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January Issue 2011
ACQUISITION INTERNATIONAL The voice of Corporate Finance
Fast Track 100 buymobilephones.net tells AI how it feels to be the fastest growing UK company in 2010
Also in this issue... Freek Vermeulen is "The Deal Guru" MMC invests in www.alexandalexa.com Bridging Finance "builds" a picture Mergermarket "constructs" an M&A outlook Building: a future in 2011?
www.acquisition-intl.com
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Building a future in 2011
Seventeen
Editor’s comment
Contents
2011 has shown some encouraging signs, with M&A volumes up last year markedly on 2009. The doom and gloom predictions for Christmas spending by the consumer turned out not as bad as expected and underlying activity seems more buoyant.
News
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Deal Guru
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Trade buyers are still strong, private equity started spending again and banks, whilst mixed signals, supported more lending in M&A deals. The outlook for 2011 would seem to be one of continued improvement...
Lead Mandate
Over the course of the year we expect to see more deals across most sectors, more high profile deals too, with plenty of mergers and a resurgent private equity market. If you have a good business to sell you might want to start thinking seriously about an exit whilst conditions remain strong... Over the next twelve months, AI will be profiling a different sector in each issue, highlighting the key players and the opportunities available for investment. Next issue, we will be profiling the oil and gas sector, if you would like to contribute and demonstrate your expertise to the key players in the market, email charlotte.abbott@acquisition-intl.com . This month, Acquisition International takes an in depth look of the building and construction sector, asking the question, is there a future for the sector in 2011? Enjoy the issue! Charlotte Abbott, Editor charlotte.abbott@acquisition-intl.com
Production by Grapevine Print & Marketing Ltd. 01903 531 531.
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buymobilephones.net make a good call clinching the top spot in the Fast Track 100.
Deals in Detail
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MMC invests in www.alexandalexa.com
Building & Construction Bridging Finance builds a picture‌ Mergermarket constructs an M&A outlook for 2011. Building: a future in 2011?
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Sector Spotlight
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Mining Energy & Euros Forming Futures Around The Globe Protecting Your Assets The Price is Right? Introducing the Information Professional The Professional Private Investigator
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39 41
Route to Recovery: Emerging Private Equity Legal Eagles Destination Leading Advisers 2010
42 48 51
Deal Diary
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How to contact AI AI welcomes news and views from its readers. Correspondence should be sent to Acquisition International, Blakenhall Park, Barton under Needwood, Burton on Trent, DE13 8AJ. Telephone 0844 809 4788 or email reception@acquisition-intl.com. For more information visit www.acquisition-intl.com
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“PEP” Talk Jonathan ChocqueelMangan, Managing Director and Co-founder of specialist leadership consultancy Tyler Mangan, provides comment on what he considers the most important challenges for private equity in 2011.
Private Equity firms need to deliver on the hype “Whenever we talk with investors or management teams, both parties tell us that what makes the difference between a good deal and a great deal is ‘value add’. “Everyone knows that investors need to bring more than just money – they need to demonstrate expertise, contacts, and opportunities that make a tangible difference to the growth of the portfolio company. Investors need to add value that entrepreneurs could not obtain any other way. But for as long as people across the industry have been discussing it, few are actually doing it. It still feels like a largely academic debate. “My hope for 2011, as well as my prediction, is that private equity firms will actually start to deliver on the hype. Those firms that can get behind the numbers and truly understand and support the operations, the products, the markets and the people that make up the company will be clearly differentiated from the pack. Returns will be harder to find on investments that are held for longer and funded with a greater proportion of equity. Adding ‘alpha’ as well as ‘beta’ will be critical. “To respond, private equity firms will need to bring in more operational expertise to be able to deliver on their promises - and not just consultants who have worked at big strategy firms. They will need to take more time to understand and get involved in the industries in which they have invested and not just rely on what the due diligence reports have told them. They will also need to spend more time understanding and working with the management teams – truly delivering on the promise of partnership.”
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GE Capital Study says UK SMEs often live ‘on the breadline’ with little cash to cover emergencies One in six (16 per cent) small and medium-sized enterprises in the UK are living ’on the breadline,’ with only a minimum amount of cash to cover emergencies, according to a study on the UK SME landscape commissioned by GE Capital, one of Europe’s leading providers of working capital and asset based lending.
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igures show that almost 28,000 of the country’s SMEs would struggle to survive if they faced any immediate or unforeseen situations. Meanwhile, less than one in four businesses (24%) believe that they have a significant cash buffer and lending facilities to have a healthy cash position. According to the findings, the South West and the North West are the two regions that seem to be struggling most with available cashflow, with a fifth (22 per cent and 20 per cent respectively) of businesses saying they currently have a precarious existence. Transport and IT & Telecoms are the worst hit sectors, with 27 of transport SME owners, and 20 per cent in IT & Telecoms, admitting they have an insufficient amount of cash to provide a buffer. John Jenkins, CEO, GE Capital commented: “With so many businesses under pressure due to increased competition, a decline in customer spend and increasing costs of raw materials, it is worrying that so many are not in a position to deal with an emergency should it arise.” SMEs have, however, also revealed that they believe there are opportunities for providing financial assistance available to their business, with over half (54 per cent) suggesting that the market for this is either extremely or relatively competitive. Nearly half (45 per cent) of SME owners believe that greater transparency on charges would help ensure even greater competition and choice for them when looking for funding, either at times of crisis or growth, while just over two fifths (43 per cent) said that they would like to see better information and advice from alternative sources other than the banks. John Jenkins added: “With many SMEs desperately seeking additional funding, it is good to see that there is a strong belief, among small and medium sized firms, that competition does exist in the market. This will clearly serve to help them through times of both growth and of hardship. SMEs and their advisers should be aware of all the funding options available to them to ensure they have sufficient access to cash when they really need it.”
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News
Christian Index licensed to Deutsche Bank Faith based index for the European region will underlie exchange-traded fund STOXX Limited, a global index provider and creator of the leading European equity indices, today announced that the STOXX Europe Christian Index has been licensed to Deutsche Bank AG to serve as the underlying for an exchange-traded fund (ETF). The db x-trackers STOXX Europe Christian Index ETF is available on Xetra.
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The STOXX Europe Christian Index has been launched to meet market participants' demand for a benchmark which measures the performance of European companies who act responsibly on an ethical, environmental, social and economical level and therefore according to the values of the Christian religion,” said Hartmut Graf, chief executive officer, STOXX Ltd. “By licensing the STOXX Europe Christian Index, Deutsche Bank offers the first ETF based on this index.” “By licensing the STOXX Europe Christian Index for the latest addition to our ETF portfolio, we are adding a product which offers exposure to index components selected according to social and moral doctrines,” said Thorsten Michalik, global head of db x-trackers ETFs. “We know that for many investors, ethical aspects are closely linked to capital investment.” Launched on April 26, 2010 in collaboration with Christian Brothers Investment Services, Inc., trading in Europe as CBIS Global, the STOXX Europe Christian Index is the first Christian equity index for the European region. It is meant to enable investors to participate in the performance of companies which are compliant with Christian moral and social doctrines. To ensure the quality of the index and the integrity of the underlying index methodology, an independent committee has been established to define, build and implement the screening criteria. It is made up from experts of the Christian community, as well as members of the academic and investment community. To be included in the index, stocks must pass a set of screens for compliance with Christian values and principles. Excluded from the index are companies which do not meet predetermined tolerance levels for certain areas of activity, such as for example pornography, strategic and non-strategic weapons, birth control and gambling. The index universe for the STOXX Europe Christian Index is defined as all stocks in the STOXX Europe 600 Index. The index is weighted by free-float adjusted market capitalization, and each component's weight is capped at 20% of the index's total free-float market capitalization. It is reviewed semi-annually in June and December. Daily history is available back to December 31, 2004. The STOXX Europe Christian Index is available in price and net return versions, and is calculated in Euro and U.S. Dollar (USD).
2011 is a window of opportunity for tech M&A - PwC The alignment of cash-rich trade buyers, private equity sponsors with funds to invest and continued improvement in financing liquidity is opening a window of opportunity for technology M&A activity, says a new report by PwC published today. Andy Morgan, partner, PwC, commented: “More high quality assets are now being brought to market as sellers seek to take advantage of the presence of cash-rich corporates with a renewed appetite for mega-deals, a resurgence of private equity buyers and improving capital markets. “We are seeing a change in deal dynamics as appetite returns. The number of pre-emptive deals is on the rise with buyers originating deals rather than competing in traditional auction processes. Growth is firmly back on the corporate M&A agenda.” Compared with the cyclical low in 2009, technology sector deal volumes recovered over the course of 2010, while deal values rebounded more strongly. Some 393 deals completed in 2010, (up 32% from 2009) with a total value of €75.7bn – more than double the value completed in 2009 (€36.8bn). The recovery in M&A activity remains relatively cautious with both deal volumes and values still some way off the highs of 2007 and 2008.
Cloud Clearing
Financial Technology (FinTech) Hot
The development of virtualization and security technologies will underwrite continued interest in Cloud technologies. The prospect of significant cost savings and ability to handle large data volumes is making companies sit up and consider third parties handling their data and applications, and take responsibility for their security.
The regulatory push and a greater focus on transparency and risk management is fuelling demand for more highly integrated software solutions. Some banks will design and develop their own IT platforms but many are looking for external providers and the area is likely to receive sharp attention from overseas players this year, especially from India. Misys' acquisition of software vendor Sophis for Euros 435m in November is a good example of consolidation in this sector.
Deal multiples in the Cloud space are high. Cincinnati Bell and Montagu Private Equity paid double digit EBITDA multiples for Cyrus One and Host Europe, but these look moderate compared with the prices paid by HP and Dell in the data storage space.
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Appointments
Julien Darmon Hired as a Managing Director by Harris Williams & Co.
The Firm’s Expansion in Europe to Continue in 2011.
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arris Williams & Co. Ltd has announced that Julien Darmon has joined the firm as a Managing Director in London. Mr. Darmon has considerable experience executing deals in both Europe and the U.S. including numerous cross-border assignments for corporations and leading private equity groups. Prior to joining Harris Williams & Co., Mr. Darmon worked in the investment banking group of Robert W. Baird both in the U.K. and the U.S., advising middle market clients on a variety of assignments including public and private divestments, mergers and acquisitions, fairness opinions, capital raising and strategic advisory. During his time at Baird, Mr. Darmon spent three years working in the Chicago office where in addition to leading transactions for U.S. clients, he helped coordinate the firm’s transatlantic business efforts between the U.S. and Europe. Mr. Darmon’s extensive experience spans multiple sectors including diversified industrials, industrial technology, and consumer products. “Julien is a tremendous addition to the firm,” said Chris Williams, co-founder of Harris Williams & Co. “He brings the right experience, skill and relationships to help continue to build the Harris Williams & Co. platform in Europe.” The firm’s European advisory practice is based out of London and led by Thierry Monjauze. Harris Williams & Co. anticipates increased global M&A activity throughout 2011 and will be hiring additional professionals as the firm continues its expansion. “We are thrilled to have Julien join our London office. He has strong experience across a broad range of industries and deep relationships
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across Europe and the U.S. that will be tremendously valuable to our clients,” said Thierry Monjauze, managing director and head of Harris Williams & Co.’s European advisory practice. “Since we launched our London office last December, we’ve experienced positive momentum and have won numerous high quality mandates. With Julien on board, we expect to see our deal flow continue to increase.” Harris Williams & Co. Ltd is the U.K. affiliate of Harris Williams & Co., one of the largest and most reputable U.S. middle market advisors with a 20-year legacy in mergers and acquisitions. Harris Williams & Co. currently has six offices across the U.S. with approximately 180 professionals. The firm, focused exclusively on the middle market, serves clients worldwide across a broad range of industries by providing sell side and acquisition advisory, restructuring advisory, board advisory, private placements and capital markets advisory services. Clients have included some of the world’s most prominent private equity groups and venture capital firms, privately and publiclyheld businesses and multinational corporations such as Cardinal Health, Danaher, GE, International Paper, Lafarge and Procter & Gamble. Harris Williams & Co. (www.harriswilliams.com) is a member of The PNC Financial Services Group, Inc. (NYSE: PNC), a global diversified financial services organization. Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of INRA and SIPC, and Harris Williams & Co. Ltd, an Appointed Representative of Sturgeon Ventures LLP, which is Authorised and Regulated by the Financial Services Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business in the U.S. and Europe, respectively.
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Turning Tide The prospects for Media M&A in 2011 ■
Increased activity in Q4 2010 shows signs that the recovery is strengthening in Media M&A
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M&A to be a key driver of digital transformation for media companies in 2011
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Continental Europe in particular beginning to accelerate; UK increase more steady for quality assets, albeit there were few sellers amid the economic uncertainty. Going forward we expect bigger deals, driven by an appetite among investors to back growth plans in the context of an improving economic outlook, and slightly easier financing conditions.”
The UK and in particular Continental Europe beginning to accelerate
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ick George, Media and Entertainment Strategy Partner at PwC, commented: “Economic recovery, technological change and easing credit conditions will drive the M&A market this year. Certain sub-sectors should be particularly active, such as TV, which is buoyed by 10-15% increases in advertising revenue year on year, although there remain regulatory hurdles to overcome (e.g. affecting News Corporation’s tabled acquisition of BSkyB). Film and related industries such as visual effects, which are also on the back of a strong year and M&A activity in 2010 (e.g. Doughty Hanson’s acquisition of Vue Entertainment Holdings), could see further activity in 2011.” “However, further re-structuring cannot be ruled out as persistent structural challenges affect key sub-sectors. Therefore a second round of re-structuring may hit the sector in 2011, as lenders re-appraise performance in light of evolving cyclical and structural trends. 2010 was a relatively quiet year for media restructurings, after the plethora of re-structuring deals in 2008/9 brought on by the recession.” After the market low-point for volume and value of Media deals in 2009, greater confidence and activity is returning to European M&A markets. There were 110 European Media deals that concluded in 2010, representing €12bn in deal value, up over 90% on the €6.3bn value recorded in 2009. Although the number of completed deals in the second half of 2010 (H2) was down on the first six months (H1), 44 deals vs. 66, the value of completed transactions was just short of €7.4bn, which is an increase on the €4.6bn in the first half of 2010 . Andy Morgan, Head of Media Corporate Finance at PwC, commented: “Through the downturn it remained the case that appetite was high
The upward trend in M&A activity is most evident in Continental Europe (excl. UK), where deal values increased for the third successive half-yearly period. 32 deals were recorded in the second half of 2010, down slightly on the 37 deals in the first six months, representing €6.3bn in deal value, significantly up on the €3.7bn in the first half of the year. The UK also saw a pick-up in deal values over the latter part of 2010 (€1,156m in H2 vs. €838m in H1), although the rate of increase was slower than in Continental Europe and the overall deals value for 2010 (€1,994m), was 25% down on 2009 (€2,653m). The largest transactions of 2010 were Liberty Global’s €4.8bn Q4 acquisition of Promotora de Informaciones SA - PRISA (57.7% stake) and EQT’s Q1 acquisition of Springer Business Media for €2.3bn. Andy Morgan, PwC’s Head of Media Corporate Finance, commented: “Mega deals were few and far between, and beyond these headline grabbing transactions, deal values dropped considerably in 2010. “Other notable acquisitions over the year included Time Warner Inc’s €145m acquisition of TV production company Shed Media, BSkyB’s €191m acquisition of Virgin Media TV Channels, CME’s €300m acquisition of bTV, and Doughty Hanson’s €520m acquisition of Vue Entertainment Holdings.”
Where Next? Momentum builds for 2011 Nick George, Media and Entertainment Strategy Partner at PwC, commented: “Given the structural changes in the sector and the rise of digital media companies who operate in a less regulated environment, we may see the regulation in the traditional media sector relax, which could permit more consolidation as the playing fields even out.” “Private equity firms, who have been significant acquirers of media assets over the last five years, appear to be readying assets for sale. Further acquisitions should also be driven by technology change, in particular the embrace of digital by European media companies.”
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The
DEAL
GURU Freek Vermeulen
Acquisition Myths...
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he famed investor, Warren Buffet, once said that many corporate acquirers think of themselves as beautiful princesses, sure that their kisses can turn toads into handsome princes. The acquirers pay substantial premiums over market value, believing that they can release the imprisoned princes. But, as Buffet said, “We’ve observed many kisses but very few miracles”. Many beliefs, hear-say and stories are abounding about acquisitions; when they work, when they don’t, how come so many of them fail, and so forth. Undoubtedly, some of these stories carry some weight, but others are myths. However, it is not always easy to separate the wheat from the chaff. Here are three of those beliefs: Size and profits: reversing cause and effect The rationale for many acquisitions is presented by the acquiring firm in terms of gaining firm size: “This take-over will immediately make us the largest company in the industry” and statements alike. However, that firm size will make a company more successful is often a myth. Surely being big can have certain advantages, but that doesn’t mean that bigger (let alone being the “biggest”) always automatically is better. True, company size is often associated with financial success. For
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example, the firms that always feature on “the most admired companies” lists are usually Behemoths such as Toyota, Dell, Intel, WalMart, and Pfizer. However, many of these firms grew bigger because they were successful. Adding size to your company is not necessarily going to enhance success. Managers who opt for a strategy of increasing size often reverse cause and effect; although success will likely make you bigger, striving for size per se is not necessarily going to make you more successful. In fact, it is quite possible that focusing all ones resources and efforts on becoming bigger (for the sake of being big) might actually decrease a firm’s chances of becoming successful.
Success often breeds failure A second myth is that an initial acquisition success will lead to more successes. People believe this because they assume that once a CEO has made a successful first acquisition, he will have figured it out, has learned from this first experience, and will from then on know how to conduct more of them and turn them into winners. Although research does show that firms can learn how to do acquisitions better over time, it is not as easy as often thought. The evidence shows that, for the average firm,
things often get worse before they get better. Because acquisitions are so different, and require different approaches and have their own particularities, one needs quite a bit of experience to see them through. In fact, specific research on CEOs, conducted by Professors Matthew Billett and Yiming Qian from the University of Iowa found some compelling evidence that initial successes led CEOs to become overconfident, which caused them to have ample subsequent failures. They discovered that those CEOs who had experienced a successful first take-over got the hots for deal-making; they were very likely to undertake even more acquisitions in the ensuing years. Those subsequent deals, however, on average destroyed shareholder value. First-time, successful deals make CEOs overconfident, which not only stimulates them to do even more deals, but also makes them inclined to pay even heftier take-over premiums for subsequent ones, which they usually were unable to recoup after the acquisition.
Overconfident CEOs are made (not born that way) This also points at a third myth, and that is that overconfidence is some sort of a personality trait; that it is the type of person that makes a company take on too many acquisitions at too high a cost. Instead, there is compelling evidence that such CEOs are
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The Deal Guru
not born overconfident but that their environment turns them that way. It is the initial experience of success – discussed above – which gradually makes them overconfident, but also their environment, such as the media. My former colleague at the London Business School, Professor Mathew Hayward, performed a slightly mischievous piece of analysis. He counted the number of favourable articles that had appeared about particular CEOs in the business press (such as the Financial Times, Business Week, etc.). Subsequently he computed whether CEOs who had received more media praise paid higher premiums for their acquisitions. The answer was: absolutely yes. To be precise, each highly favourable article about a company’s CEO would increase the premium paid with no less 4.8%. For an acquisition of a billion, this would be 48 million… And that is for every article! And this really is 48 million down the drain, because Mathew also showed that CEOs with more favourable press were completely unable to create additional value out of those acquisitions. They had simply overestimated themselves. But their inclination to overestimate themselves had been built up by the media; all they were guilty off believed their own press. To conclude, what determines acquisition success and failure is not always obvious. Digging deeper reveals a real understanding of the M&A phenomenon. And only when you really understand what is going on, can you begin to improve things, and really become a successful acquirer. Freek Vermeulen is an Associate Professor of Strategic & International Management at the London Business School, and the author of the book “Business Exposed: The naked truth about what really goes on in the world of business” (FT Prentice Hall) Contact Details Freek Vermeulen Associate Professor of Strategic & International Management London Business School Regent's Park London NW1 4SA United Kingdom Tel: +44 (0)20 7000 8722 www.freekvermeulen.com
COMPETITION Win a copy of “Business Exposed: The naked truth about what really goes on in the world of business” To win a copy of the book, please submit answers to the below questions, via email to charlotte.abbott@acqusition-intl.com The winning submission will also be published in the forthcoming issue of Acquisition International.
Escalation of commitment Escalation of commitment is the phenomenon that when we invest a lot of time and effort (and money) into setting up a particular big project, when things start to go wrong, we stubbornly persist in the failing course of action – often throwing good money after bad. It happens mostly when the project is big, fraught with uncertainty, and some very senior executive has thrown his weight – and, importantly, his reputation – behind it. We’ll persist, no matter what! We see it very often with big acquisitions. See for instance: http://freekvermeulen.blogspot.com/search?q=operation+market+garden Who can give an example of a deal which – perhaps in hindsight – we would qualify as “this was clearly a case of esclating commitment”?
Make the numbers fit the decision Numbers are a dangerous thing in strategy. Numbers are usually extrapolations of the past, so if we insist on a “sound, quantified business plan” (with a “net present value calculation” or “pay-back time”) we end up only doing incremental things, killing of the really radical innovations before they have even seen the light of day. Yet, they also force us to be careful and objective, so shunning them entirely might not be a good idea either... Not an easy trade-off to make. To make things worse, we can also make them say whatever we want them to say… If we want to bid a bit more for that acquisition target, we can always calculate some extra “synergies”; if we want the prospective market to look bigger, we can always find some more potential customers to quantify. See, for instance, http://freekvermeulen.blogspot.com/2008/03/when-acquisitions-take-over-firms-are.html Do you have any blatant examples where the numbers were created to fit the deal, rather than the other way around?
Strategy meetings when really the decision has already been made… Some time ago, I was watching an old television adaptation of Tolstoy’s War and Peace. At some point, it showed the generals’ meeting before the battle of Austerlitz; they were contemplating – at length – whether to have a battle or not. But it was very obvious that that decision had already been taken! Prince Andrei, who had noticed the same thing, wondered dreamingly why they were still talking about it in the first place; “the decision has already been taken, so why don’t they all go home?” It reminded me of one of the first strategy-making meetings I was ever present at: three CEOs and their cronies deciding whether to merge or not. After half a dozen lengthy meetings – surprise, surprise – the answer was “yes”; something that had been blatantly obvious from minute one. Why do we do it? I am sure you must have been in meetings like that? Is there a purpose? What is it? Who can give an example of a deal which was preceded by many meetings and calculations although the decision had already long been made?
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GOOD CALL for mobile phone company
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An online mobile phone retailer has clinched the top spot in the Sunday Times Virgin Fasttrack 100, making it the fastest growing business in the UK.
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erbyshire-based BuyMobilePhones.net was named number one on 5 December in the Sunday Times league table, which ranks the 100 privately-owned companies which have seen the fastest growing sales over the last three years. Over this time period, BuyMobilePhones.net grew its sales by 340 per cent, seeing a rise from £288,000 in 2006, to a phenomenal £24.5m in 2009. Founded by Derbyshire businessman Paul Sisson in 1997, the company began life as a chain of 14 shops based in and around the Derbyshire/Nottinghamshire area. In 2003, the company made the transition from high street to online retailer and set up base in Alfreton. In the past two years, it has doubled its employee-base from 30 to 60 and now sells more than 80,000 mobile phone contracts every year. A unique selling point for BuyMobilePhones.net is the free gift incentives it offers to customers who purchase a mobile phone contract, with top-brand gifts ranging from iPods and games consoles, to laptops and televisions. The company is currently the largest independently owned online mobile phone retailer with more than 1,000,000 deals on its website, including the latest mobile phone handsets. In summer 2010 the business saw its one millionth order, a landmark event which was celebrated by presenting the millionth customer with a brand new Mini Cooper. The company followed up with another landmark, this being its most successful trading day ever, on 6 December 2010. BuyMobilePhones.net’s success, according to Paul, is due to good marketing, the reluctance to offer “ridiculously low” margins and great relationships with operators which are growing steadily. “A lot of people are currently buying their first smartphones, so this has been good for our business,” he said. ““We’ve worked hard to get our name out there,” explains Paul. “We are ranking high up on internet search engines and worth of mouth has also proved very powerful. Also, our affiliation with Derby County Football Club as shirt sponsor has helped to get our name out there.”
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Lead Mandate As a Derbyshire-based business the company is particularly proud of its roots and became the Official Shirt Sponsor for Derby County Football Club for the 2010/11 Championship Season in the spring of 2010, with a shortened version of the name (BuyMobiles.net) appearing on the kit. As a local man, the county’s football club is close to Paul’s heart and this move was not purely for sentimental reasons, as it has also helped to increase coverage of the brand. The business continues to grow year-on-year and 2010 has been a particularly successful year. As well as clinching the top-spot in the Sunday Times Fast Track 100, BuyMobilePhones.net was also voted ‘Best Online Retailer’ in both the What Mobile Magazine Awards and the Mobile Choice Consumer Awards. It seems there is no slowing down for BuyMobilePhones either, as Paul adds: “Our ambition now is to become the first place people go for a mobile phone, and we are well on our way to achieving that.”
