September 2012 /
In this Issue/
RESPICARDIA — Tim Hauch, Chief Financial Officer of Respicardia, gives Acquisition International some insight into the company’s recent senior secured credit facility. / 8
www. ACQUISITION-INTL .com
6
SECTOR TALK:
10
DEAL GURU:
72
SECTOR SPOTLIGHT:
Private Equity-Backed IT & Technology Buyout Deals Bric Asset Managers Look Attractive Takeover Targets Q3 Report
M&A AWARDS 2012
— Winners Speak To AI About Their Awards / 12
MERGER CONTROL
— Managing Competition / 45
FCPA COMPLIANCE
— Mitigating Risk in M&A Transactions / 37
CONTENTS:
September 2012
Editors Comment The UK economy is projected to shrink in 2012 according to The British Chambers of Commerce Q3 economic forecast. The business group has downgraded its predictions for UK growth in 2012 from +0.1% to -0.4%, and its predictions for 2013 from 1.9% to 1.2%. While many Chamber members have continued to report positive trading conditions and growth intentions in recent months, the deteriorating global environment has meant that the UK economy as a whole is now likely to shrink in 2012. Headwinds from slowing global economy, the crisis in the eurozone, and domestic austerity measures are complicating the UK’s recovery prospects. The BCC believes that UK businesses have got what it takes to help the UK return to growth, and continued reports of growth by many Chamber members suggests there is a reserve of business confidence and strong performance in the UK that can be harnessed. However, this can only be achieved if the government acts quickly and radically to introduce both short-term stimulus measures and radical long-term policies for growth. The BCC calls for action to create a new model economy for the UK, with immediate measures to support business confidence and investment, a radical long-term growth plan, and a continued commitment to deficit reduction. The situation faced by the UK is similar to that of many jurisdictions around the world that are struggling to return to growth. This month’s Acquisition International includes an extensive report on Q3 2012 with expert commentary from around the world, please turn to page 72 to read more. We also celebrate excellence with our 2012 M&A awards, discuss the complexities of doing business in various jurisdictions, and examine specific areas such as merger control and FCPA compliance.
Enjoy the Issue, Charlotte Abbott, Editor charlotte.abbott@acquisition-intl.com
CONTENTS — September 2012
ON THE COVER - RESPICARDIA: /08
Tim Hauch, Chief Financial Officer of Respicardia, gives Acquisition International some insight into the company’s recent senior secured credit facility.
NEWS: /04
The latest news stories from around the world.
SECTOR TALK: /06 Private Equity-Backed IT & Technology Buyout Deals Powered by Prequin.
DEAL GURU: /10 Bric Asset Managers Look Attractive Takeover Targets
How to get in touch AI welcomes news and views from it’s readers. Correspondence should be sent to; Address/ Acquisition International, Blakenhall Park, Barton under Needwood, Burton on Trent, DE13 8AJ. Tel/ 0844 809 4788 Email/ reception@acquisition-intl.com Website/ www.acquisition-intl.com
SECTOR SPOTLIGHT: /72 Q3 Report
@acquisition-int
ACQUISITION INTERNATIONAL
2012 Winners Speak to AI about Their Awards 21/ 30/ 32/ 34/ 37/ 40/ 41/ 42/ 45/ 51/ 52/ 53/ 55/ 56/ 58/ 60/
DEAL DIARY: /85 The latest M&A from around the world.
Find us on/
M&A AWARDS: /12
62/ 63/ 64/ 65/ 66/ 69/ 70/
2012
Doing Business in... The Isle of Man Leading The UK to Recovery The UK Bribery Act - One Year on Double Taxation Agreements FCPA Compliance Mitigating Litigation Risk Ukraininan Insolvency Reform Ukraininan Competition Law Aspects in M&A Transactions Merger Control - Managing Competition NDA’s in M&A New Opportunities for Libya After The Arab Spring Boardroom Trends Managing Future Uncertainty in M&A Transactions Employment Law & HR Issues in M&A Changing South African Private Companies’ Constitutional Documents Before 1st May 2013 Exemption Of Bonds From Tax & Implication of Foreign Investment in Nigeria Entertainment & Media Disputes The Importance of Protecting Intellectual Property Asset Financing - Malta Bouncing Back - Malta Comprehensive Due Diligence Resolving Disputes in The Aviation Industry Meet The Experts
September 2012 /
3
NEWS:
from around the world
ESMA Proposes Remuneration Guidelines For Firms Providing Investment Services The European Securities and Markets Authority (ESMA) has published a consultation paper on proposed guidelines on remuneration policies and practices under the Markets in Financial Instruments Directive (MiFID). The guidelines aim to strengthen investor protection by seeking to improve the implementation of the MiFID rules on conflicts of interest, and thereby preventing mis-selling of products. The guidelines will apply to investment firms, credit institutions, fund management companies when
providing investment services, and to competent authorities. Firms must ensure that they have appropriate remuneration policies and practices in place, bearing in mind the obligation on firms to act honestly, fairly and professionally in the best interests of their clients. Steven Maijoor, ESMA chair, said: “During the last decade we have seen a number of mis-selling scandals affect the retail investor across Europe, ranging from pensions to mortgages to investment products. A key factor identified as a driver for the promotion, recommendation and selling of unsuitable products
is the presence of financial incentive schemes for sales staff that do not take account of the clients’ best interests. “Today’s proposed remuneration guidelines for MiFID investment firms are key to ensuring that the pay and incentive structures for sales staff and their superiors do not create false incentives when selling financial products to retail investors. The consistent application of ESMA’s remuneration guidelines will help strengthen investor protection and achieving the same level of protection for Europe’s retail investors no matter where they invest.”
Guernsey’s zero-10 regime given EU approval Guernsey’s revised zero-10 corporate tax regime has been given a clean bill of health by the EU. An April meeting of the EU Code of Conduct Group on Business Taxation concluded that the deemed distribution provisions meant Guernsey’s zero-10 corporate tax regime was harmful. At the end of June, the Guernsey parliament, the States of Guernsey, agreed to repeal the deemed distribution provisions from 1 January 2013. At a meeting earlier this week, the EU Code of Conduct Group assessed Guernsey’s repeal of the deemed distribution provisions and agreed that this removed the “harmful effects” of the island’s corporate tax regime. A statement from Guernsey’s Policy Council said that Guernsey’s zero-10 regime without deemed distributions can now be considered to be compliant with the Code of Conduct. This is subject to the usual
formal ratification by the EU’s Economic and Financial Affairs Council (ECOFIN) at the end of this year. Guernsey’s Chief Minister, Deputy Peter Harwood, said: “Obviously this is subject to the standard ratification process but I am pleased that the EU Code Group confirmed yesterday that the repeal of our deemed distribution regime does indeed, as we expected, ensure our corporate tax regime conforms to the EU Code of Conduct.” Under Guernsey’s zero-10 regime, all companies are taxed at zero per cent, except for the profits of specified financial services businesses which are taxed at 10 per cent (and local utilities at 20 per cent). There is a specific tax exempt regime for collective investment schemes. Fiona Le Poidevin, chief executive of Guernsey Finance – the international promotional agency for
the island’s finance industry, says: “The deemed distribution provisions primarily affect locally resident shareholders and therefore it is very much a case of business as usual for the international client base of our finance industry. “However, it is pleasing to hear that the Code Group has assessed our amended regime as Code Compliant. This shows Guernsey is a jurisdiction which is willing and able to move quickly to ensure it continues to meet international tax standards, while also retaining its position as an extremely competitive place to do business.” The Code Group has previously reached similar conclusions, in terms of both offending elements and remedies, in relation to the Jersey and the Isle of Man zero-10 corporate tax regimes.
Deloitte Comments On European Commission’s Proposals For Banking Union As the European Commission publishes its proposed framework for a European banking union, Deloitte, the business advisory firm, says the proposals set out a clear direction for progress towards banking union but the overall timetable remains very ambitious. David Strachan, co-head of the Deloitte Centre for Regulatory Strategy, said:
4
/ September 2012
“The Commission’s proposals are a major stride towards full banking union. They involve a wholesale transfer of responsibilities for banking supervision in the Euro area to the European Central Bank (ECB). National banking supervisors will continue to play a significant role, albeit under the direction of the ECB. Achieving a common supervisory approach and culture across the banking union will be key.
“The proposals set out a high-level blueprint for how supervision will be carried out, but some important details and elements are missing. These include how the ECB will carry out supervision in practice and how crisis management will really work. Progress here is essential.”
ACQUISITION INTERNATIONAL
NEWS:
from around the world
Global ETP industry Attracts Net Assets Of USD12.1bn in August In August the global exchange-traded product industry attracted net assets of USD12.1bn, more than twice the USD5.3bn collected in August 2011, despite lower overall trading volume, according to BlackRock.
into gold ETPs reached their highest level in 2012, with USD3.6bn in net flows. Volatility ETPs, which seek to deliver returns correlated to measures of market volatility, attracted nearly USD1bn.
ETPs listed in Europe gathered solid flows of USD4.4bn - the highest monthly total since July 2011. They have attracted USD13.2bn since April, accounting for the majority of the USD15.4bn in year-to-date flows for the region.
As of month end, global ETP assets totalled USD1.76trn, compared with USD1.72trn at month-end July and USD1.58trn at the end of August 2011.
Fixed income drew USD6.5bn for the month with all major fixed income categories attracting net inflows, led by investment grade corporate with USD1.6bn and high yield with USD1.3bn.
Dodd Kittsley, global head of ETP Research at BlackRock, says: “The breadth of unique and precise exposures that ETPs offer has been a crucial factor in the industry’s strong ongoing growth. The flows reflect how ETP investors are repositioning their portfolios to act on market opportunities that they see emerging, even in the midst of global uncertainty.”
During the month, ETP investors showed an increased interest in gold and volatility ETPs. With gold a natural beneficiary of a low interest rate environment, flows
The category has attracted USD50.8bn year to date, already surpassing 2011’s record inflows of USD49.9bn.
US retail federation Threatens Legal Action Over $7.25Bn Interchange Settlement America’s National Retail Federation (NRF) says it will go to court to block a $7.25 billion class action settlement with Visa and MasterCard over credit card interchange fees. The settlement agreed in July was designed to end a seven-year legal dispute over interchange fees, with retailers securing a multi-billion dollar cash payment and significant reforms of Visa and MasterCard rules and business practices. However, two of America’s biggest merchants, Walmart and Target, are among those to have called for the deal to be rejected and now the NRF, the world’s largest retail trade association, has entered the fray.
FSA
The NRF is not party to the original lawsuit but says that a resolution approved by its board authorises it to take steps including “intervention in pending actions” in order to reach an agreement “equitable to the broad merchant community”. The association says it is looking into what form any legal action might take and is waiting for US District Court Judge John Gleeson to outline how outside groups will be allowed to intervene, or if the case qualifies as a class action. Combined credit and debit card swipe fees tripled over the past decade to about $50 billion a year - driving up prices an estimated $427 for the average household before debit swipe was capped by the Federal Reserve last year, claims the NRF.
It says that the $7.25 billion settlement is “pennies on the dollar” and that if the case went to trial a judgement could be worth hundreds of billions of dollars. The group also argues that the deal does nothing to block future swipe fee rises, reform the “cartel-like” system by which Visa and MasterCard each set fee schedules, or improve transparency. Matthew Shay, president and CEO, NRF, says the settlement “does nothing to curb the anticompetitive behaviour of Visa and MasterCard, and instead ensures that swipe fees paid by retailers and their customers will continue to rise while barring any future legal challenges. The proposal is a lose-lose-lose for merchants, consumers and competition.”
Fines BlackRock Unit £9.5m For Putting Client Money At Risk BlackRock Investment Management (UK) (BIM) has been fined £9.53 million by the FSA after errors caused by systems changes put client money at risk. The watchdog’s client money rules require companies to have a trust letter from any bank holding its customer’s cash to ensure that, in the event of the firm’s insolvency, the funds are clearly identifiable and ring-fenced. Between 1 October 2006 and 31 March 2010, BIM failed to obtain such letters in relation to some of the money market deposits it placed with third party banks.
The error happened because of Blackrock’s acquisition of the unit, previously called Merrill Lynch Investment Managers, in September 2006 and subsequent migration of client portfolios to the buyer’s operating system. Tracey McDermott, director, enforcement and financial crime, FSA, says: “Despite being part of one of the largest asset managers in the world, BIM’s systems were simply not adequate, and the basic step of notifying banks that the money was held on trust for clients was not done.” The FSA says that in deciding how much to fine BIM it took into account that the misconduct was not
ACQUISITION INTERNATIONAL
deliberate, and that the firm reported the issue and has since put in place better systems and controls. No clients suffered any losses as a result of the error. In a statement, BlackRock says: “At BlackRock, our fiduciary commitment to our clients is at the heart of our business. That is why when we identified this issue through an internal review and reported it to the FSA, we took steps to ensure we have what the FSA now describes as robust systems and controls relating to client money protection. These steps include establishing a dedicated client money team, led by a Managing Director responsible for oversight of our client money obligations.”
September 2012 /
5
SECTOR TALK:
Private Equity-Backed IT and Technology Buyout Deals
Private Equity-Backed IT and Technology Buyout Deals
— Powered by l The IT and technology sector comprises a variety of sub-sectors including computer services, electronics, gaming, IT, software and wireless, amongst others. According to Preqin data, the IT and technology sector has seen 1,612 private equity deals completed since 2006 (as at 10/09/2012), at an aggregate value of $149bn.
No. and Aggregate Value of PE-Backed IT and Technology Buyout Deals Globally: No. and Aggregate Value of PE-Backed IT and Technology
H1 2006 - H2 2012 (as at 10/09/2012)Buyout Deals Globally: H1 2006 - H2 2012 (as at 10/09/2012) Aggregate Value of Deals ($bn)
117 90 112 110 113 85 75 102 102 120 164 199 157 66
5.9 34.5 17.5 9.1 3.1 3.5 2.3 6.1 7.3 8.1 15.8 20.4 5.6 9.8
250
40.0 35.0
200
30.0 25.0
150
20.0 100
15.0 10.0
50
5.0
0
Aggregate Deal Value ($bn)
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 ytd
No. of Deals
No. of Deals
Period
0.0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 YTD No. of Deals
Aggregate Deal Value ($bn)
During the buyout boom years of 2006-2007, $67bn of private equity investment flowed into the IT and technology sector across 429 deals. However, in the period immediately following the onset of the financial crisis in 2008, the industry saw some visible contraction and in the following two years, despite the volume of deals being relatively high at 375, the amount of capital put to work in this sector slowed considerably. Just $15.1bn was invested in IT and technology businesses by PE buyout firms during 2008 and 2009, a decrease of 77% over the preceding two years.
No. of PE-Backed IT and Technology Buyout Deals by Region:
2006 - 2012 (as at 10/09/2012) Region
2006 2007 2008 2009 2010 2011 2012 YTD
North America 122 Europe 68 Asia & ROW 17
134 65 23
100 74 24
104 53 20
131 67 24
196 139 28
131 69 23
During 2011, the number of PE-backed buyouts in the IT and technology sector reached 363 deals, equating to $36.2bn in aggregate capital for the entire year – a post-Lehman high for the industry. In H1 2012 transaction volume hit 157 deals, just a 4% decrease on H1 2011 levels. Despite this similar volume of deals, aggregate deal value in H1 2012 declined by 65% from that seen in H1 2011. H2 2012 has already seen a 75% increase in aggregate deal value over H1 2012 figures, despite a lower number of transactions recorded. This increase in aggregate deal value can largely be attributed to the $6.6bn leveraged buyout of Cequel Communications announced in July by BC Partners and CPP Investment Board.
Breakdown of PE-Backed IT and Technology Buyout Deals by Breakdown of PE-Backed IT and Technology Buyout Deals by Region:
Region
2006 2007 2008 2009 2010 2011 2012 YTD
North America 59% 60% Europe 33% 29% Asia & ROW 8% 10%
51% 37% 12%
59% 59% 30% 30% 11% 11%
54% 38% 8%
59% 31% 10%
Proportion of Total IT & Tech Deals
Region: 2006 - 2012 (as at 10/09/2012)
2006 - 2012 (as at 10/09/2012)
100% 90% 80% 70%
8%
10%
33%
29%
59%
60%
2006
2007
12% 37%
/ September 2012
11%
8%
10%
30%
30%
38%
31%
59%
59%
54%
59%
2010
2011
2012 YTD
60% 50% 40% 30% 20%
51%
10% 0% 2008
North America
6
11%
2009 Europe
Asia & ROW
ACQUISITION INTERNATIONAL
SECTOR TALK:
Private Equity-Backed IT and Technology Buyout Deals
Aggregate Value of PE-Backed IT and Technology Buyout Deals by Region:
2006 - 2012 (as at 10/09/2012) Region
When looking at PE-backed IT and technology buyout deals by region from 2006 to present, North America accounts for on average 57% of total deal flow, with Europe and Asia & Rest of World accounting for 33% and 10% respectively. So far in 2012, North America’s IT and technology sector has attracted $10bn in aggregate deal value from PE buyout firms, a 44% decrease on 2011 figures but an 11% increase on levels seen in 2010. Europe and Asia & Rest of World have attracted $4bn and 1.3bn respectively in 2012 to date.
2006 2007 2008 2009 2010 2011 2012 YTD
North America 28.1 Europe 12.1 Asia & ROW 0.3
17.1 7.0 2.4
3.5 2.1 1.1
3.4 4.0 1.0
9.0 5.0 1.3
18.0 12.9 5.3
10.0 4.0 1.3
No. and Aggregate Value of PE-Backed IT and Technology Buyout Deals by Type:
2011 - 2012 (as at 10/09/2012) Type
No. of Deals
Aggregate Deal Value
LBO Add-on Growth Capital Public to Private
228 220 98 40
26.8 7.8 3.9 13.1
From 2011 to present, leveraged buyout (LBO) transactions have made up 39% of the total number of deals and 53% of aggregate deal value. The IT and technology sector has seen some consolidation during this period, with 38% of total PE-backed buyout deals being add-on (or bolt-on) transactions. Public to private deals have accounted for just 7% of the total number of deals, yet have made up 25% of aggregate deal value, mainly stemming from three of the top 10 largest deals announced this year being take-private transactions. The largest IT and technology deal announced this year is the aforementioned $6.6bn LBO of US-based Cequel Communications (formerly Cebridge Connections). BC Partners and CPP Investment Board are the two investing firms, injecting $1.98bn in equity to support the transaction. In the 12 months ending March 31, 2012, Cequel Communications generated $1.96bn in revenue and $743 million in adjusted EBITDA. The company was previously acquired in 2006 by a consortium of investors including Charterhouse Group, Goldman Sachs Merchant Banking Division, Jordan Company, Oaktree Capital Management, and Quadrangle Group.
Breakdown of PE-Backed IT and Technology Buyout Deals by Type:
Breakdown of PE-Backed IT and Technology2011 Buyout by Type: - 2012 (as atDeals 10/09/2012)
2011 - 2012 (as at 10/09/2012)
LBO Add-on Growth Capital Public to Private
No. of Deals 39% 38% 17% 7%
Aggregate Deal Value 53% 15% 7% 25%
7%
90%
17%
25%
70%
7%
60%
38%
15%
80% Proportion of Total
Type
100%
50% 40% 30% 20%
53%
39%
10% 0% No. of Deals LBO
Add-on
Aggregate Deal Value Growth Capital
Public to Private
10 Largest PE-Backed IT and Technology Buyout Deals:
2012 YTD (as at 10/09/2012) Firm
Investment Type
Deal Gate
Deal Size
Investors
Bought From/ Exiting Company
Primary Industry
Location
Cequel Communications
LBO
Jul-12
6,600.00 USD
BC Partners, CPP Investment Board
IT
US
Misys plc Deltek, Inc. Q9 Networks
Public To Private Public To Private LBO
Mar-12 Aug-12 Jun-12
1,266.80 GBP 1,100.00 USD 1,100.00 CAD
Software Software IT Infrastructure
UK US Canada
BARTEC
LBO
Jul-12
600.00 EUR
Turaz Global, Vista Equity Partners Thoma Bravo BCE Inc, Madison Dearborn Partners, Ontario Teachers’ Pension Plan, Providence Equity Partners Charterhouse Capital Partners
Charterhouse Group, Goldman Sachs Merchant Banking Division, Jordan Company, Oaktree Capital Management, Quadrangle Group New Mountain Capital ABRY Partners
Daewoo Electronics
LBO
Aug-12
326.00 USD
iGATE Patni UC4 Software GmbH CDC Software Corporation RADVISION Ltd.
Public To Private LBO LBO
Apr-12 Aug-12 Mar-12
Add-on
Mar-12
ACQUISITION INTERNATIONAL
CapVis Equity Partners, Partners Group
Technology
UK
-
Electronics
S.Korea
14,138.00 INR 220.00 EUR 250.00 USD
CXC Capital, Inc., Dongbu Asset Management, KTB Private Equity, Vogo Investment Apax Partners, iGate EQT Partners Vista Equity Partners
Carlyle Group -
IT IT Software
230.00 USD
Avaya, Silver Lake, TPG
-
Technology
India Austria Hong Kong Israel
September 2012 /
7
ON THE COVER:
Lead Mandate - Respicardia
LEAD MANDATE — Respicardia
l Tim Hauch, Chief Financial Officer of Respicardia, gives Acquisition International some insight into the company’s recent senior secured credit facility.
Ares Capital Corporation closed its first venture finance transaction with Respicardia®, Inc., an early stage company developing a medical device targeted to improve both respiratory and cardiovascular health by treating Central Sleep Apnea (CSA), in August. Ares Capital served as lead agent in a $6 million senior secured credit facility to provide working capital to continue Respicardia’s clinical trial activities. Respicardia, headquartered near Minneapolis, Minnesota, is dedicated to improving the lives of patients by developing implantable therapies designed to improve both respiratory and cardiovascular health. Respicardia is in the clinical trial phase of the development of the remedē® System, a fully implantable stimulation device that is designed to restore a more natural breathing pattern during sleep in patients with CSA, a disorder characterised by a lack of respiratory effort by the diaphragm and associated with a higher rate of ventricular arrhythmias and increased risk of death. The company estimates more than 25 million patients worldwide are affected by the disorder. The remedē® System, which received CE Mark approval in 2010, consists of an implantable pulse generator, implantable leads, and an external system programmer.
8
/ September 2012
The remedē® System delivers small electrical pulses via the lead to one of the phrenic nerves. The diaphragm responds to these signals from the phrenic nerve, resulting in a more normal breathing pattern. A more normal pattern of breathing may allow for better oxygenation, less activation of the sympathetic nervous system, and improved sleep, leading to improved cardiovascular health. Commenting on the criteria for suitable investors, Tim Hauch, Chief Financial Officer of Respicardia, said: “We were primarily interested in a partner who would provide us the debt structure that would accomplish three goals: minimise cash outflows, minimise cost of capital and maximise our financial flexibility.” Respicardia is backed by one strategic medtech company and five experienced life sciences-focused venture capital firms: Three Arch Partners, Versant Ventures, Polaris Ventures Partners, Accuitive Medical Ventures and Affinity Capital Management. The venture debt provides Respicardia with flexible capital to continue the clinical trial phase in the development of the remedē® System. According to Mr Hauch, there were no unexpected or significant challenges and the transaction was
completed, start to finish, in five months. He noted that Capital Advisors Group helped to pull the transaction together. “We are excouraged by the progress we have made with our technology,” said Bonnie Labosky, Chief Executive Officer of Respicardia. “We recently announced the closing of enrolment in our pilot study and are making plans to embark on the next phase of clinical development. We are confident about the clinical performance of our system and will be looking for additional investors to help fund the pivotal trial, the next step in bringing the product to the US market.”
Company: Respicardia Name: Tim Hauch Email: thauch@respicardia.com Web: www.respicardia.com Address: 12400 Whitewater Drive, Suite 150, Minnetonka, MN 55343 Telephone: +1 952-540-4470
ACQUISITION INTERNATIONAL
DEAL GURU:
Bric Asset Managers Look Attractive Takeover Targets
BRIC ASSET MANAGERS LOOK ATTRACTIVE TAKEOVER TARGETS — Investment M&A deals in emerging markets could be worth £1bn by end of 2013
Fund management companies in Brazil, Russia, India and China (BRIC) could become targets for mergers and joint ventures with European and North American financial institutions that want access to faster growing markets.
competitive, emerging markets will continue to attract the attention of larger, stable investment managers who are looking to position themselves in new markets, either through acquisitions, investments or strategic partnerships.
Deloitte, the business advisory firm, estimates that cross-border investment management M&A deals in developing and emerging markets totalled over £1bn in deal value since January 2011. It believes that investment M&A deals in emerging markets could be worth an additional £1bn by the end of 2013.
“GDP in BRICs, worth about $13trn, is forecast to expand to $95trn by 2050 but markets, taxes and regulations vary widely between regions. In some jurisdictions the restrictions affecting foreign investment and ownership are complex, with Russia and China at the harder end of the spectrum, India in the middle and Latin America and South East Asia the most open.
Baber Din, investment management M&A director at Deloitte, said: “As the investment management sectors in North America and Europe become increasingly
10 / September 2012
“Differing distribution models locally, as well as the profile of the existing investment management sector can also make identifying the right targets
or partners difficult. Companies must understand and manage these factors effectively if mergers or partnerships are to be successful.”
Company: Deloitte LLP Name: Baber Din Email: bdin@deloitte.co.uk Web: www.deloitte.co.uk Telephone: 020 7282 2878
ACQUISITION INTERNATIONAL
M&A AWARDS:
Fund Administrator of The Year - Curacao
FUND ADMINISTRATOR OF THE YEAR — Curacao
l Danique Sprock, Director of Global Operations at SFT Fund Administration, gave Acquisition International a detailed view of the company, and explained the honour of being selected for this award. Willemstad City / Curacao
Ms Sprock initially noted that SFT has grown organically since its inception primarily by word of mouth through client referrals and from referrals provided by its professional network. In 2011 SFT had a 48% increase in revenue over the previous year. “We’ve worked hard at going above and beyond our clients’ expectations and demands, and this award is positive indication that our dedication to client satisfaction is paying off and stands out. We’re very pleased that our high standards have been recognized in the market, and we’re honoured to accept this recognition.” When asked for the one thing that sums up what SFT is about, Ms Sprock noted that the firm believes in providing a high quality product and paying close attention to client service above anything else. “These are the core fundamentals of our company. We are committed to upholding the highest standards at all levels of our operation, by keeping ourselves apprised of the latest industry requirements and continuously adapting to meet our clients’ needs. Technology is a cornerstone of our client service proposition. “Our cutting edge platform enables us to help
12
/ September 2012
funds cope with regulatory burden and increased demand for transparency. PFS PAXUS has been our systems partner since 2006, providing us with a fully integrated share registry, portfolio reconciliation and fund accounting platform. We have been working together to deliver quality service to our clients. “The fact that we are SSAE Soc1 Type II certified for three years now, is an attestation to our strong client commitment and our internal quality control, and is a stamp we’re proud of.”
which they have come to need and expect.” SFT intends to continue to provide the highest level of service to its clients while trying to meet the additional demands they, and the firm face. “We aim to broaden our scope by opening an office in Cayman next. The opening of this office will once again demonstrate our commitment to growing and developing our product.”
Despite tough economic challenges facing managers worldwide, SFT has managed to attract significant new business. Ms Sprock believes that there are many strategic decisions that have contributed to this success. One key determining factor for SFT’s growth has been SFT’s strategic positioning for servicing its European and now Asian based clients with the opening of its Cyprus office earlier this year. “Having an office in Cyprus enables us to service our European managers in their own time zone, while our office in the US and head office in Curacao service our Latam and US based managers, enabling us to fulfil our clients’ expectations at the speed with
Company: SFT Fund Administration Name: Danique Sprock Email: dsprock@sftfunds.com Web: www.sftfunds.com Address: Ara Hill Top Building, Pletterijweg Oost 1, Willemstad, Curacao Telephone: + 599 9 732 3200
ACQUISITION INTERNATIONAL
M&A AWARDS:
Vietnamese Overall Law Firm of The Year
VIETNAMESE OVERALL LAW FIRM OF THE YEAR l Duyen Vo Ha, Managing Partner of the head office of VILAF in Ho Minh City, tells Acquisition International how our Vietnamese Overall Law Firm of the Year sets itself apart. “We continue our tradition of diligent devotion to clients’ needs, a solution-oriented approach to legal issues, increasing experience and knowledge in clients’ industries, and reasonable fees,” she explained.
A developing country is a difficult legal environment to operate in due to the highly political and dynamic nature of the legal system. Our biggest strengths lie in the ability to effectively interpret the stories and possibilities hidden behind each fine line of the laws and to advise clients with a risk-assessment and solution-oriented approach. The firm works with clients from most parts of the world, mainly: the US; Europe; Japan; Singapore; Hong Kong; Thailand; and Korea. Ms Duyen noted that, by value, M&A volume in the Vietnamese market has steadily increased over the last four years despite enterprises’ decreasing revenues.
“Inbound transactions occupy the largest portion (approx. 80%) and most likely will continue to be a material part of Vietnam’s M&A market in the several years to come. Consumer goods and finance are the top industries for M&A activities in 2011. These two industries together make up more than half of the M&A transactions (by value). Consumer goods are destined to remain on top of the list for both M&A and new investment activities in Vietnam in the near future because Vietnam’s market of 88 million people is far from being fully explored.”
“Our rule has always been that clients’ success is VILAF’s success. In our view, professional awards will naturally flow in when we put efforts in satisfying clients’ needs, building our profile with real experience and maintaining a strong pool of talented lawyers.”
Ms Duyen believes that team culture is of critical importance to productivity and talents retention. “We place emphasis on creating a friendly, flexible, mentoring and inspiring workplace environment for staff members to boost creativity and involvement.” At this time, VILAF’s vision is to work harder towards clients’ satisfaction and talents retention, but at the same time making extra effort to control work time and legal fees in sharing with clients’ valid concerns during a slow economy.
Company: VILAF Name: Duyen Vo Ha Email: duyen@vilaf.com.vn Web: www.vilaf.com.vn Telephone: +848 3827 7300 Fax: +848 3827 7303
Phat Thiet, Mui Ne / Vietnam
ACQUISITION INTERNATIONAL
September 2012 /
13
M&A AWARDS:
Indian Deal of The Year - Praj Industries/Neela Systems
INDIAN DEAL OF THE YEAR: — Praj Industries/Neela Systems l Merzi Sodawaterwala, Founder and Managing Director of MX Capital, told Acquisition International about the firm’s delight at receiving the Indian Deal of the Year award.
Gateway of India, Mumbai / India
appropriate solution. We take pride in our solutions orientated approach and offer the right advice to our clients irrespective of the same not resulting in an immediate transaction for us. We provide valuable strategic inputs and fresh perspectives to build superior business value for our clients. We provide strategic advisory services to assist clients in choosing the best financing option in congruence with their strategic goal.” Commenting on the process of finding the right set of investors for a private equity fund raising, Mr Sodawaterwala explained that there are 400+ private equity/venture capital investors in India today. While there is a lot of competition amongst investors for a good investment opportunity, he noted that it’s crucial to carefully select, approach and negotiate with the right set of investors.
“This award further gives us the reassurance that we are following the right solutions oriented approach by ensuring that we not only give the right advice to our client but also ensure that the counter party and other stake holders in the transaction collectively consent at every stage of the transaction for the deal process to be smoothly executed,” began Mr Sodawaterwala. “The fact that we were nominated for this award by Praj (the Buyer) while we were representing Neela (the Seller) is a testimony to our approach.” Commenting on the current difficult deal-making environment, Mr Sodawaterwala explained that for any partnership/engagement to be successful it is imperative to ensure “meeting of the minds” between the parties involved in a deal. “We prefer to spend quality time with our clients to understand their culture, philosophy, aspirations and collectively list down the objectives before engaging on any transaction. Our entrepreneurial mind set and diversified industry exposure coupled with an ability to think out-of-the-box helps us build a good understanding of the client’s business and objectives. We leverage our rich experience and strong network to find the right partner and recommend solutions which best fit our client requirements.” Mr Sodawaterwala acknowledged that investment banking in India is a very competitive environment, noting that bankers often fall head over heels to justify their existence and retain their jobs by undercutting fees and showcasing unrealistic valuations to clients in their quest to win assignments which never go through. “We really don’t feel that we face any competition in deals we decide to take up as we only take up such assignments where the management is realistic in their expectations and we are comfortable with the
14
/ September 2012
management background and underlying business model. In fact, most of our assignments are created during the course of our interaction with clients who are not active in the market for any transaction and engage us purely based on the value they see in our advice. We are often the only advisor being considered for the assignment based on mutually acceptable terms which are finalised across the table without much negotiation.”
“Our deep understanding of the culture, investment philosophy and preferences of the private equity/ venture capital investors built through continuous interaction helps facilitate the most appropriate investor – company fit. We represent our clients through the entire deal process and help pre-empt potential bottlenecks and creatively facilitate a common ground to effect deal closure with minimal lead time.”
In an increasingly global M&A services market, Mr Sodawaterwala is convinced that a local presence is not sufficient and adequate to serve clients that act in a global arena.
Mr Sodawaterwala explained that the team has acquired rich insights witnessing the conduct of investors, acquirers and clients over the entire life cycle of the investment or acquisition.
“Globalisation is one of the key drivers of mergers and acquisitions. We have a network of close to 50 plus reputed investment banks across the globe which is continually increasing and we leverage the same for our cross-border M&A transactions wherein we represent our client and the global investment bank represents the counter party. Given the tremendous growth potential in India and tough economic conditions in Eurozone, we are increasingly seeing a lot of interest from major European players across industries to acquire or form a joint venture with Indian players. We have been directly approached and are currently representing a few of them for their India entry strategy / acquisitions / joint ventures in India.”
“We leverage the same throughout the deal process with uncompromising commitment to client interest, utmost honesty, integrity and objectivity to achieve our client goals. As an entrepreneurial organisation, we draw the highest level of commitment from each member of the team and go the extra mile beyond being an advisor or an intermediary, to becoming our client’s confidante and which is what keeps us happy.”
Mr Sodawaterwala strongly believes that it is foolish to follow a “one size fits all” approach in investment banking, noting that each industry has different dynamics; each company has different challenges; and each management has different aspirations. “It is imperative to carefully understand the industry dynamics, business challenges and management vision and aspirations before recommending an
Company: MX Capital Private Limited Name: Merzi Sodawaterwala Email: info@mxcapital.in Web: www.mxcapital.in Address: Level 9, Platina C59 G Block, Bandra Kurla Complex, Bandra East, Mumbai 400 051 Telephone: +91 22 3953 0558
ACQUISITION INTERNATIONAL
M&A AWARDS:
Turkish Trademarks Law Firm of The Year
TURKISH TRADEMARKS LAW FIRM OF THE YEAR l Based in Istanbul, Turkey, Deris has 100 years of history pertaining to the establishment of IP rights, as well as the protection and enforcement of such rights. The firm’s activities in both fields date back to 1912, when Mr Celal Dervis, attorney at law, first founded the law office.
Istanbul / Turkey
Today, Deris consists of two legal entities, namely Deris Patents & Trademarks Agency A.Ş. which counsels, files, prosecutes, registers and manages IP rights worldwide, and Deris Attorneys-At-Law Partnership, which provides legal counsel, assistance in contentious and non-contentious matters, and representation before civil and commercial courts. These two entities operate together and feed each other, in order to address clients’ needs and requirements in the most confidential, effective and cost efficient way. Moreover, the firm maintains an alliance with SEDIN S.A. in Geneva/Switzerland through a formalised and contractual cooperation agreement. The association has resulted in a working relationship for more than 30 years, for the securing, maintaining and defending of IP rights along with a view to enhance their mutual international service capabilities and technical know-how, while also sharing philosophies, professional competences and abilities. The Deris team consists of 18 attorneys at law, as well as 24 registered trademark and patent attorneys. With the administrative and support staff the firm has a total of more than 70 collaborators. FOCUS ON IP Deris provides a wide spectrum of services for
ACQUISITION INTERNATIONAL
securing, maintaining, defending and enforcing IP rights, designed to meet client’s budgetary requirements. Deris considers IP rights to be assets, and has structured its own organisation to provide services with a proactive approach, and to offer clients a complete range of legal services. Services Provided by Deris Patents & Trademarks Agency A.S.: Deris Patents and Trademark Agency A.S. provides services such as drafting, preparing, filing and prosecuting the application of industrial property rights in Turkey. Through its separate departments for Patents, Trademarks and Industrial Design, Deris Patents and Trademark Agency A.S. follows administrative procedure management for securing registrations in other countries. Where appropriate, the firm works in tandem with its international network of correspondents, as well as directly with international authorities such as the WIPO. Services Porvided by Deris Attorneys at Law Partnership: The firm’s non-contentious services include: performing due diligence, audits and appraisals of intellectual property rights and portfolios; developing and implementing strategies and programs for IP protection and enforcement in all jurisdictions; and representation and conducting negotiations for settlement agreements whether out of court or in ongoing actions.
Meanwhile, the firm’s contentious services include, but are not limited to: preparing, instituting, prosecuting court actions for: enforcement, defensive and regulatory purposes before civil, criminal, administrative, appellate courts; civil evidentiary actions for determining through Court appointed expert(s) facts and evidences on matters such as infringement, similarity, confusion, damage, compensation and notoriety; civil actions for declaration of non-infringement; as well as serving cease and desist letters for the prevention of infringing acts against IP rights.
