gilfillan’s Lisa Botha, Partner in the Banking and Finance Team, Francisco Khoza, Partner in the Banking and Finance Team and Priyesh Modi, Partner in the Corporate Department represented the PIC, which acted in this transaction as representative of the South African Government Employees’ Pension Fund.
Contact Details: www.kpmg.co.za
EDS, a provider of decommissioning and dismantling services, has an established working relationship with Silverdell and serves an “attractive market niche” to which Silverdell does not currently have exposure. The move will, according to Silverdell, accelerate its planned expansion into Canada and Australasia, adding scale and track record in those markets. The company added that “significant” cross-selling opportunities are expected to exist and the enlarged group will be a more attractive partner to multi-national corporations. Sean Nutley, CEO of Silverdell, said, “This acquisition will transform Silverdell into a global specialist environmental support services group. EDS is a highly specialised decommissioning and dismantling provider with genuine global reach and a blue chip customer list which provides repeat work. “Having worked closely with them, we understand the business well and believe that it can be successfully integrated into the group. It serves attractive market niches in geographies which are target territories for us. We believe that the enlarged business will be well placed to win further large framework contracts with multi-national corporations.” Further, he added that the acquisition is expected to be “immediately earnings enhancing”. Through the acquisition, Silverdell intends to create an international specialist environmental support services group with a bluechip, multinational client base. A planned expansion into Canada and Australasia will be accelerated, with extended cross-selling opportunities. EDS has won contracts for several multi-national corporations including: Shell, RioTinto, GSK GlaxoSmithKline, ExxonMobil, Cadbury, Rolls Royce, Pfizer and Ineos. Silverdell has retained EDS’s key staff including managing director Darren Palin. The agreement for the acquisition of EDS by specialist environmental support services group Silverdell for an initial consideration of £15 million was completed in June. Andy Harris at SNR Denton UK LLP led the legal team that advised Silverdell on the acquisition. “We were delighted to have the opportunity to advise Silverdell. Our international network meant that we were able to mobilise resource elsewhere in the world, when and where it was needed, to get this deal done for them.” Contact Details: Andy Harris: http://www. snrdenton.com/people/h/harris_andrew.aspx Contact Details: SNR Denton: http://www.snrdenton.com/
PUBLIC INVESTMENT CORPORATION OF SOUTH AFRICA INVESTS $250M PENSION FUND IN ECOBANK
ABSA ACQUISITION OF EDCON
SILVERDELL ACQUISITION OF EDS GROUP HOLDINGS
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M&A from around the world EFG HERMES’ INFRAMED INVESTS USD 100 MN IN THE EGYPTIAN REFINING COMPANY Egyptian asset manager EFG Hermes entered in partnership with InfraMed in a USD100 million refinery investment. The USD3.7 billion refinery project, run by the Egyptian Refining Company (ERC), was developed by Egyptian private equity firm Citadel Capital. The project is aimed at helping Egypt cut its diesel import needs by 50 percent, resulting in over USD300 million in additional direct benefits to the state annually and boost job creation. The investment represents an effective ownership of 15.6 percent in Orient and, in turn, 7.5 percent in ERC, Egyptian Fund Management Group (EFMG) said. EFMG is a unit of EFG Hermes and the investment advisor and partner of InfraMed in infrastructure deals in Egypt. The project will be operated as a public-private partnership under a 25-year supply and off-take agreement with the Egyptian General Petroleum Corporation (EGPC), a government-owned company. Tim Pick, Shearman & Sterling’s head of project development and finance advised project sponsor Egyptian-listed private equity firm Citadel Capital and project company Egyptian Refining Company (Takrir). He said, “Citadel Capital is a longstanding and valued client of the firm. We have advised Citadel Capital on several other deals including in relation to corporate loan facility refinancing and OPIC (the US government’s development finance institution, the Overseas Private Investment) guaranteed facilities.”
LGC’S £80M FINANCING ROUND
EQUISTONE INVESTS IN FIRCROFT
LGC has raised approximately £80 million of additional financing from Commerzbank, GE Capital, ICG and ING in order to support the company’s future growth ambitions. The four new Mandated Lead Arrangers have joined the existing syndicate that was established for Bridgepoint’s original buyout comprising Bank of Ireland, HSBC Bank plc, Lloyds, Santander and Societe Generale. The financing completed on 15th June 2012.
Equistone Partners Europe bought a significant stake in Fircroft in a deal worth £140m.
LGC is an international leader in laboratory services, measurement standards, reference materials and proficiency testing. The company operates out of 22 countries with laboratories and centres across Europe and the US, as well as sites in Brazil, China and India. Bridgepoint originally acquired LGC from LGV Capital in 2010 in a transaction that valued the business at £257 million. Since the original acquisition, LGC has made a number of acquisitions and the new financing provides additional facilities in order to support further acquisition opportunities. GE Capital is one of Europe’s leading providers of leveraged finance for mid-market private equity backed transactions and has a leveraged loan portfolio in excess of €5 billion across EMEA covering 160 companies in the region. The firm has been lead arranger of over 30 deals in the last 18 months and has a strong pipeline in place for the year ahead. Fenton Burgin (Partner) and Chris Skinner (Director) of Deloitte acted as Debt Advisor to the Equity House & Management team. Chris Skinner commented, “The expertise shown by Management and Bridgepoint was a key feature of the deal, as was the collaborative and positive engagement from all the banks.”
He continued, “The project had to deal with various external constraints including the lack of liquidity caused by the financial crisis during 2008 and 2009 and the impact of the Arab Spring.”
Johnathan Johnson, the founder and chief executive of Fircroft, said the business planned to continue its international expansion and open further offices to help boost growth. The transaction was handled by Steve O’Hare, Paul Harper and Andrew Backen from Equistone’s Manchester office. Following completion of the transaction, Steve O’Hare will join the Fircroft board as a non-executive director. Deloitte provided vendor financial and tax due diligence for Fircroft. The work was carried out by a Manchester based team consisting of Richard Bell, Matt McLoughlin, Fiona Gray and David O’Leary. Ewen Maclean, Project Manager at Calash, led the Commercial Due Diligence Team throughout the transaction for Equistone Partners Europe. They commented, “We enjoyed working closely with Equistone on this transaction and are in discussions to provide additional strategic advisory services.” Calash provided commercial due diligence to Equistone throughout the transaction. Project Manager, Ewen Maclean commented, “Calash has conducted similar exercises in the oil and gas manpower sector, which enabled us to quickly establish the facts and support Equistone from an early stage in the process. We enjoyed working closely with Equistone on this transaction and are in discussions to provide additional strategic advisory services.” IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control overinformation. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitivedocuments — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling highstakes transactions and business collaborations valuedat more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New YorkCity. In addition the company operates eleven offices on four continents.
For Egypt, the refinery is strategically important. It will be the first to produce European-grade diesel and IATA-grade jet fuel and to comply with World Bank and EU environmental standards, reduce sulphur/ SO2 emissions by 186,000 tonnes annually, reduce present diesel imports by approximately 50% and create up to 10, 000 jobs in the Mostorod area.
EFG HERMES’ INFRAMED INVESTS USD 100 MN IN THE EGYPTIAN REFINING COMPANY
LGC’S £80M FINANCING ROUND
EQUISTONE INVESTMENT IN FIRCROFT
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M&A from around the world AMBIENTA ACQUIRES A 35% STAKE IN FOUNDOCEAN
GROWTH CAPITAL PARTNERS INVESTS IN UK’S LEADING SKI AND CRUISE AGENT - IGLU.COM
Ambienta SGR SpA, an Italian private-equity company has taken a 35% stake in the U.K. offshore wind engineer FoundOcean Ltd. FoundOcean, based in Buckinghamshire, England, provides subsea and offshore foundation grouting to the offshore wind and oil and natural-gas industries. The company’s sales doubled to 12 million pounds ($19 million) last year from 2009, driven by new offshore wind contracts.