Sunday Times Fast Track 100 The Sunday Times Fast Track 100 league table ranks Britain's 100 private companies with the fastest-growing sales on their latest three years. To see the current league table click on the 'League table supplement' tab in the left hand menu. Fast Track 100 is compiled by Fast Track and published in The Sunday Times each December, with an awards event at Richard Branson's Oxfordshire home in May and follow-up regional dinners throughout the year. A typical Fast Track 100 company: • is owned and run by entrepreneurs • has between 50 and 250 staff • has average 3 year sales growth ranging between 40% and 400% pa • has sales ranging between £5m and £500m (typically £5m - £100m) • 15% of the companies have venture capital backing
Contact Details BuyMobilePhones.net Contract House Turnpike Business Park, Alfreton, Derbyshire DE55 7AD. Tel: 01773 522352 Email: krissy@buymobilephones.net
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CHILD’S play... “
MMC Ventures invests £1.5 million in luxury online children’s wear retailer alexandalexa.com
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MC Ventures (MMC), the growth company investor, has invested £1.5 million in AlexandAlexa, www.alexandalexa.com, the UK’s leading online retailer for luxury children’s-wear, selling premium brands such as Ralph Lauren, Burberry, Little Marc Jacobs and Junior Gaultier. MMC is taking a significant minority stake in the business. The company is forecast to turnover £40million by 2014 through international expansion. AlexandAlexa is a family owned business that was founded in September 2007 by husband and wife team Alex and Alexa Theophanous. Based in London, the duo set up the business in order to bring the best of international children’s fashion, online. AlexandAlexa currently stocks over 75 luxury and premium brands, offering fashion, shoes, toys, books and accessories for children aged 0 – 12 years. The business continues to focus on securing high-profile luxury and premium children's wear brands. For Spring/Summer 2011 brands such as Baby Dior, Stella McCartney Kids, Kenzo and Tommy Hilfiger join the list of luxury labels the site stocks. AlexandAlexa are also the exclusive online stockist for a host of premium brands for Spring/Summer 2011, including Fred Perry, Baby ISSA, North Sails, Napapijri and more. According to recent data from market research site Mintel, the global children’s-wear market is worth £100 billion. The UK currently accounts for only 5 per cent of the global market. The online children’s wear market continues to grow at a rapid rate, as 12 per cent of all UK children's fashion is bought online, up from 2 per cent three years ago
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(2007). In comparison, 18 per cent of women's fashion is bought online, up from 12 per cent three years ago. Rory Stirling, investment manager at MMC Ventures who joins the Board of the company told AI: “MMC Ventures invests in fastgrowing UK companies and AlexandAlexa is a unique business that has demonstrated significant growth since it was founded in 2007. We work in partnership with the businesses we invest in and we are able to offer operational, financial and strategic support. AlexandAlexa has a strong track record in the retail sector and we look forward to driving international expansion and taking the business to the next level.” Belinda Earl, chief executive of Jaeger and Aquascutum sits on the AlexandAlexa Board as non-executive chairman. Belinda Earl commented: "Since joining the board in July 2009, I have been incredibly impressed with the success of AlexandAlexa. This important investment from MMC Ventures is a testament to the strength of the AlexandAlexa brand and we expect the business to more than double in size in the next 12 months”. Alex Theophanous, founder and CEO commented: "My wife, Alexa, and I are incredibly excited to see our online concept develop into a global brand over such a short period of time. We continue to take an active role in leading the business with the strong management team and we are confident about accelerating the brand proposition further, over the next five years."
Since joining the board in July 2009, I have been incredibly impressed with the success of AlexandAlexa. This important investment from MMC Ventures is a testament to the strength of the AlexandAlexa brand and we expect the business to more than double in size in the next 12 months.
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Sector Spotlight
Bridging Finance
Chris Baguley, managing director of Bridging Finance Limited has vast experience advising the construction sector. He reports that short-term lenders are assisting building and construction businesses, large and small, that wish to seize market opportunities.
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Savvy construction businesses are also snapping up opportunities to expand, buying up land and other businesses that would have been out of the question before the recession, due to the high cost.
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Building and Construction
A
n excellent example of an industry getting back on its feet, and taking market opportunities, is the construction sector, which is starting to show signs of recovery. House builders fared much better in 2010 than in 2009 and there is increasing activity in the commercial property arena. Lessons will be learnt from the heady, pre-crunch days and there are still reports of casualties among the less agile SMEs but on balance, the industry is starting to improve.
Opportunity One of the less obvious outcomes of the financial crisis is the strength of demand in the residential letting area. Flat-lining house prices have caused a massive shift in sentiment in the home-ownership equation and new-build figures, while improving, are still falling short of demand. For the first time in two or three generations, with so much uncertainty in the employment stakes, renting is seen by many families as a more attractive way of putting a roof over their heads than buying. It has the advantage of low initial costs (compared with high equity requirements from most mortgage lenders) and geographic mobility if tenants lose their job or need to change their location for a better one. Hence, there’s a huge increase in demand for rentals and thus a burgeoning ‘buy-tolet’ market. The knock-on effect is that large numbers of investors are seeing this as a much more productive place for their money than leaving it stagnating in their savings account.
Savvy construction businesses are also snapping up opportunities to expand, buying up land and other businesses that would have been out of the question before the recession, due to the high cost. Businesses that take these opportunities now, will reap the rewards in the future.
Banks feeling better? The indications are that the bankers are feeling a little better and slowly getting back on their feet. The problem for the property construction and development industry is that to invigorate the recovery they often need funds in a hurry. As I said at the outset, the funds are there for the right proposals but the thorough and cautious approach taken by the banks in their decision-making means there is a risk that good quality opportunities will slip through the net while borrowers are waiting for decisions. That is where the short-term lending market comes into its own. We have the agility and the ability to hold property deals together while the main funders make up their minds. Deals can be snapped up as we can advance funds quickly.
Softly, softly…. There is no doubt the banks are slowly relaxing their iron grip on property investment funding. They know that ultimately, in the medium to long term, their own salvation lies in secure growth that only the property sector can provide. Some of my clients who are in the process
of using the short-term bridging route, have made another interesting observation; banks seem keener to replace bridging finance on deals which are signed - and already in physical progress - than when looking at paper proposals in the pipeline. It stands to reason, really. It’s always easier to follow than to lead when your confidence isn’t what it used to be. So, the new rules for the property sector finance picture from where I’m standing look like this. 1. Be prepared to shop around for the right long-term finance deal. There is light at the end of the tunnel but if the first few doors don’t open, keep knocking. There is plenty of money around that’s not earning its keep. 2. All the indications are that the sector is regaining its vigour. It must. History dictates that societies must re-build and regenerate to survive. Governments and banks know that and funding must fuel this process. 3. Rather than lose a deal, think about borrowing some ‘proactive’ short-term finance to allow Banks to undertake their longer term due diligence. 4. Remember, over the last 250 years, despite world wars, disasters, stock market crashes, and other calamities, residential and commercial property has always produced a fair return. It will again. Chris Baguley is managing director of national short term lending specialist Bridging Finance Limited.
Contact Details www.bridgingfinance.co.uk Tel: 0845 337 5800
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Sector Spotlight
Global Building and Construction M&A: An Outlook for 2011 G
lobal building and constructionrelated M&A activity is likely to show a steady improvement in 2011. Set against the backdrop of improving worldwide growth – especially in emerging markets – and more stable financial conditions, dealmakers expect to see a continued recovery in takeovers, although the twin spectres of a double-dip recession and further EU debt bail-outs will continue to haunt the sector closer to home. The availability of financing will also be key. There were signs last year that credit markets had begun to thaw, while those companies that had recapitalised their balance sheets, or turned to shareholders for fresh funding, are now in a strong position to lead the next wave of consolidation. Reflecting the more favourable conditions, there were a number of mega-deals in the construction sector last year. One of the biggest was the $7.6bn bid by US construction machinery group Caterpillar for mining equipment maker Bucyrus International. In Europe, there were a number of cross-border deals. Spanish construction firm ACS launched a hostile EUR 5bn bid for German rival Hochtief, while UK private equity firm CVC bought a 15.5% stake in Spanish infrastructure group Abertis and is widely expected to make a full offer later this year. This could value Abertis at around EUR 12bn.
Malcolm Locke
More strategically driven deals are also anticipated in 2011 as construction firms seek to provide an end-to-end solution for clients. Higher margin sub-sectors such as compliance, consultancy and professional services are likely to be the ‘hot sectors’ to watch in 2011.
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“Companies are realising that organic growth is not enough. Many are now turning to acquisitions as way to promote growth rates and expand their operations,” said Chris Temple, a strategy partner at business consultancy PwC. Last year’s £223m two-way bid battle between URS and CH2M Hill, two cash-rich US construction companies, for UK consultancy Scott Wilson illustrated the premium put on these high-growth assets. Counter-bids by each party saw URS pay 290 pence a share to win the day – a massive 230% premium to where the shares were trading before the bid. “Firms with plenty of cash on the balance sheet will look to broaden their skills set and build a vertically integrated business through acquisition,” said Panmure Gordon building analyst Andy Brown. Key markets for investment are likely to be in Asia, the Middle East and Australasia, while the so-called VISTA markets – Vietnam, Indonesia, South Africa, Turkey and Argentina – are also proving attractive to buyers. The BRIC nations – Brazil, Russia, India and China – are again expected to be at the forefront of M&A activity as GDP growth projections for 2011 range from 4% to 9%. China is again expected to be an active market as its huge infrastructure programme in roads, rail and airports is set to drive M&A at a local level. Construction machinery and building materials were high on the list for acquirers last year. In the UK, M&A activity in the building sector remained fairly
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subdued in 2010. In fact, the year will be best remembered for two high profile collapses as both Connaught and Rok were put into administration and various assets and contracts were parcelled up and sold on. Observers reckon there will be more distressed assets coming to the market in 2011. “Last year’s Spending Review will reduce the amount of public sector contracts and put many smaller firms under pressure. This could be a catalyst for further M&A activity,” said Panmure’s Andy Brown. “If stock markets stay firm, you could see more rights issues or share placings to fund deals. The banks are still being very selective who they will lend to.” Private equity also looks poised to start re-investing as low valuations and the more predictable income streams and returns offered by the sector prove attractive. Cinven bought infrastructure support services firm Spice for £251m last year, while Rutland Partners bought plant equipment firm Brandon Hire for £43m. PwC’s Chris Temple believes many PE firms are now looking to get into the sector ahead of the anticipated recovery in 2012. “We’ve had a lot more conversations with PE firms over recent weeks about potential acquisitions. Construction materials and environmentally friendly building products are especially sought after.” The biggest takeover in the UK sector last year was the £557m cash and shares offer for BSS Group from Travis Perkins, the building materials group. Costain’s £120m approach for Mouchel last month also got the market talking and there are hopes that this could spark a revival in takeovers in 2011.
More strategically driven deals are also anticipated in 2011 as construction firms seek to provide an end-to-end solution for clients. Higher margin sub-sectors such as compliance, consultancy and professional services are likely to be the ‘hot sectors’ to watch in 2011.
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Sector Synopsis
Building:a
future in
2011?
In the first of the magazine’s monthly sector reviews, Acquisition International takes an in depth look into the Building and Construction sector, asking the experts what opportunities are available for today’s deal maker. How do you see the outlook for new build over the next 12-18 months? James Price Knight Frank
Angus Miller Baker Tilly
Stephen J. Pratt Godwin Developments
Stuart P. Pratt Godwin Developments
Nick Grace Savills
James Price, Knight Frank commented: “In general terms, we expect this to remain sluggish unless either the project is located in a prime market where demand is truly international and on-going; London new build would appear to remain healthy, in part as a result of the buyers from the Asia Pacific region. Also, new build that is reaching completion or at least with work well advanced is better placed to capture buyers than that at early stages.” Angus Miller, Baker Tilly added: “New build across the UK has had a tumultuous 2010 particularly in residential where supply grew 24% yet demand only increased by 7%. The future looks uncertain particularly given the continuing volatility of house prices and lack of available credit for both developers and buyers. Previous signs of a recovery in new build were somewhat misleading as many contractors rushed to get projects complete before the introduction of public sector cuts kicked in. Orders for public works such as hospitals and roads are 43% lower than a year ago and the cancellation of the majority of the £55bn Building Schools for the Future project has led to a vast reduction in potential pipeline work for UK construction companies in the coming years. Commercial building looks more promising, with a number of large office space projects finally going ahead in the London area such as the Bishopsgate Tower and “The Cheese Grater” at 122 Leadenhall Street.”
Stephen Pratt, Godwin Developments concluded: “The outlook for new build over the next 12-18 months will heavily rely on what particular part of the property industry you are operating in. “For example the government have obviously vastly reduced the amount of grant funding for developments i.e. B.S.F (British Schools for the future) projects and also Housing association projects. This will no doubt affect the total number of new build projects going ahead in 2011. “Thus we are seeing allot of patching up projects going ahead as a medium term solution rather than full new build developments. “Industrial and commercial sectors will have a slow 12-18 months unless an ‘end user’ is firmly in place. Gone are the days of speculative development and these sectors have suffered heavily from this. Companies are looking to refurbish what they already have instead of moving and with redundancies across the whole industry firms now have less staff so the need to expand has reduced considerably.
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Over the Noughties there was an increase in the proportion of development on predominantly urban brownfield land. To achieve financial viability that required housing to be built at increasingly high density.
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Nick Grace, Savills
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“The two areas that remain strong in 2011 are food retail and housing. Supermarkets are looking to open more new stores across the UK. Large supermarket sites are creating valuable jobs to the community and we are also seeing another surge in convenience stores from the main four operators. “PLC house builders are keen to push ahead once more with new sites. I see this part of the construction industry as the biggest supplier of new build during 2011.”
Will there be more new housing build starts? Has the planning process eased to assist in speeding up the recovery? James Price, Knight Frank, explained: “In overseas terms, the tighter the regulations generally the better for the market as supply is restricted, and buyers do not have the same fears of value eroding through over development- Dubai and South of Spain being obvious examples.” Nick Grace, Savills commented: “Rather than simply saying yes or no it is probably more appropriate to say that there needs to be more houses delivered through 'localism' as the abandonment of top-down planning will change the way the industry delivers housing. “Over the Noughties there was an increase in the proportion of development on predominantly urban brownfield land. To achieve financial viability that required housing to be built at increasingly high density.
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“A simple comparison between housing completions and the formation of new households suggests that in this period a development shortfall emerged. This indicates that localism will need to bring forward more, not less, land to meet housing need. The demand for high-density housing is less certain in current housing market conditions, and finance for high-density developments remains scarce. This makes it less easy to deliver. “Over the course of the next 12 to 18 months with the revocation and reinstatement of Regional Spatial Strategies as a material consideration in the determination of planning applications, developers may feel left behind in a policy void, unable to confidently fall back on published house building targets and there is every prospect of a go-slow on site promotion until the policy void is filled. This risks prolonging the hiatus in house-building activity. Combined with reduced capacity in the construction industry post-credit crunch, my belief is that housing output will remain low for at least 18months and the planning process has not eased significantly to assist in speeding up the recovery.” Angus Miller, Baker Tilly concluded: “ With house prices sliding again over the last few months – 70% of the country fell in value by an average of 1.6% over the year – developers are cautious about embarking on large housing projects. This is particularly the case for apartments which accounted for half of new developments in the peak in 2007 when they represented the best returns for small development sites. The development plans of the big three housebuilders, Persimmon,
Taylor Wimpey and Barratt, have since shifted significantly, with Persimmon in particular setting aside only 15% of its land bank for apartments with two storey houses coming back into favour. With a sector still hurting from the oversupply of apartments, this trend is likely to remain for some time. “There is also still a large shortage of affordable housing. Most local councils have failed to provide half of the quota of affordable housing they estimated they needed back in July. In Scotland the ‘Homes for Scotland’ industry body pleaded with political parties in November to raise house building by 10% in order to stave off an impending housing shortage and boost employment. “Corporate confidence in the sector appears to be returning in places with Skanska recently announcing they will be launching a new UK residential development business which they expect to generate
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The new build sectors are suffering from lack of bank funding and finance as it is still not readily available to start projects without end users being put in place. The deal needs to be heavily secured before construction can start on site. Some large construction companies are looking to help finance projects up to a certain level in order to push forwards with the development but of course this is not an available option to everyone.
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Stephen Pratt, Godwin Developments
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Sector Synopsis
profitable growth through to 2015. This is balanced however by the increased failure rate of smaller firms down the chain as a result of a more competitive market. “The new government has committed to devolving more planning power to local bodies and will have a democratically elected body to oversee major infrastructure project permissions. This should help to streamline the currently opaque and bureaucratic planning process which may help to speed up the recovery if effectively implemented.”
How are corporates driving more towards environmentally friendly materials? James Price, Knight Frank explains: “The larger Developers are certainly aware of need to appear environmentally responsiblesustainability is a watchword, though this is as much in terms of long term economic benefits to the local area. “Green technologies will certainly feature ever more as buyers respond to these- the key is if this increases development costs, will buyers still respond positively and support these?” Angus Miller, Baker Tilly commented: “The introduction of environmental standards into contracts such as BREEAM and the FSC regulations for timber is becoming more common and not only are subsidies on offer, the adoption of these standards is increasingly being used as a good selling tool for new commercial developments. Environmental issues are featuring more prominently in the operating policies major corporates and the number of new office
space lets coming onto the market with high BREEAM ratings is increasing.”
Where do you see M&A activity in the building products and construction industry? What are the hot spots? James Price. Knight Frank: “This I think is really more directed outside my area, though as a general rule one would think that activity would focus on those products and firms active in the stronger markets locationally, perhaps also with a view to the above renewables question.” Angus Miller, Baker Tilly concluded: “2010 saw many opportunities for distressed acquisitions, such as Costain’s approach for Mouchel which has struggled with its debt level and reductions in public sector spending. “There has also been some consolidation of contractors and professional services firms such as Balfour Beatty’s acquisition of Parsons Brinckerhoff in the US. With the current uncertainty and low growth prospects in the UK market, construction companies are increasingly looking overseas for acquisition led growth. The Middle East has seen overseas players targeting businesses with a strong presence in the growing markets, such as Aecom’s acquisition of Davis Langdon. Qatar is expected to be the fastest growing region in MENA with GDP forecast to grow by over 15% in 2011. Winning their recent bid to host the 2022 World Cup will enhance their prospects and constructors looking to win a share of the $100bn of infrastructure spending forecast up to the event may look to M&A to boost their chances.”
Will the tightening of public sector purses have a dramatic effect on the building products and construction market? James Price, Knight Frank told AI: “In the public sector, one would think so, though private sector would be expected to absorb some of this; in our area of second homes, less so.” Angus Miller, Baker Tilly concluded: “Public sector activity in the industry remained stable early in the recession as a result of the various stimulus packages but has since dropped off as funding cuts have started to bite. However, whilst funding for capital projects has been sharply reduced, certain infrastructure projects have been ringfenced, such as the £15bn Crossrail project in London. We have already seen the effects of government spending cuts on public sector reliant construction firms like Laing O’Rourke and we can expect more casualties and restructurings in 2011 as these firms struggle to source a higher proportion of revenues from a highly competitive private sector.”
Are banks willing to lend to this sector? How have their attitudes changed since the recession? Stephen Pratt, Godwin Developments: “The new build sectors are suffering from lack of bank funding and finance as it is still not readily available to start projects without end users being put in place. The deal needs to be heavily secured before construction can start on site. Some large construction companies are looking to help finance projects up to a certain level in order to push forwards with
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the development but of course this is not an available option to everyone. “The banks still have allot of toxic debt and are worried about starting new lending until this has been cleared. Banks will lend on new build projects but there has to be a clear exit strategy as well as some seed capital from the developer/construction company. “We will see banks lending for new build but they will pick their markets carefully and funding will be fixed around the 60-70% LTV range. London and the City will see no major problems but outside of this they will pick their deals with care. “They have been badly burnt by the last three years and it will take time for the banks to feel comfortable again in the various sectors.” Angus Miller, Baker Tilly told AI; “Lending to the construction sector fell by £5.7bn in the five months between April and August 2010 highlighting the weak banking appetite. The
issue is compounded by the lending attitudes to supporting property buyers, residential and commercial – with ever lower LTVs required, the Council for Mortgage Lenders has predicted that lending will fall in 2011 to its lowest level in 30 years. Despite record low base rates, the relative mortgage rates have increased significantly with margins over base increasing tenfold from 0.3% in July 2007 to 3% on a two year fixed rate Halifax product. These margins are likely to remain high for some time as the cost of capital for banks has increased because of the new Tier One capital requirements and their greater reliance on depositors following the huge contraction of the wholesale lending markets.” James Price, Knight Frank concluded: “Overseas, still very hard to find finance for new build projects, but where there is strong equity, a good track record, and a prime location, there is some appetite. Generally the approach is of course far more cautious than before the recession.”
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Public sector activity in the industry remained stable early in the recession as a result of the various stimulus packages but has since dropped off as funding cuts have started to bite. However, whilst funding for capital projects has been sharply reduced, certain infrastructure projects have been ringfenced, such as the £15bn Crossrail project in London. We have already seen the effects of government spending cuts on public sector reliant construction firms like Laing O’Rourke and we can expect more casualties and restructurings in 2011 as these firms struggle to source a higher proportion of revenues from a highly competitive private sector.
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Contact Details James Price Partner, International Residential Knight Frank LLP 55 Baker Street W1U 8AN United Kingdom Direct Line: +44 (0) 20 7861 1057 Mobile: +44 (0) 7771 885994
Nick Grace BA(Hons) Dip TP MRTPI Associate Director Head of Nottingham Planning & Regeneration Savills (L&P) Ltd Direct Tel: +44 (0) 115 934 8061 Mobile: +44 (0) 7968 550376 Fax: +44 (0) 115 934 8001 Email: ngrace@savills.com Web: www.savills.co.uk
Stephen J. Pratt Director Godwin Developments Email: sjp@godwindevelopments.co.uk Tel: +44 (0) 870 60 60 537 Web: www.godwindevelopments.co.uk
Stuart P. Pratt Godwin Developments Email: spp@godwindevelopments.co.uk Tel: +44 (0) 870 60 60 537 Web: www.godwindevelopments.co.uk
Angus Miller, Baker Tilly
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Sources Financial Times Scotsman Publications Yorkshire Post Economy Watch Economist Office for National Statistics
SECTOR SPOTLIGHT
MINING ENERGY & EUROS W
e hear much about the challenges surrounding the use of coal as an energy source, less about the use of energy in the extraction of coal. However, the resource extraction industry, which includes drilling for oil and gas as well as mining for minerals and metals, is recognised as a major energy user and accordingly a significant emitter of greenhouse gases.
While most mining companies are now focusing on energy efficiency, to meet regulatory requirements, if not because of economics, the more far-sighted are moving beyond their traditional business and becoming producers of energy in their own right. Typically the focus is on distributed energy, which is also appropriate for their own needs. We can expect to see growing numbers of mining companies investing in clean technologies, including fuel cells, over the coming years. Acquisition International speaks to the mining and energy experts.
The high energy consumption of the mining industry means that the potential for generating electricity as a by-product of the process of mining is an attractive proposition. South Africa’s Department of Minerals and Energy (DME) estimates that the mining industry uses 6% of all the energy consumed in South Africa.
Soemadipradja & Taher Advocates
Rahmat S. S. Soemadipradja Address Wisma GKBI, Level 9 Jl. Jendral Sudirman No. 28 Jakarta 10210 - Indonesia Tel. (+62 - 21) 574 0088 Fax. (+62 - 21) 574 0068
In Brazil, the largest single energy consumer is mining giant Vale, which accounts for around 4% of all energy used in the country. In the US State of Colorado, mining has been estimated to account for 18% of total industrial sector energy use, while overall in the US it is calculated that the mining industry uses 3% of industry energy.
Contact details
Rui Botica Santos Partner
Coelho Ribeiro e Associados Lisbon Portugal
Rui Botica Santos is a Partner at CRA and CRA-Timor (firm based in East Timor). CRA is member of CRA Global, a network of law firms comprised of Portuguese speaking countries. He is also Director of Belo Sun Mining a Canadian based mineral exploration company listed in TSX-V with a portfolio of properties including gold in Brazil. What areas do you specialise in? I am a lawyer that specializes in natural resources law. How does your firm stand out from local competitors in terms of the services you offer? “CRA is a medium sized law firm. CRA offers a full-service legal advice, specifically providing services to foreign investors in the Portuguese Speaking Jurisdictions.” Have there been any notable deals (size, complexity, duration, etc.) that you’ve been involved in recently? “CRA has been involved in several mining transactions in Portugal, Brazil, Angola and East-Timor. We cannot disclose details of these transactions for confidential reasons, although my involvement in Lundin Mining’s acquisition of Somincor is of general knowledge.” How has the global downturn impacted on the mining and energy industry in your jurisdiction? “The present socio, economic and financial crisis appears to have no impact on the mining industry. The current cycle is pushing for investments in this sector.”
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Tel. +351 21 383 9060 Email. rui.santos@cralaw.com Web. www.cralaw.com
When it comes to sustainable and renewable policy, how do you think your jurisdiction fares in comparison to immediate neighbours and the international leaders?