Company: Deris Patents & Trademarks Agency AS Deris Attorneys at Law Partnership Name: N.Serra CORAL / Kerim E. YARDIMCI / Okan CAN / Banu BARBUR / Aydin DERIS Email: deris@deris.com.tr Web: www.deris.com.tr Address: Inebolu Sok. No:5 Deris Patent Building, Kabatas /Setustu 34427 Istanbul/Turkey Telephone: +90-212-252 61 22 Fax: +90-212-293 76 76
September 2012 /
15
M&A AWARDS:
Dutch M&A Pensions Law Firm of The Year
DUTCH M&A PENSIONS LAW FIRM OF THE YEAR l Eric Bergamin and Jos Gielink, the founders of Bergamin & Gielink Pensions Law in Rotterdam, Netherlands, describe their pleasure at winning an award. Binnenhof Palace / Dutch Parlament in the Hague
“This award means that we are internationally recognised as one of the leading pensions law firms,” said Mr Bergamin. Commenting on how the firm has adapted to the current difficult economic conditions, Mr Bergamin noted that this firm succeeds in providing clients with top-level advice and assistance. “Not just the ‘basic’ legal advice, but more and more guiding our clients on a strategic level. Our clients seem to like this, since we get even more often the top level clients and projects out of the market.” According to Mr Bergamin, the firm sets itself apart by being legal advisors with ‘a wide scope’. “This means that we do not limit ourselves to explaining the relevant legal provisions, but also consider the other relevant aspects. Our advisors advise in a ‘coloured’ way. We strongly recommend a certain direction to our client, rather than say ‘you can go this way or that way’’. We have set up a Twitter account and we publish opinions and comments on our website, instead of just following developments.”
16
/ September 2012
In order to address the global market for M&A services, the firm is a member of the global alliance Ius Laboris.
care for our clients, the case is just one way of getting to a long term relation with our client.”
“We share knowledge and develop business internationally. We travel a lot to meet people everywhere on the globe, instead of sending hundreds of emails. This ‘personal touch’ is very important.”
Mr Bergamin concluded with some advice for the other nominees for the award:
Mr Bergamin stated that team culture is very important to the firm, noting that it is a small team with high profile clients.
“Personal approach, combined with social media to present yourself as the best in the market. Be ambitious, there is nothing wrong with that.”
“We celebrate successes, but as Dutch we are a bit Calvinistic too. Besides, we train our people on a personal base, which is very important to get smart and focussed colleagues.” The firm has taken a number of steps to maintain its quality and continue to win awards. “We have adopted the quality program of our Alliance. Secondly, we are renewing our social media activities, including a new website. What we are not changing: personal approach, long term contracts with clients rather than just ‘interesting cases’. We
Company: Bergamin & Gielink Pensions Law Name: Eric Bergamin Email: info@pensioenrechtadvies.nl Web: www.pensioenrechtadvies.nl Address: Bahialaan 502, 3065 WC Rotterdam, Netherlands Telephone: +31 (0)10 463 77 55
ACQUISITION INTERNATIONAL
M&A AWARDS:
Turkish Employment Dispute Law Firm of The Year
TURKISH EMPLOYMENT DISPUTE
LAW FIRM OF THE YEAR
l Tevfik Gür is the Founding and Managing Partner of GÜR LAW FIRM, winner of the Turkish Employment Dispute Law Firm of the Year. Istanbul / Turkey
Mr Gür began by stating how honoured the firm was to receive the award.
to Mr Gür, is the fact that it is completely focused on its work and thinks ahead on its clients’ needs.
“It has also made a positive impact on our team members. As a law firm practicing through specialised departments, we believe that we have earned this admiration by means of the efficiency and successful performance of team working.”
“When the needs of the clients and our forecasts match, the partnership between them and our firm results in success for each party. Our firm has always prioritised client-orientated solutions and aimed to proceed in this direction for quite a long time. Therefore it should not be considered as the outcome of the last 12 month’s work but rather a longer period of time.”
Commenting on how the firm has adapted work operate successfully within very difficult economic conditions, Mr Gür explained that the firm’s legal team is composed of highly qualified and experienced lawyers, and that it works closely with tax and financial advisors. “Thus our clients are not only provided with legal advice but they also receive business-orientated solutions from us as their legal advisors. With our commercial and legal point of view, they can make the right choice(s) and investment(s). Providing commercial advice requires good knowledge of the market. In other words, these are our firm’s and team members’ strengths, which attract the clients.” The main factor which sets the firm apart, according
ACQUISITION INTERNATIONAL
they are among the best law firms of the country. However, he stated that the reason the firm won the award is linked to its high performance standards. “We revise them regularly. We motivate our team members and encourage them to be involved with the market, to establish good connections. Our success definitely lies in efficient management of both our people and our business.”
The opinions and demands of clients are important to the firm, and its clients are consistently the number one priority, noted Mr Gür. “We depend on research combined with our qualified experience in practical area. Our goal is to protect our position in the Turkish legal market, as well as the international law firm and always move forward. We continue to provide premium quality services to clients because we believe that the best marketing tool in this market is the performance, success and efficiency of the law firm in precedent cases.” When asked for one piece of advice for the other nominees for the award, Mr Gür acknowledged that
Company: GÜR LAW FIRM Name: Tevfik Gür Email: tevfik@gurlaw.com Web: www.gurlaw.com Address: Sümbül Sokak, No: 61, 34330 Levent, Istanbul, Turkey Telephone: +90 (212) 325 9020 Fax: +90 (212) 325 9023
September 2012 /
17
M&A AWARDS:
Dutch Mid-Market M&A Law Firm of The Year
DUTCH MID-MARKET M&A LAW FIRM OF THE YEAR l Alexander Steenaert is a partner at Marree & Dijxhoorn Business Lawyers and heads the practice group Corporate Law. The firm consists of over fifty people, lawyers and staff, in both its Amsterdam and Amersfoort offices. Mr Steenaert describes the firm’s pride at being selected for the award.
Amsterdam / The Netherlands
“When we heard that we were elected as the best Dutch Mid-Market M&A Law Firm of 2012, we felt very proud and consider this as a reward for all the effort and energy we spent on assisting our clients in mergers and acquisitions.” Mr Steenaert noted that the current economic and financial crisis has certainly had, and still has, a detrimental impact on the number of M&A deals in the past few years. “Although the crisis affected the mid-market deals less gravely than the bigger, multinational, listed companies deals, the number of deals in the midmarket has also dropped significantly. And yet, our firm succeeded in assisting in a growing number of M&A deals. Clients (buying and selling) and referrers such as corporate finance companies, accountants, banks, etc. have come to realise that for all M&A deals (especially the mid-market deals), we are the ideal legal partner. With its highly experienced staff, Marree & Dijxhoorn Business Lawyers diligently assist in M&A deals and
18
/ September 2012
play an important and constructive role in effectively closing these deals. “The majority of the lawyers in our M&A team not only previously worked for the larger international law firms; also they hold post gradual degrees in corporate law. The expertise of our team is highly appreciated by our clients, and clients’ feedback show that not only our legal knowledge but also our commitment, focus on the commercial interests of the client and our endeavour to seek solutions rather than dealing with problems.” Mr Steenaert believes that the crisis made everybody, including those in the world of corporate M&A, more cost-conscious. “This award also shows that we score very well on a value for money contest. Together with member firms in our broad international networks and alliances of independent accountancy and law firms, we yearly handle a number of cross border M&A deals.” Commenting on how the company has set itself apart in the last 12 months, Mr Steenaert highlighted its
solid legal quality and true grasp of the commercial and financial aspects of a deal. He stated that clients view the company as firm dealmakers who always maintain their independent professional approach. “This is how we have worked over the past decade and even before that. Most of the lawyers in our team previously worked at larger (international) firms where they gained experience in the field of M&A and corporate law. They joined us because they believe in our approach and value, our high level of commitment and involvement, our hands-on mentality and prefer to work on mid-market deals. We were pleased to welcome them. We believe that our strategy and our vision on the legal assistance in M&A is the reason for our success and the increasing number of deals and M&A-clients, even in these times of crisis.” Mr Steenaert acknowledged that the market for M&A services is globalising, noting that most of the firm’s lawyers have a background with larger international law firms. This shows how the firm is internationally orientated, as much as the Dutch economy is.
ACQUISITION INTERNATIONAL
M&A AWARDS:
Dutch Mid-Market M&A Law Firm of The Year “In close cooperation with our colleagues at the member firms of our international networks and alliances of independent accountancy and law firms across the EU, the US and the BRIC-countries, we have assisted in a great number of cross border deals. We have an excellent track record in international deals. Also, we are generally considered as an attractive alternative to the large international Anglo-Saxon law firms in international deals as well.” Commenting on the firm’s client base, Mr Steenaert stated that its foreign clients often come to it through its international networks and alliances, but also by referrals from, for example, corporate finance firms, notaries, and accountants. “As from the start of 2012 Marree and Dijxhoorn Business Lawyers is also based in Amsterdam. We take the view that especially our foreign clients prefer a law firm with a presence in Amsterdam – the commercial, financial and cultural centre of The Netherlands – close to the international airport and close to all other major professional service providers such as banks, accountants, tax advisors and corporate finance firms. Because of our strong international focus, we have the in-house capacity to provide to our foreign clients all legal services required for doing business in The Netherlands. All lawyers and staff of course have an excellent command of the English languages well as a solid grasp of German. In addition, a number of our lawyers fluently speak French and Italian.” According to Mr Steenaert, the Euro, even in the current financial crisis, has proven to be a fairly strong currency and although some of the member states have their difficulties, the EU has a relatively stable economy. He believes that the Netherlands is an attractive country in which to do business because of its tax regime, the well-educated labour force, and its infrastructure. “Our clients come from all over the world, and differ from a major European energy company to a multinational company with branches in over 75 countries all across the world. Therefor we are convinced that Marree and Dijxhoorn Business Lawyers has enough opportunities to expand its business despite the financial crisis.” The approach of private equity clients differs most of the time from that of trade clients, observed Mr Steenaert. In fact, he noted that within these two groups the approach can strongly differ as well. “The major difference is the more financially driven approach of the private equity clients. They have a strong interest in the return on investment, shareholders value and other specific financial milestones. Trade clients tend to have a more strategic approach. Often the target company fits in their commercial strategy: either they want to “buy and build”, or just to acquire customers/markets to increase their turnover, add new products and/ or services to their portfolio, or to strengthen their position in a certain (geographical) market.” During the past twelve months, both private equity and trade clients have acted very prudently on the Dutch M&A market, which Mr Steenaert states can be considered a buyers’ market in the Euro zone. “Private equity clients tend to invest in the BRICcountries (especially in Brazil) or, closer to home,
ACQUISITION INTERNATIONAL
in the Czech Republic and Turkey rather than in the Euro zone. In The Netherlands, however, the number of PE-deals is growing since 2009.” Comparing the current volume of M&A transactions compare to the peak of the market in 2007/2008, Mr Steenaert states that the amount of transactions in general has decreased. However, since 2009, the firm has seen an increase in the number of mid-market deals, although the deal value is still very low. “The number of deals in 2011 compared to 2007 dropped with app. 40%, the total deal value however dropped over 80%. Also in The Netherlands, the mid-market deals have suffered less from the crisis than the larger deals, but even then the mid-market of M&A deals has slowed down. However, I predict an increasing interest of stakeholders in the Euro zone and a continuing interest of companies from outside of the Euro zone to buy a stake in Dutch companies. In certain sectors, such as health care, a rapid increase in the number of deals is expected on the very short term. For these reasons, I foresee a growth of the volume of M&A transactions in the next two years.” Commenting on the firm’s team culture, Mr Steenaert stated that it goes without saying that the achievement of this award is a team effort. He noted that the firm’s team of nine well-equipped lawyers focuses on corporate law in general and M&A in particular, and are very pleased to be successful in what is considered to be a difficult period in the market of M&A services. “We have doubled the size of our team in the last year. Contrary to the large firms, we tend to form rather small teams (mostly just two or three lawyers) that work on one M&A deal. We believe that the involvement and focus is very important in successfully assisting in a deal. But again, in general, no more than two or three lawyers work on the same deal. We believe that larger teams in the mid-market deals is generally inefficient and too costly for the client.” There are of course numerous requirements to become a lawyer at Marree & Dijxhoorn Business Lawyers. According to Mr Steenaert, the most important and probably most obvious requirement is that the firm selects on a high level of legal knowledge.
“The majority of the lawyers in the M&A team not only previously worked for the larger international law firms; also they have post gradual degrees. Other qualities we seek in our lawyers are a hands-on mentality, high level of service, a genuine interest in our corporate clients and their commercial goals and a true willingness to contribute to a successful deal. The team culture can be described as hard working, open, competitive and always striving to achieve and celebrate success. “Winning the award for best Dutch mid-market M&A law firm of the year, sets a new standard: We certainly want to win this award in the upcoming years as well. We continue to strive to improve ourselves constantly and at the same time stick to the core values of our firm and keep taking an extra step for our clients in order to get them the best deal possible.” Mr Steenaert believes that the reason the firm won the award is that its lawyers, both individually and the team as a whole, made the difference. “We are convinced that when our lawyers grow, the firm grows. For that reason, we invest considerable time and money in the development of our lawyers. They are constantly educated and trained, not only legally, but in all skills we feel they can make a difference for the client. So my advice to the other nominees would be: invest in your people!”
Company: Marree and Dijxhoorn Business Lawyers Name: Alexander Steenaert Email: a.steenaert@mend.nl Web: www.mend.nl Address: Emmaplein 2, 1075 AW, Amsterdam Zonnehof 31-35, 3811 ND, Amersfoort Tel: +31 (0)20 575 5005 / +31 (0)33 422 1900
September 2012 /
19
M&A AWARDS:
Turkish Legal Due Diligence Firm of The Year
TURKISH LEGAL DUE DILIGENCE FIRM OF THE YEAR l Mehmet Akugur, LL.M., Founder Partner at Akuğur Law Firm, describes the firm’s pleasure at receiving the award. Bosphorus bridge in Istanbul / Turkey
“To see that you had got the return of your efforts and comprehensive studies during the due diligence process of the M&A Project feels restful and pleasing. To be appreciated by independent party and to be granted an Award of our work as a sign of this appreciation makes us proud.”
“Our clients’ recommendations and pleasures are our promotion in the global market and help us to meet with other global group and companies in Turkey. And some embassies also recommend our law firm to its investors who are willing to enter the Turkish market.”
Mr Akugur explained that to operate in the current difficult economic climate, it is necessary to manage work and processes more efficiently.
Commenting on team culture, Mr Akugur stated that Akugur Law Firm’s team is well organised and wellstructured before starting a project.
“At Akuğur Law Firm we had been focused in Construction and Real Estate sector before 2009, after the crisis in real estate sector, we had canalized other sectors especially energy, private security, entertainment and food sector. This change relating roadmap makes our firm more successful in M&A projects in Turkey. We had completed our 12th project, its project value is approximately Euro 1,3 billion.”
“Our team consists of at least 5 or 6 persons from different levels. During the due diligence process, at the end of the day our team has meetings for only one hour in order to make general review of the day and plan for tomorrow. Every day also our team prepares daily reports to the client and informs of them daily and asked them their queries. Our team members have different expertise areas therefore they put their perspective and different evaluation on every day.”
Akugur Law Firm’s past projects are its entrance into the increasingly global market, noted Mr Akugur.
20 / September 2012
Mr Akugur noted that, during 2012, the firm is very close to completing at least 7 or 8 M&A deals with a project amount of US$1.2 billion. “We plan to win best legal firm in the M&A in Turkey. Therefore we have to be well organized and work more efficiently.”
Company: Akugur Law Firm Name: Mehmet Akugur Email: mehmeta@akugurlaw.com Web: www.akugurlaw.com Address: Levent Mah. Cilekli Cad. No.10 Levent Besiktas- ISTANBUL/TURKEY Telephone: +902122864828
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business in Morocco
DOING BUSINESS — in Morocco l
Amin Hajji is the senior partner at Hajji & Associés Law Firm in Casablanca.
MOROCCO’S ECONOMY STRENGTHENED OVER THE PAST YEAR, YET THE GROWTH IS NOT NEARLY AS GOOD AS IT WAS DURING 2008 AND 2009. TO WHAT EXTENT DO YOU FEEL THIS IS DUE TO EXTERNAL CIRCUMSTANCES? Not necessarily, but the new government lead by a moderate Islamic party is not yet clear about its strategy in respect of some sectors such as international tourism development for example. HOW WELL PREPARED IS MOROCCO FOR WEAKENED GROWTH? There are plenty of potential high yield projects which are to be financed by international private and public funds. The renewable energy strategy is for example a great challenge for the Moroccan economy for the coming 20 years in order to reach a form of energy independence. WHAT ARE THE MAJOR CHALLENGES FACING ENTREPRENEURS IN YOUR COUNTRY?
Fair financing and tax incentives together with an equitable justice system are the most important challenges to be faced in Morocco. WHAT MAKES MOROCCO AN ATTRACTIVE DESTINATION FOR FOREIGN DIRECT INVESTMENT? COULD MORE BE DONE TO ATTRACT THIS ALL-IMPORTANT CAPITAL?
A new simple and clear investment charter and nationwide training for new entrepreneurs having access to international languages and new IT systems. The will is certain but the ability is another challenge because there are still some battles against the weak education system and the dominant position of some important economic groups.
The economy potentialities which could easily be considered until 2030. Administrative procedures should be dramatically reduced and the Moroccan currency should become totally convertible. Those two options would multiply foreign investment in capital. WHAT MEASURES COULD THE GOVERNMENT ENACT TO SPEED UP ECONOMIC ACTIVITY IN MOROCCO? DO YOU FEEL THAT THEY HAVE THE WILL OR ABILITY TO IMPLEMENT THESE MEASURES?
Company: Hajji & Associés Name: Amin Hajji Email: a.hajji@ahlo.ma Web: www.ahlo.ma Address: 28 Bld Moulay Youssef – Casablanca Telephone: + 212 522 48 74 74
Sunset in Marrakesh / Morocco
ACQUISITION INTERNATIONAL
September 2012 /
21
SECTOR SPOTLIGHT:
Doing Business in Switzerland
DOING BUSINESS — in Switzerland l
Andros Payne has served as the CEO of Humatica since 2003.
Switzerland is still considered the premier off-shore banking center of the world. For over 200 years, and since the beginning of the industrial age, capital in search of stability and privacy quietly piled-up in the country’s vaults. The Swiss still manage about a quarter of total off-shore money. However, this world is changing. International tax authorities are cracking down on Switzerland’s banks and dismantling their wall of secrecy. The collapse of bank secrecy will impact the Swiss economy. Over 10% of GDP is generated by the financial sector. And, Switzerland’s haven status has helped to push down interest rates to ridiculously low levels for the rest of the economy, especially in times of international turbulence - right when the stimulus is needed. The Swiss must adapt to a new international regime in order to maintain their economic prowess. Whether by intention or by chance, Switzerland is changing. Talent, like capital in earlier times, is streaming into the country. Unlike Germany,
France and Italy, Switzerland’s population is growing rapidly at over 1% p.a. and according to the federal government’s statistical office it just broke through eight million. Many immigrants are talented, white-collar specialists, bringing know-how and connections. Like a recent London investment banking émigré who noted that his move to Switzerland was based on a “profound admiration of the economic stewardship of the country, especially in light of the Euro tragi-comedy”. Economic uncertainty in the EU and a high “quality of life” are two motivators for mobile knowledge workers to move to the alpine enclave. However, other, less well known factors also play an important role in attracting top talent to the country. In particular, Switzerland has one of the most flexible and business-friendly regulatory environments in Europe. According to Adrian Stettler, who is in charge of attracting companies like Google to the area for the Canton of Zurich, “thanks to our great combination of academic excellence, a liberal economy and an outstanding quality of life, Zurich is not only very
competitive in the global market for talented students and professionals, but also entrepreneurs.” In a world where ideas, rather than capital, increasingly drive productivity, the Swiss response bodes well for the country’s long-term economic well-being and continued stability.
Company: Humatica AG Name: Andros Payne Email: andros.payne@humatica.com Web: www.humatica.com Address: Forchstrasse 239, CH-8032 Zürich Switzerland Telephone: +41 44 955 1101
Swiss Parliament Building / Bern, Switzerland
22 / September 2012
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business - in Latin America
DOING BUSINESS
— Latin America. The US-Colombia Free Trade Agreement: Opportunities & Risks l Andy Webb-Vidal is CEO of Latin-IQ Corporation, a boutique business intelligence and risk consultancy specialised in Latin America. Bogota Skyline
produce premium-quality items; lower-end products can no longer compete on price with Chinesemade goods. But there are other opportunities for Colombian businesses, for example producers of goods that can be marketed to the growing Hispanic population in the US, as well as health and tourism services. Some areas of agribusinesses will benefit, too, but the FTA is not good news for other subsectors of Colombian agriculture, which will face a flood of subsidised products from the US. The main beneficiaries in the US will be providers of construction services, car parts, mining equipment, and oil and gas machinery. DO YOU EXPECT TO SEE A LARGE INCREASE IN THE AMOUNT OF FOREIGN DIRECT INVESTMENT IN BOTH COUNTRIES AS A RESULT OF THE FTA? WHICH SECTORS OF THE COLOMBIAN ECONOMY ARE LIKELY TO ATTRACT FOREIGN INVESTMENT?
WHAT WERE THE MAJOR FACTORS THAT CONTRIBUTED TO THE DELAY IN THE FTA COMING INTO FORCE AND WHY WERE THEY OVERCOME? Implementation of the US-Colombia FTA was delayed by five years because opponents in the US, many linked to the Democratic Party, contended that labour union leaders in Colombia faced serious human rights violations, and that the Colombian authorities were ineffective in prosecuting the perpetrators. However, by 2011, proponents of the deal, especially from the Republican Party but also an increasing number of Democrats, gained the upper hand, arguing that violence against trade unionists had declined markedly, impunity had receded, and that the agreement would boost US exports and open up investment opportunities. The FTA came into effect in May this year. Essentially, it means that over 80% of US exports can now enter Colombia duty free, while remaining products will be phased into zero tariffs over the next ten years. For Colombia, most of its goods will enter the US duty free while some products will have preferential quotas and also see duties on them gradually fall to zero over a decade. IN WHICH SECTORS DO YOU EXPECT TO SEE A MAJOR BOOST IN TRADE FOR COLOMBIA AND, CONVERSELY, FOR THE US? The main beneficiaries in Colombia will be manufacturers of products such as textiles and footwear. The challenge for these companies is to
ACQUISITION INTERNATIONAL
Few Colombian companies have capital available to invest directly in the US market, but we do expect to see a progressive increase in direct investment from US companies in Colombia. The advantages are that Colombia has good legal protection for investors, which strengthen under the investment protection chapter of the FTA, as well as an educated and flexible labour market. However, Colombia has some major structural deficiencies. Indeed, sub-standard infrastructure is a more serious problem than crime and insecurity. Colombia’s road network is one of the worst in Latin America. Local economists calculate that transport infrastructure failings equate to a 10% to 15% tax on business, and the government recognises that high logistical costs have left the country at a competitive disadvantage compared with some of its neighbours. Inadequate infrastructure is a result of corruption, poor design, and disputes over environmental permits, leading to financial overruns. The flipside to this of course is that infrastructure is a huge investment opportunity with potentially handsome returns for civil engineering firms, and the government of President Juan Manuel Santos is reforming regulations and has drafted a major plan to attract investment in infrastructure. Other potentially attractive areas for investment in Colombia are biofuels, tourism and forestry. But we’re not expecting to see much of a surge in oil, gas and mining, basically because these sectors have already seen a major influx of foreign investment predating the FTA. WHAT RISKS DO US COMPANIES FACE IN INVESTING IN AND TRADING WITH COLOMBIA?
The most significant risks are money-laundering and terrorist-financing. Colombia is still a major producer of illegal drugs, and outlaw groups involved in the trade are constantly on the look-out for vulnerable legitimate businesses through which to launder the proceeds from narcotics trafficking. Foreign companies need to be very careful and run appropriate checks when selecting local suppliers. Extortion is also a risk, especially in some remote regions. However, kidnapping for ransom aimed at foreign executives is now a much lower risk than it was several years back, when Colombia was the abduction capital of the world, and while there are still some physical security risks related to terrorism, overall these are receding. PRESIDENT JUAN MANUEL SANTOS RECENTLY ANNOUNCED THAT HIS GOVERNMENT HAD AGREED TO BEGIN PEACE TALKS WITH THE FARC INSURGENT MOVEMENT. WHAT’S THE SIGNIFICANCE OF THIS? The FARC has been active for almost 50 years, and it’s the longest-running insurgency in Latin America. Various governments have engaged in negotiations with the FARC before, but all of these previous attempts ended in failure. It’s too early to tell how these new talks will evolve, but the chances of success this time round appear greater than at the outset of previous efforts, since the FARC now understands that it has no chance of taking power militarily. For Santos, this move is the biggest political gamble of his presidency. It won’t be a quick process, and there may well be reversals along the road, but if Santos is able to accomplish the FARC’s demobilisation, one of the benefits will be greater investment and stronger economic growth in the future.
Company: Latin-IQ Name: Andy Webb-Vidal Email: awv@latin-iq.com Web: www.latin-iq.com Address: 16th Floor, Plaza 2000, 50th Street, Panama City, Panama Telephone: +44 (0) 845 680 8026
September 2012 /
23
SECTOR SPOTLIGHT:
Doing Business in London
DOING BUSINESS — in London Westminster Bridge with Big Ben / London
WHAT WERE THE MAIN FACTORS WHICH CONTRIBUTED TO THE RISE OF LONDON AS THE MAJOR FINANCIAL CAPITAL OF EUROPE? This appears to be mainly historical but the increased internationalisation and beneficial tax regime differentiated London from other financial European capitals. THE VOLUME OF DEALS HAS DECREASED SUBSTANTIALLY SINCE THE BOOM YEARS OF 2007 AND 2008. DO YOU EXPECT THE MARKET TO RECOVER AND AGAIN REACH THESE LEVELS? Not really. If so then it would be wise to exit before the next bubble bursts again. The key is to create a more sustainable M&A environment and avoiding the return of the recklessness of the boom years. CAN YOU COMMENT ON ANY SMALLER FINANCIAL HUBS WHICH OFFER OPPORTUNITIES FOR FIRMS? WHICH OTHER GLOBAL CITIES ARE LONDON’S BIGGEST
24 / September 2012
COMPETITION IN TERMS OF ATTRACTING INVESTMENT? Obviously New York is the main competitor from a global perspective but don’t underestimate Singapore which I can imagine increasing in importance with the emerging Asian markets. WHY DO YOU THINK THE UK HAS RETURNED TO RECESSION? YOU MAY WISH TO REFER TO POLITICAL AND SOCIAL FACTORS AND / OR THE EUROZONE CRISIS. The UK seems to be not far away from the same level of debt nationally from the likes of Spain and Portugal. The only reason it is not in the same mess is that it is not fixed into the Eurozone constraints. The fact that the Eurozone is the UK’s most important trading partner does not help. DO YOU EXPECT TO SEE A PROSPEROUS LONDON AND BRITAIN IN 5 YEARS’ TIME?
Yes, subject to the Government getting this right and private enterprise having the environment and liberty to grow again. London has the unique mix of the British-coming-together-in-a-crisis-mentality in combination with the international melting pot of expertise and networks that should foster entrepreneurialism. This should also then benefit Britain as a whole - if this is permitted.
Company: Ambiente International LLP Name: Allan Busse Email: allan.busse@ambientellp.com Web: www.ambientellp.com Address: 207-209 Regent Street, London W1B 4ND Telephone: 020 7929 7888
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business in Scotland
DOING BUSINESS — in Scotland l
Patricia Barclay is the Founder of Bonaccord Ecosse Limited.
I set up Bonaccord to meet what I perceived to be a gap in the market for a law firm specialising in the commercialisation of scientific innovation that could provide not just cost-effective legal advice but could also offer additional support in the form of the contacts and business expertise that I had built up working around the world for many years as a General Counsel in the international life science industry. Many of my clients are start-ups and are dependent on the ability to raise money and so the recession hit them hard as investors shied away from the risks of scientific innovation and established businesses pulled back from investing in new products. Over the last 18 months however the market has really picked up. Investors are active again and are increasingly willing to invest early in less conventional or more
high-risk companies as well as those already generating revenue. The impetus has come from private investors tired of waiting on a global upturn but the professional funds are now also active again. Increasingly too we are seeing a move to more long term investments rather than the previous short term exit focussed approach which has provided more stability for companies who can now plan for growth rather than being pressurised into an early trade sale. There is certainly a growing confidence and I am finding companies are much more willing to turn away potential purchasers and to be more selective in the investments they accept, looking instead to create more strategic partnerships in certain areas of their business. Looking forward with our formidable science base I think Scotland is well placed to prosper in the coming
years. I am actively involved in looking for inward investment and am finding a receptive audience for what we have to offer.
Company: Bonaccord Ecosse Limited Name: Patricia Barclay Email: patricia@bonaccord.eu Web: www.bonaccord.eu Address: 31 Merchiston Park, Edinburgh EH10 4PW Telephone: +44 (0) 131 202 6527
Edingburgh Skyline / Scotland
ACQUISITION INTERNATIONAL
September 2012 /
25
SECTOR SPOTLIGHT:
Doing Business in Turkey
DOING BUSINESS — in Turkey
l While lots of countries are still recovering their damages from the “global financial crisis 2008”, Turkey intervened before the occurence of the financial crisis and saved the country from loss. Turkey’s approach showed remarkable progress with the economy, which expanded by 9.2% in 2010 and 8.5% in 2011, thus being the second fastest growing economy in the G20 behind China, because of the fact that Turkey had already took lessons from the economic crisis in 2001. Since then Turkey has accomplished macroeconomic strategy in combination with prudent fiscal policies and integrated major structural reforms. Under favour of new banking law and regulations, Turkey has become one of the major recipients of FDI. Occasionally, these structual reforms have had the purpose of increasing the role of the private sector in the Turkish economy. Today, Turkey predicts that it will bring the level of per capita income to 25,000 dollars in 2023 and that means a great opportunity for foreign investors. Our business solutions help clients to find the best solutions for their operational excellence and their legal disputes. We gather, analyse and evaluate
26 / September 2012
useful and related information: business partners searches and finding customers or distributors in Turkey in order to help clients making accurate business decisions and strengethining their market positions. We aim to assist companies or individuals entering emerging markets in accordance with Turkish Legislation. Azim ÇIGIL founded AZIM ÇIGIL BUSINESS CONSULTANCY & LAW OFFICE in 2005. He began his professional business life in the Law Department of Arthur Andersen, then he started working as a Manager in the Law Department of Ernst&Young Istanbul Office. Additionally, Azim ÇIGIL is a solution partner of Moore Stephens Turkey for years.
Company: Azim Çigil Business Consultancy & Law Office Name: Azim ÇIGIL Email: azim@azimcigil.av.tr Web: www.azimcigil.av.tr Address: Sulun Sokak No:32 PK:34330 Levent Beşiktaş/ISTANBUL- TURKEY Telephone: +90 212 269 25 77
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business - in a Transcontinental Country
DOING BUSINESS
— in a Transcontinental Country l Ahmed Abou Ali is the managing partner of Hassouna & Abou Ali Law Firm, Egypt. WHAT ARE THE ADVANTAGES OF BEING GEOGRAPHICALLY A TRANSCONTINENTAL COUNTRY? Most transcontinental countries lie on important trade routes and act as a connecting zone between distant economic markets. In addition, some transcontinental countries combine the benefits of the two continents on which they are located such as economic agreements and unions, and political alliances. WHAT SETS EGYPT APART FROM OTHER TRANSCONTINENTAL COUNTRIES SUCH AS TURKEY? Egypt’s geographic location provides it with a competitive edge over other transcontinental countries such as Turkey, Russia and Kazakhstan. It lies on the cross roads between Africa, Europe and Asia. The Suez Canal provides the shortest and most economically feasible route for the trade of goods between the West and the East. Other alternatives
such as Cape Agulhas and the Northern Sea Route are significantly more expensive. In addition to its proximity to all continents of the Old World, Egypt is a WTO plus within its regional and bilateral related agreements. For example, it is a member of the COMESA and GAFTA as well as several agreements with the EU and the US. These agreements provide Egyptian goods and services (or goods and services containing Egyptian components) with more facilitated and less expensive access to international markets in general, and African and European markets in particular. WHAT FACTORS HAVE CONTRIBUTED TO THE STRONG GROWTH FIGURE IN EGYPT OF 5% SINCE THE FINANCIAL CRISIS IN 2009? During the years preceding the financial crisis in 2009, the Egyptian Government took several measures towards the improvement of the investment climate and facilitating investment procedures for local and foreign investors. These include, for example, issuing new tax
laws, reduction of custom tariffs, simplifying procedures for starting businesses, introducing several banking reforms, more freedom for the transfer of capital both internally and abroad, and, in more general terms, dismantling the economic system that has hindered Egypt’s development for decades. The foregoing, coupled with the diversification of Egypt’s economy, contributed to Egypt’s economic growth despite the financial crisis.
Company: Hassouna & Abou Ali Law Firm Name: Ahmed Abou Ali Email: agaa@hassouna-abouali.com Web: www.hassouna-abouali.net Address: 2 Abdel Kader Hamza St., Cairo Center Bldg, Garden City Cairo, Egypt Telephone: +20-2-27924101 & 2-27924102
DOING BUSINESS IN A TRANSCONTINENTAL COUNTRY (RUSSIA) Company: Akis Tech. Ltd Name: Alok Kumar Email: alok@akistech.com Web: www.akistech.com Address: St. Burakova-27, Moscow 105118, Russia Telephone: +7-495-2762739
ACQUISITION INTERNATIONAL
September 2012 /
27
SECTOR SPOTLIGHT:
Doing Business in Northern Ireland
DOING BUSINESS — in Northern Ireland
l Fearghal O’Loan is Partner and Head of Finance and Restructuring at Tughans.
It is sometimes suggested that Northern Ireland, in comparison to other regions in the UK, has been less affected by economic turmoil. I don’t agree that we have been so lucky. The private sector economy is still retreating and the public sector economy will come under significant pressure as part of the Comprehensive Spending Review. Foreign direct investment, developing export markets and strong potential for growth in the technology (life sciences, healthcare and IT), professional services, engineering, agri-foods and outsourcing sectors are all factors which Northern Ireland can look to for future growth. In addition, a reduction in the corporation tax rate in Northern Ireland is one of the key policy areas which could assist in stimulating economic recovery in Northern Ireland. The CBI in Northern Ireland have long been vocal in supporting this. Tughans’
28 / September 2012
managing partner, Ian Coulter, is leading the charge through his role as Chairman of the CBI. Some express concern that lowering corporation tax rates in Northern Ireland will simply displace economic activity. I believe that lowering corporation tax will create and stimulate new enterprise. The ability to set corporation tax rates would establish the framework for a more productive and dynamic economy and would have the knock on effect of stimulating economic activity throughout the UK. Local businesses will also benefit. Less tax to pay means more capital available for investment in new products and equipment, finding new markets, increasing sales and, most importantly, creating new jobs. A reduction in corporation tax is a critical factor in Northern Ireland’s ability to deliver prosperity.
Although not the solution to all of the challenges facing Northern Ireland, it is a key measure which would help kick start private sector growth overnight. Without it, the Northern Irish economy will not be rebalanced in the foreseeable future.
Company: Tughans Name: Fearghal O’Loan Email: fearghal.oloan@tughans.com Web: http://www.tughans.com Address: Marlborough House, 30 Victoria Street, Belfast BT1 3GG Telephone: +44 (0) 28 9055 3300
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business in The North East
DOING BUSINESS — in The North East l
David J. Pickles is Director of Strategy & Development at MIAC Acadametrics Ltd.
Angel of The North / North East England
MIAC Acadametrics forecasts risk in residential or commercial property portfolios using a client view of the future regional economies. Regional house prices reflect the regional lending risks as seen by the mortgage providers. In the North region which, in the LSL/Acadametrics House Price Index, combines Cumbria and the North East, the index shows that in June 2012: • • •
the average house of £141,277 was the lowest of all regions and 1/3 of that in Greater London prices fell -0.6% over the year; more than in any other region except the North West; without Cumbria, prices would have fallen further prices fell in seven of the past 12 months (one more than in any other region) and fell in each of the last 3 months
ACQUISITION INTERNATIONAL
At MIAC Acadametrics, we deduce that those macroeconomic factors which damage the housing market have been running more strongly in the North East than in, say, the North West, Greater London and England & Wales as a whole. Greater London prices were boosted from buying by wealthy overseas investors, reputedly using cash. Mortgage lenders’ requirements as to both minimum deposits and credit-worthiness are the greater in regions which might suffer highly from unemployment, such as the North East, and in respect of clients with high loan to value (LTV) ratios who would quickly fall into negative equity were house prices to fall. Lender losses would result in them having less to lend and even less incentive to do so. In the North East, the struggling housing market speaks of a regional economy in difficulty.