GCP announced its investment in Iglu.com, the UK’s leading online ski and cruise agent, Iglu.com, in a deal valued at £19 million.
Fawcus Corporate was introduced by the directors of FoundOcean to act as their Corporate Finance Lead Adviser. David Fawcus of the company said: ‘The Private Equity investment in FoundOcean provides an exciting platform for the company’s future. The transaction is based on secure foundations through a meeting of minds. I was pleased to bring important structural points to the negotiation table that are now embedded in the agreed transaction terms.’ PricewaterhouseCoopers supported Ambienta in making the investment through the provision of financial and tax due diligence and SPA advice. David Smellie, partner in the corporate and commercial practice at B P Collins LLP, led the lawyers which acted for FoundOcean Limited and its management team in connection with the investment by Ambienta SGR. Other members of the corporate team were associate lawyer, Harriet Jones and trainee lawyer, William Key. Smellie commented, “There were a number of issues to overcome but these were successfully negotiated due to the collaborative approach taken by advisers on all sides to ensure a relatively swift and smooth transaction.” David Smellie continued, “We are delighted to have assisted FoundOcean Limited in helping it to bring on board an investor focused on growth environmental investments which will allow the company to achieve its expansive growth strategy. B P Collins LLP has had a long relationship with both FoundOcean and some of its larger shareholders and directors and this instruction illustrates the success of the approach taken by our practice in becoming trusted advisers to our clients.”
GCP is taking a significant minority stake in the business and will join the existing board. GCP underwrote the entire transaction, providing the debt and equity on the deal that was a buyout from Matrix Private Equity Partners. Simon Jobson, partner at GCP said: “Iglu has capitalised brilliantly on the huge increase in the popularity of online travel, especially in the ski and cruise sectors. Grant Thornton, led by Mo Merali, provided due diligence services to Growth Capital Partners in its investment in Iglu.com. He expressed that “The focus of due diligence was on the achievability of management’s growth forecasts, the impact of the recent Costa Concordia partial sinking incident and regulatory capital requirements.” Osbourne Clarke’s Partners Alisdair Livingston, Michale Bell and High Jones acted for GCP on a series of management buy-out investments and exits over a number of years. Livingstone asserted that, “One of the biggest challenges faced was the complexity of the tax structuring required in order to maximise tax efficiencies for the management team.” Christopher Photi, Partner at White Hart Associates LLP, advised GCP in relation to travel regulatory specific issues. “We have not acted for GCP before but are often instructed by private equity firms for such travel transactions and are well known by them generally for our specific expertise in the travel regulatory arena”. Photi commented, “The major challenge faced was the CAA regulator and agreeing a structure they could approve under their approved ring fencing structure.”
H.I.G ACQUIRES COMVERGE, INC. H.I.G. Capital, LLC announced the acquisition of Comverge, Inc. Based in Norcross, GA, Comverge is a leading provider of intelligent energy management solutions that empower utilities, commercial and industrial users and homeowners to use energy in a more effective and efficient manner. Brian Schwartz of H.I.G. commented, “We believe that the intelligent energy management and demand response industries will continue to grow quickly supported by a rebounding economy, aging power infrastructure, more stringent environmental regulations and a strong value proposition. With the support and expertise available to it as an H.I.G. portfolio company, Comverge is well-positioned to take advantage of this growth with a leading market position and differentiated product offering. We are excited about this opportunity and look forward to working with Comverge’s executives and employees to help the Company reach its full potential.” Comverge brings unparalleled industry knowledge and experience to offer the most reliable, easy-to-use, and cost-effective intelligent energy management programs. Comverge delivers the insight and control that enables energy providers and consumers to optimize their power usage through the industry’s only proven, comprehensive set of technology, services and information management solutions. H.I.G. is a leading global private equity investment firm with more than $8.5 billion of equity capital under management. H.I.G. specializes in providing capital to small and medium-sized companies with attractive growth potential. H.I.G. invests in managementled buyouts and recapitalizations of profitable and well managed manufacturing or service businesses. H.I.G. also has extensive experience with financial restructurings and operational turnarounds. Since its founding in 1993, H.I.G. invested in and managed more than 200 companies worldwide. Assessing the Relative Market Position of Comverge Inc. was Daniel M. Violette, Ph.D., Managing Director of Energy and Stuart Schare, M.S., Director of Energy at Navigant. They assisted by surveying market participants, and reviewing contracts and performance.
Contact Details: david@fawcuscorporate.co.uk
AMBIENTA ACQUISITION OF A 35% STAKE IN FOUNDOCEAN
GROWTH CAPITAL PARTNERS INVESTS IN IGLU.COM
H.I.G ACQUISITION OF COMVERGE, INC.
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M&A from around the world 3I DIVESTED ITS 49% EQUITY STAKE IN THE BUSINESS TO INGMAN GROUP
HENRY COMPANY ACQUIRED BY INVESTORS LED BY GRAHAM PARTNERS
Halti was founded in 1976 and is headquartered in Vantaa. The company employs 60 staff and reported net sales of €28m in 2010. 3i invested in Halti in July 2004, alongside management of the company. Since 2004, 3i has actively supported Halti’s efforts to build on its leadership position within its domestic markets in Finland and accelerate the internationalisation of the business, expanding into the strategically important Alpine countries of Austria, Italy and Germany.
Henry Company has been acquired today by an investor group led by the private equity firm Graham Partners and certain other coinvestors including the private equity firm OceanBridge Partners, members of current management, and the Company’s former owners.
Additionally, Halti has boosted export sales and brand credibility through significant investments in international sponsorship and marketing. In 2013 Halti will be the official clothing supplier for the fourth time in the FIS Alpine World Ski Championships in Schladming, Austria. Moreover, Halti will equip the Finnish Olympic Team in the London Summer Olympics in 2012. Erkki Nikoskelainen of 3i’s Nordic Private Equity team commented: “Over the last eight years, 3i has worked closely with Halti’s management, offering access to 3i’s network of global contacts and strategic advice to support the internationalisation of the brand. Over the investment period, Halti has doubled its turnover and achieved international recognition and success. Today the firm has a strong platform for continued future growth.” Halti CEO Mr. Martti Uusitalo said: “Halti’s business and processes developed significantly during this eight year partnership. 3i’s added value and experience in international business as well as brand building has led Halti’s permanent expansion into international markets.” Krogerus, led by Partner Ville Hailikari and Counsel Marjukka Sippola, represented 3i Group plc and 3i Nordic Private Equity 2004-06 LP in the sale of their respective stakes in the company and represented the company in the refinancing arrangement related to the sale.
With one of the largest manufacturing footprints in North America, Henry supplies roof coatings and cements, air and vapor barriers, underlayments, waterproofing products, spray foam, green roofing systems, and other building and do-it-yourself products. Graham Partners and the co-investors acquired Henry from the private equity firm AEA Investors and other minority shareholders. Terms of the transaction are not being released. L.E.K. Consulting acted as commercial advisor to Graham Partners on Henry and we have supported Graham in many prior investments. L.E.K. Consulting had a team of nine professionals co-led by Rob Rourke, Peter McKelvey and Chris Rule. Rourke commented: “Henry has a broad array of products across a range of building products categories and channels and is a leader in many of these segments. The commercial assessment required a detailed investigation of how each segment would likely perform in the future based on macro trends like housing recovery and energy efficiency, as well as Henry’s competitive position and performance vs. these trends and drivers. It was a great deal of work to sort it all out, but we were able to work through it with the help of Graham and OceanBridge and the collaboration with the Henry leadership team. We believe the partnership between Graham, Henry and OceanBridge will be a great success. The company is positioned for strong growth, building off of leading brands and a talented leadership team.”