“Renewable energy sources have sharply risen from 17% in 2005 to 45% in 2010 mostly derived from hydro and wind power, making minerals one of the country’s dynamic industrial sectors.” How have your clients taken advantage of the growing “green” market? How have you been equipped to advise and assist? “Portugal is advocating for investment in renewable energy. Grants are available for investments in this area.” With the oil price being strong at $90 will this lead to much industry M&A activity in 2011? Which are the hotspot M&A areas? “It is difficult to foresee whether the current price is favourable for M&A. It may encourage investments in areas where the expected exploration and exportation costs are lower than the capital return.” How has the BP crisis in the Gulf changed the industry? What changes have still to come and who will be the winners and losers post this crisis? “The players will be more cautious when managing their activities and maintaining their operations.” On a lighter note, what is the best piece of advice ever given to you? “The only failure is the fear to fail. You must always be patient, persistent and optimistic.”
MINING & ENERGY
Contact details
Leonardo G. Rodríguez Partner
Marval, O’Farrell & Mairal Av. Leandro N. Alem 928, Piso 7° Ciudad de Buenos Aires, Argentina (1001)
Leonardo G. Rodríguez is partner Marval, O’Farrell & Mairal (Buenos Aires, Argentina). Marval, O’Farrell & Mairal is the largest, and one of the oldest law firms in Argentina. The firm has grown steadily and employs over 300 lawyers. Our Mining Law Group is a branch of the Natural Resources & Energy Group, and it is formed by lawyers and in house technicians, which allows the Group to render an interdisciplinary and efficient advice and service to the clients. The Mining Law Group renders its services to clients in all steps of mining processes, and it grants them legal advice in all matters related to this practice field. “Our Mining Law Group in the City of Buenos Aires keeps updated with day to day legal and precedent news from each one of Argentine Provinces. In this regard, our Group publishes every month a newsletter which compiles all legal, regulatory, court precedents, and general news on the mining business. In addition, we have recently published the book “Argentine Law on Mining,” the most complete legal guide to invest in the mining business in Argentina.” How has the global downturn impacted on the mining and energy industry in your jurisdiction? “Although worldwide economic uncertainty has discouraged investments (in particular, high risk investments, such as mining), Argentina has not had suffered a significant impact in the mining business. In recent years, mining has developed significantly and according to the National Mining Secretariat, between 2003 and 2009: (i) mining investments increased 1.014%, reaching the amount of USD 1,900 million; (ii) mining exports
Tel. 54-11-4310-0100 Email. LGR@marval.com.ar Web. www.marval.com.ar
increased 275%, reaching the amount of USD 3,100 million in 2009; (iii) direct and indirect employment from mining activity raised 110% and 141% respectively; (iv) mining production increased 292%, reaching the amount of USD 4,150 million in 2009; and (v) meters drilled for exploration increased 302% (around 668,000 meters drilled in 2009).” What perspectives do you see for mining investments in Argentina in the near future? “As mentioned before, Argentina ranks sixth among the countries with the greatest mining resources. However, only 25% of the surface deemed with a mining potential (750,000 square kilometres) has been explored and developed to date. Compared to other countries with a longer mining history, where the possibilities to make important mineral discoveries are lower due to the high number of projects and exploration ventures, Argentina is an appealing destination for mining investments both because of its mining potential and encouraging legal framework. In spite of a few discouraging measures, the Federal and most of the provincial governments strongly support the mining industry. Meanwhile, when the intervention of local courts was sought with respect to a matter that affects the mining sector the judges have rendered timely and reasonable decisions.” On a lighter note, what is the best piece of advice ever given to you? “Paul J. Schlauch, my mentor and former boss at Holland & Hart (Denver, Colorado) told me “A sound, fruitful and durable mining law practice rests in a prestigious reputation and strong relationships, which takes take long time and effort to accomplish. Don’t give up and work hard to achieve these aims”
Contact details
Jaime P. Zaldumbide Partner
Perez Bustamante & Ponce Attorneys at Law Ecaudor
Tel. (5932) 225 4323 Email. jzaldumbide@pbplaw.com Web. www.pbplaw.com
Jaime P. Zaldumbide, a Partner at PEREZ BUSTAMANTE & PONCE, Attorneys at Law in Quito – ECUADOR, specailsing in Oil & Gas, Mining, Environment and M&A.
oil exploration bidding rounds for April 2011. Under current regulations, government is entitled to award exploration/exploitation areas to State owned.
How has the global downturn impacted on the mining and energy industry in your jurisdiction?
Companies without bidding processes, something that is not allowed to private companies, who necessarily have to be part of such processes.
“Oil and mining industry has suffered a radical change in our country due to the new policies enacted by the current government. Exploration and Exploitation of oil contracts have been renegotiated to service contracts. Mining industry has a new law and concession titles have been revised. New rules apply for the extraction of non-renewable natural resources.” When it comes to sustainable and renewable policy, how do you think your jurisdiction fares in comparison to immediate neighbours and the international leaders? “Our new Constitution contains very modern legislation regarding sustainability and renewable policy, including provision that grants rights to nature. Nature is subject to have rights by its own. In addition, some new principles have been incorporated regarding environmental issues like: the reversion of the burden of proof, the strict liability principle and the no statue of limitation for environmental actions.” With the oil price being strong at $90 will this lead to much industry M&A activity in 2011? Which are the hotspot M&A areas? “The policy of the current government regarding the oil industry is mainl oriented towards local and foreign State owned companies, although there is space for the private companies. Government is planning to launch new
The government has also announced to bid to service companies, enhance oil recovery projects for fields currently operated by the Stated owned company, EP PETROECUADOR. How has the BP crisis in the Gulf changed the industry? What changes have still to come and who will be the winners and losers post this crisis? “It is clear that the BP crisis changed the industry regarding the exposure oil industry has regarding the environment and how serious operations offshore are. Definitively this event will force the State and the Companies to be, on one hand, much more careful in granting concession rights of shores, and on the other hand, to be much more cautious in operating in these extremely difficult technical conditions.”
Twenty Two
SECTOR SPOTLIGHT
FORMING FUTURES AROUND THE GLOBE C
ompany formations are still big business, the size, scale and clientele may have changed over recent years, but there is still a strong demand for the service. “The process is as complicated as ever, especially when looking towards a foreign jurisdiction and there are many firms out there making big claims that are sometimes too good to be true. In order to guarantee success, the key is to engage a professional adviser and why to avoid “bucket shops.” Norman Younger, Formations Direct commented: In all my years of forming companies I have never failed to predict economic trends through watching formation numbers and also the types of companies being formed. The change in law with Companies Act 2006 has caused a number of issues with small companies, which can be avoided with the correct approach. In addition many agents, like us, provide essential ancillary services such as accountancy for foreign firms and bank introductions.” Norman, describe the legal requirements when it comes to setting up a company in the UK? “The company requires articles (the constitution), a director and a shareholder and payment of a fee to Companies House” What can the UK offer to prospective companies? “Lowish” taxes, low capital requirements, respected legal system and reliable registry. Particularly attractive to Eurozone firms due to speed of legal system compared to theirs.”
Deep & Far Attorneys-at-law Address Taipei Taiwan
Tel. 886-2-25856688 Web. www.deepnfar.com.tw Email. email@deepnfar.com.tw
Bouchaib Law Firm Address Algiers Medea .20, RUE CLAUDE DEBUSSY (in front of the Council of State), ALGER CENTRE, ALGIERS 16004, Algiers, Medea Tel. +213 21 74 80 43 Fax. +213 21 74 80 44 Email. adbouchaib@yahoo.frMedea
How does your service differ, and what gives you an advantage over local and global competitors? “Formations Direct employ professionally qualified staff therefore we up to date with legislative matters. We place an emphasis on fair fees and 1st class client centred service.”
nitscheLegal
What are the economic and social benefits of foreign companies moving to your jurisdiction? Can you provide any recent examples? “The United Kingdom offers lower accounting and legal fees and an employment climate more favourable for employers. We have many Eurozone clients looking to avoid cumbersome rules in their home country so base themselves here.”
Tel. +49 (0)40.300 66 88 - 0 Fax. +49 (0)40.300 66 88 - 89 Web. www.nitschelegal.com Email. hamburg@nitschelegal.com
As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “It will remain flat and any growth will be illusory it is will be a transfer from public sector jobs to private sector jobs as redundant civil servants become self employed.”
AI speaks to the international experts about how company formation act as an economic barometer, the legal requirements for setting up a company in their jurisdiction and more importantly what is in store for company
Twenty Three
Dr. Thomas Nitsche, Rechtsanwalt Address Große Elbstrasse 47, 22767 Hamburg, Deutschland
Formations Direct Address 1st Floor 47 Bury New Road Prestwich Manchester UK M25 9JY Tel. 0800 085 45 05 Fax. 0161 798 7888
COMPANY FORMATIONS
Contact details
Raul Zúñiga Partner
Alemán, Cordero, Galindo & Lee Panama
Raul Zúñiga B is partner at Alemán, Cordero, Galindo & Lee Please describe the legal requirements when it comes to setting up a company in your jurisdiction. “A Panamanian corporation may be organized by two or more persons of full age, who need not be nationals or residents of Panama. Any person or entity desiring to form a corporation must sign the Articles of Incorporation setting forth: (a) The name and domicile of each subscriber; (b) The name of the proposed corporation which shall not be the same as, nor so similar as to cause confusion with, the name of any other existing corporation; The name shall include a word, phrase or abbreviation to indicate that it is a corporation as distinguished from a natural person or partnership; The name of the corporation may be expressed in any language. (c) The general purpose or purposes of the corporation; (d) The amount of the capital stock and the number and par value of the shares of which it is to consist; and if the corporation is to issue shares without par value, the statements required by Artic1e 22 of this law. The capital stock and par value of shares of any corporation may be expressed in terms of the legal currency of the Republic of Panama or of gold units of the legal currency of any other country, or of both; (e) If the shares are to be classified, the number of shares to be included in each class and the designations, preferences, privileges and voting powers or restrictions or qualifications of the shares of each class, or that such designations, preferences, privileges and voting powers or restrictions or qualifications shall be determined by resolution of the majority of the interested stockholders or of the majority of the Directors; (f) The number of shares of stock which each subscriber to the Articles of Incorporation agrees
Tel. +(507) 269-2620 Fax. +(507)264-3257 Web. www.alcogal.com
to take; (g) The domicile of the corporation and the name and domicile of its Resident Agent, which must be an attorney-at-law or a firm of lawyers admitted to practice in Panama; (h) Its duration; (i) The number, names and addresses of its directors, which must not be less than three; (j) Any other lawful provisions which the subscribers to the Articles of Incorporation may desire to include.” What can your jurisdiction offer to prospective companies? Are there any tax benefits? Or any economic and social benefits for foreign companies setting in your jurisdiction? “Our jurisdiction offers a long-standing Corporations Law that dates to 1927 without any substantial reform, which results in our corporations regulation being very stable. Additionally, we have a very trustworthy and dependable Public Registry Office and an experienced legal market catering to the incorporations business.” “There are no requirements to hold annual directors or shareholder meetings. As long as the corporation is not doing business in Panama, it does not incur any tax liabilities. The only tax to be paid by the corporation (other than a $300.00 annual franchise tax) is the registration fee which is paid at the time of the incorporation, which may vary in accordance with the amount of authorized capital.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “We believe that demand of Panamanian companies will increase in 2011, based on the growth we experienced in 2010.”
Tel. 43. 1.535 16 30 Dr. Jürgen Brandstätter Email. Partner juergen.brandstaetter@bma-law.com Wallnerstraße 3, 1010 Vienna, Web. Austria www.bma-law.com Contact details
Dr. Jürgen Brandstätter is Managing Partner at Rechtsanwälte GmbH.
BMA Brandstätter
“As a lawyer, I can count on 25 years of professional experience in corporate law. In these 25 years I have set up a large number of companies here in Austria, for domestic clients as well as for international clients. Benefitting from my experience, our law firm has the expertise and the means in counseling and leading clients through the process of establishing a company.” “The lawyers of our law firm offer services in seven languages: German, English, French, Spanish, Russian, Hungarian and Romanian. The Austrian legal system offers several different types of companies. Among them are: “The most commonly used form of a legal entity is a Company with limited Liability, Gesellschaft mit beschränkter Haftung – GmbH. It requires a minimum share capital of euro 35.000 of which at least half of the amount must be paid in in cash. A GmbH does not need to have more than one shareholder and one director. Shareholder can be a natural person or a legal entity.” “There are no restrictions as to the nationality or the domicile of the shareholder. The director needs to be a natural person but it is neither required that he is an Austrian citizen nor that he has his domicile in Austria. The articles of incorporation need to be set up in the form of a notarial deed and it is necessary to register the company with the book of firms of the competent court where the company has its legal seat. The registration process is rather quick and usually does not take longer than five to ten days.”
“The stock corporation, Aktiengesellschaft – AG, is another available legal entity. It requires a minimum share capital of Euro 70.000 of which at least one quarter must be paid in in cash at the foundation of the company. Also an AG can have only one shareholder and one director but an additional mandatory requirement is a supervisory board of at least 3 members. In principle, the registration process for an AG is similar to that one of a GmbH.” “Apart from the above described legal entities, the Austrian legal system also offers companies to be established in the form of a general partnership or a limited partnership.” What can your jurisdiction offer to prospective companies? Are there any tax benefits? “Austria offers a secure environment and a reliable legal system with a modest corporate income tax rate of only 25 %.” What are the current company formation levels in your jurisdiction? How far do you agree that these figures act as economic barometer? “The current company formation levels are similar to those of the average of the last five years. But these figures only provide some information about new businesses and not about the pace of growth of the whole economy.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “Despite all the general economic problems, already the year 2010 was surprisingly good with regard to the demand for company formations. My expectation is that 2011 will be similar.”
Twenty Four
SECTOR SPOTLIGHT
Contact details
Matt Bailey Newport house, Newport Road, Stafford, Staffordshire.
“In the current economic climate Howards are finding that people who have been made redundant are starting their own business and deciding to use a corporate structure. Matthew Bailey, firm director at Howards Accountants comments on the legal requirements of setting up a company in the United Kingdom, tax benefits and the firms’ unique selling point. “ “There are two main legal requirements that need to be addressed. 1, money laundering searches in respect of the directors/shareholders and 2, the company name must be unique and not create a false impression. i.e. the name includes “international” then the company must have an international purpose.” “The simple incorporation can be done with in 6hours, often quicker. The average costs of these are £50. For more large complex incorporations they can take up to a week to het the articles and memorandums correct and ensure they comply with the companies Act 2006.” Tax benefits “A corporate entity can benefit from many tax advantages from that of being a sole trader, partnership etc. Everyone’s circumstances differ but there will be always an advantage. There are also non tax benefits that a corporate structure can offer such has control issues and of cause of having limited liability.”
Unique Selling Point “We are a cheap alternative to company formation agents. We can work with the client to achieve the best solution to their requirements. We have often found that one size doesn’t fit all. It is therefore best to get it right from the start.” What are the economic and social benefits of foreign companies moving to the United Kingdom?
In Stafford we have had an influx of German and American companies opening a UK office. The benefits are that they are creating jobs that otherwise would not exist in the area. The benefits from employment are obvious.
Contact details
Sym Otike-Odibia Partner
Johnson Bryant Oregun Ikeja Lagos
Johnson Bryant offers general advisory services in all aspects of the law relating to commerce and matters under the Companies & Allied Matters Act concerning the operations of businesses in Nigeria such as the establishment and maintenance of companies be they indigenous or subsidiaries/local affiliates of foreign companies, joint ventures. Sym Otike-Odibi is Head Corporate, Commercial and Intellectual Property Law Group at Johnson Bryant (Legal Practitioners & Trademark Agents). “We also carry out on behalf of clients’ research, documentation and updates on legislation and policies of the Nigerian Government together with general advice on compliance with corporate legislation relevant to the clients` operations in Nigeria.” “Foreign investment in Nigeria is generally governed by the provisions of the Nigerian Investment Promotion Commission Act, 1995 (NIPC Act). The Act permits investment and participation in the operation of businesses in Nigeria without sectoral limits, save for those referred to as being on the “negative list” which Nigerians and non-Nigerians alike are precluded from investing in.” “A foreigner can freely invest and participate in any enterprise in NigeriaSection 17 NIPC Act, except enterprise in the negative list.” “The foreigner may operate alone or in joint venture with Nigerians by means of a company which must first be formed and registered by Corporate Affairs Commission, and thereafter registered with the NIPC- Section19, 20 and 27 NIPC Act.”
Twenty Five
Tel. 01785 243276 Web. www.howardsca.co.uk Email. mab@howardsca.co.uk
Web. www.johnsonbryant.com
Tel. +234 1 7742298 +234 1 7732904 +234 1 6283598 Email. info@johnsonbryant.com
What are your Investment Incentives? “The Nigerian Government has put in place a number of investment incentives for the stimulation of private sector investment from within and outside the country, for example Pioneer Status, Investment Infrastructure and tax relief for research and development.”
Industrial establishments are expected to engage in Research and Development (R&D) for the improvement of their processes and products. Up to 120 per-cents of expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profits is derived. “Nigeria was recently pronounced as the third fastest growing economy in the world next to India and China which is very indicative of the vast potentials waiting to be exploited by foreign investments willing to tap into the myriad of opportunities in this yet unexplored economy.”
COMPANY FORMATIONS
Dr. Wilbert Kapinga, Senior Partner and Kennedy Gastorn, Senior Associate at Mkono and Co. Advocates in association with SNR Denton “The firm’s corporate practice has a longstanding reputation for its representation of major public and private companies and institutions on all aspects of corporate activity, including incorporation of local companies and establishment of a foreign compliance. “To incorporate a company in Tanzania certain provisions under the Companies Act, 2002 should be complied with. The following details are required for incorporation of a company: (a) Name of the proposed company. (b) Principal objects; (c) Share capital of the company and the nominal value of each shares; (d) Names and proposed holdings of the shareholders (e) Names and details of directors; and (f) Registered office of the company. For every company incorporated outside Tanzania wishing to establish a place of business in a Tanzania must deliver for registration the following documents: (a) a certified copy of the Charter, (b) the address of the registered office of the company in and outside Tanzania; (c) a list of the directors of the company; (d) a statement of all subsisting charges created by the company, (e) a statutory declaration made by a director or Secretary of the company stating the date on which the company’s place of business in Tanzania was established, the business that is to be carried on and, if different from the registered name of the company, the name under which that business is to be carried on; and, (f) a copy of the most recent accounts and related reports of the company. “Tanzania’s jurisdiction offers several tax benefits if requested by the company depending on the nature of its activities. The use of an established professional company formation expert is recommended because the bucket shops may not be aware of any changes in the laws and there are no bucket shops in Tanzania. Despite the economic downturn, the demands for formation of companies remain high.”
Contact details
Dr. Wilbert Kapinga Tel. + 255.22.2118789-91 Email. wilbert.kapinga@mkono.com Web. www.mkono.com
Contact details
Kennedy Gastorn Tel. + 255.22.2118789-91 Email. kennedy.gastorn@mkono.com Web. www.mkono.com
Sheikh Tariq M. Abdullah is managing partner at the Law Offices of Sheikh Tariq Abdullah What are your specific areas of expertise when it comes to company formations? “Everything that is needed to be done under the law. Memorandum & Articles of Association, advising on Company Law matters and completing all the formalities of registration including the Free Zone area.” What are the legal requirements regarding company formations? “The requirements regarding the documents that are required are very similar to any western jurisdiction except that these must be in Arabic. The registration is done in the Companies Section at the Ministry of Industry & Trade.” What can your jurisdiction offer to prospective companies? Are there any tax benefits? Or any economic and social benefits for foreign companies setting up in your jurisdiction? “In the Aden Free Zone there is no income tax and no Customs Duty or any other taxes or duties. Aden port is strategically located being very convenient for both the import and export of goods from / to Europe, Africa and the Far East. How important is it to use an established professional formation expert who understands the law of the country, rather than “bucket shops”? “In Yemen without professional guidance a foreign company would face difficulties because of language and completion of formalities that require professional support.” What are the current company formation levels in your jurisdiction? How far do you agree that these figures act as an economic barometer? “The current company formation levels are as yet not high. The economic barometer at present is slow. However, some of the larger foreign companies do set up their branches or set up a new company in Yemen.” Do you have any predictions for 2011, in terms of demand in your jurisdiction?
The International Finance Corporation (IFC), the Islamic Development Bank (based in Saudi Arabia), and the Kuwait Development Fund are open to supporting the private sector in Yemen by granting loans. We have expertise in banking and finance related to private sector projects. The formation of a company is a small part of a much bigger picture. Contact details
Sheikh Tariq Abdullah
Tel. +967 2 259062 Email. Managing Partner relevant@y.net.ye The Law Offices of Sheikh Web. Tariq Abdullah Republic of Yemen www.yemenlaw-relevant.com
Twenty Six
COMPANY FORMATIONS
Contact details
Grignard Didier CEO
Quai Orban, 52 B-4020 Liege
GRIGNARD Didier is CEO at LEGES SCPRL, a firm that assists companies in all stages of their life, from the beginning to the end of their activity. Please describe the legal requirements when it comes to setting up a company in your jurisdiction. “There are different companies’ forms which are adapted to certain types of activities. Our role is to inform our clients about the most adapted form to their activities. Then we help them through the setting of their company. “We have a deep knowledge of the legal requirements for all forms of companies. We deal with Belgian, European and international law.” What can your jurisdiction offer to prospective companies? Are there any tax benefits? “Everything depends on the form of the company and the type of activity. We have to be consulted on these aspects.” How important is it to use an established professional formation expert who understands the law of the country, rather than “bucket shops”? “It is essential to consult an expert who deals with company law and applies it each day. He will be able to shed light on the particularities of each situation. That’s our role.”
What are the current company formation levels in your jurisdiction? How far do you agree that these figures act as economic barometer?
New companies are created each day. But the longevity of a company also depends on the quality of the adviser during the setting of the company. We propose a step-by-step accompaniment by taking into consideration the setting of the company but also the future life of the company under all its aspects. As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “Generally when we are getting out of an economic downturn, the number of new companies increases because entrepreneurship wakes up. We have good prospects for 2011.”
Contact details
Maja Ciboci / Jelena Zjacic
Law Offices Macesic & Partners
Maja Ciboci and Jelena Zjacic, attorneys at law in Law Office Macesic & partners. Maja Ciboci is attorney at the Macesic & partners Zagreb office, while Jelena Zjacic is working from Macesic & partners Rijeka office. Please describe the legal requirements when it comes to setting up a company in your jurisdiction.
When it comes to setting up a company in Croatia it is very difficult to describe the legal requirements in short and generally as Croatian Company Act Companies’ Act (Official Gazette 111/93 with amendments) regulates four different types of companies.
“The most common type is a limited liability company (ltd.). In short, as of January 1, 2004, the minimal initial capitalization for a limited liability company is 20.000 HRK (i.e. approximately 3.000 EUR). A foreign legal person or individual may own a company in Croatia in 100%. However, and regardless of the nationality of the founder, such a company would be deemed a Croatian entity subject to all the laws of Croatia, including, among other things, tax laws.
Twenty Seven
Tel. +(32) 4 344.06.60 Email. info@leges.be Web. www.leges.be
Law offices Macesic & partners / Maja Ciboci/ Jelena Zjacic / ciboci@macesic.hr/ zjacic@macesic. hr / Mihanoviceva 16, 10 000 Zagreb, Croatia/Pod kastelom 4, 51 000 Rijeka, Croatia
Tel. 00 385 (0)1 45 76 794 00 385 (0)51 215 010
“A limited liability company may have a Supervisory Board (i.e. the Supervisory Board is a legal requirement only in certain cases prescribed by the Act, such as, for example, if the company employees more than 300 employees or if it is required by lex special is). If the founder should decide to appoint a Supervisory Board, it has to have the minimum of 3 members. A limited liability company must have a Management Board, consisted of any number of directors (1 and up), which is appointed and controlled either by Supervisory Board, if any, or directly by the founder (shareholder) of the company. If a foreign citizen was to be employed with the Company then, for employment purposes, both a residence permit and a work permit would be required.” What can your jurisdiction offer to prospective companies? Are there any tax benefits? “All companies set up in Croatia are considered Croatian entities and are subject to all the laws of Croatia, including, inter alia, tax laws. Thus, there are no tax or social benefits for companies set up by foreign shareholders. “However, Croatia has not yet introduced Capital Gain Tax, which may be considered as benefit by shareholders and/or stockholders. It is expected that Capital Gain Tax will be introduced in not so far away future.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “Since in the last couple of months of 2010 we have been receiving demands for new company formations, we expect to see stagnation trend going slightly upwards in 2011.”