Company: MIAC Acadametrics Limited Name: David J. Pickles Email: david.pickles@acadametrics.co.uk Web: www.miac-acadametrics.co.uk Address: 226 Sheen Lane, London, SW14 8LD Telephone: +44 (0) 20 8392 9082
September 2012 /
29
SECTOR SPOTLIGHT:
The Isle of Man - Leading The UK to Recovery
THE ISLE OF MAN — Leading the UK to Recovery
l The current global economic crisis has showcased the robustness and adaptability of certain international jurisdictions. IOMA Fiduciary, part of the IOMA Group, is proud to have its heritage of more than 30 years closely aligned with that of the Isle of Man, which has shown remarkable economic growth over that same period. Harbour / Isle of Man
-----------------------------------------------------------------------Craig Brown is Managing Director of IOMA Fiduciary. ------------------------------------------------------------------------
The Isle of Man offers a unique mix of stability (political and legislative), regulation, high professional standards and a can-do attitude in which businesses and government work together to promote the island’s economic standing. Unlike many international financial centres, the Isle of Man is not dependent on just one or two sectors such as banking and finance, but instead has diversified its economy, thereby attracting new investment not just because of a favourable tax regime, but by being a centre of excellence in a diverse range of sectors. This approach has led to an unprecedented period of sustained growth for more than 25 years, which looks likely to continue in the future.
30 / September 2012
IOMA has adopted a similar approach to serving its clients needs, and is alone amongst the island’s companies in being able to provide trust and company services, life assurance, fund management, investment management, pensions, captive insurance and general insurance business under one roof. Businesses coming to the Isle of Man can be assured of receiving a professional and well regulated service, which offers them an excellent opportunity to succeed in their venture. IOMA have helped many businesses to grow and thrive, and we are keen to work with new businesses considering a move to the island. Rather than mere providers of a business service we see ourselves as becoming business partners with our clients, using our knowledge, expertise and extensive network of business contacts to support and guide the business as though it were our own.
All IOMA Group companies hold the requisite Financial Supervision Commission or Insurance & Pensions Authority licences. Our website at www.iomagroup. co.im details each entity and the licences held.
Company: IOMA Fiduciary Name: Craig Brown Email: craig.brown@iomagroup.co.im Web: www.iomagroup.co.im Address: IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP Telephone: +44 (0)1624 681250
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Isle of Man - Leading The UK to Recovery -----------------------------------------------------------------------Micky Swindale is Associate Director, Advisory, at KPMG LLC. ------------------------------------------------------------------------
Whether onshore or offshore, these are challenging times, and yet we have much to be thankful for in the Isle of Man, in particular; • A highly diversified economy by offshore standards, with eGaming as a particular success story contributing nearly 10% of GDP. • A public and private sector which works closely together, as epitomised in the relationship between the Department of Economic Development and the Chamber of Commerce, but also the plentiful and active sector groups. Nevertheless, the challenges remain, particularly in light of the propensity of the UK government to throw spanners in the Manx wheel such as the reconfiguring of our VAT revenues and the proposed point of consumption tax – so it is imperative that the island remains fleet of foot. At KPMG in the Isle of Man, we not only advise clients in the Isle of Man, but also regularly lead engagements
-----------------------------------------------------------------------Steve Wicks is Managing Director of Home Strategic. ------------------------------------------------------------------------
As one of the Island’s leading marketing and design agencies, I suppose we are ideally placed to comment on the Islands ongoing success story and the businesses that thrive here. Unfortunately, the obvious starting point for many, particularly the uneducated, is to point the finger to the well publicised tax benefits as the driving factor behind our success. Well, I moved from the UK 12 years ago and I don’t feel financially better off at all – I do however feel more fulfilled, happier, less frustrated by red tape, better supported by Government, better supported by Government agencies, better looked after health and education wise. In fact, better all round. And that’s something you hear all the time! Maybe that’s why so many businesses choose the Island as their jurisdiction of choice – it’s an amazing environment to live and work in.
in other offshore jurisdictions, which puts us in a strong position to understand the pressures on, and relative strengths of, the individual finance centres. As Offshore Head of People and Change for KPMG, and operator of our multi-jurisdiction remuneration and benefits survey, I know that the Isle of Man is a very cost-effective location to be an employer, particularly when compared to some of our closest rivals. Recently we have carried out surveys looking specifically at the factors which attract and retain companies to the Isle of Man and, putting aside tax and sector-specific factors, two elements stood out; • Quality of life • Accessible & business friendly As for the level of corporate transactions that take place on the island, KPMG in the Isle of Man has a large transaction services team, with the team’s directors, David McGarry and Russell Kelly, both seeing a continued strong flow of work in this area. With all this in mind, I think we can afford to look forward with confidence as well as our usual steely resolve.
Yes, of course there are financial incentives but I remember the grants being handed out to Welsh companies in the 90’s which made them more competitive and able to win work from non-funded English companies. It happens everywhere. The big difference with the Isle of Man is the way we go about our ‘offshore’ lives – honestly and with pride. With so many tax information exchange agreements in place, nobody can point seriously to the Isle of Man and question our ethics, although frustratingly some still do. And for Home Strategic? We have local, national and international clients and we often compete successfully against major UK agencies, so being offshore hasn’t hindered us at all. Maybe that’s also down to the way we work and the results we’ve been able to deliver. For us, there is only one thing that matters, and that’s results. Everything else is just hot air. And the future? Well, recent times have proven
I know that the Isle of Man is a very cost-effective location to be an employer, particularly when compared to some of our closest rivals.
Company: KPMG LLC Name: Micky Swindale Email: mswindale@kpmg.co.im Web: www.kpmg.co.im Address: Heritage Court, 41 Athol Street, Douglas, Isle of Man, IM99 1HN Telephone: +44 (0) 1624 681020
the old crystal ball doesn’t work so who knows. One thing’s for sure, the businesses here will be in the sort of jurisdiction that never stands still and will always be well placed to make the most of every opportunity. Exciting times!
Company: Home Strategic Name: Steve Wicks Email: steve@homestrategic.com Web: www.homestrategic.com Address: Millennium Park Studio, Ballafletcher Road, Cronkbourne, Douglas, Isle of Man, IM4 4QJ Telephone: +44 (0) 1624 610121 / 666103
Taiwo Afonja
9th Floor, St. Nicholas House, Catholic Mission Street, Lagos Island, Lagos, Nigeria Telephone: +234 1 4622093-4 Mobile: +234 803 303 2977 Email: tafonja@acas-law.com
www.acas-law.com ACQUISITION INTERNATIONAL
September 2012 /
31
SECTOR SPOTLIGHT:
The UK Bribery Act - One Year On
THE UK BRIBERY ACT — One Year on -----------------------------------------------------------------------Andrew Bodnar is a barrister at Matrix Chambers in London. He is a specialist in asset recovery, fraud, money laundering, corruption and financial misconduct. ------------------------------------------------------------------------
WHAT ARE THE REQUIREMENTS OF THE UK BRIBERY ACT OF 2010? The Act gives rather clearer definitions of what constitutes “bribery” than was the case under the old legislation and criminalises it, and places a positive obligation on companies to have systems in place to prevent corruption by employees and agents. Unlike the US FCPA, there is no exception for facilitation payments, even if some of the definitions in the Act might allow for some debate and a degree of prosecutorial discretion. IN YOUR OPINION HAS THE UK BRIBERY ACT BEEN EFFECTIVE? WAS THE TIMING RIGHT?
The Act has certainly raised awareness of corruption in the business community, in much the same way that the Proceeds of Crime Act raised awareness of money laundering nearly 10 years ago. The primary objective was to discourage corrupt activity, and encourage businesses to expose it where it was discovered, rather than to prosecute offences after the event; in that respect it has been effective. The long lead-in to the Act coming into force enabled businesses to take a close look at themselves. WHAT IMPACT IF ANY HAS THE ACT HAD ON BUSINESSES? DO YOU FORESEE MORE OF AN EFFECT OVER THE COMING YEAR? The biggest effect on business was felt before the Act came into force, as everyone feared that even corporate hospitality would become a criminal offence in the UK. Fortunately that has not happened, and the primary effect on business has been greater awareness of the issue. Of course, the threat of
The introduction of a corporate offence where bribery was committed and “adequate procedures” were not in place to prevent it, gave the Act a formidable amount of coverage and a place on every board room agenda. Although the corporate offence has yet to be tested in the courts, the effect of the Act has been substantial. -----------------------------------------------------------------------Mark Beardsworth, Partner, and Chloe Pawson-Pounds, Associate, of Brown Rudnick LLP: ------------------------------------------------------------------------
It is 14 months since the Bribery Act came into effect. The Act was touted as a serious declaration of intent by the government to prosecute corrupt business practices. It was viewed with trepidation by corporations, who struggled to define the practical effect of the extra territorial reach. The introduction of a corporate offence where bribery was committed and “adequate procedures” were not in place to prevent it, gave the Act a formidable amount of coverage and a place on every board room agenda. Although the corporate offence has yet to be tested in the courts, the effect of the Act has been substantial. It has coincided with a growing political awareness of the need to be seen to be acting against corruption and an increased appetite for action. The extensive corporate time and money expended to ensure
32 / September 2012
effective compliance and governance means that one aim has already been achieved.
prosecution has not gone away, and the Act applies both to all companies registered in the UK and all citizens of the UK and its overseas territories, so companies may find themselves caught by the Act in unexpected ways.
Company: Matrix Chambers Name: Andrew Bodnar Email: andrewbodnar@matrixlaw.co.uk / matrix@matrixlaw.co.uk Web: www.matrixlaw.co.uk Address: Griffin Building, Gray’s Inn, London, WC1R 5LN Telephone: +44 (0)20 7404 3447
Company: Brown Rudnick LLP Name: Mark Beardsworth Email: mbeardsworth@brownrudnick.com Web: www.brownrudnick.com Address: 8 Clifford Street, London W1S 2LQ, United Kingdom Telephone: +44 20 7851 6000
This effort may not yet be wasted. The Act is only applicable to corrupt practices undertaken after 1 July 2011 so it is hardly surprising that, to date, there has only been one prosecution under it. In November 2011 a court clerk at Redbridge Magistrates’ Court, pleaded guilty to accepting a bribe to remove a defendant’s conviction from the record and was sentenced to 4 years imprisonment. Experienced practitioners will know that new legislation takes several years to “bed in.” Amidst reports of unrest over budget and high numbers of departures from the SFO, this summer has at least seen some high profile appointments including that of Geoffrey Rivlin QC, formerly presiding judge at Southwark Crown Court. Coupled with the success of the Nadir prosecution we may now see the director of the SFO increase in confidence and put the Act back on the agenda.
Company: Brown Rudnick LLP Name: Chloe Pawson-Pounds Email: cpawson-pounds@brownrudnick.com Web: www.brownrudnick.com Address: 8 Clifford Street, London W1S 2LQ, United Kingdom Telephone: +44 20 7851 6000
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The UK Bribery Act - One Year On
-----------------------------------------------------------------------Nick Burkill is Co-head of the Dorsey & Whitney London office trial group and co-chair of the firm’s Anti-Corruption Practice Group. ------------------------------------------------------------------------
Dorsey’s Anti-Corruption Practice Group is made up of experienced lawyers in the US, UK and China. Experience includes conducting investigations on behalf of clients all over the world and in a huge range of industries; representing companies subject to US Department of Justice and SEC action; pursuing civil claims arising from corruption; drafting anticorruption compliance programs and providing and assisting with the provision of anti-corruption training; advising on the introduction of deferred prosecution agreements into the UK; and advising clients on corruption issues arising in acquisitions and joint ventures.
There are however a large number of companies, including those listed on AIM operating in high risk sectors and high risk jurisdictions that have yet to address the anti-corruption procedures that the Act encourages them to use. The Act will only become more effective when it is enforced and when the SFO is better able to negotiate sanctions with corporates, including the deferred prosecution agreement structure that appears likely to be introduced in the UK.
The Act has been effective in raising standards of responsible corporates subject to UK jurisdiction.
-----------------------------------------------------------------------Kevin Robinson is head of the national Regulatory and Criminal Investigations Group at Irwin Mitchell. ------------------------------------------------------------------------
However, the most significant events of the first year of the Bribery Act have not taken place in the UK. They are a prosecution in Switzerland and a decision not to prosecute in the USA.
The Bribery Act was introduced to a great deal of fanfare and not a little scare mongering from both the Government and the accountancy and legal professions.
In Switzerland Alstom paid almost 60 million Euros for breaches of the Swiss Criminal Code which almost exactly echo the provisions of S7 of the Bribery Act. The significant aspect of that case is that Alstom had devised first class anti-bribery procedures, but did not implement them properly or train staff adequately. In the USA the DoJ and the SEC charged a senior Morgan Stanley employee with involvement in funnelling millions of dollars to a government official in China but did not prosecute Morgan Stanley. They, like Alstom, had first class procedures in place but, unlike Alstom, had implemented them and trained their staff properly. The employee in question was trained no fewer than 7 times and was reminded of his obligations 35 times.
A year on it all seems a lot of fuss about nothing. Not a single SFO prosecution, and, as far as we can tell, not even a single SFO investigation. The one and only prosecution being a tabloid newspaper sting on a court clerk who was actually prosecuted for misfeasance in public office with the Bribery Act charge being a make weight. None of this should allow complacency to creep in. There is a lot happening below the surface. The SFO has a new Director and, quite possibly, a new direction. It has set up a confidential hotline for receiving information about bribery activity, and has already taken hundreds of calls. It is impossible to think that such a deluge of information will produce no response from the SFO.
ACQUISITION INTERNATIONAL
Confirmation of my advice to use a search order on a case of an employee fraud where on the execution of the search it was discovered that the employee had retained a memo in his house identifying the steps he needed to take to hide evidence of his fraud.
HOW ARE YOU (AND YOUR TEAM) ABLE TO ASSIST IN IDENTIFYING POTENTIAL CORRUPTIONS OR VIOLATIONS WITHIN A BUSINESS? HOW CAN YOU ASSIST IN ENSURING THEY COMPLY WITH REGULATION? Dorsey’s Anti-Corruption Practice Group is made up of experienced lawyers in the US, UK and China, and this international approach to clients’ global issues is highly valued by clients both in resolving issues that are identified in their businesses in a way that is proportionate to the issues; and in advising on practical anti-corruption policies that are proportionate to the risks clients face in their sectors in different parts of the world.
IN YOUR OPINION HAS THE UK BRIBERY ACT BEEN EFFECTIVE? WAS THE TIMING RIGHT?
ON A LIGHTER NOTE, WHAT IS THE BEST PIECE OF ADVICE YOU HAVE BEEN GIVEN?
The lesson is clear. Do not pay lip service to compliance, implement effectively and train staff properly.
Company: Dorsey & Whitney (Europe) LLP Name: Nick Burkill Email: burkill.nick@dorsey.com Web: www.dorsey.com Address: 21 Wilson Street, London EC2M 2TD Telephone: 020 7588 0800
In May an Ernst & Young survey of 1000 middle managers produced the astonishing statistic that 72% of those surveyed had not even heard of the Bribery Act. That means there are an awful lot of businesses in the UK that are nowhere near being compliant. It looks like easy, and rich pickings, for the SFO.
Company: Irwin Mitchell Name: Kevin Robinson Email: kevin.robinson@irwinmitchell.com Web: www.irwinmitchell.com Address: Irwin Mitchell, 40 Holborn Viaduct, London, EC1N 2PZ Telephone: +44 (0) 20 7421 3877
September 2012 /
33
SECTOR SPOTLIGHT:
Double Taxation Agreements
DOUBLE TAXATION AGREEMENTS
l Steve Austwick is the Partner responsible for tax and legal services in the Baltics and Belarus at KPMG. He has worked for KPMG in Latvia for the last eight years and has previous experience in UK and Russia. and taxing rights over the transaction of the jurisdictions concerned. They also form a basis under which the tax authorities of the countries concerned are required to negotiate the position if the treaty rules lead to an inconclusive outcome. Treaties also usually specify maximum rates at which a jurisdiction can tax certain types of income received by a resident of one country but sourced in the other. For example most treaties set limits on tax withheld from dividends, interest and royalties, and eliminate tax on business profits unless there is a permanent establishment in the other country. HOW IMPORTANT IS IT FOR ENTREPRENEURS TO CHOOSE THE RIGHT BUSINESS ENTITY FOR A NEW COMPANY? AND HOW DOES DOUBLE TAXATION AFFECT THEM ON A DAY TO DAY BASIS? The chosen entity needs to fit the business and the group of companies it will form part of. In 99% of cases in Latvia a Limited company is chosen as this provides the corporate identity without the excessive administration of a joint stock company. Use of a limited company keeps the taxation of profits more simple, than for example a branch where there would immediately be two countries seeking to tax the profits. -----------------------------------------------------------------------Dominique Pepin is the Director of the Tax Department at Ernst & Young Services Ltd. ------------------------------------------------------------------------
In these troubled economic times, can growth be achieved? Implementing a sound and tax-efficient structure in a well-recognised jurisdiction may be the cornerstone. Barbados’ political and economic stability are central to its platform as a home for international business. More importantly, Barbados’ progressive corporate and low-tax regimes deliver broad opportunities to businesses in a myriad of sectors. With global bodies like the Organization for Economic Co-operation and Development (“the OECD”) escalating their efforts against tax-havens, the longterm prospect for corporations and high-net-worth individuals paying no tax is both increasingly shortsighted and unfeasible. Unlike purported tax-havens, Barbados has already substantially implemented the OECD’s “internationally agreed tax standards”,
34 / September 2012
Provided a limited company from Latvia does not create a taxable presence in any country it trades with, there should not be a difficulty with double taxation. IN BRIEF, WHAT ARE THE OVERALL AIMS, PROVISIONS AND GOALS OF EACH TREATY AND THE BENEFITS TO TAXPAYERS OF THEIR EXISTENCE? Tax treaties aim to eliminate or minimize double taxation which may be caused by tax jurisdictions overlapping. They also provide a degree of certainty as to the taxation of international transactions, by providing rules to determine residence of participants, thereby securing its place as a leader among compliant low-tax jurisdictions globally. Barbados’ edge over zero-tax jurisdictions is underscored by its already developed and rapidly expanding tax treaty network. With more than 20 agreements already in force, and many more in discussion or pending ratification, Barbados is a unique springboard for international investments. The growing treaty network provides companies and individuals with protection against double taxation, reduced withholding tax rates of 0% to 15%, permanent establishment protection and access to competent authority. Barbados’ tax-effective entities include financing companies, private banks, captive insurance companies, holding companies, segregated cell companies, shipping companies, mutual funds, and securities companies. The tax benefits attached to these entities vary from reduced tax rates of 0% to 2.5%, no tax on capital gains, a participation exemption, and the access to tax and investment protection treaties.
Company: KPMG Baltics SIA Name: Steve Austwick Email: saustwick@kpmg.com Web: www.kpmg.lv Address: Vesetas Iela 7, Riga, LV 1013 Telephone: +371 6703 8000
With its dedicated tax advisory team throughout the Caribbean and a truly global reach, Ernst & Young’s tax resources are uniquely deployed to help your company leverage the many opportunities offered in and through Barbados.
Company: Ernst & Young Services Ltd Name: Dominique Pepin Email: dominique.pepin@bb.ey.com Web: www.ey.com Address: Worthing Main Road, Worthing, Christ Church BB15008 , Barbados Telephone: +1 246 430-3812
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Double Taxation Agreements
l In this article Mr. Sándor Szmicsek, Tax Partner of Mazars in Hungary presents the double taxation situation in Hungary, and gives his comments about the double taxation agreements. Mr. Szmicsek is also the Head of tax and legal services, and has more than 27 year experience in M&A projects, business restructuring, tax and legal advisory services. He became an international partner of Mazars in 2008. He also coordinates the tax practices in Central and South-Eastern Europe and leads the global transfer pricing network of Mazars.
The main goals of a state entering into a double tax treaty are the exclusion of double taxation, eliminating tax evasion, and encouraging crossborder trade efficiency. It is generally accepted that tax treaties improve certainty for taxpayers and tax authorities in their international transactions. The existence of a double tax treaty is in many cases a key indicator for multinationals when choosing the right place to perform business activities. As Hungary has a wide network of tax treaties with more than 70 tax treaties in force, the country is a favourable location for large corporations. Nearly all the treaties provide for a reduced withholding tax of 5% or 10% on dividends paid out to foreign shareholders. In addition to this, Hungarian domestic rules do not prescribe any what to be applied when recipients of dividends, royalties or interest are foreign corporate entities. Most
-----------------------------------------------------------------------Dan Agbor heads Udo Udoma & Belo-Osagie’s banking and finance, power, private equity and taxation teams. ------------------------------------------------------------------------
Nigerian tax laws require Nigerian residents (both individuals and companies) to pay tax on any income accruing in, derived from, brought into, or received in Nigeria. In the case of Nigerian companies, their income will be regarded as taxable in Nigeria regardless of where it is actually derived, and this raises the potential that such income will also be liable to tax in the country from which it is derived. In order to provide relief from such double taxation Nigeria’s tax laws provide that, in certain cases, profits which are derived from outside Nigeria or which have already been subjected to tax in a country that Nigeria has entered into Double Taxation Treaty (“DTT”) with, will not be liable to further tax in Nigeria. Such relief can be obtained in respect of dividends, rent, interest and royalties derived from outside Nigeria and brought into Nigeria through a Nigerian bank, as well as in respect of any other income.
ACQUISITION INTERNATIONAL
Hungarian treaties prescribe the application of the exemption method as regards foreign branch income of Hungarian registered corporations. This, together with the advantageous participation exemption rules attract many investors to set up a Hungarian holding or operate through a Hungarian branch office. The majority of double tax treaties concluded by Hungary do not include anti-avoidance clauses, and can often be used highly efficiently in international tax structures. Besides the treaty protection, foreign entities operating in Hungary can get access to the EU Directives as well. Recent developments in relation to the Hungarian tax treaty network are inter alia the new treaty between the US and Hungary, which was concluded in 2010. The new treaty (contrary to the former version) includes extensive limitation of benefits clauses. Also, the treaty between Germany and Hungary has also been renewed recently. The aim of re-negotiating the
To date, Nigeria has entered into DTT’s with the United Kingdom, the Netherlands, Canada, France, Pakistan, Belgium, Philippines, Romania, South Africa and China. The Nigerian constitution requires all DTTs to be ratified by Nigeria’s National Assembly before they can become part of local laws. The National Assembly is yet to ratify the DTT with South Africa and China but, this notwithstanding, the tax authorities are already giving effect to the DTT with South Africa. The provisions of the various DTTs that Nigeria has entered into are broadly similar and extend to companies’ income tax, personal income tax, petroleum profits tax, capital gains tax and similar taxes applicable in the other contracting States. The DTTs enable Nigerian resident companies and individuals to claim a tax credit on account of the tax that they have paid in a DTT country. Companies and individuals that are resident in a country that Nigeria has entered into a DTT with also benefit from
old treaty was to be more compliant with the OECD Model Tax Convention, especially as regards the prices applied between associated enterprises.
Company: Mazars Kft. Name: Sándor Szmicsek Email: sandor.szmicsek@mazars.hu Web: www.mazars.hu Address: Hungary 1074 Budapest, Rákóczi út 70-72. Telephone: (+36) 429 30 10
a reduction in the rate of tax withheld from dividends, interest and royalties received from Nigeria. Such reductions are from the current applicable rate of 10% to 7.5%.
Company: Udo Udoma & Belo-Osagie Name: Dan Agbor Email: dan.agbor@uubo.org Web: www.uubo.org Address: Udo Udoma & Belo-Osagie, St. Nicholas House (10th Floor), Catholic Mission Street, Lagos Telephone: +234-1-4622307-10 Fax: +234-1-4622311
September 2012 /
35
SECTOR SPOTLIGHT:
Double Taxation Agreements CAN YOU PLEASE EXPLAIN THE BILATERAL AND MULTILATERAL TREATIES IN PLACE WITHIN YOUR JURISDICTION?
WHAT ARE PREDICTIONS REGARDING DOUBLE TAXATIONS AGREEMENTS OVER THE NEXT 12 MONTHS?
As a member of the European Union, France benefits from all European Directives and notably from the VAT Directive, the Merger Directive, the ParentSubsidiary Directive, the Interest-Royalties Directive and the Savings Directive.
New tax treaties and amendments to existing tax treaties are currently discussed by the FTA notably with Switzerland, Luxembourg and Belgium in order notably to extend the French right of taxation. More generally, the current trend is for France to introduce in the DTAs to be signed its local anti-avoidance mechanisms.
France has also an extensive treaty network with bilateral income tax treaties signed with 122 countries or overseas territories and Tax Information Exchange Agreements (“TIEAs”) concluded with 19 countries or overseas territories. The scope of French bilateral tax treaties is generally limited to individual and corporate income tax. However 57 tax treaties also include provisions regarding wealth taxation and 36 countries have concluded specific arrangements regarding inheritance taxation. -----------------------------------------------------------------------Pierre-Jean Douvier has been an equity partner at CMS Bureau Francis Lefebvre since 1991. He is specialized in transfer pricing, cross border transactions and in private clients having 27 years’ experience in those areas. Bruno Gibert joined CMS Bureau Francis Lefebvre as an equity partner in 2001 after a 16 years’ experience in the government service where he was in charge of international tax affairs. He specializes in international taxation with a particular focus on transfer pricing matters. Pierre-Sébastien Thill joined CMS Bureau Francis Lefebvre in 1984 and became Chairman of the Management Board of the firm (from 2004 to 2012).He is specialized in international taxation since 25 years. ------------------------------------------------------------------------
HOW IMPORTANT IS IT FOR ENTREPRENEURS TO CHOOSE THE RIGHT BUSINESS ENTITY FOR A NEW COMPANY? AND HOW DOES DOUBLE TAXATION AFFECT THEM ON A DAY TO DAY BASIS? Legal and tax considerations are critical for entrepreneurs when structuring a business in France. If the development of a French business does not specifically require the incorporation of a local subsidiary, it may be recommended from a French tax perspective. Indeed, where a branch would be set up, the French tax authorities (FTA), in case of an audit would have access to information pertaining to the foreign company.. In addition the current trend of the FTA is to focus on the reassessment of permanent establishments in France. A specific procedure allows the FTA to visit French premises or personal residences in order to find and seize evidence of the existence of a permanent establishment. On a day to day basis, entrepreneurs and companies are affected by double taxations mainly on the following bases: • • •
transfer pricing; qualification of intra-group flows (e.g. royalties vs. remuneration of services); tax residence, place of effective management and permanent establishment.
36 / September 2012
The main purpose of bilateral tax treaties is to avoid double taxation. They also frequently contain anti-treaty shopping rules and limitation of benefit provisions.
For instance, the draft tax treaty discussed with Switzerland may provide the right for France to levy inheritance duties on transfers of French real estate companies in cases where the deceased is a resident of Switzerland. It is also envisaged to modify the principles governing the elimination of double taxation by replacing the current exemption method with the credit method which will be generally detrimental considering the low inheritance duties applied in Switzerland. These evolutions clearly reflect the current determination of the French authorities to increase their power of taxation and their financial resources.
HOW DOES A DOUBLE TAXATION AGREEMENT FOSTER COOPERATION BETWEEN THE HOME NATION AND INTERNATIONAL TAX AUTHORITIES? Approximately 80 tax treaties concluded by France include provisions regarding mutual assistance and exchange of information between the tax administrations. In addition to this treaties, specific agreements (TIEAs) have been signed with 19 countries or overseas territories to allow the exchange of information between the tax authorities. Depending on the attitude of each State the effectiveness of the cooperation may vary.
Company: CMS Bureau Francis Lefebvre Web: www.cms-bfl.com Address: 1-3, villa Emile Bergerat, 92522 Neuilly-sur-Seine Cedex, France Name: Pierre-Jean Douvier Email: pierre-jean.douvier@cms-bfl.com Telephone: +33 1 47 38 55 90
A new European Directive entered into force on 1 January 2012 has supplemented the existing mechanisms within the European Union. WHAT IS THE BEST WAY TO REDUCE THE AMOUNT OF TAX WITHHELD FROM INTEREST, DIVIDENDS, AND ROYALTIES PAID BY A RESIDENT OF ONE COUNTRY TO RESIDENTS OF THE OTHER? PLEASE USE EXAMPLES TO ILLUSTRATE YOUR ANSWER. The extensive treaty network of France constitutes a major asset to the setting up of French entities. European business developments are also encouraged by the various tax directives which prevent European transactions from the application of any withholding taxation. More aggressive tax planning can also be observed where taxpayers take advantage of hybrid structuring to benefit from a situation of double non-taxation. On March 2012, the OECD however published a specific report describing the most common types of hybrid mismatch arrangements (hybrid entities, hybrid transactions et seq.) and providing possible measures to avoid these situations (notably the application of general anti-avoidance rules or specific rules to limit tax credits or deductions). Note that the FTA is currently focusing tax audits on such structures.
Company: CMS Bureau Francis Lefebvre Web: www.cms-bfl.com Address: 1-3, villa Emile Bergerat, 92522 Neuilly-sur-Seine Cedex, France Name: Bruno Gibert Email: bruno.gibert@cms-bfl.com Telephone: +33 1 47 38 42 19
Company: CMS Bureau Francis Lefebvre Web: www.cms-bfl.com Address: 1-3, villa Emile Bergerat, 92522 Neuilly-sur-Seine Cedex, France Name: Pierre-Sébastien Thill Email: pierre-sebastien.thill@cms-bfl.com Telephone: +33 1 47 38 43 50
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
FCPA Compliance - Mitigating Risk in M&A Transactions
FCPA COMPLIANCE — Mitigating risk in M&A transactions -----------------------------------------------------------------------Jacob Frenkel, a former public corruption prosecutor, is Chairman of his law firm’s White-Collar and Government Investigations Practice and is a recognized expert in international anti-corruption matters. ------------------------------------------------------------------------
HOW IMPORTANT IS IT FOR PROSPECTIVE ACQUIRERS TO ENSURE THEY CARRY OUT EXTENSIVE FCPA DUE DILIGENCE? Thorough FCPA due diligence is critical to international M&A transactions. The U.S. Government has prosecuted a good number of criminal cases against corporations for FCPA violations where the acquiring company “inherits” the liability for bribery existing in the acquired company or in connection with an aspect of the transaction itself. Guidance from the U.S. Government, the U.K. Government with the adoption the U.K. Bribery Act and the analysis in criminal cases makes clear that a principal focus of investigations is and will continue to be the adequacy of FCPA due diligence. HOW ARE YOU (AND YOUR TEAM) ABLE TO ASSIST IN IDENTIFYING POTENTIAL CORRUPTIONS OR VIOLATIONS EARLY ON IN A DEAL?
-----------------------------------------------------------------------Deloitte AG are the leading forensic advisor in the Swiss market and the firm’s centre of Excellence on FCPA for continental Europe. They frequently support both Swiss and international clients in identifying and mitigating bribery and corruption risks. Deloitte Partner David Fidan is leading a team of about 50 employees in Zurich and Geneva in that area, working closely with Deloitte’s Swiss M&A practice. ------------------------------------------------------------------------
One of the main developments in the FCPA area is the practically complete shift from companies paying bribes themselves to using third parties. Typically these parties appear as “agents” or “business consultants” although there are also examples of legitimate and substantial business links being utilised as a channel for corrupt payments. Identifying such payments relies strongly on investigative and data analytics techniques rather than the more traditional reviews of company data as it is necessary to go beyond information provided by the target and gather intelligence from other sources on such third parties, their reputation and activities. The ability to flag FCPA risks therefore increasingly depends on two factors: the advisor’s actual experience in investigating potential violations (including the ability to analyse complex data) and a detailed understanding of local business practices. As the role of third parties has become very much a key area of concern, it is no longer sufficient
ACQUISITION INTERNATIONAL
My approach always begins with developing the risk assessment protocol, then executing it. Every industry, company and transaction is different. Country and corporate cultures vary, as do the personalities of persons involved in the transactions. An effective risk protocol includes identifying potential red flags, market risks, useful resources and relevant documents and participants. Flexibility and investigative agility are critical, because circumstances surrounding transactions and dynamics of deals constantly shift. It is not possible to open a book or a manual and apply the reading to a risk assessment. I ensure that my team – the accountants and investigators with whom I work – has actual anti-corruption audit, investigative and compliance experience. DO YOU HAVE ANY PREDICTIONS FOR ANTICORRUPTION REGULATION OVER THE NEXT 12 MONTHS? Regulation and enforcement in western countries affecting acquisition activities in emerging markets will continue to present challenges, given the imbalance and disparity in regulatory and enforcement programs. In the U.S., aggressive emphasis on prosecution of individuals will continue. The U.S. Government still believes that
(though obviously still highly advisable) to check the hospitality habits of an acquisitions target or to rely exclusively on self-certifications and evidence of having provided some training. In order to know what to look for, it is necessary to understand how corrupt payments would likely be routed in a specific business environment and to be able to conduct appropriate investigations. The SEC in 2011 started targeting banks over their dealings with sovereign wealth funds, clarifying that the funds’ employees could be considered public officials for FCPA purposes. The British FSA more recently and more broadly focused on investment banks and their systems and controls intended to prevent corrupt payments. Given the high level of internationalisation and the continuing focus of many financial institutions on business development in new and emerging economies which may carry increased corruption risks, the financial sector is likely to become the next focal area for FCPA enforcement.
One of the main developments in the FCPA area is the practically complete shift from companies paying bribes themselves to using third parties.
there is widespread and ongoing corrupt activity in international transactions; as a result, the Government adds resources, and the investigations and prosecutions will continue to increase. As more individuals face charges, thus potential incarceration, we will see challenges to extradition requests and trials testing the Government’s theories.
Company: Shulman, Rogers, Gandal, Pordy & Ecker, P.A. Name: Jacob S. Frenkel Email: jfrenkel@shulmanrogers.com Web: www.shulmanrogers.com /attorneys-95.html Address: 12505 Park Potomac Avenue, Sixth Floor, Potomac, Maryland 20854 Telephone: 1-301-230-5214
Company: Deloitte AG Name: David Fidan Email: dfidan@deloitte.ch Web: www.deloitte.ch Address: General-Guisan-Quai 38, 8002 Zurich, Switzerland Telephone: +41 (0) 44 421 60 00
Company: Deloitte AG Name: Dr. Christoph Rojahn Email: crojahn@deloitte.ch Web: www.deloitte.ch Address: General-Guisan-Quai 38, 8002 Zurich, Switzerland Telephone: +41 (0) 44 421 60 00
September 2012 /
37
SECTOR SPOTLIGHT:
FCPA Compliance - Mitigating Risk in M&A Transactions A COMPANY MAY HAVE A LONG RECORD OF FCPA COMPLIANCE BUT MAY BUY A FIRM WHICH DOES NOT COMPLY. HOW DAMAGING OR COSTLY COULD THIS BE FOR THE ACQUIRER? There have been several instances where misconduct at a recently-acquired subsidiary resulted in a long, painful investigation and an enforcement action for the acquirer. An established record of compliance is an important and helpful factor when dealing with the DOJ or SEC in such a circumstance, but is unlikely to help the acquirer avoid the expense and distraction of an investigation. Indeed, prosecutors often request information to enable an investigation that is broader in scope than the circumstances surrounding the subsidiary, and may ask for information related to operations throughout the region where the subsidiary is located, or throughout the business line in which the subsidiary operates. The cost of such an investigation can often dwarf any fine or disgorgement associated with resolving the matter. Moreover negative publicity can have a damaging effect on the acquirer’s reputation and prospects for future business. HAVE THERE BEEN ANY NOTABLE RECENT CHANGES IN ANTI-CORRUPTION AND ANTIBRIBERY REGULATION? -----------------------------------------------------------------------William P. Barry is a partner with the law firm Richards Kibbe & Orbe LLP. Richards Kibbe & Orbe LLP (RK&O) has offices in New York, London and Washington DC. ------------------------------------------------------------------------
by the acquirer post-acquisition. Third, it protects the reputation of the acquirer in the global marketplace, which can translate to more and better opportunities going forward.
WHAT ARE THE REQUIREMENTS OF THE FOREIGN CORRUPT PRACTICES ACT?
WHAT IMPACT COULD A LACK OF FCPA DUE DILIGENCE HAVE ON A BUSINESS?
The FCPA has two substantive prongs: the antibribery provision and the books and records and internal controls provisions.
Inadequate anti-corruption due diligence exposes the acquirer to the risk that it could be buying a problem and perhaps paying too much for it as well. Just as importantly, the failure to conduct adequate due diligence can cost the acquirer business in the future. In the event improper payments are discovered postacquisition, the scope and efficacy of pre-acquisition due diligence will be an important factor for US regulators evaluating whether to pursue an enforcement action involving the acquirer. The discovery of a potential FCPA violation post-acquisition can cause potential counterparties to decline to do business with the acquirer in the future and, in some circumstances, lead to debarment or otherwise jeopardize the acquirer’s ability to obtain US government contracts.
The anti-bribery (or foreign payments) provision, enforced by the US Department of Justice (“DOJ”) and the US Securities and Exchange Commission (“SEC”), makes it illegal to make payments directly or indirectly to foreign officials, officials of foreign political parties, or any other person acting as a conduit for payments to foreign officials or political parties for the purpose of obtaining or retaining business. The books and records and internal controls provisions, under section 13 of the Securities Exchange Act of 1934 give the SEC a potent and easily-applied tool for requiring US issuers to provide full and fair disclosure. These provisions require companies who file reports with the SEC to maintain records that accurately reflect transactions and the nature and quantity of corporate assets and liabilities. HOW IMPORTANT IS IT FOR PROSPECTIVE ACQUIRERS TO ENSURE THEY CARRY OUT EXTENSIVE FCPA DUE DILIGENCE? Anti-corruption due diligence is critical in three respects. First, it enables the prospective acquirer to identify and potentially resolve problems before those problems result in legal exposure for the acquirer on the basis of a theory of successor liability. Second, the due diligence process helps identify circumstances where the valuation of a potential acquisition is predicated on a business model that may be dependent on conduct that would not be permitted
38 / September 2012
HOW ARE YOU (AND YOUR TEAM) ABLE TO ASSIST IN IDENTIFYING POTENTIAL CORRUPTIONS OR VIOLATIONS EARLY ON IN A DEAL? Our multi-disciplinary approach allows us to provide our clients with a lean, efficient team of attorneys that bring deep experience and varied areas of expertise to a project. We believe that fewer lawyers with more expertise brings more value to a deal than an army of junior people. We have former prosecutors and SEC officials, transactional experts and subject matter experts with respect to anti-corruption, economic sanctions and money laundering issues. As a result, we are able to come to a potential deal with a good idea of where the potential problems lie, and how to solve them. We are keenly aware of developing regulatory issues in the US and abroad, and have experience advising with respect to complicated, cross-border transactions.