ON24 ACQUIRES IMASTE AON24, Inc., the global leader in webcasting and virtual event solutions announced the acquisition of Madrid-based IMASTE, the leading provider of virtual events in Europe. Led by an accomplished management team, IMASTE delivers virtual events products and services to a variety of leading global companies, including Deloitte, Accenture, The Economist, British Council, Top Language Jobs, Renault and Monster.com. “We have the utmost respect for IMASTE’s leadership and organization,” said ON24 CEO Sharat Sharan. “IMASTE’s market expertise and strong European presence complement ON24’s current London operations perfectly.” Sharan continued, Our Fortune 1000 clients will benefit from the stronger local support made possible by our acquisition of an EMEA powerhouse. In addition, this merger further consolidates ON24’s lead in the global marketplace and provides IMASTE customers with access to ON24’s world-class virtual communications solutions. He added that IMASTE will lead ON24’s expansion into Latin America. “With its industry-leading virtual communications technology and brand reputation, we are thrilled to be merging with ON24,” said Miguel Arias, IMASTE co-founder and CTO. This merger of two leaders in the virtual events space will result in a single, dominant global virtual events and webcasting company that will serve customers more effectively and efficiently. With the acquisition, ON24 now has seven primary hubs -- in North America (San Francisco, Charlotte and New York City), Asia Pacific (Sydney and Singapore) and Europe (London and Madrid). Fernando Fernández Sallent is the principal in Moore Stephens Madrid and has been the coordinator of this work with audit partner Fernando Fernández Ripoll and tax partner Mario Ovejero. They represented IMASTE to offer advice on every step taken on the due diligence. Fernandez Sallent confirmed, “We had to be very well coordinated with the company and with other advisors, to provide the best advice on a timely basis, and to be aware of the most relevant risk, so the transaction could be agreed in a very short period of time.” Pº General Martínez Campos 42, bajo 2 28010 – MADRID. España T. +34913104046 F. +34913083492 www.msmadrid.com
3I DIVESTS ITS MINORITY INTEREST IN HALTI OY
INVESTORS LED BY GRAHAM PARTNERS ACQUISITION OF HENRY COMPANY
ON24 ACQUISITION OF IMASTE
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M&A from around the world ENCORE INVESTS IN TESTING EQUIPMENT COMPANY
HONG KONG STOCK EXCHANGE AGRESS TO BUY LME FOR $2.1 BLN
MAKIELAB BANKS $1.4M TO 3D-PRINT AVATARS INTO REAL, UPGRADEABLE COLLECTABLES
Encore Capital has completed an investment in Technical Software Consultants (TSC), a designer and manufacturer of non-destructive testing equipment.
Hong Kong Exchanges & Clearing has signed a framework agreement with the London Metal Exchange to buy the LME for 16.673 billion HK dollars (2.1 billion U.S. dollars).
Its acquisition of a majority stake in TSC is supported by Octopus Investments, which provided a £3 million facility to fund the deal.
In a filing to the stock exchange, HKEx said it offered to buy the LME’s 12.9 million shares at 1,292.55 HK dollars per share.
MakieLab closed a seed round investment of $1.4 million. The round was led by early-stage investors Lifeline Ventures and Sunstone Capital and is joined by Anime and gaming industry veterans Matthew Wiggins, Daniel James and Cedric Littardi of superangel-fund Ynnis Ventures.
Shirin Gandhi, partner at Encore said, ‘We have been actively looking for investments within the integrity management space. TSC has developed market leading technologies and has demonstrated rapid international growth through a blue chip customer base.
The credit has been secured from a group of banks including the China Development Bank Corporation, Deutsche Bank, HSBC and UBS, according to the statement.
‘We believe there is exciting potential for further growth with the additional resource and expertise that management recognised they need and which Encore has a track record in helping to source.’ Hugh Costello, investment manager at Octopus, added, ‘We are pleased to be able to support Encore in their investment into TSC. It is an impressive business, which has a track record of consistently delivering for its customers.’ Iain Gallow, Project Manager, led the Commercial Due Diligence Team at Calash during the transaction with Encore. They undertook a review of Technical Software Consultants (TSC), focusing on management, technology and market to assist Encore with the investment process and help shape future strategies. Gallow commented, “Our experience of the energy industry and our contact network within the sector helped them through the process of understanding TSC’s niche technology and applications, as well as the oil and gas market.” Matthew Arnold & Baldwin LLP, led by Partner Joss Alcraft, acted as liaison between Wragge and Geoffrey Leaver in order to broker the final terms and get the deal over the line. She explained, “the main tensions were between Octopus as “lender” and management who were rolling over part of the sale price into shares in Newco.”
Terming the transaction as “opening the next chapter in HKEx strategic development,” HKEx Chief Executive Charles Li said the acquisition represents a unique opportunity to acquire in one stroke a position of global leadership in the commodities market. “This is consistent with our strategy to expand beyond equities and equity derivatives and offers significant opportunities for revenue growth,” he said. HKEx said in the statement that it was its key strategic priority to become a global integrated exchange group, expanding beyond equities into additional asset classes, including fixed income, currencies and commodities. The addition of a strong commodities component to HKEx’s existing businesses through this acquisition will enhance HKEx’s growth prospects while diversifying its earnings base. “In particular, the (HKEx) Board sees the significant and growing demand in Asia for an exchange targeting the needs of metals market participants in the region, especially in China,” the statement said. HKEx said it views the acquisition as “a compelling strategic opportunity” to grow the business of the LME through a combination of the LME’s position as the leading venue for the trading of base metals futures and options contracts and HKEx’s market position in Asia.
Meanwhile, the digital dolls on the site wander around a 3D environment and the two will eventually be linked. Physical objects will eventually be tied to digital achievements such as hit “level 20 before you can buy the crown, for instance. “Makies are great proof of how 3D printing will impact our everyday life in so many subtle ways. My daughter is already saving her pocket money for a Makie and for her and her peers this physical customization will be the norm,” says Nikolaj Nyholm, Partner at Sunstone Capital. The idea is that each toy is unique to its owner with the on-demand individualised dolls created via web, smartphone or tablet apps, with physical features that can be re-sized and reshaped. Clothes and accessories are going to be big for these things, and as you can guess they are aimed ultimately at the 3-year-old and above market, though they are starting with adults. Founder Alice Taylor says the company uses Selective Laser Sintering, to give it its proper Additive Manufacturing (aka 3D Printing) title, using EOS machines, usually a p100 model. Taylor was previously Commissioning Editor, Education at Channel 4 while co-founder Luke Petre is an MMO development veteran; other co-founder Jo Roach is a cross-media production director while Sulka Haroformer lead designer of Habbo Hotel. Sylvia Spencer, partner at Russell New, led the team which advised the MakieLab founders from the outset of their venture. Spencer said, “We represented the founders and have known Alice Taylor for more than 10 years, advising on her previous companies also.”
Hugh Costello, Investment Manager of Octopus Investments, provided funding for the debt to enable the transaction, also taking a minority equity stake.
ENCORE CAPITAL INVESTS IN TECHNICAL SOFTWARE CONSULTANTS
HONG KONG ACQUISITION OF LME FOR $2.1 BLN
MAKIELAB $1.4 MILLION SEED ROUND INVESTMENT
Debt Providers
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ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world PEP ACQUIRES NESTLE’S PETERS ICE CREAM
GIMV SELLS ITS MAJORITY INTEREST IN ICT SERVICE PROVIDER OGD
SMART BALANCE ACQUISITION OF UDI’S HEALTHY FOODS, LLC
Australian private equity firm Pacific Equity Partners has acquired Nestle Australia’s Peters Ice Cream Business for an undisclosed amount.
After more than five-and-a-half years, Gimv has sold its majority interest in ICT service provider OGD. Van Lanschot Participaties has bought the company together with OGD’s management/founders. Gimv invested in the ICT service provider in 2006 and assisted OGD in its transformation into a more professional and diversified company. Together with management, a strategic plan was drawn up, resulting in a targeted expansion of the range of services to capitalise on changing market demand and a more diversified client base.