COMPANY FORMATIONS
Virtyt Ibrahimaga Address Fehmi Agani no.1/16 Prishtina 10000 KOSOVO Tel. +381 (0) 38 227 358 Tel. +381 (0) 38 222 773 Web. www.kosovo-attorney.com
Contact details
Jesús Humberto Medina
Email. jhmedina@central-law.com
Presiding partner
Jesús Humberto Medina, Presiding Partner at CENTRAL LAW Honduras Medina, Rosenthal & Fernández. “The Corporate & Commercial Law Team at CENTRAL LAW Honduras - Medina, Rosenthal & Fernández offers a broad scope of services to both established and new business ventures. Regarding company formations our work includes companies´ incorporations and legalization to conduct business in Honduras; as well as corporate restructuring; mergers & acquisitions; venture capital and project finance. “A company in Honduras must be set as a legal commercial entity. The two most common types of entities adopted are the “Company” (S. A.) and the “Limited liability partnership” (S. de R.L.). Both must have at least two shareholders (S.A.) or two partners (S. DE R.L.) at all times. The company must have a minimum initial capital of Lempiras 25,000 (US$1,300.00) and the partnerships minimum initial capital consists of Lempiras 5,000 (US$260.00). The legal constitution of the company is formalized by a Notary Public and then registered at the Public Registry of Commerce. Afterwards the company must obtain its fiscal registry (RTN) and its registration at the local chamber of commerce. This initial process takes 12 to 14 working days to complete and once completed, the company becomes 100% operational.”
CENTRAL LAW San Pedro Sula Office: 1ª Calle entre 9ª y 10ª Avenidas, N.O. Edificio Nova Prisa, Segundo Nivel, PO BOX 10 , San Pedro Sula , Honduras.
Tel. +(504) 2550-2800
Tegucigalpa Office: Calle Principal Colonia Miramontes, Edifico Apart Hotel Continental, Segundo Nivel suite 28, Tegucigalpa, Honduras.
Tel. +(504) 2235-7473
Are there any tax benefits? Or any economic and social benefits for foreign companies setting in your jurisdiction? “A prospective company in Honduras benefits from the ease of procedure to legally form and incorporate a company, thus becoming operational in a very short period of time. Furthermore, companies doing business within any free zone status are entitled to income tax exemption; import-export taxes´ exoneration; sales´ tax exoneration and the ability to manage their business without any capital or exchange rate restrictions.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “Central America, considered as a single region, is an attractive market for both its neighbors in North and South America. The legal framework provided by CAFTA-DR, has already shown great benefits from Mexican and US companies doing business in the region. South American corporations, especially from countries like Colombia, Brazil and Chile, have also set their presence in the region, either as commercial entities or as providers of services.”
Twenty Eight
SECTOR SPOTLIGHT
Contact details
Gonzalo Ruy-Diaz Bosque de Guayacanes 117 Bosques de las Lomas Mexico, D.F.
Tel. +52 55 55966047 Email. ruy-diaz@portilla.com.mx Web. www.portilla.com.mx
Gonzalo Ruy-Diaz Benhumea help their clients to decide which type of company is to be formed, according to their needs and then coordinate the entire formation process. Also, Gonzalo Ruy-Diaz Benhumea design the most convenient labor, tax and operational legal structure for each particular case. Gonzalo Ruy-Diaz Benhumea is Partner and cofounder at Portilla Ruy-Díaz y Aguilar, S.C.
duly registered in Mexico with the IMPI, so as to avoid unnecessary problems in the future. Once the name has been reserved and approved, the company can be incorporated. The incorporation process itself is not complicated, but does require client approval of the corporate by-laws and the signing of several documents, normally by the attorneys-in-fact of the founders (as explained below).
“In the formation of a new company, the first step is to decide which type of company is to be formed. While there are several types of commercial companies which may be formed under Mexican law, the most commonly used, both by Mexican and foreign investors, are the corporation [sociedad anonima] referred to as an “S.A.” and the limited liability company [sociedad de responsibilidad limitada] referred to as an “S. de R.L. Once the type of company is decided, it is necessary to obtain approval from Mexico’s Department of Foreign Affairs [Secretaria de Relaciones Exteriores] for the corporate name that wants to be used. It is preferable to apply for approval by offering three different names, in case the preferred name is not available.
“In Mexico, corporate and other legal matters are often conducted with more formality than is frequently required in other countries. Many corporate resolutions and other business must be legalized by a local notary public and this includes the formation of the company itself. Since foreign investors and representatives of corporate entities cannot personally come to Mexico to attend to incorporation matters without the appropriate immigration visas, for shareholder/partners convenience, special powers of attorney are normally granted by each of the founding shareholders/partners to members of the law firm incorporating the company, in order to deal with such matters on their behalf. Such powers of attorney must comply with Mexican legal formalities and be properly authenticated by the appropriate official. An essential requirement to complete the incorporation process as well as to operate in Mexico is registration of the new company as a taxpayer before the Federal Taxpayer Registry [Registro Federal de Contribuyentes].
“It is important to note that the corporate name approval by the Department of Foreign Affairs confers no intellectual property right to the use of the name or any assurance that the approved name is not already subject to intellectual property protection in Mexico. If this is a concern, a prior search should be made before the Mexican Intellectual Property Institute (“IMPI”) to investigate whether the chosen name may already be “taken” and therefore should not be used as the corporate name of the new company. A company wishing to manufacture and/or sell products or services under a trade or service name or trademark should ensure that the name or trademark is first
“It is also important to note that Mexican companies with foreign capital stock need to comply with further obligations, such as filing its registration before the Foreign Investment Registry [Registro Nacional de Inversiones Extranjeras], and that certain activities are restricted for foreign investors. Additional specific requirements may apply for certain activities. “
Contact details
M.Odonhuu Managing Partner
Suite 409 Bridge Group building Enhtaivni Avenue Ulaanbaatar 210351, Mongolia
Tel. +976 11 462393 Email. d.hand@tsetslaw.mn Web. www.tsetslaw.mn
Tsets advise on the legal requirements of formation of companies and register all kinds of legal entities in Mongolia, starting with preparation of the founding documents and ordering corporate stamps and seals. M.Odonhuu is Managing Partner.
What can your jurisdiction offer to prospective companies?
Please describe the legal requirements when it comes to setting up a company in your jurisdiction
“There is neither screening of prospective investors nor are there any nationality requirements in terms of both ownership and management.
“All companies established in Mongolia are incorporated under the Company Law of Mongolia. Founders can be either Mongolian or foreign legal entity or natural person, as well as a stateless person. A company may be established directly or by the reorganisation of another legal entity. “Mongolian law requires a reasonable number of documents and a few procedures to found and register a company. A company assumes the status of legal entity upon obtaining a State Registration Certificate from the State Registration Authority of the National General Tax Department (SRA). Such Certificate is subject to annual extension. “A minimum capital requirement is MNT 10,000 for a limited liability company and MNT 1,000,000 for a joint stock company. For a foreigninvested company, a minimum capital requirement is USD 100,000 (approximately MNT 100 million).”
“There are no sectors closed or business activities prohibited for foreign investors, except for the ones which are generally prohibited.
Business registration process is relatively transparent, uncomplicated and not bureaucratic and it requires less time and money than in other Asian countries. The procedures needed to register a company take no longer than a week and cost approximately US$ 100. “The costs of starting and doing business in Mongolia are lower than or at the same level as in cost-competitive countries such as China and Vietnam, due to low costs of leasing facilities and office lease; very competitive labour costs; and low utility costs.” “With rates of all major taxes reduced to 10-15% starting 1 January 2007 Mongolia is now the lowest tax-rate nation in Asia.”
Twenty Nine
COMPANY FORMATIONS
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Nikolay A. Zorin is Managing Partner, Attorney-at-Law, Patent and Trademark Attorney, Ph.D at Zorin Law Office. Zorin Law Office specializes arbitration and litigation issues and intellectual property protection. Arbitration and litigation always require high professional level of attorneys-at-law.
Oussi Law firm was established in 1968, by general manager, Mr. Gabriel Oussi. The firm offers a full range of legal services and it is associated with a comprehensive network of distinguished experts and consultants in the field of business management, economic feasibility studies.
“Our specialists are duly qualified for providing services in the field of arbitration and litigation in Russia. Wide experience and formal qualifications of our lawyers are the guarantee of their professionalism.”
“The firm’s activities are conducted by several professional reputed lawyers dedicated to serve their clients the very best of legal services. Moreover, reliable contacts are maintained with other firms in Syria, Middle East, Europe and USA.”
“We conduct different sorts of cases at courts including specific patent, trademark and copyright infringement cases combining forensic expertise of attorneys-at-law and patent/ trademark attorneys working at Zorin Law Office. “
“As far as the legal requirements are concerned in order to establish a company, the Syrian corporate law No. 3 dated 13.3.2008 has specified these requirements as follow:
“Russian courts take a very formal approach to evidence. Usually that leads to the difficulties in procedure.” “We help our clients to collect the evidence in the right way special for the Russian courts and execute relevant documents. We are always ready to provide full range of service regarding court procedures for our clients.” “Intellectual property is another area of specialization of Zorin Law Office. We handle cases pursuing in the Russian Patent Office (Rospatent) and Chamber for patent disputes on behalf of applicants, right holders, other interested persons or legal entities.” “Patent/trademark attorneys will give you sound professional advice regarding protection of your rights in Russia and the CIS.” “Our legal advising relates to the legal protection of the results of intellectual activity and means of individualization, acquisition of exclusive rights to the results of intellectual activity and means of individualization, exercising of such rights, bringing IP and other intangible assets to stock capital of corporations, tax issues associated with intellectual property. We prepare and file applications and other documents for acquiring the legal protection for the results of intellectual activity and means of individualization, including the ones created in the exercise of international scientific and technical collaboration.” “Patent research and analyzing of circumstances determining the choice of object of legal protection is also important part of the complex activity on legal protection of IP rights. You can assign conducting of sophisticated patent and trademark disputes to patent and trademark attorneys of Zorin Law Office.”
Personal attitude to our clients is the main value in our business. Effectiveness of our way of providing legal services is very important for us as we work for the satisfaction of our clients. Contact details
Nikolay A. Zorin Managing Partner Zorin Law Office Moscow Russia
Tel. +7 495 764 47 44 Email. mail@zorinlegal.ru Web. www.zorinlegal.com
a. partners name b. company name & logo c. legal features of the company d. Capital e. Aim of the company f. Place of the company g. period of the company ( duration) h. Name of the authorize manager “At the end a contract between the partners should be signed in frontof the Priminary civil judge who will approved the contract then it will be presented to the ministry of Economy & Trade in order to be registered and a certificate of registration will be issued.”
The last step is to register the contract at the chamber of commerce, without forgetting that the said law has specified several kinds of companies. What can your jurisdiction offer to prospective companies? “Investment law has offered the foreign companies lot of facilities mainly income tax exempt for several years, permission to import products & materials for the cause of the project duty free. Other advantages are: big capitals to be invested in big projects, create new jobs, increasing the capital so the clients are attracted because of these facilities, and the high revenue.” How important is it to use an established professional formation expert who understands the law of the country, rather than “bucket shops”? “It is very obvious that as much as the law firm has good experience in establishing a company it will make the draft
Contact details
Gabriel Oussi Oussi Law Firm Damascus Syria
Tel. +963 11 33500090/1 Fax. +963 11 3312581 Email. go-law@oussico.net
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SECTOR SPOTLIGHT
protecting
PEOPLE, PRODUCTS & PROPERTY A
t Elle Security our expertise is in providing asset protection for critical infrastructure facilities. We specialise in dealing with threats from direct action and protest, threats to incapacitate or disrupt supply and also industrial protest action from workforce and strike action. “Our most prominent feature in past performance has been our quick response to imminent threats and our ability to mobilise extremely fast, fully equipped and effective as soon as we hit the ground. Our examples include such scenarios as a protective reassurance measure during company restructuring, downsizing and fears of direct action and reprisals from the workforce and a high profile protection of engineers conducting their work in a tense and volatile environment.
aware of what risks we are faced with and initiates our response to mitigate them.” “Our operational routines are kept disciplined and coordinated with constant test and adjust. This process is steered by close client liaison whereby we provide access to our management team and company directors 24/7.” “We also actively engage with local law enforcement and support functions to keep aware of the local security and intelligence picture. We regularly conduct live exercises and training with public order and special branch units with a number of UK police constabularies.” “Constantly assessing the threats and maintaining communication is key to our effectiveness which in turn protects our reputation.”
“We specialise in our ability to focus on the wider concerns our clients are faced with in regard to protection of assets. In all cases we conduct a threat and vulnerability assessment to determine the right fit and solution that is applicable and affordable.”
How has the global downturn affected the need for asset protection?
Having former serving military/police experience allows our operatives to remain disciplined and professional in their demeanor and execution of tasks. This homogenises with a rigid management structure and administration function that ensures when we deploy it’s efficient and seamless.
“In some cases it’s prudent to look at the budget where an organisation may have an “acceptable” level of loss by the nature of their industry, and compare this to actual cost of implementing even the most basic of security measures.”
“We ensure the integrity of our CPO’s with a security vetting procedure which is compliant to Security Industry Authority (SIA) standards whereas all CPO’s are checked with Criminal Records Bureau (CRB), have conducted a minimum of 150 hours SIA training in Close Protection Operations and hold a valid First Aid Qualification.” “Our clients are large multi national corporations and high net worth individuals. Our experience is extensive in the combined expertise of our operatives, who have in past catered for the security concerns of clients in all sectors and levels of industry, government and the celebrity scene.”
Protection Elle Security operatives have a worldwide capability and experience having been trained and operationally capable in benign, semi-permissive and hostile environments. “Our methods are governed by our cohesive and team approach to finding the right solution to counter the threat. Whether it’s a perceived, anticipated or direct threat we ensure prior planning and preparation are the foundation. Our surveillance and intelligence gathering provides a vital component in being
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“The economic downturn has a double edged affect on our industry. Security can be a grudge purchase influenced by the mindset of “it won’t happen to me” unless direct threat is apparent or an incident has occurred. It’s sometimes the case that when an incident occurs and already impacted on the organisation it is a consideration to assign a budget for security.”
“The other side of the coin is as times are more difficult and societies fare worse by job losses and redundancies, the opportunity for an escalation in criminality is more prominent. That’s one small part of course…” “Geographically each location differs in the affect the economy has on society and the part it plays in the way criminality or in fact terrorism evolves, therefore the risks to our organisations and our person can come in many different guises.” “What is more applicable to our response and capability to respond is the tools to hand and the effectiveness of the infrastructure and legislation in place to wield it.”
Contact details
Lynne James Managing Director Elle Security Ltd Berkhamsted House 121, High St Berkhamsted Hertfordshire HP4 2DJ
Tel. +44(0) 1442 873762 Email. lj@elle-security.com Web. www.elle-security.com
PROTECTING YOUR ASSETS
Contact details
Iliyas Campbell Managing Director Abu Dhabi UAE
Iliyas Campbell is Managing Director at Diligence Management Consultants that specializes in Due Diligence, Investigations, Fraud and Risk assessment. Which jurisdictions/high risk areas do you have particular expertise? “Midde East & North Africa (MENA). Whilst the entire region is not high-risk, it does have varying risk levels and areas that can be complex for operating a business.” Who is a typical client? “Our typical client is a US / EU based multinational but we do have numerous more regional and smaller clients also.” What methods do you use to protect your clients? “Our methods begin with an assessment of the client business with a focus on their exposure to risks in the region. During this process, the vulnerabilities and any gap in the current systems or processes are identified for remedial action. “Further actions include due diligence and screening of any individual or entity that the business will work with, vendors, partners, employees etc and an ongoing system of assessment to keep the business ahead of any potential risks.” How are your services superior to those of your competitors? “Having been in the Middle East for over 14 years our consultants have a vast array of ‘local’ experience in addition to the international accreditation they hold. This is crucial in the MENA region where the many countries, the means of doing business and related risks to the business vary considerably.”
In your jurisdiction, which assets are shielded from creditors by the law? “Various, our region has numerous judicial systems that have differing means for the recovery of assets.” Do creditors have any tools to overcome the laws that provide protection? “In each jurisdiction within the region companies are better advised to plan within and take full account of these laws when assessing each project and commitment made to any form of business. The laws, whether restrictive or supportive, should be factored into the risk portfolio that the client develops in order to make informed business decisions. ” How has the global downturn affected the need for asset protection?
Since the global downturn began our business has grown two-fold. Clients have taken a renewed focus on asset protection from the due diligence stage, through their operations and including in-depth investigation of any suspect transactions within the business.
Contact details
Christopher Nason Managing Director Business Intelligence Stirling Assynt London
Christopher Nason, Managing Director Business Intelligence at Stirling Assynt (Europe) Ltd, oversees the provision of all Business Intelligence projects worldwide. Stirling Assynt Ltd operates worldwide from offices in London and Hong Kong. Since incorporation they have operated in some 90 countries. “We provide strategic intelligence to inform decision-making, support strategic investment decisions and give our clients the best information and analysis, helping to increase profitability and reduce operational risk.We do this by providing two principal services: our subscription Terrorism and Country Risk reporting, and Business Intelligence. The majority of the work undertaken by our Business Intelligence Division is pre-engagement due diligence. Typically these Business Intelligence assessments include: · Verifying the ultimate beneficial ownership of corporate entities· Assessments of reputational and political standing · Identification of key political and business contacts · Sanctions risk assessments · Identification of other risk issues potentially impacting on client via business interaction with specific counterparties Apart from Due Diligence, Business Intelligence also includes: Pre-Acquisition: Intelligence Support for bids; New Market Entry briefings. Post-Acquisition: Crisis Resolution (problem-solving in JVs etc); Investigations and Litigation Support; and Asset-Tracing.
Tel. +971 2 4047112 Email. icampbel@diligence.ae Web. www.diligence.ae
Tel. (+44) (0)20 7856 9450 Email. christopher.nason@stirlingassynt.com Web. www.stirlingassynt.com
Who is a typical client? “The one factor our clients have in common is their interest in or direct exposure to overseas markets. They include both the private and public sectors. In the private sector we are retained by Aerospace and Defence, Financial Services, Travel and Hospitality, Mining, Energy, Public Sector, Technology and Media, Asset Management, Pharmaceutical companies and Consulting.” How are your services different from those of your competitors? “We always apply a rigorous analytical approach. Once information is collated from open and (where applicable) human sources, the analyst writing the report will meet senior management and discuss the findings and agree conclusions. Input from several parties leads to a comprehensive and thoughtful report. We will always include recommendations, which are agreed at the planning meeting.” How has the global downturn affected the need for asset protection? As we slowly recover from the economic downturn, how will it affect demand in your jurisdiction? “Combined with an increased regulatory environment, notably with the arrival of the UK Bribery Bill, there a greater need to protect assets by being able to make informed business decisions and understand the markets in which companies wish to operate and the parties with whom they wish to engage.”
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SECTOR SPOTLIGHT
the
PRICE IS RIGHT? M
&A deals are alive with transfer pricing implications, not only in the bringing together of potentially inconsistent TP systems, but also in the integration objectives and financing needs of the acquirers. AI’s Charlotte Abbott speaks to Mr. Oliver Wehnert; Ernst & Young; Head of Transfer Pricing Germany, Switzerland, and Austria about the firm’s holistic approach to transfer pricing. “The German Ernst & Young transfer pricing team of 100 dedicated transfer pricing professionals from more than 15 countries consists of certified German tax advisors, lawyers, economists and industry experts, reflecting the diverse needs of clients served. “The services provided by the German transfer pricing team comprise all areas of transfer pricing including transfer pricing documentation, planning, controversy and tax effective supply chain management. Ernst & Young Germany thereby differentiates itself by taking a holistic approach that focuses on meeting clients’ needs from concept/solution development, documentation and implementation, to defense.
In all areas of transfer pricing the German transfer pricing team always works closely together with the Ernst & Young global transfer pricing networks well as colleagues from other disciplines like indirect taxes, human capital, and advisory to develop innovative solutions and new approaches to transfer pricing issues. “Also for that reason, an increasing number of professionals are seconded inbound and outbound of Germany to broaden their transfer pricing knowledge and to deepen their connections to the global Ernst & Young network of transfer pricing and TESCM professionals. The result is that Ernst & Young Germany is able to leverage a strong international network to confidently provide clients with solutions that are both globally and locally defensible. “As the transfer pricing environment is changing rapidly Ernst & Young educates its employees with a wide range of tax and transfer pricing training courses on a national and European level. Besides regular classroom trainings the German Ernst & Young transfer pricing advisers take part in international webcasts in order to be informed regarding recent global developments.
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Does your jurisdiction follow the OECD Transfer Pricing Guidelines? “The German tax authority considers its transfer pricing laws and regulations to be consistent with OECD guidelines. The OECD guidelines provide support for domestic use but do not constitute binding law in Germany; however, German transfer pricing regulations and practices differ with regard to certain issues, e.g., the application of transactional profit methods, documentation requirements, and the treatment of shifts of functions (business restructurings).”
Further, Germany’s interpretation of the arm’s length principle differs from OECD standards in that it is assumed that both parties being involved in an intercompany transaction have full information about all facts and circumstances surrounding the transaction.
TRANSFER PRICING
What Transfer Pricing implications have you come up against over the last 12 months and how have you overcome them? “In M&A deal, transfer pricing indeed is a major area that should be covered during the due diligence process, the structuring planning phase and carefully dealt with post-acquisition. The most important issue is usually to structure the deal in a way that the following integration can be conducted without major transfer pricing exposures. This is typically predominantly related to the question where the target’s intangibles are situated and where the buyer wants to have them post-acquisition. These questions have to be solved case by case.
Pre-acquisition transfer pricing risks are usually kept at the seller’s risk. However, such risks become the buyer’s risks postacquisition if he continues the transfer pricing systems. As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “In Germany, we expect a continuously increasing number of transfer pricing examinations by German tax authorities. One reason for the increase of transfer pricing examinations may be that they are becoming more efficient. “On the one hand examiners get better trained as they can conduct for example comparable searches on their own. On the other hand the review process is becoming more streamlined as tax authorities are using diverse automated risk diagnostic tools like questionnaires and of course digital audits. Furthermore, we can see a global trend towards tax authority collaboration and information exchange. Further, with regard to the economic crisis we expect much more problems within tax / transfer pricing examinations as it will be quite difficult to benchmark the transfer prices.”
In Germany what mechanisms do tax treaties and the tax system provide for resolving disputes among taxpayers and governments in a manner designed to reduce the potential for double taxation? “In Germany several possibilities exist to avoid double taxation. The most secure possibility is the conclusion of a bi- or multilateral advance pricing agreement (APA). The agreement reached between two competent authorities will be made conditional in two regards: the taxpayer must consent to the intergovernmental agreement, and must waive its right to appeal against tax assessments to the extent they are in line with the contents of the APA.
For instance, comparable studies conducted today draw on data between 2006 and 2009. As these years were quite different in terms of profitability, they are unlikely to provide financial data or market prices that reliably indicate profitability for 2010, where the economy is slowly recovers. Contact details
“If a double taxation issue already arose in course of an audit, the taxpayer has the possibility of a mutual agreement procedure (MAP) under Art. 25 of the OECD-Model Tax Treaty and / or an EU arbitration procedure under the EU arbitration convention. For these procedures the existence of a double tax treaty between the countries affected is necessary. “Another possibility could be the domestic appeal / litigation. But, as the outcome is very insecure, this possibility should be considered very carefully. In Germany not too many transfer pricing cases are brought to court.”
Oliver Wehnert Head of Transfer Pricing
Ernst & Young Tel. +49 211 9352 0 Email. oliver.wehnert@de.ey.com Web. www.ey.com
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SECTOR SPOTLIGHT
Contact details
Yariv Ben-Dov, Adv. Bar-Zvi & Ben-Dov Law Offices Israel
Bar-Zvi & Ben-Dov has an unmatched 100% track record in tax audits worldwide. As a law firm whose members are both attorneys and economists, Bar-Zvi & Ben-Dov is dedicated to acting as a transfer pricing “one-stop shop”, providing its international clients with country specific preparation of transfer pricing studies, drafting of intercompany agreements, tax planning, economic implementation and the formulation of group-wide transfer pricing policies. Adv. (Eco) Yariv Ben-Dov is a founding partner at Bar-Zvi & Ben-Dov, Law Offices. Does your jurisdiction follow the OECD Transfer Pricing Guidelines? “Israel is a member of the OECD since March 2010, its transfer pricing regulations incorporate both the OECD Guidelines and the US Section 482 approaches.” What constitutes arm’s length prices in your jurisdiction? “In general the arm’s length prices for intercompany transactions are established by implementation of the “traditional” transfer pricing methods. While no official methods hierarchy exists, a preference is usually given to the CUP method.” M&A deals are alive with Transfer Pricing implications; what issues have you come up against over the last 12 months and how have you overcome them? “We have recently handled an M&A transaction which involved the purchase of an Israeli software development firm by a multinational based in the US.
Transfer pricing has been one of the major factors throughout the stages of the transaction. Following the M&A finalization, we have been chosen to handle all the transfer pricing aspects of the multinational’s global activity. When approaching a deal, when should Transfer Pricing risk management begin? “We are witnessing a growing trend of companies and practitioners demanding that transfer pricing issues should be included and resolved as part of the acquired enterprise’s due diligence procedure. Therefore, it is prudent for both parties to M&A transactions, to come up with transfer pricing schemes that shall cover all resolved and unresolved issues of the companies’ activities following the completion of the M&A transaction.” Post-acquisition, are there any Transfer Pricing issues that need to be addressed?