The notable change I want to highlight relates to litigation, not regulation, regarding who is a “foreign official” and what constitutes an “instrumentality” under the FCPA. The increased focus on prosecuting individuals for FCPA violations has had the effect of putting the interpretation of the FCPA before the courts. As these cases reach courts of appeal, we will get a better sense of who is a “foreign official” for purposes of the FCPA and what constitutes a government instrumentality. The FCPA defines a foreign official as an “officer or employee of a foreign government or any department, agency, or instrumentality thereof.” To date, there has been no real clarity as to what constitutes an instrumentality. DO YOU HAVE ANY PREDICTIONS FOR ANTI-CORRUPTION REGULATION OVER THE NEXT 12 MONTHS? My prediction is that the marketplace will increasingly demand anti-corruption compliance policies, procedures and due diligence as a requirement for doing business, regardless of where in the world the business operates. The potential cost of a violation of the FCPA or the UK Bribery Act is too great for multinational companies to ignore the risk. Globally, the trend is to prepare for US – style compliance requirements, which includes effective, targeted due diligence for mergers and acquisitions.
Company: Richards Kibbe & Orbe LLP Name: William P. Barry Email: wbarry@rkollp.com Web: www.rkollp.com Address: 701 8th Street, NW, Washington DC 20001-3727 Telephone: +1 (202)261-2965
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
FCPA Compliance - Mitigating Risk in M&A Transactions -----------------------------------------------------------------------Bill Olsen is US Practice leader for Global Investigation and Anti-Corruption Services for Grant Thornton LLP. ------------------------------------------------------------------------
WHAT ARE THE REQUIREMENTS OF THE FOREIGN CORRUPT PRACTICES ACT? The FCPA has two key provisions. First, the Act prohibits the bribery of foreign government officials to obtain or retain business. Second, the Act requires public companies to maintain an adequate system of internal controls to record transactions accurately. HOW IMPORTANT IS IT FOR PROSPECTIVE ACQUIRERS TO ENSURE THEY CARRY OUT EXTENSIVE FCPA DUE DILIGENCE? FCPA due diligence can be critical to an acquisition. Not understanding a target’s corruption risk profile, previous activity or tone at the top can cost
a prospective acquirer far more than the initial investment in the target. Fines and penalties resulting from successor liability can render an investment utterly worthless or even transform it into a liability. Average fines and penalties for smaller FCPA violation cases range from $3 - $33 million, with larger complex violations, such as experienced by Siemens, exceeding $1 billion. However, fines and penalties may be only the beginning. The costs of consultants, attorneys and other third parties, as well as the hours spent by employees, conducting remediation and monitoring activities can be astronomical, dwarfing the costs of the fines and penalties paid. Additionally, the reputational damage of failing to identify a corruption problem and address it early on cannot be valued. While a solid corporate reputation takes years to develop, it can be destroyed with a single transaction. Most agree that corporate strategy, fit and return on investment are important, but without extensive FCPA due diligence you are rolling the dice with the company’s assets and reputation.
-----------------------------------------------------------------------Jay Musoff, a partner at Loeb & Loeb LLP, is a member of the firm’s White Collar Criminal Defense Group and the China Litigation, Enforcement and Arbitration Response Team. ------------------------------------------------------------------------
with a great track record of FCPA compliance may find itself faced with the legal consequences of the target company’s past practices. Because the FCPA can apply to even those without actual knowledge, “sticking your head in the sand” is not an option.
WHAT ARE THE REQUIREMENTS OF THE FOREIGN CORRUPT PRACTICES ACT?
WHAT IMPACT COULD A LACK OF FCPA DUE DILIGENCE HAVE ON A BUSINESS?
The FCPA prohibits corrupt payments to non-U.S. government officials to obtain business or any other benefits, whether made directly by an employee of the company or indirectly through an agent or consultant. The FCPA also requires companies to maintain accurate books and records and internal controls designed to prevent and detect suspect payments.
Inadequate FCPA due diligence could be expensive – even disastrous. In the worst case, later-discovered FCPA violations could result in criminal penalties, including prison terms for those involved. Even if they do not lead to prison terms, FCPA violations carry steep fines and penalties. The discovery of potential FCPA violations could even sink a potential transaction.
HOW IMPORTANT IS IT FOR PROSPECTIVE ACQUIRERS TO ENSURE THEY CARRY OUT EXTENSIVE FCPA DUE DILIGENCE? The DOJ and SEC continue to make the investigation and prosecution of violations of the FCPA a top priority. In a merger or acquisition, even a company
HAVE THERE BEEN ANY NOTABLE RECENT CHANGES IN ANTI-CORRUPTION AND ANTIBRIBERY REGULATION? While the United States has led in the enforcement of anti-bribery and anti-corruption legislation for many When FCPA related allegations are about to trigger investigations in Germany we assist corporations and individuals with an in-depth strategic analysis and early litigation advice. Our clients benefit from our vast experience with corruption cases on national and international level. With a team of multi-lingual lawyers (i.e. German, English, Russian, Spanish and Turkish) we conduct and coordinate internal investigations, advice the management in criminal law matters, analyse investigation results or act as counsel for defendants or witnesses.
-----------------------------------------------------------------------Wessing & Partner is one of the leading law firms in Germany that is exclusively specialised on the law relating to white collar and tax crimes as well as on criminal compliance (four partners and 10 associates). In 2010 they were awarded as best law firm in this area of law (Juve Awards). ------------------------------------------------------------------------
HOW DOES THE FCPA INFLUENCE YOUR WORK AS GERMAN CRIMINAL LAWYERS?
ACQUISITION INTERNATIONAL
To sum up our practical experience, we have edited a practitioner`s book that gives guidance for DOJ and SEC related investigations in the US and Germany (published 2012/2013). HOW DO YOU GET IN TOUCH WITH FCPA ISSUES IN M&A DUE DILIGENCE? In many cases it is not sufficient to focus on FCPA related risks. When the target company is situated in Germany or has a German parent company or German employees it is equally vital to consider the risks that result from German criminal law.
ON A LIGHTER NOTE, WHAT IS THE BEST PIECE OF ADVICE YOU HAVE BEEN GIVEN? What you don’t know, can hurt you. Know where you are doing business, who you are doing business with, and how you are doing business.
Company: Grant Thornton LLP Name: William P. Olsen Email: william.olsen@us.gt.com Web: www.grantthornton.com Address: 2010 Corporate Ridge, Suite 400, McLean, VA 22102 Telephone: 703-847-7519
years, more countries are joining the Organisation for Economic Cooperation and Development Anti-Bribery Convention and, with the passage of the U.K. Bribery Act, international efforts to combat corruption have increased. This increasing globalisation of anti-corruption enforcement poses additional challenges to companies considering cross-border M&A transactions.
Company: Loeb & Loeb LLP Name: Jay Musoff Email: jmusoff@loeb.com Web: www.loeb.com Address: 345 Park Avenue, New York, NY 10154 Telephone: +1 212.407.4212 Fax: +1 646.619.4169
The Siemens case has proven that German prosecutors are ready to investigate corruption cases with a transnational dimension. The financial consequences for companies that may result from these investigations are considerable – even under German law. Therefore, a valid risk assessment is indispensable.
Company: Wessing & Partner Name: Dr. Matthias Dann, LL.M. Email: info@strafrecht.de Web: www.strafrecht.de Address: Rathausufer 16-17, 40213 Düsseldorf, Germany Telephone: +49 (0) 211 / 168 440 Fax: +49 (0) 211 / 168 44444
September 2012 /
39
SECTOR SPOTLIGHT:
Mitigating Litigation Risk - So What Did All That Mean?
MITIGATING LITIGATION RISK
— So What Did All That Mean? l
Mark Andrews at Maxima Insurance Services LLP discusses the growth of litigation funding. Litigation Funding has successfully allowed such people, to bring to settlement or justice such actions. It can and does level the playing field of litigation and remove the weapons of time and financial might from abusive wrongdoers. Of course, a defendant can also use litigation funding to defend erroneous claims. In essence to return to the start, litigation funding is and should always be a valuable tool, not a pre pack product. It needs in front of it experienced advisors, who can take a problem and create a solution. LBO, ATE, TPF (Third Party Funding) and all the other mechanisms available are simply tools, used in combination or alone to solve a problem for a Company.
The last edition of Acquisition International Magazine had two articles. The first “making deals happen” from the Judge a Litigation Funding Broker, albeit they have their own litigation fund too, then a raft of some of the Funders in the market detailing their “key” differentials.
Maxima was the first independent broker to procure Third Party Funding and placed one of the first profile case after Arkin v Borchard Lines Ltd, which was the Royalties dispute between the members of Status Quo.
In the terms that matter, litigation funding offers solutions to cases that need independent financial backing or wish to remove the liability off a company’s balance sheet. It is not a product in the sense its Key features are universal and its offering standard. It remains a tool you can, with the right consideration, model to a set of circumstances that deliver a workable solution and outcome that meets the requirements of a business and a funder.
We have successfully funded cases in the UK and international disputes and arbitrations in the US, African and European jurisdictions.
It could be ‘balance sheet’ protection. The costs of running a litigation confers a liability no matter how good your case is. You could lose, and if so face hefty costs in being liable for the opponent’s legal costs too. In a small operation that may mean trouble getting bank finance or investment and equally in larger companies, that can make inward investment or share value more protracted or difficult. Let alone in an acquisition / sale scenario where it will damage value.
For a Multi-National Oil firm in Eastern Europe we have again looked differently at the problem. Here they had a claim that was consuming their legal team and huge costs. Instead of funding the claim the Litigation Funder bought the claim at a discounted rate and proceeded to litigate itself. The original claimant got funds instantly and a share of the successful final award removing a problem from the in house legal team.
Moving your entire legal activity onto another balance sheet (the litigation funder) makes your company books leaner and cleaner. Not only from a balance sheet view but also cash flow because the Funder takes on all the associated costs of running a legal case. These can include Solicitors fees, experts fees, court disbursements, insurance premiums, security of costs applications, appeals etc.
In more local and simple terms, litigation funding should allow companies where cash is a precious resource to still access Justice. We have represented clients who have taken ideas to larger institutions under NDA, only to have the larger institutions abuse that trust. To successfully sue a large institution as a small company or simply an idea is impossible.
40 / September 2012
If you have a problem regarding a legal dispute, then you can now seek to resolve its financial aspects as well as the legal ones. You should ensure that your Solicitor comprehensively explores the market place or engage experts such as Maxima to assist in this process of bringing the best offering to you and at the best price. Maxima do not levy any upfront fees to you for our expertise and time. Remember a 1x multiple of investment, compared to a 5x charge from the funder has a significant impact on the settlement you receive. Whether you seek to mitigate the full costs of your legal dispute, insure the costs of losing or do not have a legal dispute but wish to ensure the legal costs in advance of a dispute arising in the future, we can reduce your financial exposure.
Company: Maxima Insurance Services LLP Name: Mark Andrews Email: markandrews@maximallp.com Web: www.maximallp.com Address: Adam House. 7-10 Adam Street, The Strand WC2N 6AA Telephone: +44 (0) 870 754 2001
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Ukranian Insolvency Reform
UKRAINIAN INSOLVENCY REFORM — Andriy Andreykiw is a Customs and Investments Partner at Nexia DK. l The practical usage of the previous Ukrainian Insolvency Law’s application shows its both legal and economical incapability in day-to-day reality. The practical effect of it brings to situation that Ukraine is almost in the end of the list in the international ratings of the bankruptcy procedure efficiency. The core question lied in fact that the previous legislation design did not correspond with the real Ukrainian economy needs in many ways. Below are the main changes of the new redaction of the Insolvency law: Shorter time terms of bankruptcy procedures(115 days is provided for property disposition with a possibility of only two month extension; 12 months for the procedure of reorganization and 12months for liquidation procedures);
this activity and introducing a system of independent computerized testing, computerized distribution of cases between trustees and introduction of their occupational insurance; and by establishing a selfregulatory organization of trustees);
Minimized costs to conduct such procedures (thanks to shorter time period of bankruptcy procedures, established maximum fees for liquidator services and control of the costs to conduct such activities);
Better satisfaction of the interests of all stakeholders of a bankruptcy process and a system put in place to insure fair conduct in the bankruptcy process.
More effective procedures of bankruptcy (owing to the improved process of identifying creditors, sales of property only through an auction, including electronic auctions, recovery of debts only in cash);
The changes will pave the way for the new approach to basic Insolvency Institutions such as arbitration manager, arbitration procedures, stipulates the powerful system of professional and public control of the arbitration managers’ activity. In such a way we foresee an incising level for rehabilitation in future but not in a fast progressive rate.
Improved legal status and control of the activity of court appointed trustees (by cancelling licensing of
Company: Nexia DK Auditors and Consultant Name: Andriy Andreykiw Email: andriyandreykiw@dk.ua Web: www.dk.ua Address: 3rd floor, 32a Yefremova Str., 79013 Lviv, Ukraine/ 7th floor, 5a Peremohy Ave., 01135 Kyiv, Ukraine Telephone: LVIV tel./fax: + 38 032 298 85 40, KYIV tel/fax: 0 44 235 50 25, 0 44 233 64 64
- Yulia Yashenkova is a Senior Associate at AstapovLawyers International Law Group. l Currently, the situation with insolvency process in Ukraine is quite difficult. Principal challenges in this respect are the following: (a) the duration of the process which, on average, comes up to 36 months, (b) the creditors’ claims which were not filed within 30 days upon the insolvency announcement are deemed discharged, (c) the absence of regulation of international insolvency proceedings, (d) regulation gaps as to contesting the contracts executed by an insolvent, and (e) legal weakness of the insolvency manager. Moreover, it is common practice in Ukraine for the companies to involve project financing and loaned assets. In the meantime, almost half of bankruptcy cases are being initiated by the insolvent itself (which usually means a disastrous financial situation of the company). Therefore, as of the date of default an average company has few liquid assets which may be used to satisfy creditor’s claims from. The Ukrainian Insolvency Law in its new edition is expected to eliminate the said problems. In particular, the new regulations: (a) reduce legally defined terms of insolvency proceedings,
ACQUISITION INTERNATIONAL
(b) define the creditors failing to file the claim within 30 days upon insolvency announcement as the creditors of the 6th priority; moreover, the court itself shall ensure the said announcement, including in the Internet, (c) fill the gap as to international insolvencies, (d) authorize the process of contesting the contracts by an insolvent, (e) establish strict qualification requirements to insolvency manager, and, simultaneously, grant him with wide enough range of rights to ensure the proceedings progress, (f) introduce the extra-judicial process of the insolvent restoration, including the restoration by the owner, (g) establish the single court jurisdiction for any claims which may probably arise against or involving the insolvent. Obviously, the said changes into the applicable Insolvency Law shall positively affect the insolvency proceedings. And establishing the single court jurisdiction over cases with the insolvent involvement is one of the most crucial clauses, which upon entering into force would make consideration of such cases easier and better.
Definitely, introducing the extra-judicial restoration proceedings deserves the favor as well. Currently, the rate of restored insolvents is quite low. At this point, such changes are expected to make the restoration of an insolvent more attractive for investors.
Company: AstapovLawyers International Law Group Name: Yulia Yashenkova Email: yashenkova@astapovlawyers.com Web: www.astapovlawyers.com Address: Europe Business Centre, 4 Muzeyny Lane, 3rd floor, Kyiv, 01001 Ukraine Telephone: +38 (044) 490 70 01
September 2012 /
41
SECTOR SPOTLIGHT:
Ukranian Competition Law Aspects in M&A Transactions
UKRAINIAN COMPETITION LAW ASPECTS IN M&A TRANSACTIONS — Kostiantyn Likarchuk, Partner, and Mykyta Nota, Associate, of Avellum Partners examine the complexities of Ukranian competition law and obtaining AMC approval. l Sophisticated M&A transactions include not only straightforward share purchase agreements but may also contemplate ancillary agreements (e.g. option agreements, share pledge agreements, repo financing, etc.). Moreover, share purchase agreements may envisage non-compete clauses, which also fall within the ambit of Ukrainian competition law.
Kamianets-Podilskyi Castle and Turkish bridge / Ukraine
ARE THERE ANY PECULIARITIES IN OBTAINING AMC APPROVAL FOR PUT/CALL OPTIONS? Put/call options are often used in M&A transactions. A put/call option is a right of a party to sell or purchase (and a counterparty’s obligation to purchase or sell) shares in the future. In practice, an option may be in the form of separate agreement, which may be considered a separate transaction. However, most commonly a put/call option is used as a solution to a deadlock which might occur between shareholders of the respective companies. All significant put/call options will most likely require approval from the Antimonopoly Committee of Ukraine (the “AMC”) for concentration. Under certain circumstances (for instance, in the case of deadlock) a party which will be adversely affected
42 / September 2012
by the exercise of the option may resist obtaining of an approval for concentration from the AMC. Therefore, it is recommended obtaining AMC approval in advance, while negotiating such an option. Under competition law, AMC approval for concentration may be exercised as a general rule within a period of one year. In practice, in exceptional cases the AMC may issue the approval for concentration for a longer period (for instance, two years). IS IT NECESSARY TO OBTAIN AMC APPROVAL TO ENFORCE A SHARE PLEDGE AGREEMENT? A share pledge agreement is used as a security instrument in financial transactions. Substantial shareholdings are usually pledged as collateral. Therefore, enforcement of pledge agreements typically requires AMC approval for concentration. A creditor
should take into account the terms and procedure for obtaining AMC approval for concentration when choosing the pledge to secure underlying obligations. A creditor may insist on receiving the power of attorney authorizing it to represent the interests of the company (whose shares are pledged) before the AMC in connection with the pledge enforcement and provide unconditional obligation of the borrower and the pledgor to submit all documents and information, required for receipt of AMC approval. IS IT POSSIBLE TO AVOID OBTAINING AMC APPROVAL WHEN EXECUTING A NON-COMPETE CLAUSE? In order to maximize future returns on acquired assets, a purchaser must be able to benefit from some form of protection against competition from a seller
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Ukranian Competition Law Aspects in M&A Transactions following purchase of the business. Hence, noncompetition obligations are imposed on the seller in the majority of M&A transactions. Such obligations guarantee transfer to the purchaser of the full value of physical and intangible assets and prevent devaluation caused by the other party’s actions. In EU countries, the European Commission’s approval for concentration is deemed to cover non-compete clauses set forth by the transaction documentation. However, Ukrainian competition law takes another approach and requires obtaining AMC approval for concerted actions in addition to AMC approval for concentration in order to enforce contractual obligations limiting (restraining) competition between the parties. Therefore, provisions on restriction of competition become enforceable upon obtaining AMC approval for concerned actions. Such approval may be obtained either before completion of the underlying transaction for the transfer of shares or following its completion depending on commercial arrangements of the parties. ARE PORTFOLIO INVESTMENTS EXEMPT FROM THE REQUIREMENT TO OBTAIN AMC APPROVAL? Portfolio investments have recently become more popular in Ukraine. Repurchase of shares by professional investors (companies with financial operations or securities operations as the main type of their activity) is one example of such investments. If such an investor does not vote at the meetings of the supreme body or other management bodies of the company and undertakes to resell the shares within a period of one year after the purchase date, such a
ACQUISITION INTERNATIONAL
transaction does not require AMC approval. In such cases, it is only necessary to notify the AMC about the transaction without having to obtain AMC approval for concentration. It is known in practice that a nonresident company (for instance, a private company limited by shares, established under the law of Cyprus), which is exclusively involved in corporate rights management, may also act as a professional investor. IS THERE ANY LIABILITY FOR FAILURE TO COMPLY WITH THE REQUIREMENTS OF COMPETITION LAW? Failure to obtain AMC approval for concentration may lead to the imposition of a fine in the amount of up to 5% of annual revenue (turnover) for the preceding year of the companies and their affiliated persons, and also gives grounds for invalidation of the underlying transaction for the transfer of shares. If the parties undertake concerted actions through conclusion of an agreement limiting competition without respective AMC approval, they and their affiliated persons are subject to a fine in the amount of up to 10% of their annual revenue (turnover) for the preceding year. Please note that AMC approval must be obtained by completion of the transaction, e.g. by the transfer of title to shares or corporate rights to the purchaser. In certain transactions, control over the target is transferred from seller to purchaser even before completion. In such cases, AMC approval must be obtained before control is transferred.
Company: Avellum Partners Name: Kostiantyn Likarchuk, Partner Email: klikarchuk@avellum.com Web: www.avellum.com Address: 19-21 B. Khmelnytskoho Str., 11th floor, 01030, Kyiv, Ukraine Telephone: +380 44 220-0335
Company: Avellum Partners Name: Mykyta Nota, Associate Email: mnota@avellum.com Web: www.avellum.com Address: 19-21 B. Khmelnytskoho Str., 11th floor, 01030, Kyiv, Ukraine Telephone: +380 44 220-0335
September 2012 /
43
SECTOR SPOTLIGHT:
Merger Control - Managing Competition
MERGER CONTROL — Managing Competition
-----------------------------------------------------------------------Ms. Pallavi Shroff is a Senior Partner and head of the Competition Law practice at Amarchand & Mangaldas & Suresh A. Shroff & Co. at its New Delhi office. ------------------------------------------------------------------------
AS WE KNOW, THE INTERNATIONAL M&A COMMUNITY IS TAKING MERGER CONTROL MORE SERIOUSLY THAN EVER; HAVE YOU EXPERIENCED MAJOR REFORM? IF SO, WHAT BROUGHT ABOUT THIS CHANGE IN YOUR JURISDICTION? Mandatory merger control was introduced in India a little over a year back and has prompted change in the way business was looking at big ticket M&A. Obtaining the Competition Commission of India’s clearance now features highly on deal planning and execution. In anticipation of the onset of this new regime in June 2011, several issues were highlighted to the CCI and the government and a majority of these were considered seriously and addressed, which has infused confidence and certainty in the industry. Importantly, the CCI has cleared all transactions unconditionally within Phase I.
ACQUISITION INTERNATIONAL
WHAT ARE THE PRIMARY MERGER CONTROL ISSUES IN YOUR JURISDICTION? HOW CAN THESE BE OVERCOME IN ORDER TO BRING A TRANSACTION TO A SUCCESSFUL CLOSE? Given the early days, issues faced by practitioners revolve around jurisdictional, procedural and substantive matters. On the jurisdictional front, where a business division or assets are being sold, the CCI requires consideration of seller parent’s financials and not those of the division or assets in question – this can lead to even foreign to foreign mergers becoming notifiable in India. Also, internal reorganizations effected by way of mergers are exempt from notification only in certain cases. On procedural aspects, there is lack of clarity in relation to the trigger for notifying multi-step transactions. Further, the CCI is hesitant in granting confidentiality over information submitted to them and require detailed justifications for confidentiality claims. On the substantive side, given that the CCI is analyzing many sectors for the first time, even on straightforward transactions, their information requests tend to be extremely detailed and data intensive, which can cause
delays (as the clock is stopped). Our advice to clients is to assess competition law concerns early on and to interact with the CCI during the review period to proactively resolve any issues to obtain a speedy clearance.
Company: Amarchand & Mangaldas & Suresh A. Shroff & Co. Name: Ms. Pallavi Shroff Email: pallavi.shroff@amarchand.com Web: www.amarchand.com Address: 216, Amarchand Towers, Okhla Industrial Estate, Phase - III, New Delhi – 110020, India Telephone: +91-11 2692 0500 Ext.4302
September 2012 /
45
SECTOR SPOTLIGHT:
Merger Control - Managing Competition If the transaction does indeed result in affected markets or even if there are no affected markets, but a joint venture is created, the notification thresholds under the Communiqué No. 2010/4 must be evaluated. Accordingly, the transaction will be subject to the Board’s approval if; (i) the total turnover of the parties exceeds TL 100 million (approx. US$ 59.88 million) (approx. EUR 43 million) in Turkey and the respective Turkish turnovers of at least two of the parties individually exceed TL 30 million (approx. US$ 17.9 million) (approx. EUR 12.9 million), OR (ii) the worldwide turnover of one of the parties exceeds TL 500 million (approx. US$ 299.4 million) (approx. EUR 215.3 million) and the Turkish turnover of at least one of the other parties exceeds TL 5 million (approx. US$2.99 million) (approx. EUR 2.15 million). WHAT PERCENTAGE OF M&AS ARE PREVENTED BY MERGER CONTROL REGULATION IN YOUR JURISDICTION? WHAT ARE THE MAJOR OBSTACLES?
-----------------------------------------------------------------------Gönenç Gürkaynak, Esq. is a Partner at ELIG, Attorneys-atLaw. ------------------------------------------------------------------------
AS WE KNOW, THE INTERNATIONAL M&A COMMUNITY IS TAKING MERGER CONTROL MORE SERIOUSLY THAN EVER; HAVE YOU EXPERIENCED MAJOR REFORM? IF SO, WHAT BROUGHT ABOUT THIS CHANGE IN YOUR JURISDICTION? With the promulgation of the Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (“Communiqué”) (1st of January 2011), which harmonised the Turkish merger control regime with that of the European Union, the Turkish Competition Authority has set new jurisdictional thresholds that can easily be satisfied by global companies in terms of notifiability. Therefore, more and more foreign-to-foreign transactions are being notified that have arguably no impact on the Turkish market. Put it differently, pursuant to Article 2 of the Law on Protection of Competition No. 4054, foreign-to-foreign mergers fall within the scope of the Turkish merger control regime, to the extent they affect the relevant markets within the territory of the Republic of Turkey. Nevertheless, merely sales into Turkey may trigger notification necessity, to the extent the thresholds are met and the transaction results in an overlap between the activities of the transaction parties (global overlap is sufficient as long as one of them conduct sales of relevant product into Turkey), or no affected market but merely the thresholds are met and the transaction results in a joint venture formation (note that even if JV will never have sales into Turkey, this factor is not considered). It should also be noted that Turkish merger control regime does not contain a de minimis rule nor a genuine foreign-to-foreign exemption. The only exemption from notifiability is in case where the transaction exceeds the turnover thresholds but neither a JV nor an affected market arises out of the transaction. In those cases, the parties are relieved from notifying their transaction since the Board does not have jurisdiction over the transaction.
46 / September 2012
ARE THERE ANY STATUTES AND REGULATIONS CONCERNING MERGER CONTROL THAT ARE UNIQUE TO YOUR JURISDICTION? DOES THIS CREATE/PREVENT ANY OPPORTUNITIES? The relevant legislation on merger control is the Law on Protection of Competition No. 4054 dated 13 December 1994 (“Competition Law”) and the Communiqué published by the Turkish Competition Authority. In particular, Article 7 of the Competition Law governs mergers and acquisitions, and authorises the Competition Board to regulate through communiqués which mergers and acquisitions should be notified in order to gain legal validity. In accordance with this provision, Communiqué, as the primary instrument in assessing merger cases in Turkey. The New Communiqué sets forth the types of mergers and acquisitions which are subject to the Competition Board’s review and approval, together with some significant changes to the Turkish merger control regime. WHAT TYPE OF TRANSACTION HAS TO BE DECLARED TO THE LOCAL COMPETITION AUTHORITY IN YOUR JURISDICTION?
Since the requirements under the merger control regime deem only certain transactions subject to the approval of the Competition Authority, certain amount of transactions are consummated without the need for the Competition Authority’s scrutiny. According to the Annual Report of the Competition Authority, in 2011, 253 submissions were made compare to 2010 where 276 submissions were made. This shows that the new merger control regime has eliminated approximately 9% of the transactions that were previously subject to the Board’s notification requirement. ARE THERE MORE OBSTACLES WHEN AN INTERNATIONAL WISHES TO ACQUIRE A STAKE IN A DOMESTIC COMPANY? From a competition point of view and merger control regime, there are no obstacles set forth that apply solely to international corporations. That said, companies in certain industries are subject to special regimes that require the consent of particular authorities. For instance, the transfer of shares and amendments to the articles of association of banks require the prior approval of the Banking Regulatory and Supervision Agency, and a similar approval of the Energy Market Regulatory Board is required for companies holding energy production licenses. Another example is that the majority shareholders in companies holding a class A license for airport ground-handling services are required to be of Turkish nationality. Similar nationality requirements exist for companies active in the defence industry.
The Communiqué defines the scope of the notifiable transactions in Article 5/I as follows: merger of two or more undertakings; acquisition or control by an entity or a person of another undertaking’s assets or a part or all of its shares or instruments granting it the management rights. Except for joint ventures, transactions that do not result in an affected market are not notifiable even if the thresholds sought for notification are exceeded. A market is deemed as being affected when the market has “a possibility to be impacted by” the transaction, and (i) where two or more of the parties have commercial activities in the same product market (horizontal relationship), or (ii) where at least one of the parties is engaged in commercial activities in markets which are upstream or downstream from the product market of the other party (vertical relationship).
Company: ELIG Attorneys -at-Law Name: Gönenç Gürkaynak Email: gonenc.gurkaynak@elig.com Web: www.elig.com Address: Çitlenbik sokak No:12 Yıldız Mah. Beşiktaş 34349 İstanbul/ Turkey Telephone: +90 212 327 17 24
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Merger Control - Managing Competition
-----------------------------------------------------------------------Luke is Head of the Competition and Regulation Group at Gilbert + Tobin, joining as a partner in 2000. ------------------------------------------------------------------------
AS WE KNOW, THE INTERNATIONAL M&A COMMUNITY IS TAKING MERGER CONTROL MORE SERIOUSLY THAN EVER; HAVE YOU EXPERIENCED MAJOR REFORM? IF SO, WHAT BROUGHT ABOUT THIS CHANGE IN YOUR JURISDICTION?
WHAT TYPE OF TRANSACTION HAS TO BE DECLARED TO THE LOCAL COMPETITION AUTHORITY IN YOUR JURISDICTION? We have a voluntary notification process in Australia and no general prohibition on closing a transaction without ACCC clearance. However, the ACCC does expect to be notified and to review acquisitions where there may be a competition issue. It can go to court for an injunction to stop an acquisition on interim or permanent basis – so it is routine for it to be notified.
We have a long standing law prohibiting anticompetitive acquisitions and a highly developed voluntary notification and review procedure. There have been changes in approach from time to time, including increased focus on transactions in concentrated sectors and coordinated effects analysis. There has been some minor legislative change to reinforce the ability of the ACCC to review what it calls creeping acquisitions, i.e. smaller scale acquisitions by corporate with an already strong market position.
In general under the 2008 Merger Guidelines 2008 merging parties are encouraged to notify the commission where both of the following apply:
-----------------------------------------------------------------------Dr. JÖRG KARENFORT, Head of Salans’ German Competition Practice, also holds the function of Head of Salans’ Global Competition, Regulatory and Trade Practice and shares his time between Brussels and Berlin. ------------------------------------------------------------------------
Despite pressure to relax existing regulations, both the legislator as well as the Federal Cartel Office (“FCO”) have resisted successfully to introduce and apply an exceptional competition law. They stick to the principle that only protection of undistorted competition can ensure a functioning market.
HOW HAS THE ECONOMIC CRISIS ALTERED MERGER CONTROL IN YOUR JURISDICTION?
This being said, it does not mean however, that the economic crisis did not have any effects on competition law and merger control in particular. First, probably the most obvious consequence of the crisis was the downsized M&A activity on the market in general. This has on the one hand led to less merger control work for the FCO. On the other hand we have seen more horizontal mergers in attempt to consolidate certain markets. Such mergers often demand more in-depth scrutiny by the competition authorities.. Finally, an impact of the crisis on the legal and economic assessment by the FCO cannot be excluded either. Setting aside the fact that economic crisis alters substantially the market conditions and relationships among the stakeholders, in cases affecting certain industries stuck within the midst of the crises, the competition authorities seem to have
To what extent crisis creates or should create an exception from existing regulations is much debated depending on economic theories represented. Different stakeholders express diverging views whether there should be a special competition law governing during the crisis. Some argue for a relaxation of existing rules applicable to merger control, to prohibition of cartels as well as abuse of dominance. Supporters of this view argue that competitors should be allowed to form cartels to rescue themselves from the crisis. Such demands gain often political popularity as there are often sensitive situations involved, for instance, loss of jobs and closure of big businesses. Others stand for strict application of existing rules without any exceptions.
ACQUISITION INTERNATIONAL
Substitutes: The products of the merger parties are either substitutes or compliments, 20 per cent market share: The merged firm will have a post-merger market share of greater than 20 per cent in the relevant market/s.
The Foreign Investment Review Board (FIRB) does also routinely refer acquisitions notified to it under the Foreign Acquisitions and Takeovers Act to the ACCC for review. The general requirement is that foreign persons notify the FIRB before acquiring an interest of 15 per cent or more in an Australian business or corporation that is valued above $244 million.
Company: Gilbert + Tobin Name: Luke Woodward Email: lwoodward@gtlaw.com.au Web: www.gtlaw.com.au Address: Level 37, 2 Park Street, Sydney NSW 2000, Australia Telephone: +61 2 9263 4014
used its discretion more generously in interpreting certain theories of harm, e.g. by accepting certain commitments rather than issuing a prohibition decision.. In this respect the FCO even partially considered behavioural commitments a viable option and, thus, anticipated one of the changes which will be introduced once the current 8th reform of the German Act against Restrictions in Competition comes into force early next year.
Company: Salans LLP Name: Dr. Jörg Karenfort Email: JKarenfort@salans.com Web: www.salans.com Address: Salans LLP, Markgrafenstraße 33, 10117 Berlin Telephone: +49 30 26 47 33 05
September 2012 /
47
SECTOR SPOTLIGHT:
Merger Control - Managing Competition When it comes to fines, the AMC issued a press release on Monday, 18 June 2012, in which the authority made its intention clear to, starting from 1 July, resort to imposing maximum statutory fines (up to 5% of gross global group-wide annual turnover) for unauthorised mergers. This caused a real stir within the legal and business communities and within two days the press release was removed from the AMC’s website as misleading. Nevertheless, the message contained in the press release clearly demonstrates the change of attitude in the minds of the AMC’s officials and a shift of the AMC’s modus operandi, characterised by a more punitive stance. Although the imposition of maximum statutory fines is unlikely as it would significantly exceed the historical maximum of EUR 60,000, large multinational companies should expect relatively high fines for the failure to seek the AMC’s approval, particularly if their transactions may lead to negative consequences in Ukraine. ON A LIGHTER NOTE, WHAT’S THE BEST PIECE OF ADVICE YOU HAVE EVER GIVEN?
-----------------------------------------------------------------------Dmitry Taranyk, Counsel, and Predrag Krupez (Associate) of Sayenko Kharenko discuss Merger Control issues in Ukraine. ------------------------------------------------------------------------
WHAT TRIGGERS THE FILING REQUIREMENT? WHAT ARE THE JURISDICTIONAL THRESHOLDS? - The Ukrainian merger filing requirement is triggered by the mere consummation of a transaction which constitutes a qualified ‘concentration’ capable of influencing economic competition in Ukraine. Under the Ukrainian competition laws, a ‘concentration’ is considered to occur, in particular, when one or more undertaking directly or indirectly purchases or otherwise acquires such number of shares (or other equity interest) in ownership or management (e.g. use) that allows the acquirer to reach or exceed, when combined with all of the acquirer’s prior shareholdings, a 25% and/or 50% threshold of votes in the target undertaking’s highest body. The criterion that a particular concentration (including foreignto-foreign transactions) is capable of influencing economic competition in Ukraine, thus, requiring prior approval of the Antimonopoly Committee of Ukraine (the “AMC”), is satisfied if all of the following financial thresholds are met or exceeded: (i) the aggregate worldwide value of assets/sales for all parties to the concentration, including related entities, exceeds EUR 12 million; (ii) the aggregate worldwide value/assets or sales for each of at least two of the parties to the concentration, including related entities, exceeds EUR 1 million; and (iii) the value/assets or sales in Ukraine of at least one party to the concentration, including related entities, exceeds EUR 1 million. The AMC’s approval is also required for any concentration, if the market share of any party or combined market share of all parties to the concentration on the relevant market (including neighbouring market) in Ukraine exceeds 35%. DOES YOUR DOMESTIC AUTHORITY COOPERATE WITH INTERNATIONAL ANTIRUST AUTHORITIES? ARE SOME COUNTRIES MORE COOPERATIVE THAN OTHERS AND DOES THIS REFLECT IN THE OVERALL M&A PICTURE?