Smart Balance, Inc. completed its previously announced acquisition of Udi’s Healthy Foods, LLC (Udi’s) for $125 million in cash from majority unit holder Hubson Acquisition, LLC.
PEP will acquire sub-brands like Billabong, Monaco Bar, Connoisseur and Frosty Fruits as well as the right to market and sell in Australia select global brands like Drumstick, Maxibon, Skinny Cow, Heaven and Milo Scoop Shake. “We are pleased that PEP has expressed its desire to continue to grow this iconic brand in Australia, and delighted that PEP has agreed for substantially all employees to offered employment with PEP as part of the deal. The remaining employees will be retained by Nestle,” he added. Nestle currently employs around 4,000 people across Australia. News Limited Lucy Court, left, and Claudia Brkic enjoy Nestle Peters’ Drumsticks in Melbourne’s South Yarra “For PEP, this is a great chance to apply our strong consumer products knowledge and credentials to support the management team and their business strategy. We are keen to invest further in Peters’ iconic and loved brands, and we are excited to include the Peters business in our portfolio,” Pacific Equity Partners Managing Director Rickard Gardell said in a statement. PwC provided financial, taxation and IT due diligence services to long term client Pacific Equity Partners in support of the acquisition of the Peters Ice Cream business. The team was led by Sean Gregory, Transaction Services Partner and Chris Morris, Tax Partner, who were supported by a wider PwC team incorporating various technical specialists Consideration of the financial performance by customer channel was a key aspect of PwC’s work. Additionally, the carve out nature of the transaction provided key challenges such as assessing the stand alone cost base including IT systems and working capital requirements. Steve Smith – Partner led the Ashurst team acting on behalf of the banks that provided the debt financing for the deal. Steve commented: “A particular focus for the banks was ensuring their security in the IP was properly protected. A key element of this was a tripartite agreement negotiated with Nestle.”
Ivo Vincente, Head of Buyouts & Growth for Gimv in the Netherlands, about this exit: “From the outset, OGD has stood out from its competitors due to its young, enterprising corporate culture. The company has a unique ability to combine flexibility and a fast response with quality. In the face of the company’s strong growth and on-going professionalisation, management has succeeded in holding onto these core competencies. We have every confidence that OGD will continue to develop strongly based on this excellent foundation.” Daan de la Parra and Roel Nikkessen, the management of OGD, look back with satisfaction on the period with Gimv as investor: “Over the last five-and-a-half years, Gimv has proved a valuable partner. We look back with pleasure on a period during which Gimv has supported the company in its growth into a mature organisation.” The sale of OGD has had a positive impact of EUR 4.9 million (EUR 0.21 per share) on Gimv’s most recently published equity value as at 31 March 2012. Over the entire period, this represents an investment with a return substantially higher than Gimv’s long-term average. The financing of the transaction was led by Menno Riemslag and Myriam Derksen as part of the Acquisition Finance and Structured Lending team of ING Event Finance Business Banking. A longstanding relationship with the company and the ability to deliver within tight timelines made ING stand out in the process. It was a demanding process financing a well performing company that is currently facing challenging market conditions. However, the positive experience with the company, the knowledge of the ICT-sector and the continuous and constructive dialogue with all stakeholders (i.e. management, investor and advisors) made this deal a success.
Total consideration, including transaction fees and other ordinary related adjustments, was approximately $126 million in cash, subject to a final working capital adjustment. Commenting on the announcement, Chairman and Chief Executive Officer Stephen Hughes stated, “We are excited to include Udi’s Healthy Foods in our portfolio of health and wellness brands and believe this transaction to be transformational to our company, as it positions Smart Balance as a leader in gluten-free, accelerates our growth rate, and further diversifies our mix toward high-growth natural brands. As a result, we expect the Company’s organic revenue growth rate to accelerate, and we look forward to providing our initial outlook on Udi’s in connection with our second quarter call on August 2, 2012.” BMO Capital Markets and Citigroup acted as joint-lead arrangers in financing the transaction. The Company granted option awards for a total of 957,500 shares of common stock to 65 of Udi’s employees as an inducement to join the Company in connection with the acquisition. The awards were granted under a newly adopted Smart Balance, Inc. 2012 Inducement Award Plan. The options have a ten year term and an exercise price equal to the fair market value of Company common stock on the date of grant. The options vest in four equal annual installments beginning on July 2, 2013, the first anniversary of the grant date. Sharon Bromberg, Partner and Transactional Services Practice Director led the due diligence team for J.H. Cohn LLP. A longstanding relationship with Smart Balance, Inc. and the ability to deliver our report within tight timelines made this engagement a success. The J.H. Cohn team was comprised of experienced/senior M&A professionals who understood the objectives an deliverables of the assignment. This, together with the cooperation of all parties, provided the framework for a positive experience.
PEP ACQUISITION OF NESTLE’S PETERS ICE CREAM
GIMV DISPOSAL OF ITS MAJORITY INTEREST IN OGD
SMART BALANCE ACQUISITION OF UDI’S HEALTHY FOODS, LLC
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FRIED FRANK HARRIS SHRIVER & JACOBSON, LLP Legal Adviser to the Seller
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M&A from around the world COLFAX ANNOUNCES ACQUISITION OF SOLDEX SA
ODIN EQUITY PARTNERS ACQUISITION OF A MAJORITY STAKE IN SSG A/S
Colfax Corporation (NYSE: CFX), a diversified global manufacturing and engineering company, announced the acquisition of the 91% interest in Soldex S.A. held by Inversiones Breca S.A. and its affiliates. The transaction values Soldex S.A. at $235 million, including the assumption of debt. With plants in Lima Peru and Bogota Colombia, Soldex is the pre-eminent supplier of welding products to customers along South America’s fast-growing Pacific coast. The acquisition positions Colfax’s ESAB division as the clear leader in South America, with a pre-eminent position in every country market, and further increases its exposure to the energy and natural resources sectors. In making the announcement, Steve Simms, Colfax President and Chief Executive Officer, stated, “We are excited to add Soldex to our large and growing South American welding products business. This acquisition reflects our continued commitment to expanding Colfax’s already-strong position in emerging markets, and in sectors with good long-term growth potential.”
The private equity fund, Odin Equity Partners, acquires SSG A/S, a leading specialist in the Danish market within damage control, industrial and property services with turnover of just under half a billion Danish kroner in 2011, from Maj Invest Equity and several employees of SSG A/S.
Clay H. Kiefaber, ESAB President and Chief Executive Officer, added “We are also delighted to strengthen the ESAB team with Soldex’s talented leadership, and look forward to working with them to leverage their successful approaches throughout our company.”
In connection with the acquisition, SSG A/S’s management team will make a reinvestment to the effect that the management team will end up owning 34% of SSG A/S. Rønne & Lundgren’s Michael Gaarmann and Jens F. Bruun acted as legal counsel to Maj Invest Equity and the other sellers in the sale and the concurrent reinvestment by members of the management of SSG A/S. Bech-Bruun as advisor to the buyer has performed due diligence as well as prepared and negotiated several transaction documents. Niels Kornerup, Partner, and Anders Rubinstein, Associate, both specialising in business transfers, have been the primary advisers on the transaction. The purchase price has not been disclosed.
BBVA was sole financial advisor to Colfax in the transaction. The BBVA team was led by Efrain Lopez, Managing Director based in New York. In this transaction BBVA was able to leverage its strong cross-border advisory capabilities and local market insight into Latin American markets to help Colfax navigate through the complex issues faced when acquiring a company that operates in multiple markets -while headquartered in Peru, Soldex also has operations in Colombia and Venezuela.