The most common transfer pricing issue to be resolved at the latter stages of the transaction is the business restructuring that is often required of the acquired entity. Israeli tax authorities (ITA) have recently published their position with regard to business restructuring and specifically stated that local transfer pricing legislation applies when dealing with any changes to intra-group corporate business structure or IP ownership.”
Contact details
David Prowse Principal
The Transfer Pricing Services Corporation Toronto, Ontario
David Prowse is principal at The Transfer Pricing Services Corporation (TPS). The Transfer Pricing Services Corporation has offices based in Calgary, Alberta and Toronto, Ontario and a member of “TPA-Global”, an affiliation of various transfer pricing firms associated with Transfer Pricing Associates, based in the Netherlands. “TPS’ services are focused on providing transfer pricing services to not just larger corporations but also smaller to medium-sized clients.” “TPS aims to provide assistance not only with documentation projects but also implementation, modeling, and other planning projects.” “We are also flexible in the type of services and projects we can deliver. While many of our competitors offer “all or none” approach to projects, we have differentiated ourselves by offering transfer pricing services on a piecemeal basis, where applicable.” “As an independent transfer pricing services firm, we do not have to worry about conflict of interest concerns since we are not attesting on the client’s financial statements. We are also happy to work with other public accounting firms to assist their clients with any transfer pricing concerns they may have.” “Our main point of differentiation is the ability to provide more “handson”transfer pricing services than our competitors.”
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Tel. +972-3-7522280 Email. yariv@bbl.co.il Web. www.bbl.co.il
Tel. 416-907-8387 403-770-2432 Email. admin@thetpscorporation.com Web. www.thetpscorporation.com
Does your jurisdiction follow the OECD Transfer Pricing Guidelines? “Canada’s transfer pricing rules are enforced through Section 247 of the Income Tax Act, and interpreted through Information Circular 87-2R.” In Canada, what mechanisms do tax treaties and the tax system provide for resolving disputes among taxpayers and governments in a manner designed to reduce the potential for double taxation? “Canada’s tax treaties with other countries are generally comparable with the OECD Model Treaty. Accordingly, taxpayers can use Competent Authority to help relieve double taxation. Also, a taxpayer can enter into a Bilateral or Multilateral Advance Pricing Agreement (“APA”) which allows them to negotiate a transfer pricing policy which would be acceptable in both Canada and other jurisdictions for a period of usually five years. Afterwards, the APA would have to be renegotiated.”
The downside of this is both the expense and the time factor involved. While unilateral APAs can be negotiated in less than a year, multilateral APAs will likely take several years to completey.
TRANSFER PRICING
Beecher Consulting LLC, based in the United States, specializes in transfer pricing and the valuation of intangible assets and going concerns for tax and non-tax purposes.
Billy Joubert is the tax director and the head of Transfer Pricing at Deloitte South Africa.
How are your services superior to those of your competitors?
We have an excellent team of senior people, most of whom have been with the team for at least 5 years. I, as the team leader, have been included several times in the Euromoney Guide to The World’s Leading Transfer Pricing Advisers (including the most recent guide for 2009). We have done extensive transfer pricing work throughout the African continent. We are the sole provider of transfer pricing services to many South African based multi-nationals.”
“Accessibility to clients, familiarity with very complex transfer pricing issues and new methodologies (among them the Income Method under the U.S. Temporary Cost-Sharing Regulations), over twenty years’ experience in transfer pricing and valuation encompassing a wide range of industries, issues and intangible assets, an exceptional reputation, and flexibility with regard to the nature of our contributions. (For example, we typically assume full responsibility for the preparation of transfer pricing documentation, but are happy to work collaboratively with clients and have them play a more significant role if the goal is to minimize costs.)” What constitutes arm’s length prices in your jurisdiction? And what is the analysis process?
Arm’s length prices are those at which third parties would transact. As a practical matter, the Comparable Profits Method (or the Transactional Net Margin Method in the lexicon of the OECD Guidelines) is used extensively to establish arm’s length prices. “However, this approach is not nuanced, and the base of socalled comparable standalone companies is diminishing all the time with widespread consolidation within industries and the long-standing trend towards taking companies private. Taxing authorities and corporations can use internal data much more frequently than they do to establish or evaluate intercompany prices. The use of internal data is cost-effective and, as a general rule, such data produce results that are significantly more reliable than those developed from external data.” M&A deals are alive with transfer pricing implications; what issues have you come up against over the last 12 months and how have you overcome them? “Transfer pricing issues routinely arise in M&A deals, although they are not always recognized. If a multinational corporation sells a subset of group companies, the latter entities’ historical profitability, and, hence, their value, cannot be assessed accurately without first ensuring that their transactions with other group companies have taken place at arm’s length prices. If one multinational firm acquires another, and the latter has not consistently satisfied the transfer pricing requirements in all countries in which it operates, the acquiring firm may unwittingly assume an enormous tax liability.”
“Our transfer pricing rules are based on those guidelines. The South African Revenue Service (SARS) participates in OECD discussions on transfer pricing related issues and regards the ongoing guidance provided by the OECD as highly persuasive.” What constitutes arm’s length prices in your jurisdiction? And what is the analysis process? “The prescribed methods for determining arm’s length prices are based on the OECD Guidelines (including the traditional transaction based, and profit based, analyses.) One important point to note is that in South Africa the onus of proving arm’s length pricing rests on the taxpayer rather than on SARS. This makes transfer pricing documentation crucially important.” When approaching a deal, when should Transfer Pricing risk management begin? “Transfer pricing exposures can potentially be significant. In addition, it is an area that SARS is giving more attention to. Therefore it is important that Transfer Pricing should be considered from the beginning of the due diligence.”
A merger or acquisition will change the relationships within the group of companies. Therefore it is necessary to determine what impact the Transfer Pricing provisions will have on the new structure. As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand in your jurisdiction? “SARS has indicated that it Transfer Pricing is a growing focus area and it is in the process of increasing its transfer pricing team. We have also seen an increase in the number of tax questionnaires that have been asking questions relating to transfer pricing. Therefore it is likely that the focus will increase going forward.”
Contact details
Contact details
Elizabeth King, Ph.D.
Billy Joubert
Tel. (617) 730-8138 Email. 344 Tappan eking@beecherconsultinggroup.com Street, Suite #1 Web. Brookline MA, www.beecherconsultinggroup.com 02445, USA
Tel. + 27 11 806 5352 Email. Deloitte Place, Building 5, bjoubert@deloitte.co.za The Woodlands, Web. 20 Woodlands Drive, Woodmead, 2052, South Africa. www.deloitte.co.za
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SECTOR SPOTLIGHT
INTRODUCING THE INFORMATION PROFESSIONAL I
n today’s information age, data and information are probably the most vital tools for many businesses. Despite the recession, the volume of information is growing exponentially and more tools, products and services are on offer than ever before. Finding, maintaining and caring for this data is essential, however it can be a difficult and time consuming job, and one that is often overlooked by busy professionals trying to get on with the job at hand. Never before have information professionals needed to work harder and been in such demand. AI speaks to the experts…
The main advantage of an information professional is specialization. This means it’s best for all of us to spend our time doing what we do best. Clients focus on what they do best and outsource activities that others can perform better and faster. Info Pro’s can perform research much faster. If a client obtains an engagement in which research is needed, often our hours can become part of the billable engagement. Rebecca Bosl
Contact details
Geisa Rodrigues AG3 Consulting Brazil
AG3 Consulting Brazil specializing in a variety of industries, such as Healthcare & Pharmaceutical, Real State, Banking, Information Technology, Food & Beverage, Automotive, Heavy Equipments Industry, Education, Consumers’ Goods, among others. Geisa Rodrigues is Managing Director at AG3 Consulting Brazil. “We use all marketing research collecting methodologies, from secondary data collect (desk research) to primary data collect. Considering primary data collect, we design methodology according to the clients’ goals, those can be from qualitative to quantitative methods. Regarding qualitative marketing research, we do focus groups (online and/or face-to-face), in-depth interviews (by phone or face-to-face), ethnographic interviews, mystery shopping. Regarding quantitative marketing research, we do census study, central location (in flux) data collect, in home interviews, CATI (computer aided telephonic interviews) and online interviews.” What are the advantages of using an Information professional? What does this area bring to the deal table? “It is impossible to take any actions or prevent any risk without information. Information is the best currency in today’s world. When a company is intending to enter a new market or launching a new product / service, if it does not count on a person or a firm owning some market information, it is just impossible to take the risk of entering a new market not only using basic information, but mainly using deep information on how market is really open to this company and its products / services, real market’s demand for such a company (if any), competition (who they are, how they work and gaps left by them), consumers’ needs and expectations.”
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Tel. +55 (48) 32665927 +55 (48) 96162060 Email. geisa@ag3consulting.com.br Web. www.ag3consulting.com.br
“No serious company will take the risk of investing any money in a market or in a new product / service without having strategic information to support and guide this action first.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand for Information professionals? “Brazil is one of the leading emergent economies in the world, so many companies are targeting our markets and they all need marketing research studies to understand our markets.”
In this scenario, information professionals like us are key important people, since we play the role of gathering information requested from these companies about these target markets and guiding them how to understand the culture, needs, consumers and how to position as a successful player.
THE INFO. PROFESSIONAL
Contact details
Rebecca Bosl
Founder and Research Director The Research Advantage Cleveland, Ohio USA
Rebecca Bosl, Founder and Research Director at The Research Advantage, a firm that specializes in Cross-Industry, Strategic Planning & Analysis, Business Development / New Product Development, Competitive Analysis and Acquisition Decisions. “The main advantage of an Information professional is specialization. This means it’s best for all of us to spend our time doing what we do best. Clients focus on what they do best and outsource activities that others can perform better and faster. Info Pro’s can perform research much faster. If a client obtains an engagement in which research is needed, often our hours can become part of the billable engagement.” “The research provided by an Information Professional can play an important role in the mergers and acquisition process, in a number of ways: • Selection of strategic direction and identifying the best target industries for a company to move into. For example, answering the question which industries offer the best growth prospects and how competitive are they. • Due diligence and “checking out” the company being purchased. • Investigating best practices for assimilating the target company into the acquiring company
Tel. 001 440-709-4724 Email. info@researchadvantage.net Web. www.researchadvantage.net
to sell stock to the investment community to fund the acquisition. He charged me with researching the success factors for mergers in the Specialty Chemical industry – why are some wildly successful, and why do other mergers unravel and leave both companies in worse shape? I gathered the research and analyzed why some performed well, and explained why my company’s merger would be wildly successful. “The CEO used this information to court investors and we sold all of the stock offering for the merger! The stock price for this company has risen 150% post acquisition and it is proving to be a very successful merger, as my analysis has shown.” As we slowly recover from the economic downturn, do you have any predictions for 2011, in terms of demand for Information professionals?
Going forward, I would expect demand for IP’s to remain strong. Companies have a need to make strong strategic decisions, and we assist by providing information for solid decision-making.
• Understanding the acquired company’s industry and competition to set an effective strategy for the new acquisition. “Research from an IP can help in limitless ways. One year, I worked for a Fortune 500 company that made a billion dollar acquisition. The CEO wanted
Contact details
Kay Harris Director
Vista Information Services & Solutions Sydney Australia
Vista specialises in business and financial research providing proprietary information to banks, fund managers, private equity, venture capitalists and corporations so that they can make informed business decisions. Kay Harris is director at Vista Information Services & Solutions; “We utilise third party sources to collate and analyse information on companies, transactions, build company comparable analysis, sector analysis and competitor analysis” “A typical client is a small to mid-size boutique firm that doesn’t have access to an in-house information service. They usually have between 3-25 advisors and deal in all aspects of advisory services.” “Our services are superior to our competitors as we have the experience to provide accurate information in a cost-effective and timely manner (seconds count in deal-making). We have an extensive array of resources that allow us to provide each client with the best available information to enhance their advisory business.” What are the advantages of using an Information Professional? What does this area bring to the deal table?
Tel. (612) 0409 128 972 Email. kay@vistainformation.com.au Web. www.vistainformation.com.au
“The Information Professional can access proprietary information in a timely manner for the deal team.” “Over the past 12 to 18 months we have seen a steady increase in our services as clients realise that they need accurate and timely information presented in an easy to read format to make their investment and strategic decisions.”
An example of this is a bank that required in-depth knowledge of the solar renewable market place in Asia and Europe. They needed an analysis of the major players, their financial situation and strategies. This analysis enabled the bank to give accurate advice to their client, who in-turn invested in solar assets in China.
“Information is the life blood of all deals. The Information Professional gives the deal team access to accurate and timely proprietary information that isn’t available on the internet. This is becoming more and more important as information is becoming easier to obtain via the internet. This information while easy to get is not always accurate and is more often than not, very dated.”
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SECTOR SPOTLIGHT
THE PROFESSIONAL PRIVATE INVESTIGATOR F
De Cuyper Brothers
In what can be, an often dishonest corporate world, high net worth individuals have to remain vigilant when it comes to protecting themselves.
Tel. 32-7-159 50 53 Email. decuyper.det@skynet.be Web. www.decuyper.net
inancial crime is a serious matter that can undermine the safety and security of a business, its assets and its employees. In today’s unpredictable world, it is becoming increasingly necessary to take precautions where the security environment presents a high risk.
If suspicions arise, be it in reference to an untrusted business partner, theft, misrepresentation (the list goes on), it is often necessary to get irrefutable evidence to either move forward with prosecution or, give peace of mind. Acquisition International speaks to the private investigators‌
Thirty Nine
Address 10, Pont de Bois, B-6533 Thuin BelgiumB-6533 Belgium
THE PPI
Tel. 01733 306 597 Keith Walker Fax. Founder & Managing Director 0844 665 3693 Email. Bluemoon House, 120 operations@bluemooninvestigations.co.uk Culley Court, Peterborough, Web Cambridgeshire, PE2 6WA www.bluemooninvestigations.co.uk Contact details
Keith Walker, Bluemoon Investigations Group, Founder and Managing Director, 30 years as a PI.
We operate on a Global scale but we have to adhere with local laws and regulations, to overcome any regulation we would tend to work with local colleagues especially if carrying out enquiries in another country but we retain total oversight and control of the enquiry and the client’s interest. “As we are full members of the ABI (Association of British Investigators) we are governed by the ABI Code of Ethics. The PI Industry has always been, and continues to be, an unregulated Industry, this may change in the future by the Government imposing a PI Licensing scheme under some kind of regulation.” “One does not have to “Qualify” as a PI as there are no qualification requirements presently; this would, of course, change when licensing comes about. However, there have been, and still are qualifications that a PI could pursue but this is only for self achievement and to better their knowledge, I have achieved many qualifications throughout my career as a PI but for my own satisfaction.”
“We, at Bluemoon, firmly believe that we offer a “second to no one” service at a competitive cost and our mantra has always been “to treat our clients as we would expect to be treated ourselves”, this has put us at the top of our profession.” “Bluemoon Investigations Group has not, and does not, seek awards or accolades, all we seek is client satisfaction.” “Every enquiry is a challenge, we take in many enquiries each and every day 24/7, every enquiry is risk assessed and the key is “never think about the client’s problem, concentrate on the solution”, works every time.” “The economic turndown has not affected Bluemoon at all, in fact quite the opposite as before when corporate clients tended to let things drift they are now looking more closely at things. As an example, an insurance body used to sample a % of claims to ascertain if they are spurious or not, in the downturn that % has raised which means that the payouts become less.” “The appetite for Private Investigation will always continue to grow as new markets open up and clients recognise the value of “foresight”, it is a great advantage to any client to make a balanced decision based on facts provided by a PI rather than an emotional decision or one made in ignorance of the facts. We have all heard and said at some time “hindsight is a wonderful thing.”
Contact details
Tom Scott
Founder & Managing Director The Cotswold Group Gloucester United Kingdom
Tom Scott is Chief Executive Officer at The Cotswold Group – www.hecotswoldgroup.co.uk .Before starting The Cotswold Group in 1990, Tom Scott spent 14 years in the Police Service working within the C.I.D. and Regional Crime Squad. “We offer full UK and Ireland coverage as well as mainland Europe, providing counter fraud services primarily to General Insurer, Corporate and Public Sector clients. Within the UK and Ireland the industry is unregulated, meaning that your reputation and the integrity of your activities are a fundamental cornerstone of success.” “Though levels of regulation differ across mainland Europe the key differentiator is the level of fraud awareness, particularly in Southern Europe, which is dramatically lower than within the UK and other northern countries.” Our areas of specialism cover both field and desktop investigation processes. Clients are always looking for the most effective strategy and this requires a broad range of skills . “We have industry recognised surveillance and fraud investigation experts who are supported by desktop techniques such as profiling and conversation management. Our team of Intelligence Analysts use the methods contained in the National Intelligence Model to gather, share and interpret disparate data which then informs our strategies whether we are investigating a motor or property theft, fraud or personal injury insurance claim.”
Tel. +44 1452 372888 Email. tom.scott@thecotswoldgroup.co.uk Web. www.thecotswoldgroup.co.uk
“Our biggest challenge is that organised fraud is rapidly becoming a global issue with activities crossing geographical borders. To be effective, Investigators need to have an integrated European capability with agents in place outside Europe to deliver a complete global package. Though it has been a challenge we do have this structure in place.”
Additionally we are always looking to identify and combat new types of fraud as quickly as possible. This is where intelligence gathering plays a key part, identifying trends far sooner. The fraud ‘battleground’ has traditionally centred upon the insurance claims process but attention is increasingly shifting towards point of sale fraud and how this can be proactively investigated and prevented. “Insurance Fraud is a £5bn problem where life changing sums can be extracted without the proper measures in place for both prevention and detection.”
Forty
EMERGING MARKETS PRIVATE EQUITY
ROUTE TO RECOVERY W
ith the effects of the economic slowdown likely to linger in North America and Europe and remain a painful memory for a long time, the so-called emerging markets around the world are making headlines with economic recovery, stronger consumer demand and large-scale investments. For international companies it is no longer a question of if to invest, but rather in which of these alternative markets to focus their investments and future growth. AI’s Charlotte Abbott talks to Doug Hewson, Managing Partner at Portland Private Equity about the Caribbean’s premier private equity firm. “We are a team of 8 people so we each are involved in most aspects of the firm’s business. Obviously each of us has a primary responsibility and mine is external relations. Our investment committee is composed of the five partners, of which I am one.” “Portland Private Equity’s genesis is in the family office investment activity of its Chairman, Michael Lee-Chin. The firm currently manages an ’07 vintage, $225M institutional fund called AIC Caribbean Fund which they expect to be fully invested in early 2011.” Doug Hewson explains: “Our investor base combines pension and fund of fund capital, several development finance institutions, and our Chairman’s sponsorship commitment.” “Our region is typically overlooked and has some challenging qualities such as geographically fragmented markets, currency vulnerabilities, and a reliance on tourism related inflows.” “In general terms it is inefficient, which is an attribute for our firm’s style of private equity investing which emphasizes operational involvement and a pan-regional perspective.” Which sectors do you specialise in? “While our fund’s strategy is opportunistic and generalist, we spend more time looking at deals in areas where we either have in-house expertise or an existing partner with the required expertise.” “In practical terms, this means we are able to quite effectively assess deals in financial services, telecom and telecom related services, and infrastructure development sectors. We are also developing expertise in the renewable energy category, with a focus on wind and geothermal.” Does your firm have a specific country focus or does it take a more opportunistic approach to private equity? What levels and patterns of activity do you foresee in the next 12 months?
“At the same time, our current pipeline would indicate that a number of conditions are providing a solid investment background - specifically, well run family groups will be more open to partnering with private equity firms to grow their businesses, the region’s role as a third border to North America and gateway to the Americas will be highlighted, governments will continue to privatize attractive assets and use PPPs as a means to build needed infrastructure, and the business case for certain types of renewable projects will continue to get stronger.” “We have a strong preference for investments that have pan-regional growth qualities since they scale to a mass that provides sufficient cash flows for dividends and become interesting to larger multi-nationals. In some cases, there are existing businesses in a particular country that have the potential to grow to become a regional platform.” “In other cases, there are areas where a business thesis has regional applicability. An example of the former would be the growth of portfolio company Columbus International from being a single country broadband services provider to servicing over 20 countries in the region. In the latter category, we believe that warm water aquaculture is an area that merits our continuing analysis.” Have there been any notable deals (size, complexity, duration, etc.) that you’ve been involved in recently? “Our portfolio company Columbus International has enjoyed success in the late 2009 and 2010 bond markets and has raised a substantial amount of capital, in excess of USD$500M, on favorable terms to help it execute its growth strategy. We anticipate announcing the newest companies to our portfolio soon and expect they will be notable.” According to the EMPEA/Coller Capital Emerging Markets Private Equity Survey, emerging markets are to gain a greater share of private equity commitments as investors seek high growth markets. Have you seen any evidence of this in your jurisdiction? “Emerging markets is a misleading term sometimes. For example, both China and the Dominican Republic are considered emerging markets but the private equity investment strategies and structures best suited for either market are likely to have significant differences. I think a majority of the commitments seeking emerging market exposure are targeting several well-known, and perhaps now overheated destinations.” “In the Caribbean Basin region that we are involved in, there has been an uptick in fundraising and deal activity in areas like Colombia and Panama but it is not similar in volume to a place like Brazil.” On a lighter note, what is the best piece of advice ever given to you? “Cash on cash trumps IRR.”
“Since we are coming back to market with a successor fund in the next 12 months, we hope that we will see fundraising in the region pick up!”
Contact details
We do not expect to see a material increase in the amount of growth capital available in our region in the interim period. It will continue to be underserved.
Forty One
Douglas Hewson Partner
Portland Private Equity Corporate Center Bush Hill and Bay Street
St. Michael Barbados W.I.
Tel. 613-792-2955 Email. dhewson@portlandpe.com Web. www.portlandpe.com
LEGAL EAGLES
BOUTIQUE & MID-SIZED LAW FIRMS TAKE ON GOLIATH A
ccording to the American Bar Association’s 2000 Lawyer Statistical Report, the large majority of all attorneys in private practice are employed in small law firms, employing less than 20 lawyers. In fact, almost half of all lawyers in private practice are solo practitioners and another 15% are employed in firms of 10 attorneys or less. Employment in a small law firm presents a unique set of advantages and disadvantages that make it quite different from working in a large law firm or other practice setting which can be beneficial for the lawyer and the client. Unlike the high-degree of specialization seen in many large law firms, lawyers in small law firms are often generalists and engage in challenging, highly varied work across a broad spectrum of practice areas. The exception is the boutique law firm which focuses its practice in a niche area of the law.
The cozy, adaptable environment of the small law firm lends itself to more flexible work schedules among lawyers and staff and because staff is limited, new attorneys and paralegals perform more substantive legal tasks with less supervision than their mega-firm counterparts. Also associates employed by smaller law firms tend to operate with greater autonomy and have more client contact than associates in large law firms where client contact may be reserved for more senior lawyers. The “megafirm” and it’s response to the recession has been well publicised so in this month’s legal eagles, Acquisition International explores the alternatives. Boutique and Mid-sized practices, which both offer a specialist service at a reduced cost, read on for the advantages of appointing a “recession proof” boutique law firm and how a mid-sized law firm might be able to offer your company “the best of both worlds.”
Forty Two
THE MID-SIZED LAW FIRM
Contact details
Zafer Karaca Founding Partner KORESEHITLERI CAD. YONCA APT. NO:1/8, ZINCIRLIKUYU- ISTANBUL, 34394 -TURKEY
Karaca & Associates Attorneys at Law is a full service international boutique law firm with offices in Istanbul and London. Karaca & Associates provides legal services in dispute resolution and consulting with a dynamic group of experienced lawyers knowledged in all aspects of Turkish Law and business transactions as well as investment opportunities. Zafer KARACA (LL.M. London), Founding Partner at KARACA & ASSOCIATES ATTORNEYS AT LAW. How does your firm stand out from local/ global competitors in terms of the services you offer? Karaca & Associates has expanded its expertise with an office in London under its subsidiary company, Servist International Consulting Ltd.( Servist). Servist, has been working mainly for corporate and business development matters in Istanbul- Turkey for 8 years. We have observed that UK companies and law firms need up to date information and expert consultants in certain areas for their daily works. If they look for such a firm in Turkey they are rather too expensive or it takes long time to establish a relationship. Therefore, Servist UK (www.servistconsulting.com) is determined to provide legal and strategic consulting with regard to Turkish law and business matters in the UK, at the doorstep of British companies. Before the British firms go for a firm shopping, our firm will furnish them with relevant basics of the jurisdiction, business and/or the market.
Tel. +90 212 3471031 Email. z.karaca@karacalaw.com Web. www.karacalaw.com
The firm has also joined another law firm network active in Europe, namely Lexicom in order to develop mutually benefited business relations. In terms of your specialist area, how do you compete with the major law firms and provide a better service to your client? First of all Karaca & Associates is a quality based boutique law firm. The firm does not compete against big law firms as our core competence is “pure law”. The firm does not work in a “copy-paste” style or never charge its clients with the stationary, translation work of young lawyers. Therefore, the firm has been active in a niche market. The firm has been involved in numerous matters in national and multinational business fields in the last 14 years. Mid-sized law firms are often referred to as being the best of both worlds, why is this so? In today’s complex issues, squeezed time frames the companies do not have time to work with bureaucracy of big firms. A client needs flexible, knowledged, creative consultant. Frankly mid-size law firms are more creative and flexible in all aspects. In big law firms there are departments like governments and you sometimes never see your “real lawyer” but a partner who signs the invoices.