48 / September 2012
The AMC enjoys a degree of informal cooperation with certain CIS states, including Russia and Kazakhstan, with high profile visits and information exchanges being commonplace. The authority also monitors the activities of the European Commission and regulators from certain EU Member States. We are aware of instances when the AMC initiated investigations or issued information requests as a response to publications that appeared on the European Commission’s website. In particular, if the AMC discovers that a concentration with Ukrainian elements is bound to be closed, it could approach the merging parties, requesting explanations as to why a merger approval was not sought in Ukraine. HOW COSTLY IS THE PROCESS IN TERMS OF TIME AND MONEY? In terms of time, the notification submission is supposed to be reviewed by the AMC within 45 days from the date of its submission (Phase I). During the first 15 days, the AMC conducts an initial review and may return the application without considering it, if it determines that it is incomplete. During the subsequent 30-day period, the AMC analyses the submitted information and decides whether or not to grant its approval. However, the AMC tries to scrutinize every application in an attempt to find an excuse for returning it as being incomplete, followed by a request for additional information to be submitted. Thus, we would recommend allocating about 60 days for the AMC approval after the filing date. In addition, if the AMC discovers any grounds on which concentration can be prohibited or needs to engage in complicated review (i.e. if the relevant market is important or the concentration involves parties with very high market shares), it may open a Phase II review that may last up to 3 months and this period can be suspended until the AMC receives any subsequently requested information. If the merging parties are facing tight deadlines, we can usually negotiate with the AMC to expedite the process. In terms of filing expenses, merger notifications are accompanied with a filing fee, amounting to approx. EUR 500). IN WHAT WAYS DO YOU ANTICIPATE THE LEGAL AND REGULATORY POLICY CHANGING OVER THE NEXT TWO YEARS?
Given that a transaction allowing the acquirer to reach/exceed a 35% market threshold faces a serious risk of being prohibited by the AMC, we are regularly required to redefine the relevant market in an effort to reduce the parties’ market shares. For example, when dealing with the relevant product market, by adding interchangeable products into the scope of the market definition, we have been successful in diluting the merging parties’ market shares in an attempt to secure regulatory approval. As far as the geographic scope of the relevant market is concerned, there is considerably less flexibility since the Ukrainian competition legislation defines it as either Ukraine-wide or regional-wide (territorial parts of Ukraine). Therefore, in theory, it does not provide for the possibility to define the market any wider, e.g. as European-wide. However, on one occasion, we were successful in widening the relevant geographic market to ensure that the merging parties’ market shares were at a level that was acceptable to the AMC officials. Namely, the AMC threatened to prohibit a merger in the tobacco industry as its analysis concluded that the merging parties had a combined market share of 64%. We managed to persuade the authorities that the figure actually represented the market shares of the parties’ Ukrainian customers and, since they were global producers, we urged the authority to calculate the market shares using their European (including Ukraine) market presence rather than Ukrainian only. This remains the only merger thus far in which the AMC accepted the argument that the relevant geographic market incorporated the European continent as a whole rather than Ukraine only.
Company: Sayenko Kharenko Name: Dmitry Taranyk, Predrag Krupez Email: info@sk.ua Web: www.sk.ua Address: 10 Muzeyny Provulok, Kyiv 01001, Ukraine Telephone: +38 044 499 6000
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Merger Control - Managing Competition -----------------------------------------------------------------------Sam Szlezinger heads SNR Denton’s competition law group. ------------------------------------------------------------------------
SNR Denton was formed from long standing, successful firms, who saw the importance of competition law/merger control in meeting clients’ commercial objectives and widening the options open to them. Our clients have tended to cluster in a number of economic sectors in which we have developed particular expertise. In the EU, these are energy, TMT/sport, retail and banking/financial services. We help clients develop a proactive strategy through to clearance. UK merger control is governed by the Enterprise Act 2002. The process is a two stage one, the Office of Fair Trading (OFT) refers mergers to the Competition Commission (CC) if they may result in a substantial lessening of competition.
-----------------------------------------------------------------------Klaus Neff, Partner, is the Head of the Competition Law Practice Group at VISCHER LTD. ------------------------------------------------------------------------
Klaus Neff has extensive experience in all areas of Swiss and European competition law, ranging from merger control to administrative and civil antitrust litigation. He has represented a wide range of companies (particularly in the finance, airline, music, retail, and leisure industries) and trade associations in proceedings before the Swiss competition authorities, the European Commission and in civil courts and arbitration proceedings. He is fluent in German, English and French. To date, the merger control regime in Switzerland must be considered rather lenient in comparison to other jurisdictions. Whilst, as in other countries mergers of previously independent enterprises and the direct or indirect acquisition of control over a
-----------------------------------------------------------------------Eytan Epstein is the founder and a senior partner at Epstein, Chomsky, Osnat & Co and heads the firm’s Competition Department. ------------------------------------------------------------------------
AS WE KNOW, THE INTERNATIONAL M&A COMMUNITY IS TAKING MERGER CONTROL MORE SERIOUSLY THAN EVER; HAVE YOU EXPERIENCED MAJOR REFORM? IF SO, WHAT BROUGHT ABOUT THIS CHANGE IN YOUR JURISDICTION? In recent years, there has been an increasing amount of public criticism of the concentrated nature and structure of the various market sectors in Israel. This criticism reached a peak in the summer of 2011, when the burgeoning social protest movement in Israel took to the streets to protest against Israel’s rising cost of living. Consequently, the public debate focused on the regulation of these markets and several recent changes were subsequently made to Israel’s Antitrust
ACQUISITION INTERNATIONAL
The OFT has jurisdiction if either the target’s UK turnover exceeds £70 million and/or if it creates or enhances a 25% share of supply of any goods/services in the UK. The OFT actively co-operates with antirust authorities internationally, for example, in the ECN. Merger filings are voluntary, this reduces the cost in cases that raise no issues. In other cases, the costs will depend on the complexity of the issues. Additionally, a fee is payable to the OFT for merger clearance. From October 2012, the fee will be £160,000 where the target’s turnover exceeds £120 million. The economic crisis has meant that the OFT has more frequently met the failing firm argument, ie that the alternative to the merger is withdrawal of the target from the market. Although sceptical, the OFT will accept it where there is “sufficient compelling evidence”.
company or its assets by one or more companies are potentially notifiable concentrations, filing thresholds are high (worldwide aggregate turnover of at least CHF 2 billion or a Switzerland-wide aggregate turnover of at least CHF 500 million and at least two of the companies involved must have reported individual turnovers in Switzerland of at least CHF 100 million), and the authority can only oppose a concentration if it creates or strengthens a dominant position that leads to the elimination of effective competition in the relevant market. A proposal by the Federal Government is now being discussed by the Swiss Parliament to bring the substantive test in line with the EU’s “Significant Impediment to Competition” test. If this proposal were adopted, more concentrations would likely be opposed or cleared only subject to remedies. Moreover, the Government proposes to simplify notification duties for concentrations that are already under scrutiny of the EU competition authorities, and
Law, which expanded the powers and authority of the Israel Antitrust Authority (“IAA”). ARE THERE ANY STATUTES AND REGULATIONS CONCERNING MERGER CONTROL THAT ARE UNIQUE TO YOUR JURISDICTION? DOES THIS CREATE/PREVENT ANY OPPORTUNITIES? Uniquely, the Israeli Antitrust Law provides that the carrying out of a merger which requires notification and approval, prior to approval being granted is a criminal offence, even if the merger does not raise any competitive concerns. The punishment specified in the Law for such offence is up to three years’ imprisonment, or up to five years imprisonment in aggravating circumstances. Criminal and administrative fines are also imposed under the Israeli Antitrust Law. WHAT ARE THE PRIMARY MERGER CONTROL ISSUES IN YOUR JURISDICTION? HOW CAN THESE BE OVERCOME IN ORDER TO BRING A TRANSACTION TO A SUCCESSFUL CLOSE?
The OFT and CC are to be combined into a single Competition and Markets Authority. Although the two phase approach to merger investigations will be retained, this institutional reform will inevitably amount to a very significant change. The best piece of advice ever given to me was find out what everyone else knows and begin where they left off!
Company: SNR Denton UK LLP Name: Sam Szlezinger Email: sam.szlezinger@snrdenton.com Web: www.snrdenton.com Address: One Fleet Place, London, EC4M 7WS Telephone: +44 (0)20 7246 7528
to allow the Swiss competition authority to coordinate deadlines and procedures the European Commission. In current proceedings legal counsels try to align EU and Swiss procedures by giving the authorities the right to exchange information and to coordinate the timing of the filings to the extent possible.
Company: VISCHER LTD Name: Klaus Neff Email: kneff@vischer.com Web: www.vischer.com Address: Schützengasse 4, 8021 Zurich, Switzerland Telephone: +41 58 211 34 00
There are very few cases where a merger poses such threat to competition that approval is not possible. Even in difficult circumstances, a realistic approach based on the analysis of the market structure and the competitive concerns will lead to a productive dialogue with the IAA and the agreement on conditions that will not take away the substance and ‘raison d’aitre’ of the contemplated transaction.
Company: Epstein, Chomsky, Osnat & Co. Name: Eytan Epstein Email: epstein@ecglaw.com Web: www.ecglaw.com Address: Rubinstein House, 20 Lincoln St., Tel Aviv 67134, Israel Telephone: +972-3-561-4777 Fax: +972-3-561-4776
September 2012 /
49
SECTOR SPOTLIGHT:
Merger Control - Managing Competition merger concerns sectors subject to specific regulation (eg telecoms), the authority closely collaborates with the experts from the sector regulators. If a merger raises concerns, the notifying parties can offer, the official parties (ie the Federal Competition Agency and the Federal Cartel Prosecutor) request and the Cartel Court impose conditions and/or remedies. Such conditions/remedies can be given both in phase I and phase II. In absolute terms, there are not many clearances subject to conditions and approximately as many of them were arrived at during phase I as during phase II proceedings. However, in relative terms, there is a rather high likelihood that phase II proceedings end in a conditional clearance. If problems arise, parties are usually well advised to think about remedies to bring the transaction to a successful close.
-----------------------------------------------------------------------Astrid Ablasser-Neuhuber is the head of the Competition Practice of bpv Hügel, one of the three largest practices in Austria, while Florian Neumayr leads the Antitrust Litigation Department directly integrated into the firm’s EU Law and Competition Practice. ------------------------------------------------------------------------
AS WE KNOW, THE INTERNATIONAL M&A COMMUNITY IS TAKING MERGER CONTROL MORE SERIOUSLY THAN EVER; HAVE YOU EXPERIENCED MAJOR REFORM? IF SO, WHAT BROUGHT ABOUT THIS CHANGE IN YOUR JURISDICTION? Transactions are indeed to be carefully analyzed as to whether or not they trigger filing obligations under the Austrian merger control regime. While in the past, failure to notify may not have been pursued so often by the Austrian authorities, this has changed. To date, several fines for “gun-jumping” have been handed down. For example, upon application by the Federal Competition Agency, the Cartel Court recently imposed a fine even for an only belated notification (25 Kt 1/10). While the fine was relatively small, this was due to the facts of the case; the Cartel Court found that the merger did not give rise to competition concerns, there were arguments that the effects doctrine applied (the involved undertakings had their corporate seats in Germany and not Austria) and, moreover, there were further mitigating circumstances (inter alia, the undertaking concerned helped in clarifying the facts of the case). Moreover, national competition authorities work more and more closely together. For example, upon initiative of the Austrian Federal Competition Agency, a cooperation between the competition authorities of Austria, the Baltic States, Bulgaria, Croatia, Hungary, Poland, Rumania, Slovakia, Slovenia, and Switzerland, the so called “Marchfeld Forum”, became operational in March 2010. I.e. filing in one jurisdiction may mean that also a competition authority in another jurisdiction becomes aware of the transaction. If such transaction were to be filed in the other jurisdiction as well but was not, the undertakings concerned may face the above described “gun-jumping” proceedings. WHAT PERCENTAGE OF M&AS ARE PREVENTED BY MERGER CONTROL REGULATION IN YOUR JURISDICTION? WHAT ARE THE MAJOR OBSTACLES?
50 / September 2012
HOW WELL DOES YOUR DOMESTIC AUTHORITY COOPERATE WITH INTERNATIONAL AUTHORITIES? WHICH REGIONS ARE THE MOST COOPERATIVE? The substantive test for clearance in Austria is whether or not the merger leads to the creation or strengthening of a dominant market position (Cartel Act, s 12). Highly complex merger projects, typically such which involve high market shares (> 30%), are most likely to receive close antitrust scrutiny by the Official Parties. As to the percentage of prevented mergers, it can be said that practically none of the notified mergers are actually forbidden by a negative decision of the Cartel Court. According to the Federal Competition Agency’s statistic, approx. 95% of notified merger cases are cleared within Phase I. The reminder of cases either reached Phase II (some 4%) or ended in some other manner (eg by revoking the notification). The rather high clearance rate is linked to the fact that the parties can offer remedies, which, if accepted, leads to a conditional clearance.
Our impression is that the Austrian Competition Agency is quite active in cooperating with other national and international authorities. It seems that there is a wellestablished connection to the European Commission as well as a close working-relationship. The same applies to the German Bundeskartellamt, where it is advisable to coordinate on adviser’s side any Merger Control filing which is simultaneously filed with the German Bundeskartellamt and the Austrian authority. Apart from that, it can be noted that the Austrian competition authority has established particularly good links with Central and Eastern European competition authorities. The Austrian competition authority is the founding partner of the so-called Marchfelder competition forum, which is an organisation to foster the activities of the competitions authorities of Austria, Bulgaria, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, Slovenia, Croatia and Switzerland.
ARE THERE MORE OBSTACLES WHEN AN INTERNATIONAL WISHES TO ACQUIRE A STAKE IN A DOMESTIC COMPANY? When an international undertaking wishes to acquire a domestic one, there are no more obstacles than in a purely domestic transaction. The only thing one may mention is that filings have to be made in German, which may be seen as an obstacle by non-German speakers. WHAT ARE THE PRIMARY MERGER CONTROL ISSUES IN YOUR JURISDICTION? HOW CAN THESE BE OVERCOME IN ORDER TO BRING A TRANSACTION TO A SUCCESSFUL CLOSE?
Company: bpv Hügel Rechtsanwälte OG Name: Dr. Astrid Ablasser-Neuhuber Email: astrid.ablasser@bpv-huegel.com Web: www.bpv-huegel.com Address: Ares-Tower, Donau-City-Straße 11, AT-1220, Vienna, Austria Telephone: +43 1 260 50 0
The substantive test in Austrian merger control is whether or not a dominant market position is created or strengthened by the notified transaction. In practice, market shares are the main indicator whether or not a transaction poses a competition problem. Having said that, the Federal Competition Agency has several people who are professional macro or micro economists. It employs all sorts of economic analysis. Already in 2006, the Federal Competition Agency had commissioned a study on the economic techniques to delineate the relevant market and apply the Herfindahl-Hirschman index. Further, it can be mentioned in this context, that where a
Company: bpv Hügel Rechtsanwälte OG Name: Dr. Florian Neumayr Email: florian.neumayr@bpv-huegel.com Web: www.bpv-huegel.com Address: Ares-Tower, Donau-City-Straße 11, AT-1220, Vienna, Austria Telephone: +43 1 260 50 0
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Non-Disclosure Agreements in M&A
NON-DISCLOSURE AGREEMENTS IN M&A — Francine Alfandary, Partner at Pearl Cohen Zedek Latzer, illustrates why “the devil is in the details” for NDAs in M&A discussions. l A Non-Disclosure Agreement is a precursor to nearly any business discussion today. An NDA typically follows a classic form. It prohibits disclosure or use of either party’s confidential or proprietary information for any purpose other than the purpose set forth in the NDA. Quite often, that purpose is intentionally broad, such as “discussions concerning a potential business transaction”. A typical confidentiality period is three years, although the period is subject to negotiation.
NDA’s take on particular importance in the context of M&A discussions. Although NDA’s follow a typical form, the devil is in the details. Two new court cases, one arising under Delaware law and one under New York law, illustrate the problems that can arise from unartfully worded NDA’s. The Delaware case, Martin Marietta Materials, Inc. v. Vulcan Materials Company arose from merger discussions between Marietta and Vulcan. Marietta and Vulcan, both publicly-traded companies, had talked for several years about a “business combination”, in the words of their NDA. After discussions stalled, Martin Marietta made a hostile tender offer for shares of Vulcan. Vulcan promptly sued, claiming that Martin Marietta had improperly used Vulcan’s confidential information to formulate its hostile bid. Vulcan brought its case before the Delaware Court of Chancery. The Court of Chancery is reputed to be the most experienced and most respected business law court in the United States. The NDA between Martin Marietta and Vulcan included a use restriction. The NDA stated that each party was providing its confidential information to the other for the purpose of discussing a “business combination”. The Delaware court decided that the history of the negotiations clearly showed that the parties
ACQUISITION INTERNATIONAL
intended to disclose confidential information to one another solely in the prospect of a merger. Therefore, Marietta was barred from using Vulcan’s confidential information to launch a hostile offer. The NDA effectively imposed a standstill. In the New York case, Goodrich Capital, LLC and Windsor Sheffield & Co. Inc. v. Vector Capital Corporation, Goodrich Capital, a financial advisor, approached Vector, a private equity firm, to invest in a target company. Goodrich, Vector and the target company entered into an NDA. Goodrich and the target company disclosed confidential information about the target company to Vector, but the parties did not do the deal. Instead, Vector invested in a competitor of the target company. Goodrich sued Vector, alleging that the investor had used confidential information that it acquired in the negotiations with Goodrich to pursue another investment. Vector argued that the NDA only covered the initial prospective deal and that Vector was not bound by the terms of the NDA once that deal collapsed. The NDA was governed by New York law, but the case was heard in a federal court sitting in New York City. The federal court disagreed with Vector. The court found that since the confidential information was disclosed for the purpose of discussing a transaction
with Goodrich and its client, the investor could not use the information to pursue another company in the same industry. NDA’s are often signed hastily just before an initial meeting between potential partners. In light of these decisions, parties are cautioned to think through the potential use and misuse that could be made of their confidential information. Their NDA should then tailor the purpose and use clauses carefully. If parties do subsequently pursue a transaction that could be deemed to violate the NDA, they should create a record showing that they used only public information in the subsequent talks.
Company: Pearl Cohen Zedek Latzer LLP Name: Francine Alfandary Email: francinea@pczlaw.com Web: www.pczlaw.com Address: 1500 Broadway, 12th Floor, New York, New York 10036, USA Telephone: +1 646 878-0800
September 2012 /
51
SECTOR SPOTLIGHT:
New Opportunities for Libya after the Arab Spring
NEW OPPORTUNITIES FOR LIBYA AFTER THE ARAB SPRING — Abdalla B Al Hasse, General Manager of Consultancy House, examines the economic situation in Libya and highlights lucrative opportunities for investors. l Consultancy House is a financial firm that provides financial services and consultation to international companies. Services include accounting auditing, taxations, compensation and financial consultations. Consultancy House is present in Libya, Egypt, UK and Malaysia. Consultancy House is designed to operate nicely with the changes of the country. In fact with our offices in Libya and overseas we have started updating our database with clients’ information and developing business relations with companies specialised in M&A so we can cope with the development and be able to provide all clients with all information and services needed.
Tuareg in the desert / Libya
DO YOU EXPECT TO SEE A LARGER AMOUNT OF FOREIGN DIRECT INVESTMENT IN THE COUNTRY OVER THE NEXT FEW YEARS AND BEYOND?
From 2012 Consultancy House started providing new services to help international companies to expand in Arab Spring countries and take advantage of the new era of business in these areas. Consultancy House’s clients are from: Europe (Italy, France, Germany, UK, Hungary, Bosnia and Croatia); Africa (Egypt, Tunis and Morocco); Asia (Singapore, China, Malaysia, Korea, India and Philippians); and the Middle East (UAE, Qatar, Jordan and Lebanon). WHAT DOES YOUR COMPANY DO IN OVERSEAS MARKETS? Consultancy House helps international companies to find opportunities in different markets of their own. We are now attracting companies to the Libyan market especially for the oil, construction and health sectors. Countries that have been through the changes of the Arab Spring are in real need of the international experiences to develop and upgrade their level of services. Therefore, Consultancy House tries to help to link the international companies with government authorities in Libya, Egypt and Tunis. Also, after the conflict in Libya, Consultancy House started providing compensation claim services to international companies that were effecting in Libya. So far Consultancy House has filled USD 3 billion worth of claims against the Libyan government and is working with the international community in providing solutions to the Libyan government for compensation issues. WITH TURBULENT CONDITIONS IN SEVERAL PLACES IN THE MIDDLE EAST, WHERE ARE LUCRATIVE OPPORTUNITIES GOING TO BE FOUND?
52 / September 2012
The risk of investment in the Middle East is not worrying investors. The situation is better now and the environment for investment is more encouraging. There are some places, such as Libya, where opportunities for investment are significant. The new government is willing to develop all sectors. The demand of services will be huge and will continue at least for the next 10 years. HOW DOES THE GOVERNMENT AIM TO KICKSTART NATIONAL DEVELOPMENT IN LIBYA? The existing government will be out of office soon (probably within one month’s time) and the new national assembly will appoint a new government for one year. One of the new government’s aims is to encourage the international companies to come back to work and finish the on-hold projects as well as start new projects that are needed related to health and housing. Other important aims are related to importation of medicines and hospital equipment as well as overseas treatments for soldiers and revolutionists. WHAT TYPE OF ECONOMY DO YOU EXPECT TO SEE NOW GADDAFI’S REGIME HAS FALLEN? The world will witness the birth of new economic activities in Libya. It is expected that the government may go to privatise most public owned projects and companies, and will also encourage the local private sector to be heavily involved in the economic development of the country. It is much more likely to see a new capitalist system to be developed. HOW WILL YOUR COMPANY OPERATE IN THIS NEW ECONOMY?
The amount of FDI is expected to increase in the next few years. In fact it starts to be seen, especially in the east part of Libya where a number of Middle Eastern companies are looking for opportunities and establishing their locations. Also the government itself is happy to encourage investors in and ease the legislation and regulation related to investment. All these issues will effect positively to encourage FDIs. IN WHAT WAYS IS LIBYA LOOKING TO DIVERSIFY ITS ECONOMY AND ENHANCE THE NON-OIL SECTORS? Libya is a country that has many sources that can be invested in to help diversify its economy. For example, in tourism, Libya has a coast on the Mediterranean Sea with a length of 2200 km. It also has a number of historical cities such as Cyrene and Lipts Megna. In agriculture, Libya is famous with its production of oranges, lemons, potatoes, olives and dates. Such productions can be exported or FDIs can help in developing these sectors. Other sectors as well can be developed.
C
House onsultancy
Company: Consultancy House Name: Abdalla B Al Hasse Email: abdalla@consultancy-house.com Web: www.consultancy-house.com Address: 57-58-59 Tripoli Tower, First floor, Tripoli, Libya Telephone: +218213351246/7
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Boardroom Trends - Effective Corporate Governance
BOARDROOM TRENDS — Effective Corporate Governance
-----------------------------------------------------------------------Helen Baines is the Senior Compliance & Governance Manager at Capital Advantage. ------------------------------------------------------------------------
Over the last few years, particularly since the realization that the global financial crisis would have an effect on the UAE, the aspect of good governance and transparency has become a real concern for both corporates and regulators. The days of the UAE being somewhat protected from external global matters such as economic downturns disappeared with the introduction of regulations to allow foreign investors and shareholders to invest in local companies which were listed on the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX). Having foreign investors and shareholders meant that there was an immediate risk of capital flight when economic recessions hit other parts of the world, hence in 2008 the UAE stock markets witnessed huge losses on share values as overseas investors withdrew their funds to shore up falling investments in other parts of the world such as US and Europe and battle the onset of the global financial crisis. In addition, not only was the UAE Economy faced with falling stock markets and companies were faced with falling market capitalizations, corporates, particularly the larger well known entities, were also faced with falling overseas investment values. UAE entities began to find themselves the subject of many questions, from overseas and local professionals, on levels of transparency of operations and capital management, particularly since, during the global crisis, UAE authorities were quick to quell questions on whether Government would ‘bail out’ ailing companies, particularly those with Government ownership. These turn of events were being monitored with interest by local Corporate Governance professionals
ACQUISITION INTERNATIONAL
such as ourselves. Capital Advantage Consultants, of which the author of this paper is a Senior Consultant, is a niche Company Secretarial, Corporate Governance and Compliance advisory firm for entities in the region which are tasked with compliance with such laws, regulations and international contractual obligations. We design, implement and educate Board Members and Corporates on Corporate Governance Frameworks, Codes of Conducts and Ethics and reporting of the same to meet increasing regulatory obligations.
With regards to Directors compensation and executive pay, the main regulations have been issued by the Emirates Securities and Commodities Authority and these are more geared to enhancing transparency of such compensation schemes rather than giving shareholders and other company stakeholders a “Say on Pay”. Similarly, current corporate governance regulations and reporting requirements do not address or encourage any establishment of “whistle blowing programs” and such programs are very rare animals to be found in any local corporate structure.
Although the UAE’s capital markets are now over a decade old, the capital markets regulator, the Emirates Securities and Commodities Authority, has only issued corporate governance regulations since 2009 applying to corporates listed on the local exchanges. Such regulations are still in their infancy in terms of detail and specifics, however, the overarching principles of Board Diversity between Executive, Non-Executive and Independent Directors, corporate reporting on financial statements, corporate governance frameworks, transparency on directors compensation and remuneration are in place and generally, being adhered to by the listed companies. The main difficulty, I think, being experienced by listed corporates, at the moment, is the ability to communicate the work that they have done in the area of Corporate Governance, or the lack of, as the case may be.
In conclusion, I think corporate governance is gaining momentum in the UAE and the Gulf as a whole. Soon everyone will come to realize its importance for the good of the shareholders and the entities themselves. More emphasis needs to be placed on the fact that it is one of the most important criteria when comes the need for raising capital.
Outside of the remit of the Emirates Securities and Commodities Authority little work has been done by other authorities to grow good Corporate Governance practices and ethics, with the exception of the DIFC and its financial services regulator, the DFSA, who both place high importance on the good corporate governance of their authorized firms, and will monitor the same closely.
Company: Capital Advantage Name: Helen Baines Email: hbaines@capitaladvantage.ae Web: www.capitaladvantage.ae Address: Office 806, Al Attar Tower, Sheikh Zayed Road, PO Box 72401 Dubai UAE Telephone: +971 4 321 9781 Fax: +971 4 321 9783
September 2012 /
53
SECTOR SPOTLIGHT:
Boardroom Trends - Effective Corporate Governance -----------------------------------------------------------------------Jennifer Sundberg is the Founder and Managing Director of Board Intelligence. ------------------------------------------------------------------------
Board Intelligence specialises in developing board information, to stimulate the right conversation in the boardroom and enable informed decision making.
Having reviewed 80 boards packs from over 20 companies in the past year alone, Board Intelligence brings unparalleled experience and visibility of best practice reporting. We work with the board to ensure they are equipped with the right information to stimulate the conversation they want to be having and to ensure that critical insight is neither absent, nor buried within a lengthy report.
Board packs are rarely a catalyst to effective supervision and stewardship and information risk is now recognised as a priority for the board. The events of the past few years have prompted leading boards to reflect on the scope and quality of the information they receive and to proactively address the blind spots.
We keep our clients at the forefront of corporate governance standards and board and executive teams we have worked with in the last 12 months include Xstrata, Severn Trent, John Lewis Partnership, easyJet and Royal Liverpool Hospital.
Company: Board Intelligence Name: Jennifer Sundberg Email: Jennifer.sundberg@boardintelligence.co.uk Web: www.boardintelligence.co.uk Address: 5 St. James’s Place, London, SW1A 1NP, UK Telephone: +44 (0)207 192 8200
-----------------------------------------------------------------------Nasser Sattar is a Partner member of the Executive Board at PwC Portugal, Financial Services and Capital Markets Leader and IFRS Technical Department Leader. ------------------------------------------------------------------------
find new markets. This implies redefining strategies, allocating scarce resources and implementing effective controls on operations.
be subject to a strong and immediate criticism and be considered as “immoral” or “unacceptable” from public’s perspective.
HAVE YOU SEEN ANY EVIDENCE IN YOUR JURISDICTION OF AN OVERALL SHIFT TOWARDS RESPONSIBILITY BY THE BOARD AND CORPORATE CONTROL?
RECENT SURVEYS HAVE DISCUSSED A ‘TRUST DEFICIT, HOW DO YOU THINK THE CURRENT ECONOMIC ENVIRONMENT HAS CHANGED PERCEPTIONS OF TRUST BETWEEN BUSINESS LEADERS, THE PUBLIC AND EXTERNAL SHAREHOLDERS?
Board’s oversight role is being adjusted to address the most relevant risks in a context of shortage of credit and shrinking internal market. Risk management systems is an area being developed, especially for the non-financial sector.
The average citizen faces, on a daily bases, news that States are not able to pay their debts, that banks are collapsing and that factories are closing. All of this goes beyond their control but has a direct impact on the everyday life.
Although there is no widespread mistrust, an increase in the lease of bank safes and in the amount of money transferences abroad are indications that the basic trust in capitalist market - financial system - is declining, therefore disclosures and communication with the stakeholders has to improve to regain the confidence and trust.
While developing the risk approach is important to link that same development with the Company’s strategy and to make sure that all divisions and functions are being considered.
In a short period, terms like ‘systemic risk’, ‘impairment’, ‘credit risk’, ‘remuneration packages’ or ‘rating agencies’ are in everybody’s vocabulary although their meaning continues to be as obscure as it was before.
The sustainability and close monitoring of every significant business are also matters being revised. Production capabilities and specialized workforce are set to a demand level that it is not expected to be seen in the near future and are driving companies to
54 / September 2012
Companies’ executives, as well as politicians, are more visible and may more easily be held accountable by all the negative consequences that everyone is experiencing. Every management decision may now
Company: PwC Portugal Name: Nasser Sattar Email: nasser.sattar@pt.pwc.com Web: www.pwc.com/pt Address: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Telephone: +351 21 359 94 28
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Managing Future Uncertainty in M&A Transactions - in Canada
MANAGING FUTURE UNCERTAINTY IN M&A TRANSACTIONS
— in Canada
l Pricing a business is hazardous! Buyers and sellers have different opinions on what represents fair value and consequently pricing may need to be adjusted. As the economy remains uncertain, corporate finance professionals are increasingly looking towards contingent forms of consideration such as earn-outs and claw backs as effective tools to bridge pricing gaps and manage future uncertainty. Doug Ryder is Vice President of Corporate Finance at Wolrige Mahon Chartered Accountants. Commenting on the success rate for M&A transactions in Canada, and some of the most common reasons for failure, Mr Ryder stated: A deal will usually only complete if it’s win / win for both sides. While there is an element of “game” in every transaction it’s important for both sides to keep their eye on the big picture. In recent times, transactions which have been professionally managed from both sides have had a much higher success rate; whereas transactions with underprepared or misguided vendors and purchasers have often failed to get across the finish line. The most common form of contingent consideration we see is earn-outs, sometimes coupled with vendor take-backs. They can be an effective way to bridge a pricing gap between parties. A purchaser is able to
take confidence that he will not overpay for a business that does not perform, likewise the vendor can take comfort he will extract maximum value should the business deliver the anticipated results. We believe contingent earn-outs and claw back clauses have their place, however they need to be structured correctly with both parties having realistic expectations as to the likely outcome. In the local context we often see earn-outs proposed by purchasers where the circumstances do not warrant such a provision. We promote the use of earn-outs where new products have been launched or cost saving measures have been implemented and the results have not yet been proven. We are unlikely to encourage using an earn-out simply as a financing vehicle due to their complexity. Do we advocate the use of alternative structuring provisions? Absolutely, but only when the situation warrants it. Deal volume would undoubtedly
increase if alternate structuring provisions were used. However, in the local context earn-outs are feared by many vendors and advisors, partly through a lack of understanding.
Company: Wolrige Mahon Chartered Accountants Name: Doug Ryder Email: dryder@wm.ca Web: www.wolrigemahon.com Address: Ninth Floor, 400 Burrard Street, Vancouver, British Columbia, Canada, V6C 3B7 Telephone: +1 604 684 6212
Granville Bridge / Vancouver
ACQUISITION INTERNATIONAL
September 2012 /
55
SECTOR SPOTLIGHT:
Employment Law & HR Issues in M&A
EMPLOYMENT LAW AND HR ISSUES IN M&A Careful consideration needs to be given to the structure of the deal, as this will impact on local law considerations with regards to issues such as informing and consulting with employees. -----------------------------------------------------------------------Christopher Fisher (Partner) and Michelle Last (Senior Associate) are members of Mayer Brown’s Employment and benefits Group (EBG), which advises clients on all aspects of the employment relationship. This includes the employment aspects of international M&A deals, from outsourcings in a handful of European countries, to substantial acquisitions and disposals across the globe. Recent transactions include advising on a business sale impacting numerous European jurisdictions and co-ordinating legal advice in over 40 jurisdictions on the hive-off of part of a global business. ------------------------------------------------------------------------
Mayer Brown’s Global EBG covers the world with a combination of its own offices and a carefully nurtured selection of internationally experienced law firms in other countries with whom our Firm’s lawyers have worked closely for many years. Our EBG helps businesses address the full range of employment law issues, both contentious and non-contentious, with over 100 employment law specialists practising across Europe, Asia and the Americas on national and cross-border employment law matters. WHAT ARE SOME OF THE TYPICAL EMPLOYMENT LAW/HR ISSUES WHICH CAN ARISE IN CORPORATE TRANSACTIONS? Identifying which employees are employed in the target business can be a difficult and timeconsuming task, particularly where the business is of a substantial size and/or there are contractors and/ or international secondments. It is important to deal with this at the outset by liaising with local personnel who are assigned responsibility for identifying impacted employees in each location. This helps to ensure there are no last minute surprises, which can cause delay and further add to cost. Likewise, it is important to take steps to retain key employees and protect the business going forward. Particular care needs to be taken, for example, to ensure that any non-compete provisions contained
56 / September 2012
in employment contracts will be relevant to the business after the transaction completes. WHAT ARE SOME OF THE MAJOR CHALLENGES WHICH CAN ARISE IN ACQUIRING AND MERGING WORKFORCES? One common concern for purchasers is the ability to harmonise terms and conditions of employment. This can be difficult to do, particularly in Europe if the transaction is one to which the Acquired Rights Directive (ARD) applies, because part of the protection given by the ARD is to prevent such changes taking place. There are, however, strategies which can be deployed to overcome such issues and we have worked with a number of employers to effect changes to terms and conditions of employment, even where the ARD applies. CROSS-BORDER TRANSACTIONS CAN PROVE TO BE MORE COMPLEX WHEN IT COMES TO HR AND EMPLOYMENT ISSUES. CAN YOU DRAW UPON YOUR OWN EXPERIENCES OF ADVISING ON HR ISSUES IN CROSS-BORDER DEALS? WHAT CHALLENGES DID YOU FACE AND HOW WERE THESE OVERCOME?
who advise on various different legal obligations, in particular the impact of M&A transactions on pension and share-based incentives. These can be high-value features in many cases, either because the purchaser is obliged to replicate them or wishes to remove or replace them. DO YOU HAVE ANY PREDICTIONS FOR EMPLOYMENT LAW OVER THE NEXT 12 MONTHS? The UK Government is contemplating amending TUPE in an effort to reduce the burden on employers. It is concerned that more transactions are caught by the legislation than is strictly required by the ARD, notably in cases of outsourcing. However if the scope of TUPE is reduced, it will not necessarily simplify things as there will simply be greater debate between the parties in terms of whether the ARD is invoked or not. ON A LIGHTER NOTE, WHAT IS THE BEST PIECE OF ADVICE EVER GIVEN TO YOU? Take the time to understand the other side’s point of view ... even if you then insist on your own!
Careful consideration needs to be given to the structure of the deal, as this will impact on local law considerations with regards to issues such as informing and consulting with employees. In Europe, the ARD will normally apply in asset sales and will bring with it various legal obligations designed to protect employees affected by the transaction. The ARD may also apply in share sale scenarios if there is to be a hive-up, hive-down, or outsourcing before or after the transaction. However because each Member State is responsible for introducing its own legislation to implement the ARD, there can be local differences. For example, on a recent pan-European outsourcing, the transaction was deemed to fall squarely within the UK’s ARD legislation, but the same transaction in France fell outside of the equivalent French law. It is important to take advice on the structure of the deal at an early stage as this will invariably impact on the timeline. Failure to factor in sufficient time to comply with local obligations can be costly and delay the transaction. For example, in France, a breach of local consultation provisions can entail criminal sanctions and potentially court action to prevent the transaction proceeding. HOW ARE YOU ABLE TO ASSIST PROSPECTIVE PURCHASERS IN ADDRESSING PENSIONS & BENEFITS OBLIGATIONS AND CULTURAL CONSIDERATIONS? We have specialist benefits lawyers within the EBG
Company: Mayer Brown International LLP Name: Christopher Fisher Email: cfisher@mayerbrown.com Web: www.mayerbrown.com Address: 201 Bishopsgate, London EC2M 3AF Telephone: +44 (0) 20 3130 3000
Company: Mayer Brown International LLP Name: Michelle Last Email: mlast@mayerbrown.com Web: www.mayerbrown.com Address: 201 Bishopsgate, London EC2M 3AF Telephone: +44 (0) 20 3130 3000
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Employment Law & HR Issues in M&A
Company: Fidal Name: Sylvain Niel Email: sylvain.niel@fidal.fr Web: www.fidal.fr Address: 14 boulevard du Général Leclerc, 92200 Neuilly-sur-Seine Telephone: 01 47 38 50 00
-----------------------------------------------------------------------Hein van den Hout is a Senior Associate at Clifford Chance LLP Amsterdam. ------------------------------------------------------------------------
In the aftermaths of the global financial crisis, The Netherlands is experiencing a rapidly changing economic and legal landscape which will have a significant impact on the HR aspects of corporate transactions in the coming years. Not only has there been an unprecedented volume of new legislation as regards e.g. corporate governance and executive remuneration, but also has the crisis affected the financial possibilities and business operations of the parties involved in M&A deals. A striking example is the way corporates and private equity look at pensions when considering the acquisition of a company. Prior to the financial crisis,
-----------------------------------------------------------------------Erika C. Collins is an Employment Law Partner and Head of the International Employment Law Practice at Paul Hastings LLP. ------------------------------------------------------------------------
WHAT ARE SOME OF THE TYPICAL EMPLOYMENT LAW/HR ISSUES WHICH CAN ARISE IN CORPORATE TRANSACTIONS? In a cross-border transaction, employment/HR issues can wreak havoc. In the due diligence process, the acquirer may learn that the benefits programs are excessive or that the pension is underfunded to the extent that it can kill a deal. Consultation requirements with works councils and employee representatives can be very challenging for US-based multi-nationals who are unaccustomed to having to communicate anticipated M&A transactions to employees ahead of signing the deal. WHAT ARE SOME OF THE MAJOR CHALLENGES WHICH CAN ARISE IN ACQUIRING AND MERGING WORKFORCES?