DE HOGE DENNEN ACQUIRES A MAJORITY INTEREST IN TALENT&PRO When De Hoge Dennen acquired a majority interest in Talent&Pro, they turned to AKD for assistance. François Koppenol, Selma Baouch, Rosanne Vlasveld and Kirsten Klinkers formed AKD’s team led by Nathalie van Woerkom, while Angelique Martens (notarial law), Jurian Snijders, Fouad el Houzi, Felice van Peski (securities & financing), Martin Hemmer (intellectual property), Mariëlle van Winden (employment law), Floris van Westrhenen and Jaap Loman (immoveable property law) were also involved. De Hoge Dennen is the De Rijcke family’s investment company and previously owned Kruidvat, ICI Paris XL and Groenwoudt. The remaining shares in Talent&Pro are held by the management. Talent&Pro is a prominent company offering secondment and project support operations for banking, insurance and pensions professionals. While Talent&Pro already employs over 400 highly educated specialists, this rapidly growing company aims to increase its market share in the financial sector, both as an independent company and by means of takeovers. De Hoge Dennen is to assist the further facilitation of the management’s operational plans and deliver commercial value to Talent&Pro’s buy and build strategy. Nathalie van Woerkom commented, “We assisted De Hoge Dennen in its purchase of the shares in Talent&Pro. We have assisted De Hoge Dennen in several purchases and sales of their participation in companies, such as Star Group, Mennens Holding, Wiefferink and Lightronics.” Further, she added, “One of the interesting aspects of the deal was that there were several managers involved with each different percentages of shares in the company. This made the negotiations with the management interesting, but sometimes also more complex.”
Mr. Lopez commented: “this is a important strategic transaction for Colfax as it furthers its reach into this high growth region, by providing it with a leadership position in Peru and Colombia, and positions the Company for further growth.”
CMS Derks Star Busmann has advised the shareholders of Talent & Pro on the sale of a majority stake in Talent&Pro to The Hoge Dennen Capital. The Hoge Dennen Capital has obtained a 51% stake in the company. The remaining 49% is owned by the current management. The CMS team that has advised the vendors consisted of Pieter Duijvenvoorde, Bart Bendel, Herman van Aerts and Casper Doorten.
IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling highstakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
COLFAX ACQUISITION OF SOLDEX SA
ODIN EQUITY PARTNERS ACQUISITION OF A MAJORITY STAKE IN SSG A/S
DE HOGE DENNEN ACQUIRES A MAJORITY INTEREST IN TALENT&PRO
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JOSE DANIEL AMADO Financial Adviser
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M&A from around the world TAM S.A MERGE WITH LAN AIRLINES Chile based LAN Airlines S.A. (LFL) has combined with Brazil based TAM S.A. (TAM). The airline holding company is called LATAM Airlines Group and trades in the U.S. under the LFL symbol. Prior to the merger, LAN had a market cap of $9 billion and TAM was worth $4 billion. The total $13 billion market cap makes LATAM the second largest airline company in the world after Taiwan based Air China. To complete the deal, TAM shareholders swapped their shares for LAN/LATAM shares. The stock will be listed on the Chile, Brazil and U.S. stock exchanges. The combined LATAM becomes the dominant airline service provider in South America, including the fast growing Brazil market. Unlike U.S. airlines, these two company has been, by and large profitable, and actually pay investors attractive dividends. For the long term investor, this is a very attractive investment in the airline industry. In my view, the majority of airline stocks are some of the worst investments around. LATAM is a good choice for an investor who wants airline exposure in a portfolio and actually expect the stock to increase in value. One negative for the company is the slowing growth of the Brazilian economy. Air travel has grown rapidly in Brazil in recent years and that growth is slowing. LATAM must manage the amount of service they offer into the Brazilian markets to avoid having too much capacity in the country.
TEAVANA HOLDINGS ACQUIRES TEAOPIA LIMITED
SUCCESSFUL RESTRUCTURING BY TRANSFER OF NDT SYSTEMS & SERVICES AG
Teavana Holdings, Inc. announced that its wholly owned subsidiary, Teavana Canada, Inc., has completed the previously announced acquisition of substantially all of the assets of Teaopia Limited, a leading mall-based specialty tea retailer in Canada, for an all-cash purchase price of $26.9 million, subject to certain adjustments related to working capital.
Tobias Hoefer the appointed insolvency administrator for NDT Systems & Services has successfully completed the restructuring by transfer.
Teaopia, founded in 2005 and based in Canada, is a specialty retailer of loose-leaf teas, tea related merchandise and beverages operating in 46 company-owned stores, primarily in high-end malls across Canada and online. Teavana is a specialty retailer offering more than 100 varieties of premium loose-leaf teas, authentic artisanal teawares and other tearelated merchandise through 223 company-owned stores and on its website. Founded in 1997, the company offers new tea enthusiasts and tea connoisseurs alike its “Heaven of Tea” retail experience where passionate and knowledgeable “teaologists” engage and educate them about the ritual and enjoyment of tea. The company’s mission is to establish Teavana as the most recognized and respected brand in the tea industry by expanding the culture of tea across the world. To support the tea culture globally, Teavana donates approximately 1% of annual net profits to the Cooperative for Assistance and Relief Everywhere, Inc., or “CARE,” through its Teavana Equatrade program.
As founding partner of Turci Advogados, Flávia Turci led the firm throughout the transaction. Associates Ana Matsuda, Carlos Fujita and Leonardo Dias were also involved. They represented the controlling shareholders of TAM, with whom they have a long-standing working relationship.
The Weissker management has great plans for NDT, securing the Stutensee location as well as expanding the international activities of the company. “NDT is well established in the market and has an outstanding reputation. The company is perceived by its customers as technology leader in the field of automated non-destructive ultrasonic testing systems, especially regarding in-line inspection tools and stationary systems for plate inspection in steel mills. We want to build on this technological strength and use our own expertise to ensure a sustained economic success for NDT in the future, in the best interest of our customers and our employees”, says Stefan Matthaei on behalf of the Weissker board. Harald Tomaselli, Partner at Albatross Invest, represented the insolvency administrator, Mr. Hoefer. Yes, we have a long time relationship with the client. They oversaw a very quick process of the high-tech company. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitivedocuments — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
Turci commented, “Some legal challenges faced were: to reach a structure that complied fully with the ownership restrictions applicable to airlines in Brazil; to conduct simultaneous antitrust procedures in multiple countries; to consolidate markets through an exchange offer. All challenges were faced having in mind that legal solutions had always to preserve commercial goals and efficiency”.
TAM S.A /LAN AIRLINES MERGER
TEAVANA HOLDINGS ACQUISITION OF TEAOPIA LIMITED
NDT SYSTEMS & SERVICES AG RESTRUCTURING
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M&A from around the world TESCO ACQUIRES HUGE STAKE IN WE7
DIAGEO TO ACQUIRE YPIÓCA THE LEADING PREMIUM CACHAÇA BRAND IN BRAZIL
AAC CAPITAL PARTNERS BENELUX NEW GROWTH PARTNER SALAD SIGNATURE
Supermarket giant Tesco has acquired a 91 percent stake in music streaming service We7, and plans to buy the rest of the company in the coming weeks.
Diageo reached agreement with Ypióca Agroindustrial S.A. to acquire the leading premium cachaça brand, Ypióca, and certain production assets.
AAC Capital Partners Benelux acquired Gilde Equity Management Benelux’ stake in Salad Signature NV.
A Tesco spokesperson said that the deal would allow it to offer customers “a wider choice in how they consume music, complementing Tesco’s current music offer in store and online”. The purchase cost the company a mere £10.8 million -- a relative drop in the ocean in terms of Tesco’s finances. The supermarket made a profit of £3.4 billion in 2009-10.
The consideration is BRL 900 million (approximately £300 million) in cash and the transaction is expected to complete in a month. The acquisition is expected to be EPS neutral in year 1 and Economic Profit positive in year 5 using a 12% WACC rate. It expands Diageo’s presence in Brazil and enhances access to the growing number of middle class consumers who are driving the growth of premium brands.