Besides our London office, in order to extend Karaca & Associates’ international geographic coverage, the firm has been a member of Mackrell International, one of the world’s most respected networks of independent law firms, having active members in 65 countries.
Contact details
Nigel Rowley Managing Partner Inigo Place 31 Bedford Street, Strand London, Wc2e 9ey
Mackrell Turner Garrett is an Award winning full service law firm with offices in London and Woking, Surrey. The practice provides a full service in litigation, commercial, employment, property and private client matters, including family and wills, trust and probate. Nigel Rowley is Managing Partner and Head of Dispute Resolution at Mackrell Turner Garrett. “The firm has considerable experience in regulatory work, specifically in relation to the Financial Services Authority (including for example insider dealing), Her Majesty’s Revenue and Customs (including carousel fraud claims) and SOCA (particularly freezing injunctions). It acts for a considerable number of high-net-worth clients in matters offshore and on shore, corporate and property, tax and estate planning. Notwithstanding the size or complexity of a matter, clients benefit by using one law firm to address all of their needs both at home and abroad. The practice is small enough to provide a personal service but large enough to maintain expertise in many fields. The dispute resolution team was recently awarded a prestigious award for ‘Dispute Resolution Excellence in England” Which area of law are you representing? Mackrell Turner Garrett is a full-service law firm with core areas of work being litigation, company and commercial, business, residential and commercial property, intellectual property private client (including matrimonial work, and wills, trusts and probate), tax and estate planning, immigration, travel and tourism, and regulatory work including white collar crime. “Having expertise in these areas the firm is for example, able to offer a corporate client not only advice on restructurings, flotation’s, AIM and Plus market (formerly OFEX) listings and contracts, but also employment issues; the sale and purchase of property, development of the same, intellectual
Forty Three
Tel. 0207 2400521 Email. Nigel.Rowley@mackrell.com Web. www.mackrell.com
property and all other matters which may become an issue. For the individual, the firm is able to assist with for example, wills, probate, employment, tax and estate planning, conveyancing, advice on separation, divorce and cohabitation and all forms of litigation.” How does your firm stand out from local/ global competitors in terms of the services you offer? “As a founder member of Mackrell International, a grouping of over 80 independent law firms with 110 offices and 4200 lawyers around the world, much of our work has an international dimension.” In terms of your specialist area, how do you compete with the major law firms and provide a better service to your client? “Personal service, less expensive rates, at the same level of experience and competence. We have the ability to offer 24 hour service to clients at Partner level but at a fee that is only a fraction of that charged by the big firms. Our hourly rates even at partner level are below £290 + vat – so dramatically less than the big firms and extremely realistic in Central London. We can also be more responsive reacting quicker to situations and thus serving the client better.” As we slowly recover from the economic downturn, have you seen any evidence of the return of the large deal? “Well run mid-size law firms did not suffer in the downturn. There are and always have been plenty of deals out there so long as you did not try to stifle the deal with costs issues, ensured a 100% personal level of service, and cast your net widely for work. Our international association was and is key to this strategy.”
THE BOUTIQUE LAW FIRM
Financial and Commercial Litigation
Contact details
Tel. 020 7148 7800 Email. marc.keidan@cyklaw.com Web. www.cyklaw.com
Marc Keidan Partner Cooke, Young & Keidan LLP London United Kingdom
Marc Keidan, a solicitor and partner in Cooke, Young & Keidan LLP “A large proportion of our work involves acting for hedge funds (international and London-based) in claims against banks. We also undertake insurance litigation (acting for syndicates in the Lloyds Market), civil and commercial fraud, international arbitration, partnership, LLP and corporate disputes and professional negligence. “After only one year in operation (the firm was founded in January 2009) the Legal 500 Guide recognised our achievements by ranking us as a leading London firm in both the Banking Litigation (Investment and Retail) and Commercial Litigation categories and commented that we are ‘a match for the large, well-known firms’. What experience and expertise do you bring to the table during a transaction, and how does this assist in getting deals through to completion? “The partners and associates have a track record of successfully dealing with heavy litigation and cutting-edge disputes. We bring to our work commitment, tenacity, creativity and insight. We always focus on the tactical and commercial, as well as the pure legal, issues and we move heaven and earth to vigorously advance or defend (as the case may be) our client’s position.”
Family Law and Domestic Relations
Why go boutique? “The boutique model offers unparalleled flexibility and freedom. We offer smart, practical and commercial solutions to our clients’ problems, with a partner leading the case. We do so in a more cost effective manner than the larger firms because we have a lower cost base which enables us, in turn, to offer our clients lower charging rates and lower overall fees.” “As a boutique litigation firm, we avoid being inhibited by conflicts of interest. This means we are frequently instructed in complex disputes involving banks and other financial institutions, against which other top City firms have traditionally been unwilling to act. We are one of only a very small number of firms that have the expertise to deal with the often novel and difficult disputes arising out of the financial crises and involving complex financial products (such as derivatives). The global downturn has led to a significant increase in this type of work for our firm and we expect this trend to continue for the near future.” “A current example of such work is our acting for a Texas hedge fund, Highland, against RBS (represented by Herbert Smith) in a case in which judgment, following a trial, was given in early December 2010. The claim was initially valued by RBS at over £35 million. In a noteworthy judgment, which has been the subject of press comment, the judge found that RBS had conducted a sham auction process, had breached its duty of good faith and had deceived its counterparty as well as third parties. [2010] EWHC 3119 (Comm)”
Contact details
Tel. 516-294-6666 Email. esamuelson@samuelsonhause.net Web. www.newyorkstatedivorce.com
Elliot D. Samuelson, Esq. Partner
Samuelson, Hause & Samuelson LLP New York USA
Elliot D. Samuelson, Esq is Partner, Samuelson Hause & Samuelson, LLP
Our practice areas include divorce law, complex litigation involving valuations of closely held businesses and professional practices, child custody, visitation rights, equitable distribution, prenuptial and post-marital agreements, separation agreements, spousal support.
“Our staff includes five attorneys and a paralegal. We are large enough to handle the most complex matters, but small enough to give each client personal attention” “Recently we were successful in settling several complex matters that involved valuation of closely-held businesses and professional practices.” “During 2010, most of our matters involved the handling of complex divorce matters with attendant valuation issues that included stock options and deferred compensation.”
Our reputation for professional excellence is our most important asset.
Our firm has over 100 years of collective experience in the matrimonial field. We were recently named as one of the preeminent matrimonial law firms in the United States by US News and World Report.
Based on our extensive experience and reputation for excellence in the field, we are able to settle a vast majority of our cases and avoid prolonged litigation.
Forty Four
SECTOR SPOTLIGHT
EQUAL STANDING E
mployment law is a broad but specialist area that affects all our lives on a day to day basis. Be you the employer or employee there is certainly a common denominator, the need for specialist advice, on both a local and global level. The recent global financial crisis illustrates the complexities of simultaneously addressing multiple countries’ employment laws while trying to implement global corporate policies and programmes.
The financial crisis has prompted more numbers of employment claims and employers have had to face difficult decisions when it comes to streamlining their workforce and cutting costs. As such it has become essential for companies to seek solid advice from experts in the field.
Contact details
Michael Elks RadcliffesLeBrasseur Westminster London
Michael Elks is partner and head of the employment department at RadcliffesLeBrasseur, based at the firm’s main office in Westminster. RadcliffesLeBrasseur advises employers across a wide range of sectors including businesses involved in healthcare, manufacturing, professional advice, realestate and education and senior executives. What are the key strengths of your team? “We have a reputation for finding practical and timely solutions to problems. At all times we work in partnership with our clients with the aim of helping them to control and minimise the risks and liabilities they face by the complexity of Employment law. We focus on values and we build long term relationships with our clients with the aim of establishing trusted advisor status. The fact that we act for both employers and senior executives enables us to provide more effective advice to both because we anticipate the arguments which will be put forward by the opposing party.” “Employment is a fast paced area of law and it is therefore important that our clients stay abreast of the many changes that this area of law brings. We recognise the need for timely commercial advice and solutions. We provide a complimentary Seminar and Briefing programme to help clients stay up-todate with changes in Employment legislation.”
Forty Five
Which sectors have been the most active in 2010? How has the global downturn altered this and the type of work you carry out? “The most active sectors for us have been private and public sector healthcare including care home providers. The economic pressures on employers has meant that we have been consulted much more over the last two years on issues relating to redundancy, restructuring and the extent to which alternatives to redundancy such as shorter working weeks or more resultsbased remuneration packages can be introduced.” In today’s climate, which is most important to a law firm? Reputation, fee structure or contacts? “There is no question that in the current climate a competitive fee structure is important. That and the responsive high quality service we give are key to the retention of clients.
In terms of winning new clients a competitive fee- structure is again important as is general reputation in the relevant business sector. As least as important is reputation among existing clients; many of our new clients are recommended by existing ones.
EMPLOYMENT LAW
Contact details
Tessa Fry 31-32 Ely Place, London, EC1N 6TD
GSC Solicitors LLP advises on all aspects of employment law from appointment to dismissal. This includes preparation of employment contracts, termination of employment, sickness absences, redundancy procedures, transfer of undertaking regulations, data protection and family friendly policies. GSC Solicitors LLP also covers employment tribunal claims mainly relating to unfair dismissal, discrimination and unlawful deduction of wages. We handle High Court actions for breach of contract including injunctions to enforce restrictive covenants, actions for breach of copyright and confidentiality and claims for non-payment of bonuses. Tessa Fry is partner and Head of Employment at of GSC Solicitors LLP. “The firm set up a specialist employment team in May 2005 following the appointment of Tessa Fry. The team consists of Tessa Fry (Partner), David Nathan (senior solicitor) and Nadia Adil (assistant solicitor). Since 2005, the fee income of the team has increased threefold. What are the key strengths of your team? Have you won any awards/ accolades for your service? “The team acts for both companies and individuals. This enables us to approach cases on an objective basis and give us an understanding of the opponent’s position which helps us achieve the best outcome for our clients. Due to the size of the team, we work closely together and clients can approach any one of us for advice.”
Which sectors have been the most active in 2010? How has the global downturn altered this and the type of work you carry out?
There was an improvement in the economy in 2010 and some companies started recruiting again, but generally on a small scale. Most of the work in 2010 has involved claims for unfair dismissal and discrimination, advice on redundancies and dealing with sickness absences, disciplinary and capability issues. The redundancies in 2010 have been on a smaller scale than in 2009. Do you have any predictions for the next 12 months? Most of the redundancies in 2009 and 2010 were in the private sector. We are likely to see large scale redundancies in the public sector in 2011.
Contact details
Richard Harvey 3000 Cathedral Hill, Guildford GU2 7YB
Harvey Camford LLP provides the full range of employment law services to corporate clients, with a particular emphasis on international employment law. The firm is a new and boutique employment law practice incorporated in 2010. Rather uniquely, it was co-founded by a brother and sister team, Richard Harvey and Anna Harvey building on the experience they gained working in senior inhouse roles and at top City and International law firms prior to setting up Harvey Camford. Richard Harvey is Managing Partner at Harvey Camford LLP. “We advise large international companies across a number of sectors, including insurance, IT and film entertainment on the employment law implications and HR strategies that arise from organisational change and development, such as mergers and acquisitions, outsourcing, large scale redundancies and, where Europe is concerned, TUPE.” “One strong facet of our services is to provide ‘outsourced in-house Counsel’ whereby we manage international employment law matters for our clients presenting, to all intents and purposes, as the company’s in-house lawyer. We draw on a wide network of lawyers we work with overseas including in France, Spain, Italy, Benelux, Nordics, Australia, South Africa, Brazil, Mexico and the US.”
Tel. 020 7822 2222 Email. tfry@gscsolicitors.com Web. www.gscsolicitors.com
Tel. (UK) 0844 879 4137 (International) +44 7901 716 652 Email. richardharvey@harveycamford.com Web. www.harveycamford.com
In today’s climate, which is most important to a law firm: reputation, fee structure or contacts? “Reputation is always a factor and increasingly bespoke fee structure has become vital, but without doubt, contacts are the most important factor to us. Without our contacts we wouldn’t be enjoying the instructions we currently receive.” What are the firm’s goals for 2011? “As a new firm, to build our name and to promote our expertise and brand providing specialist and international employment law expertise while offering service delivery and bespoke fee structures that pull away from that of traditional law firms.” Do you have any predictions for the next 12 months? “An increase in public sector outsourcing to the private sector both in the UK and globally.” On a lighter note, what is the best piece of advice ever given to you? “Never lose touch with anyone”. Thankfully, somebody invented LinkedIn and other social/professional network sites.
Forty Six
SECTOR SPOTLIGHT
DESTINATION... D
espite concerns over the euro and the debt problems facing some EU members, Germany is expected to see a continuation of M&A activity in 2011. Once again, the industrials sector is likely to dominate with VW’s acquisition of Porsche set to be the first quarter’s largest transaction. The knock-on effect of this deal, and rationalisation elsewhere in the sector, will mean further consolidation in the components sector as suppliers anticipate a squeeze from fewer customers. Similar dynamics will affect Germany’s once dominant energy sector, while the banking sector should also be active as further spending on new technology could force some smaller banks to merge. Two other companies to watch next year are infrastructure group Hochtief and MAN, the German truck maker. Hochtief is expected to start a dual-track process to either float or sell its airports concessions arm to try and boost its value and thwart a lowball bid by Spanish group ACS. Meanwhile, MAN is in talks with Sweden’s Scania over a possible tie-up. In contrast, Spain, which started 2010 strongly, saw M&A activity weaken as the year progressed as debt worries overshadowed the market. However, restucturingled M&A is expected to be a recurring theme in 2011, while Spanish companies are increasingly looking outside their own economy to fulfill their growth ambitions. Telefonica’s move to acquire a controlling stake in Vivo, Brazil’s largest mobile phone company was one of the biggest transactions of the year.
Forty Seven
This deal typified the extent to which Brazil is now being targeted by foreign investors. It is rich in natural resources and has a growing and affulent population. China invested heavily in Brazil last year snapping up assets in steel, iron ore and energy. Agriculture is seen as ripe for consolidation with more production being devoted to ethanol, the world’s leading bio-fuel. The country is fast-emerging as a “powerhouse economy” and dealmakers see further takeover and investment activity in 2011.
Over the next 12 months, Acquisition International will be travelling the globe, visiting the rising stars of M&A. This month, with our passport ready and suitcase packed... AI visits Spain and Brazil.
Meyerlustenberger Dr. Alexander Vogel Address Grabenstrasse 25 CH-6340 Baar/Zug Tel. +41 41 768 11 11 Fax. +41 41 768 11 12 Web. www.meyerlustenberger.ch Email. A.Vogel@meyerlustenberger.ch
DESTINATION: SPAIN
SPANISH FLAIR A
cquisition International’s Charlotte Abbott speaks to Julio Veloso, partner at Broseta Abogados about the innovative full service law firm oriented to quality and the success of its clients.
Julio Veloso, responsible for the corporate finance/private investment funds area and also responsible for the international relationships of the law firm. Broseta Abogados was founded in 1975 by the chaired professor in commercial law and state councillor Manuel Broseta pont and re-founded in 1995 Broseta Abogados is today a nationally renowned Spanish firm with more than 90 lawyers (including its 14 partners) two offices (Madrid and Valencia). The firm combines specialization in traditional areas of legal practice with the constant incorporation of new areas related to business activities and public administrations, for which it provides comprehensive legal services. The firm advises the leading companies in the principal sectors of the economy. Since its inception, the firm has been characterised by its total involvement and commitment to the quality of the services provided to its clients. Broseta Abogados is a member of the Spanish Venture Capital Association (Ascri) and the European Private Equity and Venture Capital Association (EVCA), and cover a wide range of areas within the private investment funds group. What gives you an advantage over local and global competitors in your areas of expertise?
I believe our main advantage is our experise and track record which I believe is difficult to find in Spain. We have been in the market for a long time and we are known to almost all players because we have worked for almost all of them. “We know the best (private funds) law firms/teams in the western world and we are free to work with them (not being committed to network as the global competitors are) which allows us to pick the best in every country and to get better prices than others.” Have there been any notable deals (size, complexity, duration, etc.) that you’ve been involved in recently? “We have been involved in a very complex deal this year related to the acquisition by a private equity entity of a majority stake in two Spanish companies. The economics of the deal were really complex and not easy to handle.”
“We have also been involved in another very interesting deal in Tunisia; the acquisition of a minority stake in a Tunisian company by a Spanish private equity entity.” “Due to the different laws and to the restrictions on foreign investments in Tunisia it has also been a very interesting transaction.” “We have also represented an UK private equity entity in two investments in two Spanish IP/IT companies. Due to the object of the companies and to the reorganisation of the UK fund both deals were really interesting.” Has the recession affected any core industries in Spain? “Absolutely. We have seen major construction/real estate/ companies & developers going into bankruptcy, the merger of all savings banks, an incredible number of companies disappearing, etc. Besides, credit is very scarce.” Spain’s public debt ratio is amongst the lowest in Europe, what is the nation doing differently to countries with high debt ratios?
I believe that comes from the recent past. We have lived in a booming economy for the last 15-18 years and we have received a lot of European funds. Besides, and until recently (due to our difficult economic situation and to the lack of budgetary positive results), the government made the appropiate decisions to keep it low. This year we have seen the return of the large deal in Spain; will we see more of these deals in the future? “Maybe, but I do not believe that many large deals take place during next year. Credit is not going to be easy to get (and/or to get it under reasonable conditions).” We slowly recover from the economic downturn; do you have any predictions for 2011, in terms of demand in Spain? “I wish I am proved to be wrong (really) but I am afraid 2011 is not going to be an easy year in Spain (it could be even worst than this year). “Unemployment rate may even grow next year in Spain and some reforms will have to be adopted by the government in case we do not want to be rescued. So again, I am afraid 2011 is going to be a tough year in Spain.”
Contact details
JULIO VELOSO BROSETA ABOGADOS Calle Fernando el Santo, 15 -2º (28101) Madrid. Spain
Tel. 34 91 432 41 44 Email. jveloso@broseta.com Web. www.broseta.com
Forty Eight
DESTINATION: SPAIN/BRAZIL
Contact details
Jose A. Sanchez-Dafos Partner
Paseo de la Castellana 35 28046 Madrid, Spain
DLA Piper is an international law firm, which has resulted from the merger back in 2005 of DLA and Piper Rudnick, and Gray Cary. Jose A. SanchezDafos is partner, head of the corporate department in DLA Piper Spain. “We are a truly international law firm, fully integrated, one-stop-shop concept, and full service. We have a strong reputation in our local market, particularly in Private Equity, M&A, Finance and Competition. Our second to none international network places us in the best position to advise in all sort of international transactions or matters.” “In 2010 we were involved in about 20 M&A deals in Spain, with a total deal size over €4,000M, including, as a recent example, advising CVC in the acquisition of Capio in Spain. We have also recently advised PAI Partners in the acquisition of Swissport from Ferrovial.” How did the needs of your clients change during the downturn and how did you adapt your services in order to meet these? “Clients have become more demanding, required more partner time and increased their quality expectations. Our approach at DLA Piper has always been that partners needed to be hands-on, so we have been able to adapt smoothly. Also, transactions have become more complex, taken longer and required more creative structures.” Has the recession affected any core industries in Spain? “The main industry that has suffered has been the Real Estate sector, where a number of developers and constructors have filed from insolvency or required heavy restructuring measures. Also, banks have had difficult times, and it is
likely that some very relevant savings banks or even banks themselves will either undergo restructuring measures or mergers.” “The leisure and travel market has also been through difficult times, as this is one of the main focus of activities in Spain, and international travelling and tourism has decreased significantly in Spain.” Spain’s public debt ratio is amongst the lowest in Europe, what is the nation doing differently to countries with high debt ratios? “While it may seem that Spain is in a better position that some of our neighbors, however, this fact has to be read in conjunction with the higher unemployment rate Spain has, and the poor management of public debt that our Government is performing. In fact, one of the key differences is that it is uncertain in Spain who controls such public debt.”
Whether it is controlled by international investors, Spanish individuals or institutions, is something uncertain. Also, the rating of the Spanish debt may be also lower than that of other countries, which would also explain why Spain performs differently in this as well.
Contact details
Maria da Graça Pedretti Director
Felsberg Pedretti Mannrich e Aidar law firm / São Paulo Brasil
Founded in 1970, Felsberg Pedretti Mannrich e Aidar (“FeA”) has grown into a full-service international law firm currently with 23 partners and more than 150 associates and trainees. Maria da Graça Pedretti, a partner of the Brazilian law firm Felsberg Pedretti Mannrich e Aidar since 1985. What do you bring to the table during a transaction, and how does this assist in getting deals through to completion? “My firm has recently acted as local legal counsel for the Inter-American Development Bank (IDB) that has extended a financing in the aggregate total amount of USD 327 million, consisting of a 17-year $ 147 A Loan directly from the Bank and 13-year B Loan from a syndicate led by the IDB, composed of BCP Millenium, Caixa Geral de Depositos and Calyon, as B Loan providers, for the construction and operation of Porto do Pecém I, a thermal coal-fired power plant (TPP) located in the Brazilian State of Ceara. BNDES agreed to finance approximately R$ 1,410.2 million to the project. Porto do Pecém I is a 50/50 partnership between MPX and Energias do Brasil.” “I have acted as the team leader of this project. From a legal standpoint, the union of the IDB and BNDES in the project presented various challenges since both institutions have some different views and approaches in regard to certain matters. We had to overcome these challenges together with IDB, BNDES and the syndicated lenders, whilst aligning not only lenders’ but also sponsors’ interests. “
Forty Nine
Tel. +34 91 3191212 Email. jose.sanchez-dafos@dlapiper.com Web. www.dlapiper.com
Tel. +55 (11) 3141-9102 Email. gracapedretti@felsberg.com.br Web. www.felsberg.com.br
Which Brazilian sectors are attracting foreign investors? “Amongst the various investment market segments, land and real estate property are currently being considered the best providers of investment opportunities.” “Real estate currently offers competitive prices that have attracted lots of both foreign and local investments. Other market leaders like the production sector have witnessed foreign company acquisitions and mergers.”
Brazil plans to invest US$236 billion by 2011 and $830 billion over the nextfive years to improve infrastructure. The key drivers of this focus on infrastructure are identified as being the 2014 World Cup, the 2016 Summer Olympic Games, the development of the energy sector and oil exploration, and the government sponsored Growth Acceleration Program (PAC).
DESTINATION: POLAND/CEE
the M&A market
IN POLAND AND CENTRAL AND EASTERN EUROPE
Paweł Sikora
in 2010
Senior Associate at Kubas Kos Gaertner
The financial crisis has contributed to the global drop in the financial institutions’ interest in M&A type transactions. No doubt, the crisis has not spared Poland, either, nor has it spared other countries of Central and Eastern Europe (CEE). Nonetheless, riding the crest of the wave of economic difficulties, it was no one else, but Poland who has emerged out of the turmoil as the leader of the M&A market in the CEE region.
F
rom the published statistical data, it follows that despite the crisis which has affected also Poland, the market of M&A transactions has not suffered as badly as in the case of Poland’s western neighbours. According to the data made available by the KPMG in 2009, 556 transactions were announced with the joint theoretical value estimated at EUR 12 billion. The present publication shall endeavour to provide answers to the question whether this trend has been successfully maintained in the year 2010, what its specificity was, and what changes in the M&A market have been caused by the financial crisis within this period.
seems only to confirm the revival noted by the analysts and the increased interest in investments in new ventures. On the other hand, with taking into account the analysis of the structure of performed transactions, investors’ tendency to seek non-standard financing methods facilitating the decrease in costs of transactions can be noted. Another noticeable trend is that of applying significant pressure in terms of guaranteeing the maximum safety of concluded transactions. For example, one can point to the use of debt instruments such as bonds, and among these of convertible loan stock, aimed at accumulation of the means for the planned acquisitions.
In the CEE region, the year 2010 caused a boom on the M&A market, a boom which analysts even dare to label spectacular. According to the KPMG report , during the first semester of 2010, only in Poland the number of concluded M&A transactions was 283 (which means the 16% growth of this market) with the disclosed value of EUR 5.1 billion (whereby it is estimated that the actual value is EUR 8.2 billion). In the entire CEE region, the number of concluded transactions was 869 with the total estimated value of EUR 20.5 billion.
Whereas in terms of collaterals for planned transactions, it is impossible to overlook investors’ increased interest in carrying out in-depth audits - not only legal but also economic. This is meant to rule out any unexpected risks of failures of investments. This concern is also reflected in the provisions of negotiated agreements. Investors more than frequently demand that their counterparties submit guarantees related to the legal and factual status of the subject of a transaction in the scope previously unheard of.