ACQUISITION INTERNATIONAL
pension schemes caused less of a debate between the parties involved. Nowadays, with half of the Dutch pension funds experiencing falling funding ratios as a consequence of which pension funds are under close scrutiny of the relevant regulator and the Dutch government considering to change the legal framework for pension providers, pensions is often a concern. Instead of, by rule of thumb, including the applicable scheme in a transaction, parties tend to look for alternative solutions such as closing the applicable pension scheme prior to completion and offering new arrangements (for instance via PPIs, the Dutch IORP-vehicle) or splitting pension liabilities between seller and buyer as per the date of completion of the transaction. Such solutions may, however, be met with restraint by e.g. employees and their representatives and require in depth knowledge of, and close collaboration between, relevant M&A advisors. As this ‘sea of change’ is all but passed, planning
ahead on the HR aspects of M&A transactions - both prior to as well as during transactions - is currently even more key than in the past.
One of the major challenges with merging workforces is trying to synthesize the benefits between two groups of employees. Additionally, if the transaction has triggered “business transfer laws” (TUPE type laws) in an asset deal, then the acquirer’s planned restructuring may seriously be hindered due to the fact that any dismissal will be automatically unfair.
intuitive to US-based executives. Designing and implementing a communication strategy that works in all jurisdictions can be very difficult—sometimes we have had to carve out the France piece of the transaction in order to keep the deal moving. Putting France on a separate track can sometimes be the only practical answer!
Company: Clifford Chance LLP Amsterdam Name: Hein van den Hout Email: hein.vandenhout@cliffordchance.com Web: www.cliffordchance.com Address: Droogbak 1A, 1013 GE Amsterdam, PO Box 251, 1000 AG Amsterdam, The Netherlands Telephone: + 31 20 7119 586
CROSS-BORDER TRANSACTIONS CAN PROVE TO BE MORE COMPLEX WHEN IT COMES TO HR AND EMPLOYMENT ISSUES. CAN YOU DRAW UPON YOUR OWN EXPERIENCES OF ADVISING ON HR ISSUES IN CROSS-BORDER DEALS? WHAT CHALLENGES DID YOU FACE AND HOW WERE THESE OVERCOME? One very challenging transaction involved the acquisition of very high level executives in more than 20 countries. Preparing the executive employment agreements was very challenging as the law differed in how certain equity plans and benefits could be administered. Another challenge is educating acquirers about the consultation and notice requirements which can be completely counter-
Company: Paul Hastings LLP Name: Erika C. Collins Email: erikacollins@paulhastings.com Web: www.paulhastings.com Address: Park Avenue Tower, 75 East 55th Street, First Floor, New York, NY 10022, USA Telephone: +1(212) 318-6789
September 2012 /
57
SECTOR SPOTLIGHT:
Changing South African Private Companies’ Constitutional Documents Before 1 May 2013
CHANGING SOUTH AFRICAN PRIVATE COMPANIES’ CONSTITUTIONAL DOCUMENTS BEFORE 1 MAY 2013
— What All The Fuss Is About l South Africa’s new Companies Act (“New Act”) took effect on 1 May 2011. South African companies that were incorporated before that date (“existing companies”) have until 30 April 2013 to change their registered constitutional documents (now called “memoranda of incorporation” (“MOIs”)). But what happens if a South African company doesn’t change its MOI? This article will only focus on the position regarding existing South African private companies with multiple shareholders (“private companies”). Before 1 May 2011 a private company had to file two constitutional documents with the relevant regulator, namely a “memorandum of association” (“Memorandum”) and “articles of association” (“Articles”). The Memorandum governed the company’s relationship with external third parties whereas the Articles regulated the relationships between the company and its shareholders and between the shareholders themselves. Before 1 May 2011 a private company and its shareholders could have concluded a “shareholders agreement”. A shareholders agreement governed essentially the same matters as the Articles did. However, a shareholders agreement could also regulate additional matters such as the company’s dividend policy, shareholders’ pre-emptive rights and shareholders’ entitlements to appoint directors. A shareholders agreement’s provisions normally prevailed over those of the Articles. This was useful, since a shareholders agreement was not a publicly available document (unlike the Articles). As a result shareholders agreements were normally negotiated extensively, whereas the Articles received less attention. The New Act changed all of that. Firstly, it replaced private companies’ Memoranda and Articles with a single document, namely the MOI. Secondly, it turned all existing private companies’ Memoranda and Articles into MOIs on 1 May 2011. Thirdly, it reversed the position whereby a shareholders agreement prevails over the Articles. Under the New Act a private company and its shareholders can still conclude a shareholders agreement but if they do so after 1 May 2011 the company’s MOI prevails over the shareholders agreement in case of a conflict. Shareholders agreements that were concluded in respect of private companies before 1 May 2011 (“existing shareholders agreements”) continue to
58 / September 2012
prevail over their correlating MOIs until 30 April 2013. From 1 May 2013 onwards those MOIs will prevail over their correlating existing shareholders agreements. The New Act also introduced numerous “alterable and default provisions”. A “default provision” is a provision of the New Act which applies automatically to a private company unless that provision is disapplied in that company’s MOI. An “alterable provision” is a provision of the New Act which always applies to a private company but the extent of its application can be changed in that company’s MOI. Default and alterable provisions can only be disapplied or altered in an MOI, not in a shareholders agreement. How then can parties to an existing shareholders agreement ensure that their carefully negotiated rights and relationships remain in place after 30 April 2013? They will have to take a number of steps. Firstly, they must determine whether those rights and relationships are now governed by alterable or default provisions of the New Act. If they are, then those parties should (insofar as the New Act allows them) amend their company’s MOI to reflect the position under the existing shareholders agreement. However, if the existing shareholders agreement’s provisions are not governed by the New Act’s default or alterable provisions, the parties must determine whether the shareholders agreement’s relevant provisions relate to matters which are now automatically governed by the New Act and which may not be changed or disapplied at all (the “unalterable provisions” of the New Act). If an existing shareholders agreement contains a clause which contravenes an unalterable provision of the New Act, that clause is void. However, to the extent that the New Act does not deal at all with a matter which is regulated by an existing shareholders agreement, the parties to that agreement can still regulate that matter in their shareholders agreement. Since a shareholders agreement is not a public document, shareholders in private companies can still privately regulate matters such as pre-emptive rights, forced sales and
shareholders’ loans in their shareholders agreements. The New Act also introduced provisions which automatically apply to private companies from 1 May 2011. However, the shareholders of those companies will not have dealt with those new provisions in their existing shareholders agreements at all, since there was no need to do so. For example, under the New Act a private company’s board of directors can now issue shares in that company without any need to obtain the shareholders’ prior approval. Minority shareholders are now likely to insist that any board resolution to issue any new shares must also be approved by a super majority of the shareholders. The New Act’s introduction of these novel provisions has two unfortunate consequences. Firstly, parties must now deal in their MOIs with new matters which they did not consider or agree on in their existing shareholders agreements. Secondly, it potentially opens the door for a renegotiation of some of the matters previously agreed upon in the existing shareholders agreements. All of this really just highlights the fact that it will be prudent for South African private company shareholders not to leave the preparation (and renegotiation, if necessary) of their new MOIs until April 2013 but to start that process sooner rather than later.
Company: Knowles Husain Lindsay Inc Name: Francois Terblanche Email: ft@khl.co.za Web: www.khl.co.za Address: 4th Floor, The Forum, 2 Maude Street, Sandton, 2196 Telephone: +27 11 669 6000
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Exemption of Bonds from tax and implication on Foreign Investment in Nigeria
EXEMPTION OF BONDS FROM TAX AND IMPLICATION ON FOREIGN INVESTMENT IN NIGERIA l KPMG Advisory Services is a member firm of the KPMG network of independent firms affiliated with KPMG International. The partners and people have been operating in Nigeria since 1978, providing multidisciplinary professional services to both local and international organisations within the Nigerian business community. that regulates the operation of bonds, promissory notes and registered stocks issued by the Federal Government of Nigeria. The LL Act gives the basis for exemption of federal government stocks and securities from tax and empowers the Minister of Finance to give directives exempting such securities from all or any taxes and duties payable in Nigeria. The tax concessions granted on sovereign bonds have usually focused on long term bonds (10 years and above) which are used to finance infrastructure and other developments rather than short term bonds. Corporate bonds, on the other hand, lacked favorable tax regime and suffered from regulatory bottlenecks, which indeed stifled its growth. It had therefore lagged significantly behind corporate bonds in market penetration. Statistics from the DMO reveals that Government bonds comprised more than 90% of the total domestic market for bonds, as at 2010.
Since the global economic crisis of 2008, corporate bodies and government have realized the need to diversify in the areas of raising capital for financial projects. In Nigeria, relative ease was experienced in raising funds from the equity market, which made the avenue popular amongst corporate bodies. However, since the global crisis, the equity market had witnessed a flight of capital, which left the market comatose. While the equity market has since stabilized, the pace of rebound has been slow as investor confidence is yet to recover fully. The bonds market has helped fill the vacuum left behind by the equity market. Dominated mainly by instruments issued by the Federal and State Governments, the market has become an attractive alternative investment route, which is actively sought by corporate entities, particularly the banks. In August 2012, available statistics revealed that the Debt Management Office (DMO), on behalf of the Nigerian Government, offered and sold N75bn ($468m) in FGN Bonds to the public. The bonds were fully subscribed by local and foreign investors and the total subscription was estimated at N249.11bn ($1.56bn) or 3.32 times the amount offered. Government bonds enjoy favourable patronage, due to special tax concessions granted to this type of debt instrument. The Local Loans (Registered stock and securities) Act (LL Act) is the principal legislation
60 / September 2012
To spur the development of the corporate bond market, stakeholders in the financial sector engaged with the Government to extend tax waivers to all forms of bonds. The interaction led to the creation of a Bond Market Steering Committee (BMSC) headed by the Minister of Finance. Part of the recommendations of this committee resulted in a report issued by the DMO in March 2010, notifying the public of a Presidential Order which granted a 10 year waiver of taxes on all categories of bonds (Federal, Sub-National, Corporate and SupraNational bonds) and short term FGN securities, such as treasury bills. However, the legislative process supporting the report and the tax waivers was not finalized, which led to uncertainties as to the appropriate tax treatment for such investments. In a bid to further deepen the capital market in Nigeria, the Central Bank of Nigeria in 2011 removed the restriction on foreign investment in government securities, which had required foreign investors to hold investment in such securities for at least one year before they can divest. The restriction was introduced in 2008 in an attempt to stem the rapid outflow of foreign exchange occasioned by foreign investors divesting from the money and capital markets in response to the global financial crisis. The removal of the restriction helped to liberalize investment flows. The DMO report had however remained without appropriate legislative backing until this year. The Nigerian Government, effective 2 January 2012, issued an Order which granted a 10 year tax relief
from Income Tax and Value Added Tax on income derived from the following instruments: • • •
Bonds issued by Federal, State and Local Governments and their agencies Bonds issued by corporate bodies including supra-nationals Short term Federal Government securities such as treasury bills and promissory notes
Also, effective June 2011, the Personal Income Tax Act was amended to exempt income received from the above instruments from tax for individual investors. We have since seen a clear growth in the corporate bond market as there has been increasing interest of local and foreign companies in raising capital through bonds. Companies have successfully issued corporate bonds to raise capital to finance their projects. For instance, Flour Mills of Nigeria Plc raised corporate bonds worth USD232 Million to build a sugar factory. The issue was oversubscribed. Also, two local banks have expressed interest to raise Eurobonds worth about $850 million around the last quarter of 2012 or early 2013. What remains is for the Government to establish an appropriate tax and regulatory framework to support the development of other sophisticated debt instruments, such as derivatives. This no doubt will serve to further deepen the capital market and enhance the options of investment alternatives available to institutional investors, such as pension funds, PE firms, investment banks, etc., and the general public. Ultimately, the Nigerian economy will benefit from a larger pool of funds that will be available for growth and development opportunities.
Company: KPMG Advisory Services Name: Ajibola Olomola (Partner and Head of Transaction Services and Outsourcing Unit) Email: aolomola@kpmg.com Web: www.kpmg.com Address: KPMG Tower, Bishop Aboyade Cole Street, Victoria Island, Lagos, Nigeria Telephone: +234 1 271 8933; +234 803 402 1039
ACQUISITION INTERNATIONAL
Thought Leader Global info@thoughtleaderglobal.com www.thoughtleaderglobal.com
Acquisition and Integration for Supply Chain Leaders
2nd annual Tax Planning Strategies and Experiences
4th Merger Integration Management Forum
September 27-28, 2012 Amsterdam
October 11-12, 2012 Amsterdam
November 15-16, 2012 Amsterdam
www.thoughtleaderglobal.com/ supplychain.pdf
www.thoughtleaderglobal.com/ tax.pdf
www.thoughtleaderglobal.com/ merger.pdf
Practical Training on Post-Merger Integration & Planning from a Supply Chain Perspective
In-House Perspectives: Planning, M&A Planning, Intangibles, Emerging Markets, TESCM
Advanced Strategies to Maximise Value from M&A and Reorganisations
Case Study: l Lessons Learned and Challenges Faced in a Global Supply Chain Integration l How to Position your Supply Chain Organisation for M&A Activities l How to be Involved as ‘Supply Chain’ Early on in the Deal l Supply Chain as a Key Synergy Driver l Target Assessment and Due Diligence: Creating a Supply Chain Due Diligence Checklist l Operating Model Design for Supply Chain Companies
Salvatore Ferragamo Group Tax Due Diligence: Acquisition Essentials ABB Valuations & Impact on Post-Deal Integration Danish Tax & Customs: Communication with Tax Authorities: Before, During & After Implementation of Tax Planning Strategies Gruppo Lactalis Intra-Group Finance Strategy and Cash Pooling AmDocs Tax and Regulatory Issues in FACTA Gucci Group Developing a Simple/Flexible Transfer Pricing Model that Supports Business Expansion BMR Advisors M&A in India & Emerging Markets Medtronic TESCM in an M&A Environment Kerry Group Intangible Asset Planning as a Primary Component of Deal Value Centrica Implementing Significant Corporate Restructuring in a Fast Paced Environment Bayer Current Legal Framework and Case Law on Cross Border Loss Utilisation Piaggio Developing a Strong Tax Risk Policy for Asia Perkin Elmer Tax Strategies for Latin America UFS Investment Company Russian International Tax Developments
Case Study: l Experiences from a Supply Chain Redesign l Risks and Dependency Assessment, Challenges typical to Supply Chain l Structuring and Managing Integration Programmes Case Study: l Culture and Communications: Experiences from Cultural Challenges l Major Causes of M&A Failure and How to Avoid Them
Telekom Austria Identifying, Evaluating and Preparing to Realise Synergies in the Pre-Closing Phase BNP Paribas Fortis Strategy Execution as a Key Driver for M&A Success Statoil Conducting Cultural Due Diligence and Change Management Siemens Turnarounds: Linked to M&A and Integration Success Areva T&D Managing Integrations of Family-Owned Companies Electrolux Maintaining M&A Strategic Intent and Dealsourcing Equens Focusing on Synergy Creation during Integration: Best Practices Alcatel-Lucent & Konecranes New Business Start-ups and Venture Acquisition Philips Performance Measurement Strategies for the Integration Phase Stora Enso Integration of the Finance Function Ericsson Successful IT Integration: Exceeding Cost Savings Targets (with Carve-Out Strategies) Syngenta Sustainable Compliance: Is it Possible to Achieve while Integrating a New Business?
SECTOR SPOTLIGHT:
Entertainment & Media Disputes
ENTERTAINMENT & MEDIA DISPUTES l Ashley Hurst is a Partner in the Commercial Litigation team at Olswang LLP with a particular focus on media and internet disputes.
WHAT ARE THE MOST COMMON CAUSES OF DISPUTES IN THE MEDIA & ENTERTAINMENT INDUSTRY? Disputes vary hugely, from commercial contract and corporate disputes to disputes over media content, including privacy injunctions and libel claims. On the content side, concepts such as “fair comment”, “public interest” and “reasonable expectation of privacy” give rise to difficult editorial decisions, particularly for media companies that publish in multiple jurisdictions. All this leads to disputes and means that media lawyers need to be increasingly up to speed on conflicts of laws when advising international media clients. There has also been an upward trend in recent years of disputes and regulatory issues arising out of the internet both in relation to content, e-commerce and cyber-security. For example, the increase in online advertising and growth of social media has led regulators such as the Advertising Standards Authority and OFT to focus in on this area.
62 / September 2012
HOW HAS THE ECONOMIC AFFECTED THE INDUSTRIES?
DOWNTURN
The economic downturn has meant that advertising spend has been squeezed. This has led media companies to cut costs in certain areas and look for new ways to generate revenue. Although this has placed a number of media companies under financial pressure, particularly in the publishing industry, internet technology and the mobile revolution are giving rise to new opportunities and revenues streams for publishers and broadcasters. So it’s certainly not all doom and gloom for the media industry and there is lots of interesting work for media lawyers... WHAT IS THE CURRENT LEVEL OF RISK FACED BY FIRMS IN YOUR INDUSTRY? I think a number of niche firms that have focussed primarily on media disputes in the last few years have felt the pressure of the economic downturn and this has led them to diversify. Whilst there continues to
be a regular flow of media disputes, the real growth area is in technology and the internet and I would predict that litigation practices which are strong across the converging world of media and technology in multiple jurisdictions will be well insulated from the economic downturn.
Company: Olswang LLP Name: Ashley Hurst Email: ashley.hurst@olswang.com Web: www.olswang.com Address: 90 High Holborn, London, WC1V 6XX, DX 37972 KINGSWAY Telephone: +44 20 7067 3486
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Importance of Protecting Intellectual Property
THE IMPORTANCE OF PROTECTING INTELLECTUAL PROPERTY — Nicholas Womsley, Director at Swindell & Pearson Ltd, explains how IP can be a company’s most valuable asset, and why protecting IP rights is vital. l With offices in the Midlands, Yorkshire and London, Swindell & Pearson Ltd is one of the foremost Intellectual Property specialists in the UK. Leading multinational clients trust the firm with their patent and trade mark portfolios, as well as designs and copyright. Nicholas Womsley has been in the Intellectual Property field for 23 years, dealing directly with business leaders, advising and counselling them in all aspects of the identification, protection and enforcement of Intellectual Property. HOW CAN THE IP RIGHTS OF A BUSINESS SET THEM APART FROM THEIR COMPETITORS? IP can be used to give a business a competitive edge. Patents can make a technology the preserve of a business. Trade marks can protect the reputation and goodwill of a business and its investment in establishing a valuable market presence. It can enable a business to extract the greatest possible benefit and return from its investment in its products, processes, brands and market position. HOW ARE YOU AND YOUR FIRM ABLE TO ASSIST THE MANAGEMENT TEAM OF BUSINESSES IN PROTECTING THEIR IP? Our attorneys are proactive, driven and focused on IP and how it best adds value to a business. This enthusiasm and focus enables us to support and often drive the creation, identification, protection, acquisition and enforcement of IP for business.
WHO IS A TYPICAL CLIENT? We represent multinationals, blue-chip companies, SME’s, academic institutions, and government agencies. WHAT AREA(S) OF INTELLECTUAL PROPERTY LAW DO YOU SPECIALISE IN; AND WHAT INDUSTRY SECTOR(S) DO YOU FOCUS ON? In terms of patents we focus on hightechnology/computer implemented programs/ telecommunications, chemistry/life sciences, physics/mechanical/ electronics. We also have a Trade Marks Team with extremely specialised skills, as well as experts in designs and copyright.
business-orientated approach and an eye on value for money for our clients. WHAT DOES AN IP ADVISER BRING TO THE DEAL TABLE? HOW IMPORTANT IS THEIR ROLE? We provide valuable insights into the often critical role of IP in business. We bring excellence, experience and expertise in the IP field. We can assist in terms of due diligence and also, because of our experience with working with large multinational IP portfolios, we have trusted associates around the globe that enables us to provide global expertise, IP investigations and to effect requisite IP recordals as part of a business acquisition.
HOW DOES YOUR FIRM STAND OUT FROM COMPETITORS?
WHY ARE IP RIGHTS THE MOST VALUABLE ASSETS FOR ANY BUSINESS? WHY IS A BUSINESS’ IP SO IMPORTANT?
We are preferred advisers for some of the world’s leading technology companies. We also have an enviable reputation managing international trade mark portfolios for many major multinational brands. All of this invaluable experience and addedvalue advice and counselling is provided with a
IP can create and protect critical revenue streams for a business. IP can enable a business to enjoy a market monopoly for protected products, enabling revenue from such assets to be maintained and often valued at a premium. IP can be sold, licensed or mortgaged. IP can attract outside investment.
ACQUISITION INTERNATIONAL
DO YOU HAVE ANY COMMENTS OR PREDICTIONS FOR IP LAW IN YOUR JURISDICTION OVER THE COMING 12 MONTHS? The relatively recent introduction of the Patents County Court will likely result in more IP litigation, particularly between small and medium sized businesses in the UK. The access to justice through the reduced complexity and costs of this forum clearly has both positive and potentially negative implications for businesses trading in the UK.
Company: Swindell & Pearson LTD Name: Nicholas Womsley Email: nick.womsley@patents.co.uk Web: www.patents.co.uk Telephone: +44 1332 367 051 +44 1332 345 200
September 2012 /
63
SECTOR SPOTLIGHT:
Asset Financing - Ships, Oil Rigs and Aircraft as Security under Maltese Law
ASSET FINANCING — Ships, Oil Rigs and Aircraft as Security under Maltese Law
l Sarah Khan is an Associate at Camilleri Preziosi, a leading Maltese law firm with an extensive range of commercial, corporate, finance and regulatory expertise. The firm regularly advises on asset financing of ships, oil rigs, aircraft and real estate.
St Julians Bay / Malta
SHIPS Ship financiers particularly consider the flag under which a ship will be registered, since the law of the flag will govern the mortgage over the ship and its enforcement. Financiers may register a mortgage on a ship for a flat fee of currently EUR 500. In terms of the Merchant Shipping Act (Chapter 234 of the laws of Malta), a mortgage is deemed to be an executive title, where the obligation it secures is a debt certain liquidated and due. Therefore a mortgage can be enforced without the necessity of obtaining a judgment. Maltese law recognises the appointment of security trustees acting for the benefit of persons to whom a debt is due, e.g. syndication lenders. In addition to these advantages of registering and enforcing of security, the Maltese flag affords financiers further registration and tax benefits. The above information equally applies to oil rigs. AIRCRAFT An aircraft may constitute security for a debt either by agreement or by operation of the law. In terms of the Aircraft Registration Act (Chapter 503 of the laws of Malta), a ‘security interest’ is an interest granted under a security agreement drawn up to secure the rights of a conditional seller or a lessor.
64 / September 2012
Mortgages may be registered in the national aircraft registry as security for loans. Security over aircraft only extends to engines attached to the airframe belonging to the same owner. A mortgagee may exercise remedies in the event of a default without leave of court by notification in writing to the debtor. Under Maltese law, special privileges arise by law over certain debts, which enjoy enhanced priority over other debts and claims. Where such special privileges are registered in the International Registry they rank prior to any debts secured by a Maltese mortgage. Malta acceded the Cape Town convention in 2010.
Post-crisis and in light of the capital requirements of Basel III, banks scrutinize the quality of collateral, its liquidity and enforceability even more carefully. CONCLUSION The Maltese legislation provides an attractive framework for aircraft and ship financing, adding value to security packages by ensuring efficient enforcement procedures. Sale-and-lease-back transactions, where a pledge over the rent receivable is granted rather than a mortgage are seen in the market.
TRENDS Having seen well-structured combinations of asset based loans and secured term loans granted by hedge funds or institutional investors, there is definitely room for innovative combinations, as well as for the recognition of new asset classes. Especially in structured real estate and aviation transactions, concepts of usufruct and sale-andlease-back shift the ownership of the asset so that the borrower cannot offer the asset as security. In such cases, we observed that pledges over rent receivables, bank accounts and insurances were granted as security instead.
Company: Camilleri Preziosi Name: Sarah Khan Email: sarah.khan@camilleripreziosi.com Web: www.camilleripreziosi.com Address: Level 3, Valletta Buildings, South Street, Valletta VLT1103, Malta Telephone: (+356) 21238989
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
BOUNCING BACK
Bouncing Back - Malta
— Malta
l Dermot S L Butler is Chairman at Custom House Group, and a member of AIMA and MFA. Here he fills us in on the factors which have contributed to Malta’s recent growth in the financial services sector. The country has signed up DTTs and MoUs with China and can provide a good base for financial products in the Gulf area for those that are nervous of the effect of the “Arab Spring”.
Malta
The Maltese government has established the region as one of the safest and best-run financial centres in the world. The regulator has done all he can to both comply with EU regulations, other sensible regulation and accommodate good quality businesses that have an intelligent compliance culture. With regard to outbound M&A I think Malta, as an attractive EU center, will grow, both from new business and from business transferring from other jurisdictions.
At Custom House we provide all the normal administrative functions, but also provide very good client service, including customized reports and similar, which I think sets us apart from the competition. Typical clients for us range from small to medium sized alternative investment funds (start-up to $500 million) to several billion.
Malta was excellently prepared for entry into the EU in 2005 and has a pragmatic, business-friendly, but strong regulator, good education and cost advantages. It has a strong legal and regulatory framework, as well as a highly skilled workforce, adequate infrastructure (telephone connections), good DTTs, low costs and is a good place to work.
-----------------------------------------------------------------------Dominic Attard is CEO of Centrecom, part of the World Aviation Group, one of Malta’s Largest Contact Centres. ------------------------------------------------------------------------
“near shoring” (or near sourcing). A number of British Companies such as Crimson Wing and Lloyds Register, that joined the global outsourcing vogue and had shifted work to India and the Philippines earlier this decade, have over the years moved back to Europe specifically from the Philippines and India to Malta. The problem in the Far East, lies in the language, English is widely spoken but not widely understood. In Malta English is spoken as a native language.
Malta offers more than financial incentives to foreign investors; it offers a complete environment that is conducive to business. There is the island’s location in the Mediterranean, its excellent air and shipping facilities, a highly-educated and skilled workforce, a proactive business environment, and English as the business language of choice. Malta’s legislative and regulatory systems, its advanced telecommunications infrastructure and a multitude of highly skilled professionals in every field, have helped Malta win both investment and international recognition. An EU State on the doorsteps of Southern Europe and North Africa, Malta has developed into one of the most progressive and efficient business locations in Europe. Near Shoring Versus Off shoring Farming work out to locations on the edge of the EU has generated a new piece of business jargon,
ACQUISITION INTERNATIONAL
Moreover there has often been a problem with cultural barriers. Employees and customers were unable to understand each other and socio-cultural linguistic barriers have even led to conflict. Near shoring to countries like Malta offer many of the benefits of offshoring with far less problems. At Centrecom we are a multi-lingual International Contact Centre company offering back and front office services through our Contact Centre, Malta. We know that our clients are unique both in their requirements and objectives, so we create individually tailored solutions. Our aim is to always add value to your business not by just meeting, but by exceeding your expectations. As a global organization we are always open for business, using the latest technology to service your customers wherever they may be.
Company: Custom House Global Fund Services Ltd. Name: Dermot S L Butler Email: dermot.butler@customhousegroup.com Web: www.customhousegroup.com Address: 25 Eden Quay, Dublin 1, Ireland Telephone: 00 353 1 878 0807
‘We chose Malta and specifically Centrecom as our nearshoring partner mainly because of their language capabilities in English. We also like the affinities that exist between the Maltese and British culture which makes communication between customers and agents easier. We had a really good experience during our transition thanks to the Centrecom staff who really helped us during this time. - Luke Todd - Head of Customer Service, Trust & Safety – Gumtree UK
Company: Centrecom Name: Dominic Attard Email: dominic.attard@centrecom.eu Web: www.centrecom.eu Address: Aviation Centre, First Floor, St. Thomas Street, Luqa, Malta LQA5000 Telephone: (356)2364 4444
September 2012 /
65
SECTOR SPOTLIGHT:
Comprehensive Due Diligence - The Key to M+A Success
COMPREHENSIVE DUE DILIGENCE — The Key to M&A Success
game. In the case of EDD, occasionally aspects of contractual protection have already been discussed. Without a firm grip on the reality of the technical aspects surrounding such protective measures, there can be problems in later negotiating the terms of any indemnities and or warrantees by the professional legal teams.
-----------------------------------------------------------------------Ben Sawford is Managing Director of KBC Environmental. ------------------------------------------------------------------------
budgeted solution would not have been adequate for the business going forward if post-transaction plans were implemented.
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS?
WHY IS ENVIRONMENTAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A?
Effective due diligence involves a highly integrated client and advisor process with a comprehensive understanding of the needs of the investor, debt funding solutions in play and the overall future business planning associated with the investment. In undertaking EDD, perhaps in a more traditional manner, in-silo or as a tick-box exercise, the client risks losing competitive advantage they may gain in the early bid stages to refine bids, build more accurate business plans, understanding of the business from an industry expert’s perspective and have a fuller understanding of the actual as opposed to perceived environmental liabilities and assets they may be investing in. A recent example of how an integrated approach can provided added value relates to a oil refinery acquisition. Environmental CapEx budget associated with sulphur management was disclosed in dataroom, however, whilst budget disclosed allowed for such aspects as a sulphur emission control system to meet regulatory requirements, the implications would have had significant negative impacts within the investor’s proposed upgrade program (by way of a bottleneck to production), which proposed a change in the crude product supply with an increased sulphur content. Therefore, the proposed and
66 / September 2012
Actually, I don’t agree with the question. I believe, perhaps more in the niche area we work within, where companies are dealing in environmentally sensitive matters, handling potentially highly contaminative or hazardous substances, on an international scale, the focus is very much upon environmental due diligence being a mainstream element of a transaction. The use of effective EDD is now also being seen, not only as a need within the DD process itself, but, from our perspective, a significant area with potential to add value to a business transaction. In addition to identifying risks and potential liabilities, good EDD may identify hidden assets within the transaction and competitive advantages within both business plans and therefore the overall bid strategy.
Other issues we come across, on a regular basis, is the general poor quality of vendor due diligence reports and VDRs. Often disclosure of important information is left until the last few days of a due diligence period. Bringing advisors in early enough to ask the right questions and request the right data early on, as appropriate within the terms of any tricky contract negotiations, can be a way around this problem. In addition, having an advisor that is properly experienced in the industry sector can aid the process, in asking the ‘right’ questions rather than a scatter gun approach. WHAT METHODS AND STRATEGIES DO YOU USE TO COMPILE AN ENVIRONMENTAL DUE DILIGENCE PLAN? We follow our own internal protocols which are underpinned by international standards. That said, no plan is the same as the last. All clients have specific needs and all assets are different by way of the challenges they present. Early stage industry understanding is key, full assessment of all pertinent aspects of the information memorandum and or teaser documentation along with known public resource assessment are crucial. We find it imperative to have quality feedback and discussions sessions with all other advisors in the client DD team. The point here is that it is not just an Environmental DD plan, it is, and has to be, part of the client DD plan.
WHAT ARE SOME OF THE MOST COMMON PROBLEMS THAT CAN ARISE WHEN STEPS ARE MISSED IN THE DUE DILIGENCE PROCESS? Poor information gathering and disclosure from targets will always result in a rush at the final stages to get a bid together with the right technical backup that is underpinned by legal review. If the steps in the early stage of the DD process are not correctly undertaken and in a timely manner, then problems will and do become significant down the line. There are occasional instances when advisors are brought into the transaction process late in the
Company: KBC Environmental Name: Ben Sawford Email: bsawford@kbcat.com Web: www.kbcat.com Address: 42 - 50 Hersham Road, Walton on Thames, Surrey KT12 1RZ Telephone: +44 (0) 1932 242424
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Comprehensive Due Diligence - The Key to M+A Success -----------------------------------------------------------------------Demet Ozdemir is a partner of Transaction Advisory Services at Ernst & Young Turkey and responsible for Transaction Support Services. ------------------------------------------------------------------------
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS? With an underlying assumption that due diligence is performed at a very quality level and effectively, due diligence teams help clients accelerate transaction value by (i) reducing risks and uncertainty surrounding a transaction, (ii) identifying key value drivers and challenging assumptions about future performance and (iii) improving potential buyers’ negotiating position and minimizing disruptions and surprises. To be precise, it enables early identification of potential issues, which gives confidence, saves time and accelerates execution. It gives confidence on key questions, concerns, deal rationale, value and risks, through recommendations supported by clear, concise analysis and conclusions. Finally, it is a flexible and cost effective approach which is tailored to the client’s needs. To exemplify, due diligence enables investors reduce a significant amount of time understanding the target company’s working capital structure and the drivers that cause working capital investment to change. These drivers can comprise seasonal fluctuations in the business, changes in customer payment terms, extension of vendor payment terms, better or worse inventory management. Assessment of the normal level of working capital can impact the ultimate cost of a transaction. CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF FINANCIAL DUE DILIGENCE AND
DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? Financial due diligence is a tool for understanding the reliability of the reported figures and quality of earnings and assets. It is a detailed business review where potential purchaser can obtain vast information related to the target’s business such as the overall market dynamics, the viability of customers, the reliability of suppliers, key business drivers and cost items as well as regulations which have an impact on financial matters; assessment of sustainable earnings results in challenging forecasted figures which a financial model is based on. Identification of non-recurring revenue or cost line items, pro-forma adjustments, unrecorded liabilities and off balance sheet items can be used for adjusting purchase price either as a downward or upward adjustment. Especially during bidding process, financial due diligence findings play a vital role in order to assess the optimum enterprise value and bid the right price to win the deal and are the indicators for potential deal breakers/shapers. Consequently, financial due diligence findings support buyers negotiating position and are basis for purchase price adjustments and input to purchase agreement and related documents.
2012 was expected to be a toughyear for M&A transactions and hence financial due diligence. However, it has not been observed yet in that manner. On the contrary, transactions and the requests for financial due diligence services have increased in 2012. Having said that, the withdrawal of many investors from the privatisation process of the electricity distribution regions due to financial problems leading to failures in making necessary payments, and the delay of the tenders of some large-scale public projects in 2011, coupled with the continuing global economic downturn, suggests that difficulties in financing transactions will continue going forward. On the other hand, we know there are a number of transactions at different sizes, increasing appetite of private equity houses for Turkey investments, activities in the industries as retail, healthcare, industrial and consumer products and energy, changing of the Turkish business owners to a potential sale and finally starting of the acquisitions abroad by major Turkish conglomerates and companies. To conclude, we strongly believe that the business will grow more and more in the following years.
WHY IS FINANCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A? Many executives perceive financial due diligence as an audit which confirms their understanding of the financials of the business. However, financial due diligence reveal some inherit problems just by a closer look at the basic fundamentals with specialized financial advisors who are experienced in M&A transactions. WHAT ARE YOUR PREDICTIONS REGARDING THE APPETITE FOR FINANCIAL DUE DILIGENCE OVER THE NEXT 12 MONTHS?
Company: Ernst Young Kurumsal Finansman Danismanlik A.S. Name: Demet Ozdemir Email: demet.ozdemir@tr.ey.com Web: www.ey.com/tr Address: Büyükdere Cad. Beytem Plaza, Kat 1-3-8-9-10, Istanbul, 34381, Turkey Telephone: +90 212 368 5405
Company: Cabinet Foucault Name: Olivier Foucault Email: ofoucault@foucault.fr Web: www.foucault-avocats.fr Address: 229, Boulevard Pereire 75017 Paris Telephone: 01 40 55 54 53
ACQUISITION INTERNATIONAL
September 2012 /
67
SECTOR SPOTLIGHT:
Comprehensive Due Diligence - The Key to M+A Success additional warranties. When we investigate postdeal, often the result is a change in management or monies being forced to be paid to our clients, by the previous owners. Members of my team have conducted investigations into a number of investments covering different industry sectors. Examples of these include: pharmaceutical companies in the Netherlands; property companies in Germany; IT companies in Germany; electronic companies in Hong Kong; and retail and manufacturing investments in the UK. We put dedicated staff on the ground who have the experience of sensitively obtaining information from present and former employees, as well as suppliers and customers. We find that most of our clients do not have the resources to put people on the ground to obtain the necessary information that is vital if our clients are to either: a) avoid investment mistakes; or b) be in a position where they can take remedial action and address loss of performance before it gets out of control.