The purchase could also act as a defence against one of Tesco’s biggest rivals -- Amazon. The web retailer has long shown ambitions for getting more seriously into music, though it hasn’t yet been enormously successful on that front. If a We7 purchase provides Clubcard holders with all the music they need, that could help to keep them away from the tendrils of Amazon’s website.
The acquired Ypióca brand has net sales of BRL 177 million (approximately £60 million) based on the pro forma adjusted figures as of December 2011.
Mark George, Tesco’s digital director hinted that new services would be launched as a result: “Customers and technology together are transforming the way we listen to music. Tesco is already one of the UK’s largest retailers of CDs; this move will help us offer a greater choice for the growing number of customers who want to access music instantly on any device, whenever and wherever they want.” We7 CEO and serial entrepreneur Steve Purdham added: “We are very excited by the prospect of teaming up with Tesco. With its loyal customer base, numerous marketing channels and international reach, we believe Tesco is the perfect partner to bring We7’s music services to a wider audience.” We7 and their lead advisor GP Bullhound ran the deal through ansarada Virtual Data Rooms. ansarada’s Regional Director Harry Gill commented “We ensured that all prospective parties, including Tesco, were seamlessly connected to the information they needed. This allowed them to move confidently through the entire process, ultimately accelerating this successful outcome.”
Cachaça is the largest spirits category in Brazil and Ypióca is the leader in the growing premium cachaça segment. It is the number 2 by value and the number 3 by volume in the overall cachaça category. In addition, Ypióca has an extensive sales and distribution network in the Northeast of Brazil and the second largest retail penetration nationwide. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control overinformation. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitivedocuments — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valuedat more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
Salad Signature is a leading producer of chilled spreadable salads and convenience food, both in Belgium and the Netherlands. The Salad Signature Group consists of operating companies Hamal Signature, Johma and Westland. The company is a market leader in the Benelux, and focuses on its portfolio of strong brands, comprising Hamal, VH and Délio in Belgium, and Johma and Westland in the Netherlands Davy De Muyer, CEO of Salad Signature, said, “We are looking forward to team up with AAC Capital Partners Benelux. Together, we are committed to continue providing our customers with the best products in its category, underpinned by constant innovation. With AAC’s track record in facilitating international growth, we believe to have found a truly like-minded partner.” Marc Staal, Managing Partner of AAC Capital Partners Benelux, added, “We are greatly impressed with the quality of this management team and their achievements to date, creating a solid Benelux platform for chilled convenience foods ready for international expansion. We support Salad Signature’s growth ambition, and are geared up to be a strong partner in its expansion strategy.” Bas Glas, Partner of Gilde Equity Management Benelux says, “We are extremely proud to have supported the company and enjoyed working together with the management team in building the Salad Signature Group to Benelux market leader.” Rabobank International acted as sole financial advisor to Gilde Equity Management Benelux, led by Jeroen van den Heuvel (Executive Director - see photo on the left) and Derk van der Erve (Director).Van der Erve explained, “Given the current state of the financial markets, a customised auction process was orchestrated geared specifically towards a select group of financial buyers.” Frans Stam, Managing Partner, and Jean Pierre Viergever, Senior Advisor of Pereira Consultants represented management in this transaction, overcoming the scrutiny of tax authorities on management participation structures and providing safe guards to limit risks.
TESCO ACQUISITION OF WE7
DIAGEO ACQUISITION OF YPIÓCA
AAC CAPITAL PARTNERS BENELUX ACQUISITION OF STAKE IN SALAD SIGNATURE
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M&A from around the world PROCURITAS CAPITAL INVESTORS IV DIVESTS DÄCKIA HOLDING AB Procuritas Capital Investors divested Däckia, a market leading multibrand tyre distribution chain in Sweden to Pirelli for SEK 625 million. Pirelli Tyre is a world leading producer of high end tyres based in Italy. In 2011 the Swedish tyre market totalled 4.4 million units, over 60 per cent of which were winter tyres. Furthermore the winter segment grew by 5 per cent in a local market which was largely flat. According to Pirelli this demand will be met by the company’s plants in Russia. Däckia is a leading provider of tires, tire changing and tire storage services to private and corporate customers in Sweden. Its network spans from Ystad in the south to Kiruna in the north of Sweden. The Däckia chain consists of 66 fully owned tire service stations in Sweden and cooperates additionally with over 50 partner operated stations. Däckia’s turnover is approximately 100 MEUR (900 MSEK). Procuritas Capital Investors IV is a private equity fund focusing on mid-sized companies in the Nordic Region. Däckia is the second investment by PCI IV. PCI IV is advised by Procuritas AB and Procuritas Partners GmbH. Procuritas is a Scandinavian private equity house specialized in initiating, structuring, and financing management buyouts. Founded in 1986, the company was the pioneer in introducing the concept of management buyouts in the Nordic region.
CAMECO ACQUISITION OF NUKEM
NG INFRA OÜ ACQUIRED
Cameco has signed an agreement with Advent International to purchase NUKEM Energy GmbH (NUKEM), one of the world’s leading traders and brokers of nuclear fuel products and services. Under the agreement, Cameco will pay Advent and other shareholders €105 million (US$ 136 million) on closing subject to certain adjustments and take over existing debt. The agreement also includes an earn-out mechanism on top of the purchase price. The transaction is subject to regulatory approvals and is expected to close in the fourth quarter of 2012.
The leading Estonian IT company Net Group and the Leading Nordic and Baltic IT infrastructure company Atea have entered into the agreement where Atea will aquire IT Infrastructure company of Net Group – NG Infra OÜ.The agreement will be accomplished after approval by the Competition Board of Estonia.
NUKEM has been involved in the nuclear energy industry for more than 50 years and has a strong role in the global marketplace due to its positioning at the intersection of producers of uranium, intermediaries and energy utilities. Under Advent’s ownership, Nukem particularly focused on developing and professionalising its trading operations and intensified its strategic client and supplier portfolio and invested in comprehensive IT solutions. In 2011, NUKEM’s sales were about € 523 million. The company’s assets include uncommitted inventory and a portfolio of purchase and sales contracts.
During the last 13 years Net Group has been continuously developing its IT Infrastructure business and today is the leader of this market segment. With this acquisition Atea establishes a solid presence in Estonia and becomes the largest IT Infrastructure company in each of the Baltic countries. “We have been looking for a suitable partner offer the last 2 years and Atea suited to be the best to further develop the NG Infra”, said Mr. Priit Kongo, Chairman of Net Group. “Through this acquisition we will improve our presence in Estonia and leverage our competences as well as services in all three Baltic countries even more effectively,” said Arūnas Bartusevičius, the CEO of Atea Baltics.
Pirelli Tyre was advised by Mannheimer Swartling in the transaction. The firm’s team was headed by Jan Holmius and included Kristoffer Stråth and Jon Rastad. Gernandt & Danielsson Advokatbyrå advised the majority seller Procuritas Capital Investors IV and the management sellers. Gernandt & Danielsson’s team was headed by Mats Hugoson and included Sara Edström and Katja Kulesch.
PROCURITAS CAPITAL INVESTORS IV DISPOSAL OF DÄCKIA HOLDING AB
CAMECO ACQUISITION OF NUKEM
ATEA ACQUISITION OF NET GROUP
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M&A from around the world ARGOS ACQUIRES A SWISS SCHOOL Private equity firm Argos Soditic has completed the management buyout of Swiss education business ASC International House. As well as providing language training to the general public and to many of the region’s leading companies and organisations, ASC provides private school education in English. The company owns the British School of Geneva, which includes Geneva Primary School, Geneva Secondary School and the A-Level College, and also runs a bilingual programme with Institution Jeanne d’Arc in France. Argos Soditic’s investment plan is to grow the education business in Swiss Romande by offering private education to the local community where demand for private education, particularly for ex-pats, exceeds supply. Des Gouttes & Associés acted on behalf of the seller, with whom they have a long-standing working relationship. Arun Chandrasekharan, Partner and Leila Hawa, Counsel led the deal team.