From the total of the concluded transactions, the greatest interest was roused by acquisitions of which the total number for the first semester was 174, where the biggest recorded transaction was the redemption by PGE Polska Grupa Energetyczna S.A. from the Ministry of the State Treasury the holdings of stocks of PGE Energia S.A. and PGE Górnictwo i Energetyka S.A. for the amount exceeding EUR 800 million. It is proper to mention here the fact that it was precisely the energy, fuels, and raw mineral materials sector that was an unquestionable leader as regards the value of concluded transactions. Their total value exceeded EUR 1.5 billion. On the other hand, the position of the construction and real estate sector (this sector suffered a visible decrease as a result of the crisis) as the leader in terms of the concluded transactions (48 transactions for the total value of EUR 948 million) may come as a bit of a surprise. Referring the data above to our own experience, it can be confirmed that in the transactions in which we provided consultancy for our clients, the dominant position was taken by acquisitions. This, in turn,
This increased caution must translate into the increase in the costs of conducted transactions, nevertheless, this tendency should be assessed as positive, also in the light of the causes of the financial crisis. Based on the above-quoted statistical data, there is no doubt that one may view the future with optimism and expect further development of the M&A transactions market. Although the full data for the second quarter of 2010 are not available yet, it can already be stated that nothing able to undo the forecasts of increase for the year 2011 has transpired. One can only hope that this tendency will spread to the markets of Western Europe which failed to record the expected growth. Contact details
Kubas Kos Gaertner al. Armii Ludowej 26 Warszawa PL 00-609
Tel. +48 22 321 83 00 Fax. +48 22 321 83 02 Email. pawel.sikora@kkg.pl Web. www.kkg.pl
Fifty
SECTOR SPOTLIGHT
STRENGTH THROUGH LEADERSHIP 2
The average EBITDA multiple across global M&A for 2010 was 13.9x, the highest since 2008. Premia paid on announced deals reached 21.8% on average.
Cross-border M&A values totalled US$ 800.4bn in 2010, up 70.8% compared to 2009 (US$ 468.5bn). Activity in Q4 2010 reached US$ 273bn, the highest since Q3 2008 (US$ 328.5bn). Cross-border M&A made up 38.3% of all global activity in 2010, the highest since 2008 (42.4%).
Mega deals (over US$ 10bn) represented a total of 15.3% of the value of global M&A announced in 2010, the lowest percentage since 2003, where they represented 14% of total deal value. 2010 saw 17 mega deals announced, the lowest number since 2004 when 14 deals over US$ 10bn were recorded. From an advisory perspective, Morgan Stanley regained top position in the Global M&A financial advisory tables by total deal value for 2010, after being led by Goldman Sachs for the first three quarters of the year.
010 Global M&A totalled US$ 2,088.7bn, up 22.7% from last year’s figure, with deal count following suit, increasing by 21.3% at 11,719 announced deals compared to 9,662 for 2009.
In 2010, emerging markets saw 2,763 deals worth US$ 557.2bn, up 19.9% by deal count and 58.4% by deal value from 2009. It was the busiest year by value on record, surpassing the previous high in 2007 of US$ 499.3bn. The emerging markets accounted for 26.7% of total global M&A in 2010, up from the previous high of 20.7% in 2009. 2010 also marked the Strongest year for private equity buyouts since 2007, with Buyout deals represent 10.9% of global M&A in 2010, up from 7.2% in 2009, making it the strongest year for buyouts (as percentage of total M&A activity) since 2007.
Fifty One
Credit Suisse finished third, while French firms BNP Paribas and SG - 21st and 40th respectively in 2009 -both entered the top 20 for 2010. Acquisition International talks to the leading advisers of 2010 about the current climate and their predictions for 2011.
LEADING ADVISERS
Tel. 81-3-6888-1061 Hideki Thurgood Kano Fax. Equity Partner 81-3-6888-3061 Email. AAnderson Mori & Tomotsune hidekithurgood.kano@amt-law.com Tokyo Web. Japan www.amt-law.com Contact details
Hideki Thurgood Kano is a partner of Anderson Mori & Tomotsune, which is one of the largest and most diversified full service law firms in Japan. What distinguishes Anderson Mori & Tomotsune from other firms is its wellknown labour/employment law practice. The firm is led by Thurgood, who has been practicing in the area of labour and employment since 1995. He acts on behalf of both Japanese and nonJapanese multinational companies, advising them on all aspects of labour and employment, including, but not limited to:
“In order to actualize the long-term presence/existence of the companies, employers are recommended to attempt to establish a reliable relationship with employees, since the Japanese labour /employment law is proemployees. To achieve this goal, it would be better for employers to demonstrate their warm-hearted consideration to their employees. The biggest labour/employment issue these days is that there are many employees who get mentally depressed due to bullying or too much work. (Some of them even commit suicide, unfortunately). In such a situation, the best approach is appointing and appropriately utilizing a medical doctor whom employers trust so that employers will pay attention to the health of their employees. Thurgood has maintained a good relationship with some excellent medical doctors, who give opinions on the safety and sanitation of work places and examine employees from the view point of employees.”
Contact details
Shardul S Shroff Managing Partner
Amarchand & Mangaldas & Suresh A. Shroff & Co. New Delhi, India
Tel. +91 11 2692 0500 Fax. +91 11 2692 4900 Email. shardul.shroff@amarchand.com
Founded in 1917, Amarchand Mangaldas is one of India’s leading full service law firms. The Delhi office of the Firm was established in 1980 and is headed by Shardul S. Shroff, along with the Kolkata office.”
“The M&A figures show that in the first 45-days of 2010, India Inc announced deals worth $14 billion, which is already more than the $11.9 billion total for 2009.”
“The three distinguishing characteristics of our Firm are - depth of practice, leadership and innovation. Our ability to draw upon the subject matter expertise of our resource pool enables us to offer legal strategies, resulting in effective solutions for our clients.”
At this pace, the value of the legal market may exceed $1 billion in just 3 years. This is not comparable to UK and US markets but as an aggregate value Indian clients expect their legal spend to outstrip the growth of the Indian economy.
Our experience, integrity, and positive results have been an integral factor in our success, and our clients value these traits. We pride ourselves in our commitment to our clients and always strive to deliver the best for them and will do the same in our way forward too. The culture and DNA of the firm is our merit.
“However, the recession experience has made us more prudent and wise. We have always given due importance to domestic deals which benefitted us during the time when tides were worse in other parts of the world.”
At the same time, the litigation sector and other sectors apart from corporate fared pretty decently in India during the bad times compensating for the overall losses.
In 2008 the fee levels in India fell half as much as those in US and UK law firms. Although in 2009 also the deal flows were more slow-moving than the previous two years, now over the past year, the situation has improved.
Fifty Two
LEADING ADVISERS
Bowman Gilfillan Address 165 West Street Sandton, 2146 Johannesburg Tel. +27 11 669 9000 Fax. +27 11 669 9001 Web. www.bowman.co.za Email. info@bowman.co.za
Brækhus Dege Advokatfirma Address Dronning Maudsgt. 10 (entrance: Ruseløkkveien) Post Box 1369 Vika, N-0114 Oslo - Norway Tel. +47 23 23 90 90 Fax. +47 22 83 60 60 Web. www.bd.no Email. Sverre@bd.no
Deloitte
Vik Khanna Address Melbourne Australia Tel. +61 (0) 3 9671 6666 Web. www.deloitte.com/au Email. vkhanna@deloitte.com.au
Nestor Nestor Diculescu Kingston Petersen Address Bucharest Business Park, 1A Bucuresti-Ploiesti National Road, Entrance A, 4th Floor, 1st District, Bucharest 013681, Romania. Tel. +40 21 201 1200 Fax. +40 21 201 1210 Web. www.nndkp.ros Email. office@nndkp.ro
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G
lobal M&A totalled US$ 2,088.7bn for 2010, up 22.7% from 2009 (US$ 1,702.8bn). Deal count was also up by 21.3% at 11,719 announced deals compared to 9,662 for 2009. However, activity continued to remain below the levels reached in 2005-2008. Q4 2010 finished at US$ 683.9bn, up 21.2% from Q4 2009 (US$ 564.5bn), and was the highest quarter since Q3 2008 which saw activity valuing US$ 707.3bn. Emerging markets had their best year on record and made up 26.7% of total global M&A. 2010’s second largest deal was within the emerging markets, with America Movil acquiring Carso Global Telecom for US$ 28.1bn. Cross-border M&A values totalled US$ 800.4bn in 2010, up 70.8% compared to 2009 (US$ 468.5bn). Activity in Q4 2010 reached US$
273bn, the highest since Q3 2008 (US$ 328.5bn). Cross-border M&A made up 38.3% of all global activity in 2010, the highest since 2008 (42.4%). The Energy, Mining and Utilities sector accounted for US$ 225.2bn or 28.1%, with Europe the most active cross-border investor in the sector. Morgan Stanley regained top position in the Global M&A financial advisory tables by total deal value for 2010, after being led by Goldman Sachs for the first three quarters of the year. Although both firms advised on a significantly higher number of deals than in 2009, the value of those deals was only up to 1.8% higher. Credit Suisse finished third, having moved up five positions since 2009, with over US$ 172bn-worth of deals more than in 2009. French firms BNP Paribas and SG – 21st and 40th respectively in 2009 - both entered the top 20 for 2010.
Global stack by region
Global M&A Activity - Quarterly
1,200 1,100 1,000
RoW M&A Asia-Pacific ex Jp M&A US M&A
4,500 4,250 4,000
European M&A
3,750
Volume
3,500
900 800 700
3,250 3,000 2,750 2,500 2,250
600 500 400
2,000 1,750 1,500 1,250
300
1,000
200
750
100
Q tr1 Q 03 tr2 Q 03 tr3 Q 03 tr4 Q 03 tr1 Q 04 tr2 Q 04 tr3 Q 04 tr4 Q 04 tr1 Q 05 tr2 Q 05 tr3 Q 05 tr4 Q 05 tr1 Q 06 tr2 Q 06 tr3 Q 06 tr4 Q 06 tr1 Q 07 tr2 Q 07 tr3 Q 07 tr4 Q 07 tr1 Q 08 tr2 Q 08 tr3 Q 08 tr4 Q 08 tr1 Q 09 tr2 Q 09 tr3 Q 09 tr4 Q 09 tr1 Q 10 tr2 Q 10 tr3 Q 10 tr4 10
0
Fifty Four
500 250 0
Volume of Deals
1,300
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Mergermarket
DEAL INDEX Mid-market M&A Activity (US$ 250m - US$ 2bn)
M
id-market M&A in 2010 was up 58.3% by value and 50% by deal count compared to 2009. Deal values for 2010totalled US$ 761.2bn, the highest since 2007 (US$ 1,136.5bn).
Activity peaked in the fourth quarter of 2010, with US$ 226.8bn-worth of mid-market deals, 33.1% more than Q42009 (US$ 170.4bn) and up 19.4% compared to Q3 2010 (US$ 190bn). Q4 2010 also accounted for the highest quarterly value since Q4 2007 (US$ 274.6bn). Mid-market M&A was a driver of overall M&A activity for 2010, making up 36.5% of all global M&A, the highest since 2003 when midmarket M&A contributed 38.7% of total M&A activity. Japan suffered a steep decline in mid-market M&A values in 2010, dropping from US$ 24.1bn in 2009 to US$13.2bn in 2010, a 45.2% decrease. Japan’s deal values have witnessed a gradual decrease since the third quarter of 2009 (US$ 8.9bn) to Q4 2010 which recorded US$ 3.8bn. The US accounted for 32.4% of global mid-market M&A activity in 2010, up from 25.2% in 2009. Europe also increased its share, from 28% in 2009 to 31.7% in 2010.
Ducatt Grupo Sergesa S.A. Italmatch Chemicals S.p.A. Munters AB PolymerLatex Stork Materials Technology Textbroker.com Viz Risk Management Ecka Granules Assets Grossauer IFCO Systems Layar Miroi P&O Services Group B.V. Photonstar LED LTX-Credence Corp/Verigy Polibol Steag Trafford Centre Vincotech
56 57 58 59 60 61 62 63 66 66 67 67 68 68 69 69 69 70 70 70
Fifty Five
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Capricorn Cleantech Fund and LRM commit €20m in Ducatt
C
apricorn Cleantech Fund and LRM have announced that they are planning to invest € 20 million in Ducatt NV, a Belgian based solarglass start-up. The banning of the incandescent light bulbs from the European market in 2012 obliges Emgo NV, the leading European producer of light bulbs to take the necessary measures and to focus on new growth markets. With the support of the Capricorn Cleantech Fund (CCF) and the investment company for Limburg, LRM, two members of the Emgo management team have taken the initiative to launch a novel solar glass start-up and plans to offer jobs to 100 Emgo employees.
“
Through the foundation of Ducatt, we are realizing an important cornerstone in the expansion of the solar industry in Limburg. Due to its special characteristics, sand from Limburg is already being used worldwide for the production of solar panel components, such as glass. And we should be able to attract more companies that are active higher up in the value chain.
“
”
Stijn Bijnens, CEO LRM
Emgo has always been a pioneer and innovator in the field of glass components for incandensent and tubular lamps. This knowledge provides a solid base to turn Ducatt into an important specialised supplier for the photovoltaic industry.
”
Paul Decraemer head of the Capricorn Cleantech investment practice
Philips Lighting and Osram have agreed to spin-out the lightbulb production from Emgo NV, their 50/50 joint venture. Two members of the Emgo management team have initiated a new activity under the Ducatt NV name. Supported by Capricorn Cleantech Fund and LRM the light bulb production line will be converted into a high value production facility for speciality glass for the photovoltaic industry. Following the signing of agreements with Philips Lighting and Osram, CCF and LRM have conditionally agreed to each invest € 10 million in this ambitious project. The balance of the financial requirements will be met with bank loans. Ducatt NV, the newly created company will start with 100 employees from Emgo. This will allow the start-up to leverage the established glass technology know-how and deploy a new economic activity in a future oriented sector.
Capricorn Cleantech Fund and LRM commit €20m in Ducatt Legal Adviser to the Purchaser/Management Team
“
Sertius CVBA was asked by investor LRM to perform an environmental due diligence (EDD) review of the light bulb (balloon) production line and also to look at possible environmental risks related to a relaunch of the new solar glass production process. The audit team that has executed this phase I and II review, consisted of a multidisciplinary team of experts on permits and legal aspects, emissions (air, wastewater, noise, green house gasses,…), soil and asbestos. Different consultations were also held with the local regulatory authorities to thoroughly assess the (very) specific conditions for a quick relaunch of the new process.
“
”
The EDD report focused not only on the technical, financial, legal and contractual risks for the investors at the time of acquisition but provided also the necessary information for the environmental management plan (e.g. ‘start up’ permit request, E.I.A., implementation of BAT) after the acquisition phase.
”
Steven Eersels, Leo Kerkstoel and Kris Merckx
Legal Adviser to the Equity Provider Tax Adviser
Environmental Due Diligence Provider
“
(Sertius CVBA). kris.merckx@sertius.be
Our vast experience in complex transactions helped us to assist the founders in a time and cost efficent way to structure their involvement in the new venture.
”
Baker Tilly Belgium assisted the founders on the deal.
Property Valuer
Property Valuer
Fifty Six
Anne Roucourt, equity partner at Baker Tilly Belgium, led the team.
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MCH Acquires SERGESA Subsidiaries
M
CH Iberian Capital Fund III, FCR has acquired from Grupo Sergesa S.A. an undisclosed majority interest in Sergesa Televida, S.L. and Sergesa Hogar, S.A., which are Madrid based providers of home health care services for the elderly. The fund specializes in buyout, growth capital, and middle market investments, and follows a generalist approach for industries.
MCH Acquires SERGESA Subsidiaries Legal Adviser
Financial and Fiscal Adviser
Tax Structuring Adviser
“
MCH acquisition was subordinated to the debt refinancing process of Grupo Sergesa. The challenges of the deal were the number of financial institutions with bilateral debt and guarantees (“tailored made” restructuring options for the different bilateral lenders involved).
”
KMPG advised Grupo Sergesa during the refinancing process of its financial debt. The team was led by Angel Martín, head of Restructuring in Spain, and two Restructuring managers: Erika Gomez and Jorge Doval. amartin@kpmg.es
“ ” “
Our firm has acted as legal counsel for MCH in the acquisition of the Spanish companies Sergesa Televida, S.L. and Sergesa Hogar, S.A., subsidiaries of Grupo Sergesa, S.A.
This has been a deal particularly challenging due to the simultaneous refinancing process carried out by the parent entity of the two acquired companies, and to the transaction structure, which has required the execution of very different type of documents in several closings.
”
The ALEMANY, ESCALONA & ESCALANTE team devoted to this transaction has been led by José Antonio Escalona, head of the corporate department, and Antonio Conde, partner of the firm. joseantonio.escalona@alescab.es
Financial Restructuring Provider
M&A Adviser
“
Eurohold has advised Grupo Sergesa for these two transactions. We believe that Sergesa Hogar and Sergesa Televida will benefit from MCH experience in growing companies and creating value. On another hand Sergesa Residences has been able thanks to these transactions to focus and compete more actively on core activities.
”
Jean-François ALANDRY, Managing Partner, EUROHOLD Jean-François jfa@eurohold.com
Fifty Seven
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Italmatch disposal
W
orld Chemicals S.A., a company controlled by Investindustrial (together “Investindustrial”), the leading Southern European investment group, has agreed to sell Italmatch Chemicals S.p.A. (“Italmatch”) to Mandarin Capital Partners, a Sino-European investor, and the Malacalza Group. Closing is expected by mid-December 2010. Italmatch Chemicals (www.italmatch.it) is a leading global producer of additives for lubricant oils, flame retardants and other phosphorous based products. Investindustrial acquired Italmatch at the end of 2004 to continue the industrial expansion strategy. Since acquisition, Italmatch has expanded from two production plants to five, three of which are based in China. As a result, the company has established itself as a prominent player in the Chinese and wider Asian markets.
“
We are pleased with the strong outcome of our investment in Italmatch. The active repositioning of the company into a leader in China and with a strong product family has built a platform for the new owners from which to continue the global industrial plan.
”
Andrea C. Bonomi, Chairman of Investindustrial www.investindustrial.com
“
It has been a very interesting deal. We were very impressed by the quality of Italmatch's management. We are confident that the new shareholder will actively push Italmatch's further internationalization.
”
Fineurop Soditic acted as exclusive financial advisor to the sellers on the deal. The team was led by Mr. Eugenio Morpurgo, CEO, with the coordination of Mr. Germano Palumbo, Partner and Head of M&A, and the assistance of Mr. Federico Mondelli, Associate.
In the last five years, Italmatch has been transformed into nearly a €100 million revenue company through organic investments and the strategic acquisition of Akzo Nobel’s lube oil division in January 2007. During Investindustrial’s ownership, EBITDA has been increased four-fold to approximately €22 million compared to €5 million in 2005.
Mandarin Capital Partners acquires Italmatch Chemicals S.P.A Debt Provider
Legal Adviser to the Purchaser
Legal Advisers to the Debt Providers
Financial Due Diligence Provider
Legal Advisers to the Vendor
Financial Advisers to the Vendor
Fifty Eight
www.fineuropsoditic.com
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Nordic Capital Fund VII acquires Munters AB
N
ordic Capital VII Limited (“Nordic Capital Fund VII”) has acquired Munters AB (“Munters”) through a recommended public tender offer. On 29 September, Cidron Intressenter AB, a company indirectly wholly owned by Nordic Capital Fund VII, announced a recommended offer to the shareholders in Munters, listed on Nasdaq OMX Stockholm.
“
Mr Slettengren has had long-standing relationships with members of the Board of Directors, as well as with management of Munters, having advised on the sale of Munters’ MCS division earlier in 2010. Following the approach and subsequent public offer Alfa Laval at SEK 68 , the key priority for the Board of Directors and Lazard was to attain a higher bid for Munters, a process that was successfully concluded by Nordic Capital’s acquisition of the Company at SEK 77.
”
Lazard advised the Board of Directors of Munters on the public offers for Munters in the fall of 2010. The team was led by Managing Director and Head of the Nordic office Gustaf Slettengren,
The initial offer of SEK 73 in cash per share was later increased to SEK 77 in cash per share. The offer was successfully completed on 5 November, at an acceptance level of 97.6 per cent. “Nordic Capital has extensive experience from successfully carrying out growth strategies and we will, together with Munters’ management and employees, continue Munters’ acquisition and expansion strategy”, says Joakim Karlsson, Managing Partner, Nordic Capital.
assisted by Jacob Engwall and Gerhard Caspar. www.lazard.com
“
The deal was a challenging process due to the nature and competitiveness of this transaction. KPMG assisted with robust financial, tax and pension due diligence as well as structuring advice which helped Nordic Capital in assessing their opportunities.
Nordic Capital Fund VII acquires Munters AB
”
KPMG acted on behalf of Nordic Capital on the deal. Taus Wolfsberg and Jan Källqvist, partners led the team.
Debt Providers
Legal Adviser to the Purchaser/Management Team
Financial Adviser to the Purchaser/Management Team
tauswolfsberg@kpmg.se
“
The main challenge of the deal was its very tight time frame. Ashurst overcame this challenge by having the ability to line up a really good team and working with lawyers on the other side which took a commercial and can do approach helped tremendously. It was a transaction out of the ordinary which required the ability to move quickly and think outside the box.
”
Mats Rooth (partner) together with Costin Mihailescu (senior associate) led the Ashurst team representing Nordic Capital. Mats.Rooth@ashurst.com
Legal Advisers to the Debt Providers
Financial Due Diligence Provider
Legal Advisers to the Vendor
Financial Advisers to the Vendor
Tax Adviser
Fifty Nine
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PolymerLatex disposal
T
owerBrook Capital Partners LP (“TowerBrook”) has agreed the sale of PolymerLatex Deutschland Beteiligungsgesellschaft mbH (“PolymerLatex”) to Yule Catto & Co Plc (“Yule Catto”) for a total gross consideration of €443 million, of which €286 million will be used to settle PolymerLatex’s existing net indebtedness. In addition, Yule Catto will assume existing pensions liabilities of €31 million. The transaction, which is subject to the necessary regulatory and shareholder approvals, is expected to be completed during Q2, 2011.
“ ” “
URS undertook Vendor Environmental Due Diligence of Polymer Latex on behalf of Polymer Latex Holdings / Towerbrook with whom URS has an established relationship.
The deal required coordination of URS’ due diligence resource across 5 countries, including Malaysia, within an expedited time-frame to identify and assess potentially material issues, and to put these issues into context for consideration within the wider transaction. URS also undertook a detailed assessment of the Target’s compliance with the European REACH regulations and supported our Client during purchaser negotiations.
”
The acquisition of PolymerLatex will build on Yule Catto’s position in the SBR latex market by adding European manufacturing assets, new end markets and applications development capabilities, enabling Yule Catto to compete more effectively in this market segment.
Polymer Latex acquired by Catto & Co Plc Debt Providers
Legal Adviser to the Purchaser
Financial Adviser to the Purchaser Legal Adviser to the Equity Underwriters Legal Advisers to the Debt Providers
Legal Advisers to the Purchaser
Financial Due Diligence Provider Legal Advisers to the Vendor Vendor Due Diligence Provider
Financial Due Diligence Provider
Environmental Due Diligence
Sixty
The URS due diligence team was led by Nicholas Howard, Principal Transactions Consultant in URS’ Manchester office.
“
We were brought in at a late stage as there were specific concerns that our clients (the selling German management team) had on which they needed UK advice. We required to bridge the people integral to the deal (ie. managememt) to the main parties (YC and Towerbrook).
”
Ian Martin is Partner at Macfarlanes LLP
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Stork Materials Technology acquired
3
i, an international investor in private equity, infrastructure and debt management, and funds managed by 3i have signed an agreement to acquire Stork Materials Technology (“SMT”), a leading international materials testing services business, in a £130 million/€150 million transaction. 3i has underwritten the full transaction amount. Headquartered in the Netherlands, Stork Materials Technology is a network of independent, accredited laboratories providing testing solutions to industry throughout Europe and the US. SMT experts support businesses with materials testing, product qualification testing, failure analysis, consulting and calibration services.
“
3i’s experience in the testing and inspection sector and their commitment to our operational growth strategy were key to this transaction. We are looking forward to the next stage of our development as we focus on growing our business, expanding our capabilities and further consolidating the testing market.
”
“
Charles Noall, SMT CEO
3i has been tracking SMT for a number of years through our local network in the Benelux. We are attracted to the company’s market leading position in a sector we understand well, exceptional management team and growth prospects. We are confident in our ability to add value to the business beyond being simply a provider of capital.
”
Menno Antal, 3i Managing Partner Northern Europe and Head of Buyout Funds
3i acquires Stork Materials Technology Equity Provider
Legal Adviser to the Purchaser/Management Team & to the Equity Provider Financial Adviser to the Purchaser/ Management Team & to the Equity Provider Financial Due Diligence Provider & Tax Advisor
“
DataroomServices is an expert in both the pre-data room phase as the ‘live’ phase. A well organised data room is nine out of ten times a result of a well organised collection, indexation and upload process. Thinking before acting is vital to ensure input equals output in a (pre) due diligence process. DataroomServices regards an M&A process as two separate phases. During ‘Phase I’ we focus primarily on advising and executing in terms of collecting, scanning, indexing, blacklining and uploading of relevant information. During ‘Phase II’ we concentrate on the actual disclosing of the in Phase I collected information. For this deal – and for many other deals – Merrill DataSite was chosen to provide the Virtual Data Room.