-----------------------------------------------------------------------Simon Bevan is a Partner in Forensic Services at BDO. ------------------------------------------------------------------------
Over the last ten years we have seen an increasing trend for our forensic skills to be used in areas that have traditionally been viewed as the preserve of Corporate Finance. More and more PE houses and venture capitalists engage us in a search for the truth. The questions that our clients want answers to include: • • •
•
What are we buying? Are previous management still using the company as a personal piggy bank? Is the recent unexpected fall in profits really due to adverse movements in exchange rates, or are management using this as an excuse to hide losses elsewhere? Are there links between the company’s main suppliers and it’s previous management that we were unaware of?
• • •
Is the independent chairman that we put in place really safeguarding our interest or has he ‘gone native’? Are recent losses really due to a known fraud or has the fraud been inflated to disguise operational inefficiencies or loss of customers? Has your investment’s biggest contract been secured through bribery?
Answers to these questions cannot be found in an online data room or by submitting management to psychometric tests. They can only be found by having forensic experts on the ground wherever your investments are. Obviously any such questioning has to be much more sensitive pre-deal than post-deal. What we do find is that if we investigate pre-deal, this usually is reflected in a change in price or in
As the pressure increases on investment vehicles to go out and take equity holdings in new opportunities, it is vital that the operational due diligence they carry out is adequate. It is too often the case, that the losses on that one bad investment in the portfolio overshadow great returns in other areas.
Company: BDO LLP Name: Simon Bevan Email: simon.p.bevan@bdo.co.uk Web: www.bdo.co.uk Address: 55 Baker Street, London, W1U 7EU Telephone: +44 (0)800 0851 477
Reliance Advocaten Conventstraat 2 2800 Mechelen E-mail: info@reliancelaw.be Telephone: +32 (0)15 63 66 53 www.reliancelaw.be
68 / September 2012
Doing Business in Belgium ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Resolving Disputes in The Aviation Industry
RESOLVING DISPUTES IN THE AVIATION INDUSTRY l Dan Soffin is a Founding Partner and currently Of Counsel at Gates and Partners LLP WHY IS THE AVIATION SECTOR SUCH A CHALLENGING AND EVER-CHANGING INDUSTRY?
match and respond to demand with increasingly high degrees of uncertainty in global economic outlook.
No contemporary industry faces more challenges than the aviation industry. It is an essential and ingrained component of national and international economies, international trade and commerce whether from a manufacturing perspective, a business and industry perspective, or a travel and tourism perspective. Yet is highly sensitive to economic fluctuations and thus the smallest shifts in economic trend are ultimately magnified in the industry. Oil prices and emissions trading issues are two examples of current economic issues that have magnified effects when applied to the aviation industry. As a capital intensive and highly competitive industry, with huge investment in technology, infrastructure, and high value assets and equipment, it is particularly challenging to maintain flexibility in size and service offering with rapid and sensitive fluctuations in demand as we have seen constantly over the past 30 years.
WHAT ARE THE KEY CHALLENGES IN HANDLING COMPLEX AND SENSITIVE DISPUTES IN YOUR JURISDICTION AND ACROSS THE GLOBE AND HOW DO YOU OVERCOME THESE HURDLES?
Moreover, there is constant challenge in fleet management and forward fleet planning in order to
ACQUISITION INTERNATIONAL
For many years our people have specialized in global litigation management. One of our core strengths is understanding legal systems, cultures and principles around the world. The most significant challenge is to understand the legal issues and likely approach of the entity that will resolve the dispute. This must take into account cultural attitudes to dispute resolution in the relevant jurisdiction. Aviation disputes, whether airline or business aviation, often tend to involve sensitive issues. Regulators take a keen interest in issues disputes faced by carriers, operators, and related parties. Disputes may well involve multiple parties including insurers, businesses, and passengers, and there is a significant possibility that multiple jurisdictions may be involved as well as disputes over applicable law.
Apart from our considerable experience in managing litigation in many jurisdictions, we are knowledgeable about the actual laws of the local jurisdiction and their relation to international laws where applicable. This is of great assistance in evaluating litigation risk and forming a view on the ultimate outcome of a dispute or litigation.
Company: Gates and Partners LLP Name: Dan Soffin Email: DSoffin@gatesandpartners.com Web: www.gatesandpartners.com Address: Fifth Floor, Capital House, 85 King William Street, London EC4N 7BL Telephone: +44 20 7337 0300
September 2012 /
69
SECTOR SPOTLIGHT: Meet The Experts
MEET THE EXPERTS
— The Changing Role of the Forensic Accountant Fraud is a fact of life and it is on the increase; according to a KPMG survey, last year in the UK alone fraud reached £1.1bn from just January to June. Challenging trading conditions are causing more and more businesses to break the terms of their contracts and employees are increasingly likely to commit fraud as a result of personal financial problems. As a result Forensic Accountants have never been in such demand; white collar crime is often well
hidden, complicated to source, and in order to get to the bottom of an incident you need to hire a firm or an individual with the corrects skill set and one that can minimise risk. Forensic accountants have to be competent in many areas and keep up with corporate, technological and legal developments; because work is done on an individual assignment, as opposed to recurring client work, it’s essential to stay at the top of the game and continually source new contracts.
Company: Bunning Bowman Ridley & Smith LLP Name: Bernard Bunning Email: bbunning@bbrsllp.com Web: www.bbrsllp.com Address: 6939 Sunrise Blvd. Ste 120, Citrus Heights, CA 95610 Telephone: +1 916-728-1040
— Healthcare M&A 2012 has seen increased M&A activity levels in the Healthcare Services sector with a number of significant transactions being announced in the first half of the year, a trend which is set to continue through the remainder of the year and into 2013. According to recent reports, businesses in the health sector are increasingly turning to M&A in high growth economies to fuel growth. Further findings show that a majority of healthcare respondents are looking for growth through M&A in order to develop their core business and diversify risk portfolios.
70 / September 2012
This sector in particular can often be complex, although we have seen great standardisation across the regulatory environment in many fields, governments cling tightly to their own healthcare policies, often making transactions within this industry somewhat difficult to navigate. An expert knowledge of regulation and comprehensive due diligence can be key to those involved in executing healthcare corporate transactions.
Company: Eversheds Faasen Name: Tom van Wijngaarden Email: tomvanwijngaarden@eversheds.nl Web: www. eversheds.nl Address: Wibautstraat 224, 1097 DN Amsterdam, Postbus 12929, 1100 AX Amsterdam, The Netherlands Telephone: +31 20 5600 635
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Meet The Experts
— Mediation - the future for Corporate Disputes As our global economies have become increasingly intertwined the number of international commercial disputes has mushroomed and in the wake of the global economic crisis these disputes are more complex than ever. By now we’re all aware of the effectiveness of alternative methods of dispute resolution from both a cost and a time point of view, so why, out of the different alternatives choose mediation? Mediation is extremely effective early on and usually it is the least costly of the alternatives, often far less
costly than going to court. It is extremely effective, most mediation provider bodies that have conducted research on the success ratio of mediation quote an approximately 80% success rate. The TCM Group has a success rate of over 90%. It has been suggested that this success is down to the fact that all parties feel empowered to negotiate effectively. With the latest changes to tribunal laws coming in to effect in the UK, Mediation is being seen by many corporations as the future for workplace dispute resolution.
Company: The TCM Group Name: David Liddle Email: david.liddle@thetcmgroup.com Web: www.thetcmgroup.com Address: 67-68 Hatton Garden, London EC1N 8JY Telephone: 020 7404 7011
— Doing Business in Iceland Iceland has returned to growth in 2011 with GDP reaching 3.1% and it is expected to continue growing until 2016. Iceland was the hardest hit by the global economic crisis in 2008 when its banking system collapsed and the region is still suffering as a result. Iceland has since completed a 33-month International Monetary Fund program and is expecting growth of 2.5% this year. In 2011 domestic expenditure increased by 4.7%. Household final consumption increased by 4% and gross fixed capital formation by 13.4% while government final consumption decreased by 0.6%. At the same time, exports grew by 3.2% and
imports by 6.4% resulting in a surplus in the balance on goods and services. Iceland is on the road to recovery although it will be some time before the full effect of the 2008 crisis will be overcome. The European turmoil has created some uncertainty however Iceland has been relatively well protected from the risks and benefits from not sharing the single currency. In recent years, Iceland has made its business environment increasingly attractive to foreign investors, making more investment opportunities available for organisations and
businesses. Due to this the country has started to see a rising interest from foreign businesses wanting to invest in the country. The country’s investor-friendly environment supports high professional standards. DOING BUSINESS IN ICELAND Company: Lögheimar ehf. Law Office Name: Jónas Örn Jónasson Email: jonas@logheimar.is Web: www.logheimar.is Telephone: +354 512 3600
— Forming Companies and Doing Business 2012 is looking good for entrepreneurs who seem to be making the most of opportunities despite the economic climate; with the highest levels since 2007, record numbers of new companies have been formed in many of the most popular locations around the world. The formation business is booming and the nature of it means that most companies in the industry service an international client base of entrepreneurs and business owners. It’s one thing to read about the advantages of an offshore/foreign company but
actually completing the paperwork to register one is completely different and it’s often most effective to engage an experienced corporate services firm that has the knowledge, experience and contacts to manage the processes. Search online for ‘company incorporation’ and a wealth of options are returned, so how to determine the right one? It’s incredibly important to select the right firm as company incorporation requires knowledge and experience to effectively build a corporate structure and achieve business objectives.
Resolving Real Estate Dispute
Company: Thetabiz S.A Name: Mr. Jean Louis Email: support1@thetabiz.com Web: www.thetabiz.com Address: Suite 458, Apdo 0832-2745, World Trade Center, Panama City, Republic of Panama Telephone: +507-832-2811
We put some skills in the game when assisting our clients
New kind of Legal services We aim to be the first and the best to provide “In-house Counsel Services” to fully integrate our legal solutions with the reality of your business.
www.vci-legal.com ACQUISITION INTERNATIONAL
HO CHI MINH CITY Suite 501, 5th floor, Sailing Tower, 111A Pasteur Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam. Tel: (84-8) 827 2029 Fax: (84-8) 823 4436
HANNOI Suit 501 – North Asia Tower 9 Dao Duy Anh Street Hanoi, Vietnam. Tel: (84-4) 577 2153 /54 Fax: (84-4) 577 2152
September 2012 /
71
SECTOR SPOTLIGHT: Q3 Report
Q3
— Report -----------------------------------------------------------------------Aidan Healy is Managing Director at Healy Consultants Pte Ltd. ------------------------------------------------------------------------
WHAT IS THE MOST RECENT GROWTH FORECAST PUBLISHED BY OFFICIAL SOURCES IN YOUR JURISDICTION? HAS THIS LAST QUARTER BEEN CONSISTENT WITH PREVIOUS FORECASTS? Toward the start of August, the Singapore government forecast 2012 growth to be 1.5-2.5%. This was a reduction from an earlier estimate of up to 3% growth for 2012. The International Monetary Authority (IMF) is a little more bullish about Singapore, predicting a 2012 growth of 2.9%. Like most parts of the world, there is impact from the Euro crisis but with Singapore’s strong policies there is not expected to be a dramatic drop, I expect growth to exceed 2%. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST INVESTMENT AND GROWTH OVER THIS Q3
Company: Folio Corporate Services Limited Name: Calum McKenzie Email: calum@folioadmin.com Web: www.folioadmin.com Address: Folio Chambers, PO Box 800, Road Town, Tortola, VG1110, British Virgin Islands Telephone: +1 284 494 7065 Fax: +1 284 494 8356 -----------------------------------------------------------------------Calum McKenzie is a Director of Folio Corporate Services Limited, a BVI based company offering a full suite of offshore corporate services in a number of jurisdictions. ------------------------------------------------------------------------
General business levels in the BVI in quarter three were positive. Notwithstanding that the traditional summer months and holidays generally result in a reduction in business levels. This will no doubt be reflected in the quarter three numbers regarding the number of new business companies that have been registered in BVI, when the FSC statistical bulletin is released shortly. BVI service providers in general seem to concur that work levels are increasing, to the point that they are similar to pre 2009 levels. Financing does seem to be somewhat more readily
72 / September 2012
PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED WITHIN THIS SECTOR? The technology sector is expected to be strong in the second half of 2012. Singapore has excellent infrastructure and a highly educated work force which is ideal for this sector. Another strength of Singapore is its world-class shipping port and so the marine /offshore sector is also seen as a sector with good potential. One local company recently secured contracts to the value of US$4billion for production of drilling ships.
exports to mainland China which grew by 8.3% in July compared to July 2011. According to IE Singapore’s Lee-Khoo Wee Lin, Panama has become Singapore’s fastest growing export market with a compound annual growth rate of close to 20%. This is mainly due to business between Singapore and Panama in the pharmaceutical and oil-related industries.
Also, the oil and gas sector is huge. WHAT ARE THE CURRENT LEVELS OF IMPORT AND EXPORT VOLUMES? ARE THESE UP OR DOWN COMPARED TO THIS TIME LAST YEAR AND WHY? While Singapore export levels showed a decline from June to July this year, compared to the same time in 2011 there are still some positive figures such as
Company: Healy Consultants Pte Ltd Name: Aidan Healy Email: email@healyconsultants.com Web: www.healyconsultants.com Address: Thong Sia Building. #18-01, 30 Bideford Road, Singapore 229922 Telephone: +65 67350120
available for private/structured transactions but funds/investment products are still struggling to attract serious new investment. Perhaps the key difference is that the financing transactions or restructuring comes more in the area of industrial markets or tangible assets with popular projects being in the areas of infrastructure, real estate and ship and aircraft financing.
governance. The most effective and pragmatic way to achieve this is by having independent directors form part of the Board. To this end we are presently working on improving our workflows, systems and IT infrastructure with a view to being able to offer our clients more sophisticated real time advice and feedback where we act as a director to funds and related investment business entities.
From Folio’s perspective as a service provider with a focus on investment business, we have seen a continuous flow of enquiries from clients exploring their options with respect to establishing new funds and related vehicles. As per above however, it continues to be the case that smaller and start up managers and hedge funds are finding it increasingly difficult to attract the necessary levels of investment, whilst simultaneously the larger and more institutional managers and funds are continuing to see an increase in capital invested. The perceived security rather than performance is the only conceivable reason for this. Despite this we do anticipate that enquiry levels will remain buoyant for the remainder of the year as most managers/funds begin making enquiries end Q3 moving into Q4 with a view to new launches in Q1 of the following year.
Our insurance affiliates, both captive and broking continue to see huge interest from all areas. From the traditional captive side numbers of enquiries are at an all time high. Interests in themselves are varying widely in the size, nature and geographical origin. Our ability to assist in all of the prominent captive insurance jurisdictions whilst remaining independent differentiates us from most of our peers.
Linked with the launch of new funds, our director services company has seen a steady flow of new business enquiries. As a service provider working in all facets of the investment business industry we continue to believe that this is an area that will grow longer term. Simply put, managers and funds are now more cognisant of the need to create more transparency and employ higher levels of corporate
On the insurance broking side again we continue to receive a variety of enquiries from numerous sources. These range from insurance for funds, fund managers and related directors, to political risk and other insurance business lines relating to the underlying investments. From a wealth and estate planning perspective, we assist HNWIs and their service providers with the sourcing of sophisticated, high-value life insurance products, as well as other products that work neatly in tandem with traditional planning tools, such as trusts. Geographically our traditional (investment product) business base is North America and European financial centres such as London and Switzerland with an increasing Russian interest. Of these markets,
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q3 Report
the Russian market seems to be the one that has remained most buoyant despite instability in the international markets. Whilst BVI companies do have many uses they continue to be popular as vehicles for raising finance and structuring deals and transactions, in major physical industries such as oil and gas mining projects and real estate. BVI companies continue to be heavily used for cross border transactions, as they are widely recognized and accepted in other jurisdictions, whilst offering certain degrees of flexibility and privacy that clients demand, thus they remain attractive to both sophisticated and developing markets.
Going forward BVI is well placed to continue to service the needs of the global finance community. New initiatives are underway, not least a Government review programme looking at how they can provide increased commitment to ensure the future growth and well being of the industry. Legislation wise, the BVI Business Companies (Amendment) Act, 2012 will come into force on 15 October 2012. The amended Act and accompanying regulations will make the BVI BC Act an even more attractive, flexible and appealing piece of legislation for those considering using the BVI.
some signs of growth. We are right there, helping them every step of the way. It is incredibly dynamic! HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? We are working on the initial stages of a very large infrastructure project in Eastern Europe, and our Superyacht Practice is involved in new build projects in Western Europe. HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED?
-----------------------------------------------------------------------Quentin Bargate is the Senior Partner of Bargate Murray, solicitors for business and entrepreneurs. ------------------------------------------------------------------------
HOW DO YOU STAND OUT AS AN EXPERT IN YOUR JURISDICTION? HOW CAN YOU ASSIST CURRENT AND POTENTIAL CLIENTS TO CONTINUE TO TRADE, EVEN FLOURISH IN THESE CHALLENGING TIMES? I have built a boutique firm with a global reputation based on old fashioned values of service and value for money, allied to contemporary and very modern openness, clarity and responsiveness. Clients who use us can and will tell the difference – and they tell me so. WHAT IS THE MOST RECENT GROWTH FORECAST PUBLISHED BY OFFICIAL SOURCES IN YOUR JURISDICTION? HAS THIS LAST QUARTER BEEN CONSISTENT WITH PREVIOUS FORECASTS? Growth forecasts for the UK have been revised downwards. For example, the British Chamber of Commerce has predicted that UK GDP will shrink by 0.4% in 2012. It is expected that the Office for Budget Responsibility will confirm that the UK government will fail to hit the Chancellor’s target of eliminating the government’s structural budget deficit by 2016-17. Worryingly, even the IMF has lowered its expectations for UK growth next year.
Interestingly, at the high end we see many investment opportunities for ultra-high net worth individuals in the BRIC economies and our extensive contacts there are invaluable in structuring these. At the other end of the funding scale, we are seeing the emergence of crowd funding for new business start-ups, many of which we are active in assisting. Money is still there for the right project, so long as the returns are good and there is adequate security for the lender. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST INVESTMENT AND GROWTH OVER THIS Q3 PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED WITHIN THIS SECTOR? The first half of 2012 saw a downturn in global M&A activity. Valuations were depressed by the generally poor economic outlook. However, the tech and Asian sectors look to be improving in the UK and a recent report by Ernst & Young suggests M&A activity in the oilfield services industry will increase over the next 12 to 24 months. I think middle market M&A activity is looking positive in the latter part of 2012 through to early 2013 and some industries, such as energy and technology will prove resilient. WHAT ARE THE CURRENT LEVELS OF IMPORT AND EXPORT VOLUMES? ARE THESE UP OR DOWN COMPARED TO THIS TIME LAST YEAR AND WHY?
In short, the British economy is flat lining in a deepening double-dip recession but we as a firm do see some incredibly exciting developments that are bucking that trend, at home and abroad.
The UK balance of trade remains a concern. However, many of our clients are overseas and we at Bargate Murray remain very busy with advisory work for them. In short, our direct experience seems to be more upbeat than market sentiments might suggest.
In and around the Shoreditch area of London, for example, new start-ups are leveraging the skills on offer from cutting edge law firms like Bargate Murray, crowd funders, the newly established Google Campus and others. The property market is showing
HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION – FOR EXAMPLE ATTRACTING NEW INVESTMENT, SETTING UP A NEW BUSINESS, GETTING ACCESS TO BANKING AND CREDIT FACILITIES?
ACQUISITION INTERNATIONAL
We are also eagerly anticipating, in Q4, the introduction of an ‘Approved Manager’ regime under the Securities and Investment Business Act (SIBA). Essentially this will introduce a new regime that will establish a legal framework for approved investment managers. The Securities, Investment Business and Mutual Funds Advisory Committee (SIBAC) and the BVI FSC are currently working together on the matter and it is expected that appropriate legislation will be finalised soon. According to the BVI FSC, the proposed legislation will introduce an alternative regime for the approval of investment managers and advisers which will be subject to a lower and more appropriate level of regulation for those that qualify.
It’s a tough market, but what’s new! I have already mentioned crowd funding as a growth area for startup businesses. Our own Seed Academy venture, which was founded and is still run by members of Bargate Murray, can help match small businesses with business partners and we have excellent contacts with venture capital and other sources of funds, old and new. While our interest in mainly in structuring deals and providing legal advice, we are very much business people who happen to be awardwinning lawyers. WHAT ARE YOUR PREDICTIONS REGARDING GDP GROWTH FORECASTS FOR THE YEAR AHEAD IN YOUR REGION? Fairly flat, but with spikes in some areas, such as energy and technology. I am not an economist, but my expectations are for zero or very low growth until mid-late 2013. Much may depend, of course, on how the Eurozone crisis plays out, given the Eurozone is such a key export market for UK businesses. We will hopefully continue to enjoy extensive on-going advisory work with our clients across Europe and the world. Private Equity investors are looking to exit and this is likely in my view to lead to an increase in mid-market M&A activity over the next 12 months. On the other hand, the overvaluation of a high profile flotation such as Facebook Inc. does send a cautionary note rippling through the market. It remains essential to look carefully at the earnings ratios and underlying economics of any investment and not be blinded by hype. Good lawyers are needed even more in a downturn, where every penny counts. Our dispute resolution expertise can be key and I would urge anyone suffering problems to take advice early.
Business Matters
Company: Bargate Murray Name: Quentin Bargate Email: quentin@bargatemurray.com Web: www.bargatemurray.com Address: 5th Floor, 20-22 Curtain Road, London, EC2A 3NF, London, UK Telephone: +44 (0) 207 375 1393
September 2012 /
73
SECTOR SPOTLIGHT: Meet The Experts
74 / September 2012
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------Paul Halpin is the Founder and Executive Chairman of HCS, an international managed services and accounting firm in Mauritius. ------------------------------------------------------------------------
HOW DO YOU STAND OUT AS AN EXPERT IN YOUR JURISDICTION? HOW CAN YOU ASSIST CLIENTS TO CONTINUE TO TRADE, EVEN FLOURISH IN THESE CHALLENGING TIMES? An international career as a chartered accountant and a former advisory partner in PwC Dublin, London and Johannesburg, with a track record of delivering services for clients across international borders in complex transactions. HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? Currently involved in capital raising for a large-scale renewables enterprise, which will be ground-breaking in terms of sustainability for Mauritius HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED?
-----------------------------------------------------------------------Gudjon Styrkarsson is the founder of GST Patentbureau. ------------------------------------------------------------------------
GST Patentbureau was established 1964, founded by Mr. Gudjon Styrkarsson, who was educated at The University of Iceland, faculty of Law and further studied at the University of Bonn, Germany. The firm is admitted to practice in all District Courts of Iceland and the Supreme Court of Iceland.
It varies depending on sector and availability of funds. Typically they are taking longer than six months and funding is scarce. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST INVESTMENT AND GROWTH OVER THIS Q3 PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED WITHIN THIS SECTOR? Activity is reduced and this past quarter is especially slow because of the European summer season.
WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? There’s a lot of focus on the DTA with India, and the publication of GAAR by the Indian Tax Authorities. Mauritius is also prioritising the conclusion of DTAs with African countries; and the development
The firm is a Legal Adviser to the Australian Embassy in Copenhagen. SUMMARY OF ACTIVITIES Trademarks in Iceland Application for registration of Trademarks, Service Marks, Collective Marks, Business Marks. Appeals, Oppositions, Assignment, Searches. Application for renewal (discounts available).
GST Patentbureau is engaged in International Trademarks, Patents, Designs, Domain Names in Iceland, and provides full IP-law services in Iceland.
Designs in Iceland Application for Designs Claiming Priority,
-----------------------------------------------------------------------Krogerus Competition lawyers regularly handle complex assignments that are monetarily significant and strategic in their importance. ------------------------------------------------------------------------
of her tenure. She has led the firm’s Competition and Regulatory practice since 2003.
ACQUISITION INTERNATIONAL
There are no major problems.
It is positive and cautious.
Patents in Iceland Application for Patents; National and International Claiming Priority, Assignments, Opposition, Searches.
Our Competition and Regulatory practice is headed by Katri Joenpolvi, a partner with Krogerus who has extensive experience in demanding competition law assignments. Prior to joining Krogerus, Ms. Joenpolvi worked for the Finnish Competition Authority, where she acted as a deputy director for the last two years
HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION – FOR EXAMPLE ATTRACTING NEW INVESTMENT, SETTING UP A NEW BUSINESS, GETTING ACCESS TO BANKING AND CREDIT FACILITIES?
HOW POSITIVE IS THE OVERALL ATTITUDE REGARDING GROWTH AND DEAL OPPORTUNITIES IN YOUR REGION?
The firm’s general business practice in Iceland covers Commercial Laws, Insurance Laws, Banking and Finance in Iceland.
Krogerus is one of the largest and most successful corporate law firms in Finland. Our Competition and Regulatory practice advises clients on all aspects of competition law with a focus on merger control, abuse of dominant market position, distribution systems and cartel investigations. Several of our lawyers have worked for governmental authorities and use this practical insight in their client representation.
of Mauritius as a regional HQ for companies doing business in Africa.
This year we successfully represented Finland’s largest pharmacy, the University Pharmacy (Yliopiston Apteekki), in a request for a preliminary reference before the Court of Justice of the European Union. The matter involved an evaluation of the University Pharmacy’s special rights in the light of EU freedom of establishment. The judgment was highly favourable to the University Pharmacy. The case will next return to the Finnish Supreme Administrative Court. We also recently represented Iittala Ltd, a major design company currently a part of Fiskars Plc, in Market Court proceedings dealing with alleged resale price maintenance. The Market Court imposed a significantly lower fine than originally proposed by the Finnish Competition Authority, as it found that Iittala had fixed retail prices. The decision was handed over in December 2011.
Company: HCS: Accounting, Consulting, Managed Services Name: Paul Halpin Email: paul.halpin@hcsmauritius.com Web: www.hcsmauritius.com Address: 2nd Floor, Nautica Business Centre, Black River, Mauritius Telephone: +230 2591323
Assignments, Opposition, Searches. Domain Names, Registration in Iceland Law services in Iceland Full IP Law Services: Trials; Court Actions etc. Company: GST Patentbureau Name: Gudjon Styrkarsson Email: gudjons@itn.is Web: www.gst.is Address: Njalsgata 110, IS-105 Reykjavik, Iceland Telephone: +354 695 0841
With the recent addition of new lawyers, our practice continues to grow, ranking among the largest EU and Competition groups in Finland. We currently have four partners, three counsel, three senior associates and three associates.
Company: KROGERUS Name: Katri Joenpolvi Email: katri.joenpolvi@krogerus.com Web: www.krogerus.com Address: Unioninkatu 22, FI-00130 Helsinki, Finland Telephone: +358 (0)29 000 6257 Fax: +358 (0)29 000 6201
September 2012 /
77
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------Kaiser Partner is an award-winning wealth management group and private bank head-quartered in Liechtenstein, with roots dating back to 1931. ------------------------------------------------------------------------
understanding, not just the world of our clients but also the world as a whole. We take the time to discuss what we’ve learned and to evaluate what it means. Every decision we make can be linked directly back to our big picture understanding.
Comprising a leading trust company, a Private Bank specialising on asset management, an SEC registered investment advisor exclusively in Zollikon-Zurich/ Switzerland, a family office and a funds administrator, the group is equipped to manage the wealth affairs of individuals and families from Europe, the EEC, Russia, Asia, the Middle East, Latin America and from the United States of America. While Kaiser Partner operates out of Switzerland and Liechtenstein, the group is capable of creating solutions for practically all aspects of wealth including intellectual property, in collaboration with its growing network of like-minded wealth and tax specialists internationally. However, what makes us unique is down to our approach.
Perpetual Innovation We are an inventive company. We believe that the tools required to successfully manage wealth should constantly be adjusted so that they are optimised to the changing world. We look at traditional systems in new ways, and are happy to go outside the norm in search of a better way.
Our Mission Kaiser Partner’s mission is to help our clients to preserve and manage their wealth, using it to make the most positive impact, for them, for their families, for their communities and for the world at large. We realise that whilst everything on our earth is interconnected, we must make it our priority to understand and engage with the causes of change, and formulate dynamic strategies to harness its power in the most positive and influential way. The fundament of our approach rests on four main values:
Being Brave We are a pioneering company. We act on our intelligence and our beliefs independently from the collective approval of our industry. Safety can no longer be achieved by flocking together but by standing for what’s right and appropriate for the times.
Big Picture Understanding We are a knowledge company. We invest in
78 / September 2012
Taking Responsibility We are a caring company. We take responsibility for our actions just as we expect our clients to be cognisant of the broader role their wealth plays. We believe that sustainability and responsibility are no longer a ‘nice-to-have’ but a ‘must-have’.
Group Genius Kaiser Partner aligns its interests with those of its clients. Thanks to the combination of a leading trust company with a bank, we are able to design many solutions as required by the tax advisors. Kaiser Partner follows the belief of group genius, this means that we act as a platform where the best people and
experts come together to design the best solution for the situation the client would like to resolve. We invite you to use our knowledge, our experience, our values and approach, and walk the journey together with us to mutual success.
Kaiser Partner Trust Services Anstalt Address: Präsidial-Anstalt, CorTrust reg., Pflugstrasse 10, 9490 Vaduz, Liechtenstein Web: www.kaiserpartner.com Telephone: +423 236 58 00 Fax: +423 236 58 01 Kaiser Partner Privatbank AG Address: Herrengasse 23, 9490 Vaduz, Liechtenstein Web: www.kaiserpartner.com Telephone: +423 237 80 00 Fax: +423 237 80 01 Kaiser Partner Financial Advisors Ltd. Address: Zollikerstrasse 60, 8702 ZollikonZurich, Switzerland Web: www.financial-advisors.ch Telephone: +41 44 752 51 11 Fax: +41 44 752 51 35
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------Dr. Mohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS). ------------------------------------------------------------------------
industry in the medium-term future. In relation to infrastructure, an implementing Presidential Regulation for the Land Acquisition law has been issued which is expected to benefit new PPP projects.
HAVE THERE BEEN ANY NOTABLE DEALS (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER?
HOW POSITIVE IS THE OVERALL ATTITUDE REGARDING GROWTH AND DEAL OPPORTUNITIES IN YOUR REGION?
We represent the Ministry of Finance, the National Electricity Company, and the Indonesia Infrastructure Guarantee Fund (IIGF) in formulating and executing the legislative and contractual framework underlying Indonesia’s current infrastructure development. The most recent, and currently ongoing, project being the $2.3 billion Central Kalimantan Coal Railway.
Indonesian development has continued apace so far this year, with Nielsen recently releasing research results that place Indonesia in the top position in its global consumer confidence survey. Such developments in turn have resulted in substantial opportunities in sectors targeted at the rapidly growing consumer market.
HAS THERE BEEN ANY SIGNIFICANT CHANGE IN REGULATION WHICH MAY HAVE AFFECTED GROWTH LEVELS IN YOUR JURISDICTION THROUGHOUT THIS Q3 PERIOD?
HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION – FOR EXAMPLE ATTRACTING NEW INVESTMENT, SETTING UP A NEW BUSINESS, GETTING ACCESS TO BANKING AND CREDIT FACILITIES?
Bank ownership restrictions have been tightened, which is expected to lead to a consolidation of the
While presenting great potential, Indonesia also presents challenges, particularly at the early
-----------------------------------------------------------------------Simon Sutton is the founding partner of Nevyan Intelligence Services. ------------------------------------------------------------------------
Nevyan also undertakes due diligence reporting as part of an organisation’s risk-assessment and we cover sectors such as Gaming Commission Licences, employee background checks and references, fieldresearch capabilities in Africa and other Countries, where companies are looking to invest or set up offices and need to undertake careful research and risk assessment prior to entering new markets.
I have 15-years expertise in risk-analysis, new country reporting and fraud investigations. My background started in the Intelligence Services and I have been operating my own firm since 1994. Nevyan is a consultancy-style risk management and research company, operating globally and with satellite offices in the U.S. China and Dubai. Our speciality is global asset tracing for Governments and Multi-national companies, notably in the Banking Sector, where a significant loss has occurred either in the form of Fraud, or Tax Evasion on behalf of Governments.
-----------------------------------------------------------------------José Pajares is Socio-Director of Pajares & Asociados Abogados for 30 years. The company was founded in 1958. ------------------------------------------------------------------------
Our office has acquired a solid position in insolvency law, M&A, company law and in general commercial law consulting. Our activities cover both national and international areas. Our attention is focused mainly on prevention and comprehensive analysis of contracts and risks. Our company is distinguished for its total dedication to the client; our response is prompt and immediate. The company has participated in many insolvency procedures, and operations of restructuring and refinancing of companies, of great magnitude. One of the most important and recent jobs, has been the largest bankruptcy case in the history of Aragon.
ACQUISITION INTERNATIONAL
We operate to a client brief and are results orientated. Where time is of the essence, we move quickly and accurately, reacting to information as it emerges to ensure a successful outcome. We are also reflective, analytical and detailed in knowledge and facts; devising tactics and strategy where a more cautious solution is required.
stages of business formation due to at times complex administrative processes. This is one of the areas where we excel by approaching assignments with a pragmatic view that is driven by a deep understanding of business needs and of the surrounding practicalities of the legal and business landscape.
Company: Lubis Ganie Surowidjojo Name: Dr. Mohamed Idwan (‘Kiki’) Ganie Email: ganie@lgslaw.co.id Web: www.lgsonline.com Address: Menara Imperium 30th Floor, Jl. H. R. Rasuna Said Kav. 1 Kuningan, Jakarta 12980, Indonesia Telephone: +62 21 831-5005, 831-5025 Fax: +62 21 831-5015, 831-5018
We handle large complex cases and work closely with legal teams in the supplication of information that has often led to High Court Cases. We give evidence in Court and our reports are often the basis on which the Legal teams present their arguments. We have been instructed in such cases by the Security Council in the U.S. and other Government bodies who remain confidential. We have worked on cases involving high-level organised crime and traced assets and monies across multijurisdictions with successful outcomes for our clients. Company: Nevyan Intelligence Name: Simon Sutton Email: enquiries@nevyanintel.com Web: www.nevyanintel.com Telephone: +44 (0) 7747 777 987
Given the current economic situation, our prevision is that in a short and medium period, these cases will continue to rise in number. Moreover, our company is comprised of experienced professionals who work with companies in every stage of their planning, structuring, creation, expansion, franchising … and all their professional needs. Having analysed the economic situation and flux, we are of the conviction that at the end of 2013 the market will begin to perceive a gradual positive transformation. Then, company structures will need to be more efficient in every aspect, in order to benefit from the aforementioned recovery.
Company: Pajares & Asociados Abogados desde 1958 S.L. Name: José Pajares Email: josepajares@pajaresyasociados.com Web: www.pajaresyasociados.com Address: C/Paseo Independencia 21 1º Centro, 50001 Zaragoza, Spain Telephone: +34 976 233 383 Fax: +34 976 795 622 Address: C) Claudio Coello, 43, 2º izda, 28001 Madrid, Spain Telephone: +34 914 357 390 Fax: + 34 915 755 396
September 2012 /
79
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------As Managing Partner of Callamus, Dimitrios Tourikis takes a pro-active role in finding solutions for his internationally based clientele’s tax planning needs. With headquarters in Athens, Greece and offices in Bulgaria and Malta, the core focus of Callamus is to create tax-effective structures in an ever-changing global business environment. ------------------------------------------------------------------------
Throughout Europe, companies are plagued with cumbersome corporate tax regimes. This is especially true for Greece, with corporate tax currently set at 20% and dividend tax at 25%. Furthermore, Greece faces startling economic figures; in 2012, the government debt to GDP ratio reached 145% and unemployment 23%. Greek businesses are challenged to simply survive. Callamus provides solutions through business migration and streamlining home based operations. In the case of one manufacturer of non-woven medical materials, moving the whole production
Within a year of commencing business the firm was profiled in the prestigious 2010 Edition of IFLR 1000 (the Guide to the World’s Leading Financial Law Firms). -----------------------------------------------------------------------Charles R.B. Rwechungura is the Founding and Managing Partner of CRB AFRICA LEGAL. ------------------------------------------------------------------------
CRB AFRICA LEGAL, founded in February 2009 as a solo practice originally under the name CRB ATTORNEYS, has steadily developed to win a place among the top ranking reputable providers of corporate legal services in Tanzania. Within a year of commencing business the firm was profiled in the prestigious 2010 Edition of IFLR 1000 (the Guide to the World’s Leading Financial Law
from Greece was not possible, but with the guidance of Callamus, the client was able to move the costly manufacturing process to a plant in Bulgaria. Using the infrastructure of the neighbouring country, with its low labour costs, low overheads and low corporate tax of 10%, Callamus was able to alleviate the high costs in Greece. “The Greek taxation system is a labyrinth where not even Theseus is able to slay the Minotaur. For the past 12 months Greek businesses have been functioning with the increasing uncertainty of new taxation laws to be announced in November 2012, spouted by politicians in an attempt to cease the business migration”, explains Tax Specialist, Dimitrios Tourikis.
Currently, renewables account for approximately 5% of electricity production. Greece’s target is a 40% share of the total electrical power by 2020, making it a viable industry for investment in Greece. Regardless of the industry or the investment, the fact is that Greece is facing highly challenging economic times, which require appropriate tax advice to make the investment in Greece prosper.
“Although the situation in Greece looks dire, the business opportunities here are phenomenal. We have seen in the past 12 months a significant number of our clients taking advantage of Greece’s natural resources to generate green power.”