DPA GROUP ACQUISITION OF BENKIS INTERIM PROFESSIONALS The Dutch staffing firm DPA Group NV (DPA:AEX) has reached an agreement with the shareholders of Benkis Interim Professionals Ltd, which grants the 100% acquisition of the shares in Benkis by DPA. Benkis is a recruitment specialist that achieved a turnover of €9.4 million in 2011. DPA said that this acquisition fits into the overall strategy of the firm, which is focusing on growth in niche markets and widening activities in this sector. In a press release, DPA said that the acquisition will be formalised “as soon as possible.” But Benkis Interim Professionals Ltd will remain involved in operational and commercial activities at least until 1 January 2014. Benkis Interim Professionals was founded in 2007 by Jan Sjirk Rodenboog and Bert Janssens, specialising in the secondment of finance professionals. It operates primarily in the north and east of the Netherlands. In a news release today the firm said it had chosen DPA because of its “quality and culture.” JanssenBroekhuysen Advocaten represented the Seller and its two ultimate shareholders in this deal. The firm was introduced to the client through the corporate finance adviser that the Seller retained for this transaction. Mariëlle Broekhuysen, partner at JanssenBroekhuysen Advocaten led the team. She was assisted by Jurriën Duijker, associate at JanssenBroekhuysen Advocaten. Mariëlle Broekhuysen commented: “The transaction structure of this deal includes an earn-out arrangement. For a seller it is always important that determining the objectives of the earnout and how this amount will be determined, is cut clear. Various elements may influence the outcome of an earnout. It was my job to identify all these issues and to draft a proper mechanism.”
AVEVA ACQUISITION OF BOCAD AVEVA (LSE:AVV) has announced the acquisition of the Bocad group of companies (“bocad”). This strategic acquisition includes all companies in the Bocad group, bringing to AVEVA all IPR, employees, contracts and assets. AVEVA will establish a new Structural Design Centre of Excellence across Bocad’s two main offices in Bochum, Germany and Ocquier, Belgium where it will continue to develop and support the Bocad software products. The software developed through the Centre of Excellence will be tightly aligned with the AVEVA PDMS and AVEVA Marine solutions and will be sold through the AVEVA global sales force. The new combination will create a worldclass engineering design offering for the plant, marine and fabrication markets. Extensive evaluation by AVEVA identified the Bocad software solutions as the most versatile structural design applications on the market today. The flexibility, capability and richness of functionality make it the first choice for a number of industrial design markets. Richard Longdon, Chief Executive, AVEVA commented, “I am delighted to welcome the Bocad team and software solutions to AVEVA. We are continually looking to strengthen our product portfolio with industry-leading solutions and Bocad easily demonstrated best-in-class. This acquisition further extends AVEVA’s position as a leader in the 3D design market and will be excellent news for our customers and expand AVEVA’s opportunity to capture even greater market share from our competitors.”
Niels Kloppenburg and Antony Jonkman led the Jonkman Kloppenburg Advocaten team.
ARGOS ACQUISITION OF ASC INTERNATIONAL HOUSE
DPA GROUP ACQUISITION OF BENKIS INTERIM PROFESSIONALS
AVEVA ACQUISITION OF BOCAD
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M&A from around the world EPURON ACQUISITION OF COTTBUSER HALDE WIND PARK
DUROBOR AND SOBODEC MERGER
Epuron, which is backed by Impax, has acquired the 28MW wind park Cottbuser Halde from Danish group Green Wind Energy.
H2 Private Equity Partners has acquired and merged Durobor and Sobodec GroupH2.
Impax New Energy Investors II L.P. (INEF II), the owner of the Hamburg and Paris-based EPURON, has provided the necessary funding for EPURON to acquire Cottbuser Halde wind farm. INEF II is an investment fund administered by Impax Asset Management Limited, one of the leading administrators of listed and private equity funds for environmental investments on the market.
Equity Partners (H2) is an independent private equity firm founded in 1991, with offices in Amsterdam, Munich and London, whilst Sobodoc Group is a glass decoration company and Durobor is a glass manufacturing company.
The total installed capacity of the Cottbuser Halde wind farm is 28MW, comprising 14 Vestas V90 wind turbines and has been in operation since the beginning of 2009. Long-term project financing is in place with Deutsche Kreditbank. EPURON develops finances, builds and operates wind farms in Germany and France. The acquisition of Cottbuser Halde wind farm is an important investment for EPURON, as it more than doubles EPURON’s existing German operating wind portfolio from 23MW to 51MW. Chris Beckmann, Director at Merrill DataSite Germany, led on the provision of the virtual data room used in the deal, which was instrumental throughout the due diligence process. Chris has a history of working in the finance industry and has assisted sellers, buyers, law firms, banks and advisors in many transactions over the past eight years with Merrill, and has previously worked with Gorrissen Federspiel, the law firm on this deal, on a number of international transactions. Chris’ role in the project was to facilitate creation of a secure, online, fully searchable document repository that hosted thousands of confidential documents necessary to the successful completion of the Cottbuser Halde wind park sale.
The group Durobor – Sobodec realizes sales of 50 million and employs more than 300 assistants in Belgium and in France. ABV Environment is an environmental consulting firm, based in Brussels who acted on behalf of H2 and Sobodec on the deal. The project was led by Jean-Marc Lambert (pictured), Head of Department at ABV Environment, he commented: “As part of the due diligence in this transaction, ABV Environment analyzed the level of soil contamination and the costs of its remediation, and advised on the environmental arrangements to the transaction. The engagement was carried out successfully in a highly compressed time frame, thanks to the strong commitment of ABV Environment team, and a swift co-ordination of the field teams. It was the first time that ABV Environment acted for H2 and Sobodec.”
ACQUISITION OF MAJOR STAKE IN RUSSIAN POWER PRODUCER ENEL OGK-5 A private equity consortium comprised of the Russian Direct Investment Fund (RDIF), Xenon Capital Partners’ Rusenergo Fund, AGC Equity Partners and the Macquarie Renaissance Infrastructure Fund (MRIF) has completed the purchase ofa 26.43% stake in leading Russian power producer OJSC Enel OGK-5. The investment by AGC Equity Partners, a private equity firm whose investors are Middle East institutions, represents the largest private equity investment in Russia by a Middle East investor to date. Rusenergo Fund and AGC Equity Partners have each invested $175 million in the transaction, while the RDIF and MRIF have invested $137.5 million each for a total deal value of $625 million. The structure of the transaction allows foran additional payment to the seller, though this is contingent on the investment generating an attractive level of returns for the investor consortium. In addition to the largest Middle East investment into Russia, the transaction represents the largest-ever private equity deal in the Russian power sector. The consortium of investors becomes a partner of Italian energy company Enel, the controlling shareholder in Enel OGK-5. The Moscow office of Morgan Lewis & Bockius acted as deal counsel to the consortium of investors.
Bech-Bruun’s German Business Group, which is the name of BechBruun’s interdisciplinary, international team focusing on German/ Danish legal issues, has assisted EPURON in the acquisition of the Cottbuser Halde wind farm in Brandenburg, Germany. M&A Corporate specialists, Ole Nørgaard (partner) and Sarah Weber (associate) led the transaction, with assistance from Carsten Ceutz, corporate recovery partner, and Arne Riis, tax partner.
EPURON ACQUISITION OF COTTBUSER HALDE WIND PARK
H2 PRIVATE EQUITY PARTNER ACQUISITION OF DUROBOR AND SOBODEC
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M&A from around the world LEAPFROG INVESTMENTS ACQUISITION OF EXPRESS LIFE INSURANCE Insurance-focused private equity funds Leapfrog Investments have acquired a majority state in Ghana’s Express Life Insurance Company for USD5.5m. Leapfrog did not disclose how much of the company they now own. Express Life targets a low-income demographic with products that cost less than USD10 a month. The acquisition in Ghana is the fourth investment since the fund was set up in 2008. Other portfolio companies are South African AllLife, East African Apollo, and Indian Shriram CCL.