”
DataroomServices B.V. represented Stork B.V on the deal, reinforcing a long
Legal Advisers to the Vendor
lasting relationship with Stork BV. Meike Kipp as the Process Manager led the dedicated process team in terms of the operations relating to the data room
Financial Advisers to the Vendor
Risk & Insurance Due Diligence Provider
Environmental Due Diligence Provider
Commercial Due Diligence Provider
Data Room Solution Provider
Sixty One
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DEAL DIARY
Textbroker.com gains expansion funds
S
ario Marketing GmbH, the company behind a leading internet platform for unique on-demand content, Textbroker.com, announced the successful completion of a multi-million Euro growth financing round. The round was led through funds advised by ViewPoint Capital Partners and the proceeds will be used to support Textbroker’s growth in existing markets, as well as expansion into new markets both within and beyond Europe.
“
I was contacted by Viewpoint Partners to advise with respect to certain U.S. tax aspects involved in its acquisition of Textbroker Funding. The specific mandate involved structuring the transfer of the U.S. entity held by the German resident shareholder of Textbroker and to integrate it within the German entity being acquired by Viewpoint in a tax efficient manner.
”
Tax partner at the law firm of Alston & Bird LLP
“
www.alston.com
INOVIS Capital has a long-standing working relationship with Sario Marketing GmbH who runs the internet platform “textbroker”.
”
The transaction was led by Christian Wexlberger, CEO of INOVIS Capital GmbH.
Textbroker.com gains expansion funds Legal Adviser to the Purchaser/Management Team and the Equity Provider
Financial Adviser to the Purchaser/ Management Team
Mokrusch Consulting
“
www.inoviscapital.de
We have been representing the funding object Sario Marketing GmbH and Textbroker International LLC, respectively, and the company´s CEO and principal shareholder, who have been our clients for several years.
“
”
The challenge was to optimize the integration of the Textbroker LLC into the German Sario GmbH under German and US tax and corporate laws. We provided an analysis of all options available and assisted in choosing the most cost-effective strategy.
”
Stefan Winheller (tax law, managing partner)
and Christian Zeller (corporate law,
Legal Advisers to the Vendor
head of transactional services) led the team.
WINHELLER Attorneys at Law, www.winheller.com
Legal Advisers to the Vendor
Legal Advisers to the Vendor Helmut Erb Steuerberater, Wirtschaftsprüfer
Sixty Two
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DEAL DIARY
Brady Plc Acquires Viz Risk Management
B
rady plc (BRY.L), the leading supplier of trading and risk management solutions for metals and commodities, announced their intended acquisition of Viz Risk Management (“Viz”), a major provider of risk management and trading solutions to the energy markets, principally electricity, gas, emission certificates and coal. This acquisition is expected to make Brady the largest European provider of specialist integrated trading and risk management solutions to the global metals, commodity and energy markets. The deal is anticipated to complete in December this year. Brady also announces a highly successful share placing of £15 million with both existing and new investors, which will be used to finance the acquisition and also further increase Brady’s cash resources. The Company looks forward to welcoming the new shareholders in what it sees as a transformational deal.
Brady Plc Acquires Viz Risk Management Nomad to Brady Plc
Financial Adviser to Viz Risk Management
M&A Adviser to Brady Plc
“
Elviz ETRM is seen as the market standard for European energy trading and risk management. Our close working relationships with the energy markets have resulted in Viz providing the most advanced solutions for realtime trading, pricing, analysis and risk management currently available. Viz becoming part of Brady makes excellent strategic and commercial sense, and also provides a major opportunity to take Elviz ETRM to the wider, global energy community. We believe Brady’s complementary solutions, geographical coverage and strong balance sheet will help us serve our customers and accelerate our growth.
”
Frank Carlsen, Viz CEO
“
We continue to work very closely with Goldenhill to assist in our M&A process including this transaction. Their knowledge of the FinTech sector, presence on both sides of the Atlantic and M&A experience has been of real value.
”
Brady CEO, Gavin Lavelle
“ ” “
The conditional acquisition of Viz is the result of a thorough research, identification, analysis and negotiation process in which Goldenhill advised Brady throughout the process. This is the third acquisition where Goldenhill has advised Brady since engaging with the company as their M&A advisor in 2008.
”
The team was led by Chris Brooke – a London based Partner with the firm
Sixty Three
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Private Equity
P
rivate Equity-backed buyouts continued to grow, with Q4 2010 seeing buyouts valuing US$ 76bn, the strongest fourth quarter since Q4 2007 (US$ 139.2bn). Buyout activity for the year 2010 was valued at US$ 226.7bn, up 85.4% compared to 2009 (US$ 122.3bn). Buyout deals represent 10.9% of global M&A in 2010, up from 7.2% in 2009, making it the strongest year for buyouts (as percentage of total M&A activity) since 2007, when they accounted for 22.9%.
the most leveraged year since 2007, when it was 67.6%.
113 buyout deals valued at over US$ 500m were announced in 2010, 74 more than 2009. On large cap buyouts (US$1bn+), private equity firms raised, on average, debt financing of 5.4x EBITDA in 2010 – a recovery from 3.8x in 2009, but still lower than the 5.5x of 2008 and the 9.9x peak in 2007. Meanwhile, the average debt financing on large cap buyouts has reached 59.6% of total funding per deal, making 2010
Private equity firms exited their holdings at the enterprise valuation of 11.1x EBITDA on average, up from 10x in2009 and the highest since 2008, but still a long way from the 17.7x peak in 2007.
Private equity exits via secondary buyouts (SBO) and trade sales were up from US$ 87.4bn in 2009 to US$ 205.4bn in 2010 (135% increase), the highest since 2007 (US$ 375.7bn). SBOs made up 30% of all exits in 2010, up from 16.3% in 2009 and again the highest proportion since 2007 (45.8%).
Carlyle Group was the most active PE firm in 2010, with 28 buyouts (worth US$ 15.6bn), and 14 exits.
Global BO 2
Global Private Equity Buyout Activity - Quarterly 400
35% RoW Buyouts (Value)
350
US Buyouts (Value)
30%
Europe Buyouts (Value) Buyouts (% of Total M&A)
25%
250 20% 200 15% 150 10% 100
50
Q tr1 Q 03 tr2 Q 03 tr3 Q 03 tr4 Q 03 tr1 Q 04 tr2 Q 04 tr3 Q 04 tr4 Q 04 tr1 Q 05 tr2 Q 05 tr3 Q 05 tr4 Q 05 tr1 Q 06 tr2 Q 06 tr3 Q 06 tr4 Q 06 tr1 Q 07 tr2 Q 07 tr3 Q 07 tr4 Q 07 tr1 Q 08 tr2 Q 08 tr3 Q 08 tr4 Q 08 tr1 Q 09 tr2 Q 09 tr3 Q 09 tr4 Q 09 tr1 Q 10 tr2 Q 10 tr3 Q 10 tr4 10
0
Sixty Four
5%
0%
Percentage
Value of Deals ($bn)
300
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Emerging Markets
I
n 2010, emerging markets saw 2,763 deals worth US$ 557.2bn, up 19.9% by deal count and 58.4% by deal value from 2009. It was the busiest year by value on record, surpassing the previous high in 2007 of US$ 499.3bn. The emerging markets accounted for 26.7% of total global M&A in 2010, continuing the steady increase since 2003 (8.3%), and up from the previous high of 20.7% in 2009. Over half of this deal value came from the BRIC countries (which on their own accounted for 14% of global M&A transactions by value in 2010) although this was down from the 2009 peak of 62.2%. Inbound deals into the emerging markets more than doubled in 2010, from US$ 55.9bn to US$ 126.1bn. Investment came from 40 countries, but the US, the UK, Spain and Japan were the biggest buyers, accounting between them for 66% of inbound
M&A deal value. BRIC countries were the most popular targets, particularly China (110 deals),India (107 deals) and Brazil (91 deals). Outbound deals also almost doubled in value in 2010, increasing from US$ 55.8bn to US$ 110.6bn. Targets for emerging countries shifted significantly towards Europe, which accounted for 34.5% of total outbound investment up from 23.2% in 2009. Energy, Mining & Utilities was the most active sector in the fourth quarter, representing 29.5% of emerging markets activity. The next most active sector was Telecoms, which accounted for 15.8%, quadrupling its share since 2009. Credit Suisse was the most active financial advisor on emerging markets M&A, with US$ 118.9bn worth of deals in 2010.
Trends
Emerging Markets M&A Activity Trend - Quarterly 200
35% Other EM (Value)
180
BRIC (Value) EM M&A as % of Global M&A (Value)
30%
160 25%
Value of Deals ($bn)
120 20% 100 15% 80 60
% of Global M&A
140
10%
40 5% 20 0
0%
03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 tr1 tr2 tr3 tr4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
Sixty Five
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DEAL DIARY
Platinum Equity acquires Ecka Granules Assets
“
This acquisition is part of an ongoing strategy to expand our presence in the metal powders space. ECKA Granules is an excellent strategic fit in our portfolio.
”
Jacob Kotzubei, the partner at Platinum
latinum Equity has acquired substantially all material assets of ECKA Granules, a Germany-based manufacturer and distributor of metal powders to a broad range of industries. The acquisition which includes copper, aluminum and magnesium powder manufacturing plants and sales offices will, upon registration of all share transfers, include Australia, Austria, Bahrain, China, Germany, Slovenia, Switzerland, the U.K. and the United States. Terms of the transaction were not disclosed.
P
Platinum Equity Acquires Ecka Granules Assets
who led the ECKA Granules transaction.
www.platinumequity.com
“
The key challenge to successfully close this transaction was the extremely complex deal structure involving more than 50 entities around the globe of the former ECKA Granules Group, the most relevant of which were represented by insolvency administrators.
“
”
It has been a pleasure to work with Platinum Equity in this transaction where we jointly found ways to maneuver through these issues and to finally win the very competitive bidder process.
Legal Adviser to Platinum Equity LLC
”
Dr. Christopher Wolff, partner of Paul, Hastings, Janofsky & Walker (Europe) LLP, Germany www.paulhastings.com
Rexel acquires Grossauer in Switzerland exel, a global leader in the distribution of electrical supplies, has closed the acquisition of Grossauer,the fourth-biggest distributor of electrical supplies in Switzerland.
R
Rexel acquires Grossauer in Switzerland Financial Advisor
Legal Adviser
Tax Adviser
Sixty Six
“
The target was a very successful family owned business which was not used to being subject to an in depth due diligence. A practical approach to the due diligence process and the transaction mechanics was required to meet the objectives of both parties.
”
KMPG Representing REXEL and their Swiss subsidiary Elektro-Material, reinforcing a long standing relationship with both the parent and the subsidiary. Sean Peyer, Partner, Transaction Services in Zürich led the KPMG team.
“
Established in 1956, Grossauer is a family-owned company based in the eastern part of Switzerland. Grossauer’s estimated sales for 2010 amount to c. €50 million. Grossauer occupies a strong market position in this part of the country through its single branch in Heiden. The company has a solid presence in the industrial segment and is well-known for its very strong customer relationships.
”
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DEAL DIARY
Apax Funds agree to sell stake in IFCO Systems to Brambles unds advised by Apax Partners (“Apax”) have agreed to sell their majority stake in IFCO Systems N.V. (“IFCO”) to the Australian logistics company Brambles Limited (“Brambles”) for €13.50 per share. Apax Europe V acquired the stake in IFCO Systems in November 2003 through the purchase of shares listed on the Prime Standard of the Frankfurt Stock Exchange and announced a voluntary public offer to the remaining free float shareholders in early 2004 for €2.75 per share.
F
“
Our successful investment in IFCO Systems demonstrates the extensive expertise of Apax Partners in the Business Services area and our team’s ability to identify companies with strong potential and promote their long-term growth. This is a prime example of Apax successfully partnering with a strong management team in one of our core industry sectors. IFCO is a leading player in the eco-friendly reusable packaging sector and Brambles is the ideal partner to maximize and develop its future potential.
”
Ralf Gruss, Partner at Apax Partners www.apax.com
Apax Funds agree to sell stake in IFCO Systems Financial Adviser to Brambles
Legal Advisers to Brambles
“
For seven years, Apax was a loyal and longterm investor, which the entire management team enjoyed working with to optimize the growth of IFCO. We look forward to a continuation of IFCO´s growth story.
”
Karl Pohler, CEO of IFCO Systems
Accounting Advice to Brambles
Layar receives $14M in New Funding ntel Capital, Intel Corporation’s global investment organization, reaffirmed its dedication to foster worldwide innovation with the announcement of 18 new investments. The new deals total approximately $77 million and were announced at the 11th annual Intel Capital CEO Summit.
I
www.ifco.com
“
Despite the economic environment, these 18 investments help advance next generation computing technologies aligning with Intel’s vision that more and more devices will compute and connect to the Internet, called the ‘compute continuum.’ The innovative technology developed by these companies supports the compute continuum from advancements in PCs and server trends, such as cloud computing, to building out the ecosystem around smart TVs and smartphones.
”
Arvind Sodhani, president of Intel Capital and Intel
The new investments include Adaptivity, Althea Systems, Anobit, boo-box, De Novo, IPTEGO, Layar, Lilliputian Systems, Inc, Ortiva Wireless, Rock Flow Dynamics, Select-TV, SilkRoad, Taifatech, Videon Central, Verismo Networks, Winchannel, YuMe and Yummly.com.
www.intel.com
“ Layar receives $14M in New Funding Layar receives $14M in New Funding
We represented Intel Capital, with whom we have a longstanding working relationship. We are delighted to have again been able to work with Intel Capital on this investment and assist in getting the funding completed and the accompanying transaction documentation in place. Layar is an exciting company and the rapid developments in the augmented reality market are truly fascinating.
”
The Bird & Bird team was led by Pauline Vos, partner in Bird & Bird’s Corporate Group, based in the Netherlands. Pauline.Vos@twobirds.com
Sixty Seven
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DEAL DIARY
Miroi Receives Equity Investment from Via Venture Partners iroi AB, a Luleå, Sweden-based in adult education and job matching provider, has received a majority equity investment from Via Venture Partners.
M
“
It has been rewarding working with Miroi, acting on the market for publically financed services where , in Sweden, health care was first out opening up for private service providers, followed by education and now labor related services. This environment has its own logic, something we have learnt to understand, having advised on transactions in several of these sectors. Together with Via Ventures as financial sponsor, Miroi has every chance of reaching the next level.
”
As stated by Miroi’s MD, Jan Aspvik, the support, of undisclosed amount, is intended to enable the company to expand its activities including labour market training, adult education and job matching.
Johan Wiström - Avantus Corporate Finance johan.wistrom@avantus.se
Following the investment, Via Venture Partners will become the majority shareholder in the company and Mr. Aspvik and vice MD Thomas Sjölund will retain 30% of the shares. Founded in 1991, Miroi is estimated to have sales of SEK180m, an increase of around 70% on 2009.
Miroi Receives Equity Investment from Via Venture Partners Legal adviser to Via Venture Partners
Grow/Work Group B.V. Acquisition of a stake in P&O Services Group B.V. row/Work Group B.V. has acquired a stake in P&O Services Group B.V., a company that sources all aspects of personnel and organization.
G
“
The negotiations took place in a friendly atmosphere. This was also important because the selling shareholders partly participate in the NEWCO that purchased the shares in P&O Services Group B.V. Next to the sale of the shares we therefore had to negotiate a shareholders agreement between seller and purchaser which gave this transaction an additional dimension.
”
BANNING represented the four selling shareholders which are new clients for BANNING.
The BANNING team was led by Rob Hendriks and Krijn Keukens.
Grow/Work Group B.V. acquires a majority stake in P&O Services Group B.V.
Rob Hendriks is the managing partner of Banning’s M&A department and Krijn Keukens is partner of the M&A department
Legal Adviser to Grow/Work Group B.V.
Legal Adviser to P&O Services Group B.V.
Accountancy advice to Grow/Work Group B.V.
Accountancy advice to P&O Services Group B.V.
Sixty Eight
“
P&O Services Group B.V. is a dynamic company that specialises in personnel and payroll in various industries (eg Hospital, Construction, and Metal). P&O Services Group B.V., sources all aspects of personnel and organization policy, putting people first.
”
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DEAL DIARY
Enfis Group Plc to Acquire Photonstar LED
LTX-Credence Corp/ Verigy merger
nfis Group Plc has conditionally agreed to purchase the entire issued share capital of PhotonStar LED Limited.
ilpitas, California based LTX-Credence Corp (NASDAQ: LTXC) and Verigy (NASDAQ: VRGY) have entered into a merger agreement under which under which LTX-Credence would become a wholly owned subsidiary of Verigy or Verigy and LTX-Credence would become wholly owned subsidiaries of Holdco, a newly created subsidiary.
E
M
Enfis Group Plc to acquire Photonstar LED Legal Advisor to the Management Team
LTX-Credence Corp/ Verigy merger Financial Adviser to LTX-Credence
Financial Advisor to the Management Team Legal Adviser to LTX-Credence Financial Due Diligence Provider & Tax Adviser Fianncial Adviser to Verigy Legal Advisors to the Vendor Legal Adviser to Verigy
Sherpa Capital Acquires Polibol herpa Capital has acquired a majority stake in Polibol, a manufacturer of flexible packaging. Polibol was established in 1959 and today generates revenues of 20 m euros by working with clients in the food, cosmetics and chemical industries. The company employs 100 staff.
S
Sherpa Capital has acquired a majority stake in Polibol, a manufacturer of flexible packaging.
“
We have a long standing relationship with Kostova Systems S.L that has lasted for five years , since with led their management buyout.
“
”
Jose Pajares led the team josepajares@pajaresyasociados.com
The deal marks Sherpa Capital’s debut deal and supports the Sherpa’s acquisition strategy. The company intends to grow the company’s turnover to 60m euros over the next three years.
”
Legal Adviser to the Purchaser/Management team
Financial Adviser to the Purchaser/Management Team/Equity
Improven Legal Adviser to the Equity Provider Financial Adviser to the Equity Provider
Improven Sixty Nine
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Steag disposal ssen-based Evonik Steag GmbH agreed to sell an initial 51% stake in its power plant unit Steag, Germany’s fifth largest electricity producer to a group of local municipalities for EUR 649 million.
E
The consortium consisting of the utilities of the cities and towns of Essen, Duisburg, Dortmund, Dinslaken, Bochum and Oberhausen was reportedly granted the option to acquire the remaining 49% share.
“ “
The Stadtwerke Konsortium acquired the stake in Steag via the SPV " KSBG Kommunale Beteiligungsgesellschaft GmbH & Co.KG.
”
We have long - standing working relationships especially with Stadtwerke Bochum GmbH and Stadtwerke Oberhausen AG.
”
Dr. Achim Compes,
partner and head of the Energy Group within Görg led the team. acompes@goerg.de
Evonik Steag GmbH sells Steag to a consortium of investors Legal Adviser to “Stadtwerke Konsortium”
Görg Accounting Advice to Park Holding
Consulting Advice to Remondis
Luther
Trafford Centre disposal eel has reached agreement with Capital Shopping Centres to sell the Trafford Centre for £1.65bn in exchange for a 19.9% stake in CSC.
P
The deal involves an equity purchase price of £747.6m for the Trafford Centre, which attracts 35m customer visits annually, and a £77m cash payment by Peel, in return for shares and bonds in CSC.
Trafford Centre disposal Legal Adviser to the Purchaser/management team
Vincotech group acquired itsubishi Electric Corporation (“Mitsubishi Electric”) has announced that Mitsubishi Electric and The Gores Group have entered into a Share Purchase Agreement on the acquisition of Vincotech group, a manufacturer of electronic components (hereafter “Vincotech”) based in Germany.
M
Having its main business activities in Europe, Vincotech specializes in the development, manufacturing (assembly testing process) and distribution of low power devices that are used as inverters for general industrial applications and power conditioners for solar power system applications. By acquiring Vincotech, Mitsubishi Electric seeks to further strengthen its power device business and to complement Mitsubishi Electric’s medium & high power device technology with Vincotech’s low power device technology.
Vincotech group acquired Financial Adviser to the Purchaser/management team
Property Valuers
Seventy
Legal Adviser to the Purchaser/Management team/Vendor Financial Adviser to the Purchaser/Management team/Vendor
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European M&A Overview
4
,553 M&A deals with a total value of US$ 629.8bn were announced in Europe in 2010. This was a 37% increase on 2009’s US$ 459.6bn, though still only 41.6% of the peak reached in 2007, which saw over US$ 1.5tr-worth of deals.
Switzerland, Russia and Belgium also saw significant increases in 2010 whilst M&A activity in the UK, Spain and the Netherlands dropped by 4.3%, 23.9% and 38.2% respectively when compared to 2009 by deal value.
Q4 saw the announcement of US$ 219.4bn-worth of European M&A, 17.4% more activity than the same period in 2009 and the highest quarter since Q3 2008 (US$ 319.1bn).
In 2010 European companies invested a total of US$ 178.6bn outside the continent, the highest value since 2008 (US$ 207.9bn). Inbound M&A into Europe in 2010 reached US$ 138bn, up 43% from US$96.5bn in 2009.
Europe’s share of global M&A for 2010 increased to 30.2% - up from 27% in 2009. The UK & Ireland continued to see the most M&A in the region, with US$ 132.7bn-worth of deals announced, followed closely by the Germanic region with US$ 129.4bn. Activity in Turkey jumped to US$ 21.1bn in 2010, up from US$ 3.1bn in 2009. Sweden,
“
Goldman Sachs retained top ranking on the financial advisory league tables for European M&A for 2010. SG moved up 15 places since 2009 to take tenth spot in the rankings by value, having worked on US$ 92.8bn worth of deals compared to US$ 16.5bn in 2009.
In 2010 European companies invested a total of US$ 178.6bn outside the continent, the highest value since 2008 (US$ 207.9bn). Inbound M&A into Europe in 2010 reached US$ 138bn, up 43% from US$96.5bn in 2009.
”
Seventy One
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US M&A Overview
A
strong second half in 2010 allowed total M&A activity in the US to tally up US$ 714.3bn-worth of deals, a 2.8% increase from 2009’s US$ 695.1bn. Deal count was also up by 27.2% at 3,428 announced deals compared to 2,695 in 2009. 2010 was not far off the levels reached in 2008 which stood at US$738.3bn from 3,635 deals. However, the US contributed a lower proportion of global M&A in 2010 than in 2009 – 34.2% as opposed to 40.8% in 2009.
M&A activity in Q4 2010 in Asia-Pacific stood at US$ 149.6bn, the highest quarter on record. Q4 2010 was 46.4.9% higher than Q4 2009 (US$ 102.2bn).
Q4 2010 finished at US$ 230bn and was up 12.2%, or US$ 25bn, from the levels reached for the same period in 2009. It was also the highest Q4 period since Q4 2006 which saw US$ 439.8bn-worth of M&A.
Australia was the most active M&A market in the region, accounting for 22.8% (US$ 101.8bn) of M&A in Asia-Pacific, followed closely by China. Malaysia saw M&A increase from US$ 3.5bn in 2009 to US$ 32.5bn in 2010. Australia and India saw activity more than double in 2010 compared to 2009 whereas large drops were seen in some countries including China (-23.8%), Japan (-25.8%) and Taiwan (-61%).
One of the largest deals in Q4 was France-based Sanofi -Aventis’ unsolicited offer for Genzyme Corporation, valued at US$ 17.9bn – the only non-domestic US deal in the top 10 biggest deals. Morgan Stanley took top ranking in the US financial advisory league tables. Seven European firms appear in the top 20, six of which have improved on their positions from 2009. Credit Suisse is the highest ranking European firm in fourth place, and BNP Paribas is up 35 places at 21st.
Asia Pacific M&A Overview (ex Japan)
The region accounted for 18.7% of global M&A in 2010, up from 16.8% in 2009. 2010 saw the Asia-Pacific region accounting for the highest proportion of global M&A on mergermarket record (since 2001).
Notwithstanding a slight dip in Q2, outbound Asian M&A remained strong in 2010, totalling US$ 103.5bn, the second highest value after 2007 (US$ 126.1bn). Q4 2010, at US$ 35bn, was the highest quarter since Q1 2008 (US$36bn) for outbound activity. Inbound deal flow into Asia Pacific was up by 81.8% to US$ 83.5bn worth of deals in 2010, compared to US$ 45.9bn in 2009.
Total M&A in the region in 2010 totalled US$ 391.5bn, the highest value on record and 14.2% greater than the previous peak achieved in 2008 which stood at US$ 342.8bn. Deal count is also up by 19.1% compared to 2009.
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Morgan Stanley retained its top ranking in the 2010 financial advisory league tables for Asia-Pacific (excluding Japan) M&A. Nine of the top ten banks were international fi rms.
Australia was the most active M&A market in the region, accounting for 22.8% (US$ 101.8bn) of M&A in AsiaPacific, followed closely by China. Malaysia saw M&A increase from US$ 3.5bn in 2009 to US$ 32.5bn in 2010. Australia and India saw activity more than double in 2010 compared to 2009 whereas large drops were seen in some countries including China (-23.8%), Japan (-25.8%) and Taiwan (-61%).
Seventy Two
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