INDUSTREA LIMITED ACQUIRED
ACQUISITION OF HANSEATISCHE CHOCOLADE
GE (NYSE: GE) announced today that it is pursuing acquisitions of two underground mining equipment manufacturers in support of the global expansion of its mining business. GE has entered into an agreement to acquire 100 percent of Australia-based Industrea Limited (ASX: IDL, OTCQX: IULTY), a provider of safety and productivity-enhancing mining equipment and services. The transaction is valued at approximately A$700 million, which represents a 5.5x EBITDA multiple based on fullyear financial data as of Dec. 31, 2011. The company also signed a binding Letter of Intent (LOI) to acquire Fairchild International, an independently owned and operated underground mining equipment manufacturer located in Glen Lyn, Virginia. Terms of the agreement were not disclosed.
DC Advisory is pleased to announce the acquisition of Hanseatische Chocolade by Toms Gruppen. All shares in Hanseatische Chocolade have been acquired by Toms Gruppen from the two owners and Managing Directors Hasso Nauck and Wolf Kropp-Büttner. The transaction is the final result of an extensive search and selection process throughout Europe for potential acquisition targets to Toms Gruppen. DC Advisory and Danske Bank Corporate Finance acted as exclusive financial adviser to the buyer for this transaction. Buyer’s legal advisers include Freshfields and Blaum Dettmers Rabstein Rechtsanwälte & Notare for the sellers. Further, KPMG Transaction Services in Copenhagen, Denmark, acted as adviser to Toms Gruppen by performing financial, tax and commercial due diligence in relation to the acquisition of Hanseatische Chocolade.
The combination of the two entities expands GE’s product offering to address approximately 35% of the underground mining value chain. Industrea Ltd. and Fairchild International together are well positioned in dynamic growth regions for mining, including Australia, China (Industrea), and the United States (Fairchild). GE will enable these regionally focused enterprises to reach a global customer base with enhanced products based on GE’s clean propulsion systems, energy storage offering, and world-class system integration capabilities. Both Industrea Ltd. and Fairchild International will benefit from GE’s lean manufacturing and effective global supply chain management.
Hanseatische Chocolade is one of the leading premium chocolate manufacturers in Germany with a substantial product portfolio under the two brands Hachez and Feodora. The company is located in Bremen in Germany with a turnover of approx. EUR 48m in 2011 and employs more than 400 employees. The two former owners will continue as Managing Directors under the new ownership. Read more about the two brands on www.hachez.de and www.feodora.de.
Both companies will become part of GE Transportation’s global mining business which utilizes the people, technologies, and products from across GE to help its customers solve their toughest mining challenges. GE helps mines work better by providing innovative solutions in critical areas such as power, water, and productivity.
Hanseatische Chocolade fits perfectly into the growth strategy of Toms Gruppen sharing the same production concept from “bean to bar”, strong premium brands and a good position on the large German market. Toms Gruppen is the leading confectionery manufacturer in Denmark with a range of leading brands within both chocolate and sweets. The brand portfolio includes Ga-Jol, Galle & Jessen and the premium chocolate brand Anthon Berg. Toms Gruppen is headquartered near Copenhagen in Denmark, has production in Denmark, Sweden and Poland and has a broad network of international sales units and distributors. The combined Toms Gruppen’s turnover was about EUR 235m. Toms Gruppen is owned by the trust Gerda & Victor B. Strands Fond. Read more about Toms Gruppen on www.toms.dk
LEAPFROG INVESTMENTS ACQUISITION OF EXPRESS LIFE INSURANCE
GE ACQUISITION OF INDUSTREA
TOMS GRUPPEN ACQUISITION OF HANSEATISCHE CHOCOLADE
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M&A from around the world HOMAIR VACANCES REORGANISATION HOMAIR Vacances announces a reorganisation project of its shareholding structure pursuant to which the current participations held by the funds managed by Montefiore Investment, (i) directly up to approximately 37% of HOMAIR Vacances’ share capital and 42.3% of its voting rights, and (ii) indirectly through Iliade up to approximately 24.8% of HOMAIR Vacances’ share capital and 26.3% of its voting rights, would be totally held through Iliade. Easton acted as the sole financial advisor of Homair’s main shareholders, led by Montefiore Investment. As we had a long standing relationship with Montefiore Investment and frequenlty discussed their strategy in the campsite management business, we were deeply convinced of the quality of Homair as a European leader in its segmen and impressed by the skills of the management team. Within the team, Laurent Camilli (Managing Director of Easton) was the team leader along with Thomas Gaucher (Executive Director), Nicolas Saint Pierre (Manager), Julien Choppin (analyst) and Charlotte Trin-Duc (Analyst). Camilli commented: “In a very adverse economic context, combined with a lack of debt, our mandate consisted in identifying the potential partners able to fulfil Montefiore Investment requirements. As Naxicap demonstrated a strong interest, we negotiated with them the valuation pf the company in the view of factoring in the fast path of growth the company was able to prove. Along with Montefiore legal advisors, we conceive and put in place the legal structure designed to match both Naxicap and Montefiore requests.”
CORPFIN CAPITAL ACQUISITION OF KIWOKO Corpfin Capital has acquired a majority shareholding interest in the company Masquepet, S.L., which commercializes under the brand name Kiwoko, a Spanish pet care retailer, from Prince Capital Partners. Kiwoko, which is headquartered in Madrid, has 30 stores and 150 employees. Founded in 2007, it operates in five regions across Spain and sells some 2,000 products for dogs, cats, reptiles and fish. The investment will enable the company to consolidate its market position and roll out new stores. Kiwoko expects to have more than 100 stores within the next five years. April was a busy month for pet care deals. Pangea Investors took a majority interest in Austria Pet Food for €25m, LDC sold its stake in Cranswick Pet Products and Vendis Capital backed Yarrah. Prince Capital Partners will retain a stake in Kiwoko. ALEMANY, ESCALONA & DE FUENTES has acted as legal counsel for Corpfin Capital. The legal team was led by José Antonio Escalona and Antonio Conde, partners of the Corporate Department. This has been a deal particularly challenging due to time restraint and to certain special features derived from the transaction structure, as one of the former investors group has left the company but another investors group (Prince Capital Partners) as well as the management team have remained as shareholders of the company.
Venue©, the RR Donnelley proprietary solution, was mandated by Montefiore Investment via Easton Corporate Finance to provide the Virtual Data Room for the deal. The project was handled locally by the Paris based Venue team. The point of contact was Greg Tringat, Sales Manager, along with the dedicated Project Managers.
JONCOUX GROUP ACQUISITION OF MK Joncoux Group has acquired the Polish company MK and become the only real pan-European metal chimney producer established on 4 big markets. After acquisition, Joncoux group will have 60 M€ consolidated revenues with 400 employees. “This acquisition gives us the opportunity to create a real pan-European group, active on four domestic markets (France, Benelux, Germany, and Poland) with interesting perspectives in Northern and Eastern Europe.” With manufacturing sites in each zone and local managing directors, the Group is in the best position to offer outstanding service to its customers with high quality chimney flue systems adapted to each market. All subsidiaries of the Group will benefit from the acquisition, by increasing the product range offered to the customers, and the Group as a whole will benefit from an unrivaled capacity for innovation” said Jacques-Olivier Joncoux, chief executive officer and main shareholder of the group. CM-CIC Capital Finance, shareholder of the group since 2001, is contributing in the development of the group with a 4 M€ investment in equity. Caroline Pasquet, Director at CM-CIC Capital Finance, is very confident in the future of the Joncoux Group managed by a young, dynamic and reliable CEO. “The Joncoux Group did successful acquisitions in the past and has succeeded in remodeling its internal operations, sales and IT systems to be in a position to make further acquisitions.”
HOMAIR VACANCES REORGANISATION
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