Company: Callamus Ltd Name: Dimitrios Tourikis Email: dt@callamus.com Web: www.callamus.com Address: Naxou 2, Kifisia 14562, Athens Greece Telephone: +30 210 363 1086
Firms). It featured in the 2011 Edition among “other notable firms” and in the 2012 IFLR Edition won a ranking in Tier 3 (www.iflr1000.com). In the 2012 Edition of Chambers Global (the World’s Leading Lawyers for Business) (www.chambersandpartners. com) , the firm was ranked under Band 3 in the General Business Law category of leading law firms and Charles R. B. Rwechungura, the founder of the firm and its Managing Partner, was ranked under Band 2 in the leading individuals categories in General Business Law and Dispute Resolution categories.
of a team of twelve professionals, including three Senior Partners, a Junior Partner, five Associates and three Legal Officers. Although the firm is relatively new in the market, the three partners between them have vast experience as corporate and general legal practitioners in the Tanzanian market and in handling complex international transactions in various fields. The Partners are Charles R.B Rwechungura, Rugambwa Cyril John Pesha, Abdul Qaubid A. Abdallah and Octavian Mushukuma.
INTRERNATIONAL LINKAGES: CRB does not have an exclusive association with any single international law firm. Rather, it consorts and works closely with a wide range of reputable international law firms including but not limited to Norton Rose, Baker &Mackenzie, Clifford Chance, White & Case, Addleshaw Goddard and Linklaters. THE CLIENT BASE: The firm’s clients include large and medium sized local and foreign mining companies, multinationals, including banks with or without corporate presence in Tanzania, insurance companies, gas exploration companies, airlines, and beverage manufacturing and trading companies. THE TEAM: As of August 2012, the firm is made up
Company: CRB AFRICA LEGAL Name: Charles R.B. Rwechungura Email: c.rwechungura@crbafricalegal.com Web: www.crbafricalegal.com Address: 6th Floor Amani Place, Ohio Street, PO Box 79958. Dar es Salaam, Tanzania Telephone: +255 784 507 429
-----------------------------------------------------------------------Zbigniew Jusis is a Partner of Valuation & Business Modelling at Ernst & Young Corporate Finance sp. z o.o. in Warsaw, Poland. ------------------------------------------------------------------------
Valuation requires high level of industry expertise and it’s an art to find a talented specialist. Ernst & Young Poland would like to thank Acquistition International for awarding our Valuation and Business Modelling team the title “Polish Business Valuations Provider of the Year”. Moreover, we thank all our clients for their trust, involvement and cooperation which made it possible for us to effectively support them and participate in transactions which influenced and shaped the economic landscape of Poland and the region.
ACQUISITION INTERNATIONAL
Company: Ernst & Young Corporate Finance Sp. z o.o Name: Zbigniew Jusis Email: zbigniew.jusis@pl.ey.com Web: www.ey.com Address: Rondo ONZ 1, 00-124 Warszawa, Poland Telephone: +48 22 557 6663
September 2012 /
81
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------José Luís Moreira da Silva is a Partner at SRS Advogados and Head of the Public Law Practice. ------------------------------------------------------------------------
WHAT IS THE MOST RECENT GROWTH FORECAST PUBLISHED BY OFFICIAL SOURCES IN YOUR JURISDICTION? HAS THIS LAST QUARTER BEEN CONSISTENT WITH PREVIOUS FORECASTS? The expectations are very low as it is predicted a decline in growth for 2013 due to the Eurozone crises. In 2012 the predictions were correct as the growth went down to almost zero due to all the restrictive measure taken by the government to reduce the public deficit. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST INVESTMENT AND GROWTH OVER THIS Q3 PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED WITHIN THIS SECTOR?
Our success as the premier offshore law firm for private equity transactions is based on the broad range of experience of our team, a strong understanding of our clients’ businesses and our proactive role in the development of the relevant law. -----------------------------------------------------------------------Rolf Lindsay joined Walkers in 2005 and is a partner responsible for the Private Equity practice group. His practice focuses primarily on private equity funds and their activities, and encompasses the structuring of fund sponsor vehicles, the formation of alternative investment funds and the consummation of acquisition and exit transactions undertaken by them. ------------------------------------------------------------------------
Walkers focuses principally on corporate and international finance law with an emphasis on investment funds, private equity and capital markets and structured finance. Our firm delivers clear, concise and practical advice based on an in-depth knowledge of the legal, regulatory and commercial environment in the British Virgin Islands, the Cayman Islands, Ireland and Jersey. HOW DO YOU STAND OUT AS AN EXPERT IN YOUR JURISDICTION? HOW CAN YOU ASSIST CURRENT AND POTENTIAL CLIENTS TO CONTINUE TO TRADE, EVEN FLOURISH IN THESE CHALLENGING TIMES? Walkers’ client base is unique and unrivalled. Our specialist Private Equity practice group, consisting of more than 20 lawyers practising in eight offices around the globe, across six time zones and on three continents, advises almost 70 per cent of the world’s largest and most successful private equity firms. We are consistently ranked in the top tier of all the major publications for offshore legal service provided to private equity funds. Our success as the premier offshore law firm for private equity transactions is based on the broad range of experience of our team, a strong understanding of our clients’ businesses and our proactive role in the development of the relevant law. We provide
82 / September 2012
There is not a specific sector better than another. All sectors are lingering but maybe we can say that energy is better than others. The privatisations of the incumbent operator (EDP) and the net supplier (REN) are two of the most important deals in this sector. Also a major change in the ownership of GALP - that we advised – can be noted.
Unfortunately we expect a 2013 with a downfall in GDP but we are optimistic for the future. We are prepared and professional and Portugal has lots of good opportunities waiting for investors and we are ready to advise and help someone to wants to take these opportunities and come to do business in a distressed economy.
WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? Lots of measures were taken by the Government like a general rise in fiscal taxes but also an important change in labour and competition laws. Although the effects are only due for the next years a general liberalization of the economy is expected to improve foreign investment and the economy. WHAT ARE YOUR PREDICTIONS REGARDING GDP GROWTH FORECASTS FOR THE YEAR AHEAD IN YOUR REGION?
commercially sensitive, consistent and practical advice that sets the industry standard for responsiveness. Our global presence means we are always open and accessible to clients in all time zones, and our collegiate approach ensures that we are globally consistent. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST GROWTH OVER THIS Q3 PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED? The past quarter has seen significant activity in the sectors that have traditionally used offshore corporate structures: energy and mining continue to be busy areas, as are businesses such as IT and consumer brands that have a strong focus on intellectual property assets. In terms of geographies, Asia continues to offer terrific opportunities, but our clients have also been increasingly busy with deals in the European and North American markets. Unsurprisingly, distressed assets in a variety of markets have offered clients extremely attractive opportunities. These trends are illustrated by a couple of recent transactions: • Walkers advised Fox Paine on the sale of US energy software group Paradigm to private equity group Apax Partners for approximately $1 billion in cash. •
Company: SRS Advogados Name: José Luís Moreira da Silva Email: moreira.silva@srslegal.pt Web: www.srslegal.pt Address: Rua D. Francisco Manuel de Melo, 21, 1070-085 Lisboa, Portugal Telephone: + 351 21 313 20 00
manner, which is critical to the success of complex cross border transactions. By imposing a Cayman Islands company at the top of the ownership structure, it is possible to create a level of flexibility and sophistication that affords shareholders the ability to determine for themselves how business will be conducted. HOW EASY IS IT TO DO BUSINESS IN YOUR JURISDICTION? Doing business in Cayman is both quick and easy. The ability to incorporate entities in 24 hours and a sensible level of regulation focussed on AML and regulatory cooperation mean that there are no artificial impediments to getting business done. Experienced and responsive professionals and a judiciary steeped in the English common law traditions of commercial good sense make for a system based on widely-understood principles that provide predictable outcomes. Amid intense global competition for capital, efficient mechanisms to raise and deploy international capital provide real structural benefits for local economies, and those which have embraced these realities have taken a lead over rivals who are unable to see past outdated policies and misplaced suspicion about global capital.
Walkers advised Vista on its acquisition of CDC software, a group that was in Chapter 11 bankruptcy proceedings at the time.
From a transactional perspective generally, there has been a notable increase in interest and appetite for the use of the Cayman Islands as a jurisdiction to raise and deploy international capital. International Financial Centres such as the Cayman Islands provide efficient access for global capital to local business and also provide local investors with access to the global marketplace. Cayman Islands corporate entities provide the ability to structure and manage companies with numerous investors and multiple layers of debt and equity in an efficient and effective
Company: Walkers Name: Rolf Lindsay Email: rolf.lindsay@walkersglobal.com Web: www.walkersglobal.com Address: Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9001, Cayman Islands Telephone: +1 345 914 6307
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q3 Report
-----------------------------------------------------------------------J. Mahmoud Ayoub Barros Lubbad is the CEO of Lubbad Advogados Associados ------------------------------------------------------------------------
HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? They take in average between 4 to 6 months and sometimes going as far as 1 year depending on the due diligence, on the stakes, and on governmental support and tax deals for exemption. Usually the funding accusers from an International bank to the company or client account in Brazil who then makes the payment. Yet this will depend of tax strategy and company structure. WHICH SECTORS HAVE SHOWN THE MOST PROMISE/EXPERIENCED THE MOST INVESTMENT AND GROWTH OVER THIS Q3 PERIOD? HAVE ANY MAJOR DEALS BEEN ANNOUNCED WITHIN THIS SECTOR?
-----------------------------------------------------------------------ANNAM IP & LAW is one of the most professional intellectual property & law firms in Vietnam with a staff consisting of lawyers and patent and trademark agents practicing in the IP field since 1992. ------------------------------------------------------------------------
We provide clients with a full range of IP services to protect their inventions, trademarks, industrial designs and related matters not only in Vietnam, but also in Laos, Cambodia, Myanmar and other jurisdictions. The firm also advises on corporate and business law. The firm is a member of APAA, INTA and VIPA.
In the regions of the north and northeast it has been mainly construction of housing projects and infrastructure. Specially because of the federal fund that is financing the construction today of 3 million houses and the need for infrastructure, not only because of the world cup but because of the consistent growth on the last5 to 10 years in agricultural production and industrial growth in this areas. WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? Of many we shall mention the most notable: 1 The launching of the federal fund PAC 2 2 The launching of Minha Casa Minha vida 2 3 The concession law that came up last month giving to whom ever is interested the right to get any federal infrastructure project for the next 20 + 20 years with the right of having the project assumed financed by the federal bank BNDES in chemical, pharmaceutical, bio-technology, electrical, and mechanical fields, among others. A patent application will be handled by a professional in the right technical field of the invention. In addition to its in-house staff, ANNAM IP & LAW has technical associates including professors, specialists and engineers who work for the Vietnam Academy of Science and Technology, Hanoi University of Pharmacy, Institute of Chemistry, Hanoi University of Technology, etc. They have been effectively supporting our patent division to provide our clients with precise Vietnamese specification versions and technical advice.
ANNAM IP & LAW handle thousands of patent, trademark and design applications for all sorts of clients, from individuals to multinational corporations in all technical fields. Around 10% foreign patent applications filed in Vietnam are through our firm. The firm’s patent attorneys and technical staff have been graduated from different technical universities
With the experience of more than 20 years in the IP field, patent and trademark attorneys and associates at the firm provide clients with professional services from filing patent/design/trademark application to granting certificates. Their offering is always accurate, timely and cost-effective.
-----------------------------------------------------------------------HEUSSEN is an internationally oriented firm. It has vast experience in both domestic and cross-border transactions and projects. Heussen’s client base comprises large and medium-sized national and multinational companies. Heussen’s international focus is also evidenced by our foreign desks: HEUSSEN has established a Japan desk, a Sweden desk, a China desk and a Spain & Latin-America desk. ------------------------------------------------------------------------
in general the M&A-related work appears to have decreased.
From its establishment in 2005 HEUSSEN has provided legal assistance and services in legal areas that are most relevant to most foreign companies doing business in the Netherlands, being corporate law and M&A, contract law, employment law and litigation. Heussen has a particularly strong track record in cross-border corporate and financial M&A and structuring projects. During the third quarter of 2012, Heussen’s M&A team has seen that, after having picked up early 2011, M&A activity has again slowed down notably in view of the second part of the “double dip”. Although there is some distressed and restructuring M&A activity,
84 / September 2012
for the maximum of 90% with interest to be paid with original loan only after 3 to 10 years with an interest rate going from as low as 1% up to maximum 9% a year.
Heussen’s corporate structuring specialists have also noticed that the number of corporate structuring projects related to acquisitions (pre- and post-deal corporate reorganizations) has decreased due to the ongoing financial crisis. However, there is still a need and desire for companies to implement tax driven corporate structuring projects as well as structuring projects that are undertaken to reduce costs, including by refinancing the relevant entities. The third quarter of 2012 will give way to the last quarter of the year with an exciting legal development in the Netherlands. On 12 June 2012 the Upper House of Dutch parliament adopted the new Act on the simplification and flexibilization of the rules applicable to Dutch BVs (private companies with limited liability). The new Act, which will enter into force on 1 October 2012, is part of a broader package of rules and legislation aimed at modernizing Dutch company law, which will also include the introduction of a “one-tier board” in Dutch law.
Company: Lubbad Advogados Associados Name: J. Mahmoud Ayoub Barros Lubbad Email: jmlubbad@lubbad.com.br Web: www.lubbad.com.br Address: Rua Tuburcio Cavalcante n*1327’ Meirelis, Fortaleza, Ceará, Brazil, Zip: 60.125.100 Telephone: (+5585) 30333950
Their offering is always accurate, timely and costeffective.
Company: ANNAM IP & LAW Name: LE QUOC CHIEN (MR.) Email: mail@annamlaw.com.vn Web: annamlaw.com Address: No. 10, Lane 34, Au Co Street, Tay Ho District, Hanoi, Vietnam Telephone: (844) 3718 6216
The new rules make the BV a far more flexible legal entity and very attractive for use in the international corporate practice. Since BVs are already being used as international holding companies in many existing group structures the new rules will make it possible to implement transaction projects in a more efficient and cost effective manner.
Company: Heussen Name: Stan Robbers Email: stan.robbers@heussen-law.nl Web: www.heussen-law.nl Address: De Entree 139-141, 1101 HE Amsterdam, The Netherlands Telephone: +31-(0)20-312-2800 Fax: +31-(0)20-312-2801
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world
DEAL DIARY — Deal index
91
86
AENOVA
86
ANSETT
92
86
APOLLO GOESSNITZ GMBH
87
97
UC4
JRS
97
UKAR
92
K+U PRINTWARE
98
UNDERWATER
BANG & OLUFSEN
92
LUOTTOKUNTA
98
VISTEON
87
BILCARE
93
MORGAN SINDALL
98
XMBRACE
87
BIOGENGREENFINCH
93
MOVEA
88
BLOCK 9
93
NOVA MEDICAL
88
B TENDO
94
NOVUS LEISURE
88
CANOPIUS HOLDINGS
94
OKK
89
CENTRAL AMERICAN PAINTS
94
PHO
89
DENTAL HEALTH
95
RADIANT ANTENNAS
89
DESERT COMMERCIAL
95
RCC
90
ENERGINET.DK
95
ROBBINS & MYERS
90
FINTRAX
96
SENSEFLY
90
FROSTKRONE
96
SERVICE KING
91
FUHU
96
SHUSTERMANN & BORENSTEIN
91
ICI PAKISTAN
97
TCW
ACQUISITION INTERNATIONAL
JANALAKSHMI
September 2012 /
85
DEAL DIARY:
M&A from around the world AENOVA
ANSETT
APOLLO GOESSNITZ GMBH
l Private equity group BC Partners has agreed to buy German vitamins and generic prescription drugs maker Aenova from Bridgepoint, the investors said in a joint statement on Monday.
l Australian private equity firm Champ Ventures has bought a majority stake in Melbourne-based Ansett Aviation Centre for an undisclosed amount from Australia’s David Gilmour and Wayne Bos.
A price tag was not disclosed, but a source close to the transaction said BC Partners paid roughly 500 million euros ($617 million), of which half is being covered by equity.
Mr. Gilmour and Mr. Bos bought the training facility, near Melbourne’s Tullamarine airport, in October 2004 from the administrators of what was Australia’s secondlargest carrier, Ansett Australia.
l HMS Group, the leading pump manufacturer and provider of flow control solutions and related services in Russia and the CIS, announces today that it has entered into agreement to acquire 75% of Apollo Goessnitz GmbH, worldwide operating manufacturer of centrifugal pumps and system equipment, located in Goessnitz (Thuringia), Germany.
Aenova is another name on a growing list of medium-sized German businesses going up for sale as private equity groups trawl their portfolios looking for strong disposal candidates.
The centre has 12 simulators, including an Airbus A320 and a Boeing 737, which are available for use at any time of the day or night by pilots including those from Qantas’s low-cost carrier Jetstar, Singapore-owned Tiger Airways, Papua New Guinea’s national airline Air Niugini and domestic carriers like Regional Express.
Elvinger, Hoss & Prussen is the long-standing Luxembourg counsel of BC Partners. We advise BC Partners on all the corporate aspects of the transaction. I am partner at the firm and am assisted by Christophe Bregeon and Elsa Idir (associates). I cannot answer the other questions as the deal has yet to close. CMS DeBacker Luxembourg assisted CMS Hasche Sigle (team led by Dr. Udo Simmat and Dr. Jacob Siebert) in advising BC Partners with the purchase of Aenova Holding S.àr.l. from Bridgepoint. Julien Leclère, in charge of the Corporate department was the lead Partner in Luxembourg. Diogo Duarte de Oliveira and Vivian Walry, Partners respectively in charge of the Tax and Banking & Finance Departments, also worked on financing and restructuring and on a due diligence of the target company from several perspectives: corporate, contractual or tax. Julien Leclère
‘‘
‘‘
Time was really tight but thanks to the close collaboration between the CMS offices, the transaction resulted in a complete success. BC Partners buys Aenova from Bridgepoint
It’s the third investment from the recently closed 475 million Australian dollar (US$502 million) fund Champ Ventures Investments Trust No. 7 which invests between A$20 million and A$55 million in expansion capital, replacement capital and buy-out opportunities in companies with enterprise values of up to A$200 million. Ansett Aviation’s newly appointed chairman is a familiar face in the airline industry, former Qantas chairman Margaret Jackson, who was on the Flying Kangaroo’s board of directors between 1992 and 2007.
‘‘
I never thought I would do anything in aviation ever again,” Ms. Jackson told Deal Journal Australia. “But when I toured the facilities, which were first-class, I was so impressed and decided it was an opportunity to combine an industry I already knew with my existing interest in the training and development of people.
Bryan Cave has advised HMS Group on all legal aspects of this transaction in relation to German law. This comprised a legal due diligence of Apollo Gößnitz; the drafting and negotiating of the share purchase agreement, a shareholders agreement and an option agreement as well as new articles of association and by-laws of the company and new management service agreements. We also advised on the closing of the transaction. The transaction was lead by Dr. Veit Denzer, partner in the Frankfurt office, with the assistance of Mr. Jan Zschiesche (Associate, Frankfurt, Corporate and M&A), Ms. Katrin Schwab (Associate, Frankfurt, D&O) and Mr. Maximilian Karacz (Associate, Hamburg, Corporate).
Yorkway Investment Ltd (Yorkway) identified the opportunity and introduced Ansett Aviation Training (AAT) to Champ Ventures. Yorkway also acted as the commercial and investment advisor to the deal. Paul Batchelor and Michelene Hart lead the advisory team. The deal presented some complex structuring issues but provided an excellent defensive asset for the Champ Ventures fund as it has significant levels of contracted revenue. Yorkway also introduced Margaret Jackson, who has been appointed as the Executive Chairman. Yorkway has taken a minority equity stake in AAT.
Champ Buys Ansett Aviation Centre
‘‘
This was the first time we acted on behalf of HMS Group. The contact was initiated through Leonardo, the investment bank advising HMS Group on this transaction.
Dr. Veit Denzer
‘‘
In June, Swedish private equity group EQT agreed to buy German bandage BSN medical from investor Montagu and last month British buyout group Charterhouse signed a deal to acquire German industrial safety tools producer Bartec from rival investor Capvis.
‘‘
As it often proves hard to find outside buyers, private equity investors in many cases flip assets between rivals in deals known as secondaries.
The main products of Apollo Goessnitz GmbH (Apollo) are primarily used for specific applications in oil refining, offshore and onshore upstream, thermal power generation as well as chemical plants and water utilities, and include centrifugal pumps and related spare parts that comply with API (American Petroleum Institute) and DIN (German Industrial Standards), as well as integrated pump-based systems. The company has two business divisions “Pumps” and “Engineering systems”. The company’s sales are focused in Western Europe and EMEA region via a network of specialized local agents and contracts with global EPC-providers.
The transaction was executed in a very short time frame despite a complete bilingual documentation.
Both parties were extremely satisfied with the process. http://www.bryancave.com/veitdenzer Michael.Wahl@de.ey.com - www.ey.com
HMS GROUP TO ACQUIRE APOLLO GOESSNITZ GMBH
Legal Advisers to BC Partners Legal Adviser to the Purchaser Introducer and Investment Adviser to the Purchaser
Financial Due Diligence Provider
Legal Advisers to Bridgepoint Financial Adviser to the Purchaser
86 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world
l A CAPITAL, the leading Euro-China growth capital fund which specialises in investing into European companies with strong growth potential in China, today announced that it invested, and has entered into a strategic partnership, with Bang & Olufsen a/s (“Bang & Olufsen”) together with strategic coinvestor Sparkle Roll Holdings (“Sparkle Roll”) . Under the investment terms, A CAPITAL and Sparkle Roll invest US$30 million (DKK 182 million) in Bang & Olufsen to accelerate its development in China.
l Further to the announcement issued by United Drug plc (“UD” or “the Group”) on 20 August 2012, the Group confirms the completion of the acquisition of the UK and US clinical services businesses (combined “Bilcare Global Clinical Supplies” or “Bilcare GCS”) from Bilcare Limited.
Bang & Olufsen, listed on Nasdaq OMX Copenhagen stock exchange, is the world renowned designer and manufacturer of an exclusive range of luxury products including televisions, music systems, loudspeakers, telephones and multimedia products that combine technological excellence, strong heritage and emotional appeal.
About United Drug plc Listed on the Stock Exchanges in London and Dublin, United Drug is a leading international provider of services to healthcare manufacturers and pharmaceutical retailers, with operations in over 20 countries including: the UK, Ireland, Germany, the Netherlands, Belgium, and the USA.
The strategic partnership will combine A CAPITAL’s long investment experience in Europe and unique understanding of emerging Chinese corporate champions, together with Sparkle Roll’s outstanding track record in luxury marketing and distribution in China. Both partners join forces to support the acceleration of Bang & Olufsen’s development in China.
The Company operates across three divisions, Healthcare Supply Chain, Sales, Marketing & Medical, and Packaging & Specialty.
Thibaut Partsch, partner in the investment management department of Loyens & Loeff – Avocats à la Cour, led the team, which was composed of Laurent Donnay de Casteau (Tax) and Marie-Christine Turbang (Legal). Loyens & Loeff – Avocats à la Cour has acted as advisor to A Capital Management S.A., the Luxembourg management company of A Capital China Outbound Fund, FCP-SIF, a mutual fund in the form of a specialised investment fund. The same team had conducted the registration and set-up of A Capital China Outbound Fund, FCP-SIF and its feeder fund. Loyens & Loeff was consulted in the legal and tax structuring of the holding of the new participation and issued a legal opinion. thibaut.partsch@loyensloeff.com www.loyensloeff.com
BIOGENGREENFINCH
BILCARE
Further to the announcement issued by UD on 26 July 2012, the Group advises that the acquisition of the entire issued share capital of Pharmexx GmbH (“Pharmexx”) is now expected to complete over the coming weeks.
In Healthcare Supply Chain, United Drug is the largest pharmaceutical wholesaler in the island of Ireland. It is also the market leader in contract distribution outsourcing (prewholesaling) in Ireland and has achieved the No. 1 position in the UK through its joint venture business UniDrug Distribution Group (UDG). The Company provides specials medicines manufacturing and distribution services in the UK. Through its medical & scientific operations, United Drug provides sales & marketing and technical service solutions, including contract distribution services to a wide range of medical & scientific equipment & consumable manufacturers, with a market leading position in Ireland and an emerging presence in the UK. In the Sales, Marketing & Medical division United Drug is a global leader in the provision of contract sales outsourcing services to pharmaceutical manufacturers with operations in major markets including Continental Europe, the UK, North America and a presence in South America. United Drug also provides related marketing services to pharmaceutical manufacturers in many of these markets.
l Kier Group plc, a construction development, services and property company, acquired a 50% interest in Biogen (UK) Limited (dba BiogenGreenfinch), a food waste recycling company, from Bedfordia Group Plc., a company engaged in the automotive, agriculture, property and eco-technology businesses, for a purchase consideration of £24.4m ($38.15m).
‘‘
‘‘
BANG & OLUFSEN
Paul Sheffield, chief executive of Kier Group, commented,
We are delighted to have made the investment in Biogen, which again demonstrates Kier’s strategy of developing intelligent solutions for our clients and also our commitment to the green agenda. We see significant potential in an attractive market for the development of the business in the coming years.
Eunomia undertook market, commercial and regulatory due diligence on behalf of Kier to support their investment decision. The Eunomia team was led by James Fulford (Director) and Adam Baddeley (Principal Consultant). The current fast pace of change to several key regulatory and policy mechanisms, for example, the Feed-in Tariff and ‘end of waste’ criteria, created a range of challenges, which were overcome by Eunomia to provide sufficient certainty to Kier to make the investment. Eunomia is also currently working on behalf of Kier providing both procurement support in their bidding for local authority environmental services contracts and consenting support for new waste management infrastructure.
Fichtner Consulting Engineers Ltd has completed technical due diligence on behalf of Kier Services for its investment in Biogen (UK) Ltd. The Fichtner team was led by Stuart Gordon, Consultant and AD specialist supported by Stefania Trivellato, Consultant Process Engineer. This was Fichtner’s first project engagement with Kier and a strong future relationship is envisaged. The project focussed on the technical aspects of Biogen’s Anaerobic Digestion technology and involved several parties including the Biogen design, construction and operations teams and Kier Construction. A significant amount of technical information was assessed, with the overlap between disciplines and interpretation of the technical details making the project both challenging and interesting.
A CAPITAL AND SPARKLE ROLL HOLDINGS INVEST IN BANG & OLUFSEN A/S
UNITED DRUG PLC ACQUIRES BILCARE GLOBAL CLINICAL SUPPLIES
Kier Group Acquires 50% Interest In Biogen
Legal Adviser to A Capital
Legal Adviser to the Purchaser
Technical Due Diligence Provider
Legal Adviser to the Vendor
Legal Adviser to the Equity Provider
Financial Due Diligence Provider Financial Adviser to the Vendor - Tax Adviser
Legal Adviser to A Capital
Legal Adviser to the Vendor
Financial Adviser to the Purchaser
Legal Adviser to the Vendor Financial Adviser to the Vendor
ACQUISITION INTERNATIONAL
September 2012 /
87
DEAL DIARY:
M&A from around the world BLOCK 9
Completion of the transaction is conditional upon approval from the Ministry of Oil and Minerals of Yemen. Upon the completion of the transaction, Medco Energi will effectively have 21.25% participating interest (after taking into account a proportionate carried share of Yemen Oil and Gas Company (YOGC)). The resulting participating interests in the Block 9 (Malik) PSA will be as follows: Calvalley Petroleum (Cyprus) 42.50% (Operator); Medco Yemen Malik 21.25%; Hood Oil 21.25%; YOGC 15.00%. Block 9 is located in the province of Hadramaut, Yemen, about 350 kms NE of the Yemeni capital, Sana’a. The Block, which is located within the Sayun-Masila Basin, has an area of 2,234 sq kms, in which some of its area has previously been explored. On Aug 25 2005, the Government of Yemen granted the development licence for the Block for a 20 year period. Participating licence holders have the right to negotiate for an extension of another 5 years after 2025. The estimated gross 2P reserves of Block 9 are approx. 58.6 mmbo (as of Jan 1 2012) and is envisaged to produce up to approx. 14.5 mbopd. Discoveries in Block 9 include four oil fields.
Jamal Alkaf
Sahra Petroleum Consulting (Sahra) provided the legal due diligence and advice for Medco Energi acquisition of the 25% participating interest in Block 9 (Malik) in the Republic of Yemen. Sahra due diligence team was led by Jamal Alkaf, Managing Director and Head of Legal.
Sahra was representing Medco Energi in this deal, who have been clients of Sahra for several years.
MEDCO ENERGI ACQUIRES INTEREST IN BLOCK 9 (MALIK) IN YEMEN
CANOPIUS HOLDINGS
l STMicroelectronics (NYSE: STM), a global semiconductor leader serving customers across the spectrum of electronics applications and the world’s top MEMS (Micro-Electro-Mechanical Systems) manufacturer, today announced that it has taken an important additional step in its positioning in the emerging video-sharing market for smartphones and other portable consumer devices. Following a successful joint development effort with start-up bTendo, ST has acquired the intellectual property and has hired most of the staff of the Israeli company to accelerate the propagation of the technology.
l Tower Group, Inc. (NASDAQ: TWGP-News) today announced that it has exercised its previously announced option to combine with Canopius Holdings Bermuda Limited and Canopius Bermuda Limited (together, “Canopius Bermuda”), the Bermuda reinsurance business currently operated by Canopius Group Limited (“Canopius Group”). The merger with Canopius Bermuda will enable Tower to create a global specialty insurance company with greater diversification supported by an efficient international holding company structure and should enable Tower to increase its profitability.
The development effort, which has been aimed at combining bTendo’s innovative Scanning Laser Projection engine with ST’s leading MEMS expertise, video processing know-how and semiconductor process technology, has produced evaluation samples ideally suited, because of their tiny size and low power consumption, for integration into next-generation smartphones, digital cameras and laptops. These samples are now in the hands of potential customers.
‘‘
BFP, legal council to the acquirer commented:
Adv. Iris Pappo, founding Partner at the Israeli law-firm BFP & Co., led the team, assisted by BFP’s corporate department (including Adv. Noma Floom and Adv. Julian Mallach), BFP’s off-counsel for HR matters, and paralegal staff. We represented the acquirer, ST Microelectronics, with which Adv. Pappo enjoys a longstanding relationship, having represented them in a previous acquisition and post-acquisition operations in Israel. We assisted the acquirer actively with delicate negotiations, term- structuring and regulatory issues, vis-à-vis the target company, its diverse group of shareholders and relevant Israeli government agencies, and thus helped enable an economically-effective acquisition of long-term technology assets and a smooth transition of the target company’s employees, and intellectual property to our client.
‘‘
l Medco Energi has signed a Sale and Purchase Agreement (SPA) with Reliance Exploration & Production DMCC to acquire 25% participating interest in Block 9 (Malik) Republic of Yemen on July 5 2012, with effective economic date of January 1 2012.
B TENDO
STMicroelectronics ACQUIRES ASSETS from bTendo
Tower also conducted a comprehensive review of its reserves in the second quarter and strengthened its reserves by $42 million after-tax. This reserve charge should allow Tower’s financial results to fully reflect current accident year profitability going forward. As announced on April 25, 2012, Tower agreed to invest approximately $75 million to acquire a 10.7% stake in Canopius Group subject to the closing of Canopius Group’s acquisition of Omega Insurance Holdings Limited (“Omega”). Tower also entered into an agreement dated April 25, 2012 (the “Master Transaction Agreement”) under which Canopius Group committed to assist Tower with the establishment of a presence at Lloyd’s of London (subject to required approvals) and granted Tower an option (the “Option”) to combine with Canopius Bermuda. Tower today announced that it has exercised the Option and executed an Agreement and Plan of Merger (the “Merger Agreement”) with Canopius Bermuda pursuant to which an affiliate of Canopius Bermuda will acquire all of Tower’s common stock; under applicable accounting principles Tower will be regarded as the acquiring entity. Tower paid Canopius Group a fee of $1,000,000 to exercise the Option. Tower believes that the merger is a significant step towards the creation of an efficient globally diversified specialty insurance company that supports its expansion plans, building upon its existing quota share reinsurance business in London and Bermuda (through CastlePoint Reinsurance, a Bermuda- based reinsurance subsidiary of Tower). Based on the market price of Tower’s stock as of July 30, 2012, Tower currently expects that, upon consummation of the merger, current shareholders of Tower will own more than 75% but less than 80% of the merged company, and that the merger will be accretive to earnings with 2013 operating earnings per share attributable to Tower shareholders expected to improve by approximately 4%-6%
TOWER GROUP, INC. MERGER WITH CANOPIUS HOLDINGS BERMUDA LTD Legal Adviser to the Purchaser
Willkie, Farr & Gallagher
Legal Advisers to the Purchaser Legal Assistance for the Purchaser
www.bfp-law.com
Legal Assistance for the Seller
Legal Advisers to the Vendor
Financial Advisers to the Purchaser
GC Securities
Tax Adviser
MCO 88 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world
H.B. Fuller Completes Sale of Paints Business
First Dental Health, a California-based independent dental preferred provider organization (PPO), includes more than 11,000 credentialed dentists with locations in California, Arizona and Nevada.
‘‘
This acquisition furthers our national dental network strategy, focused on owning and operating dental preferred provider networks,” said Deanna Strable, senior vice president of The Principal®. “By owning dental networks, our customers receive deeper discounts and broad access to local dentists. First Dental Health has a strong regional presence, which enables us to continue to enhance our dental business in California and surrounding areas. The Principal operates one of the largest dental networks in the industry, serving more than 27,000 employers across all states, plus the District of Columbia. Principal dental products offer covered employees and their dependents flexible, comprehensive plan designs that focus on preventive care.
‘‘
We will ensure a seamless transition for our customers and business partners with the same great service and valuable products designed to help customers get the most out of their benefit dollars,” notes Strable. “Through our acquisition of First Dental Health, we also gain a discount dental product, allowing us one more way to serve new and existing customers. Kevin Fitzgerald, a partner in the Insurance & Reinsurance Industry Team, led the effort and was assisted by Andrew Oberdeck, senior counsel in the same industry team. We were representing Principal Financial Group and its subsidiaries in the acquisition. Principal is a Kevin Fitzgerald longstanding client of our firm. The most complicated aspect of this transaction was the significant number of shareholders on the selling side resulting in us utilizing a reverse triangular merger structure in order to effectuate the acquisition.
‘‘
‘‘
About Pintuco and Grupo Mundial: Pintuco is a leading paints company in the Andean region, serving this market for over 65 years. With operations in Colombia, Venezuela, Ecuador, Costa Rica, Panama and the Caribbean, it has developed a complete portfolio of decorative, industrial and construction paints and coatings. Pintuco is an affiliate of Inversiones Mundial S.A., the holding company of Grupo Mundial, a diversified group, based in Medellin, Colombia. Founded in 1921, Grupo Mundial operates 53 companies in 12 countries and exports to 25 countries. Group sales for 2011 were $1.073 billion. Grupo Mundial has six company divisions: Paints, Chemicals, General Wholesaler, Water Pipes, Inks and Packaging. Grupo Mundial’s main companies are: Pintuco (Compania Global de Pinturas S.A.), Andercol S.A., Cacharreria Mundial S.A.S and O-Tek Internacional S.A.
l First Foundation Bank (“FFB”) and its parent holding company, First Foundation Inc. (“First Foundation” or “FFI”), and Desert Commercial Bank (DCB) (DCBC), announced that effective today, FFB completed the acquisition of and merger with DCB. Additionally, FFI announced that it has raised approximately $5 million of additional capital at $15.00 per share and that in compliance with a requirement set forth by the Federal Deposit Insurance Corporation as a condition of approval of the merger, $5 million has been contributed to FFB from FFI.
‘‘
Scott F. Kavanaugh, CEO of FFI and FFB, stated, We are elated that we have been able to complete our merger with DCB as our combined entity will be well positioned to take advantage of the opportunities that exist in our markets. I want to personally welcome all of DCB’s shareholders as FFI shareholders and I look forward to serving their interests. We are also excited that we will be able to retain a strong team from DCB, including Tony Swartz who has been appointed to the position of Chief Operating Officer at FFB.
‘‘
Tony J. Swartz, President and CEO of Desert Commercial Bank, commented, The executive team and Board of Directors of DCB want to thank the shareholders of DCB for their confidence and patience, and I look forward to their continued support as shareholders of FFI. I am excited about the prospects presented to the combined entity and I look forward to serving in my position as Chief Operating Office of FFB. First Foundation now has five full service offices throughout Southern California with another office opening in West Los Angeles in September 2012. On a consolidated basis, on the date of merger, FFI will have $820 million in total assets, $700 million in loans, $600 million in deposits and $67 million in tangible capital. In addition, First Foundation’s wealth management group has over $2 billion of assets under management.
‘‘
Ben Frydman, partner, led the team at Stradling on this acquisition transaction. He was representing First Foundation Inc. & First Foundation Bank who have a long standing relationship with this client. Challenges on this deal included negotiating structuring and key deal points with acquired company’s counsel, with respect to which we were able to prevail. We also assisted the client in obtaining required regulatory approvals for this transaction.
‘‘
About H.B. Fuller Company: For 125 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. Recognized for unmatched technical support and innovation, H.B. Fuller brings knowledge and expertise to help its customers find precisely the right formulation for the right performance. With fiscal 2011 net revenue of $1.6 billion, H.B. Fuller serves customers in packaging, hygiene, general assembly, paper converting, woodworking, construction, automotive and consumer businesses. For more information, visit us at www. hbfuller.com and subscribe to our blog.
l The Principal Financial Group®, a global investment management and employee benefits leader, announces a strategic agreement to acquire First Dental Health. Upon closing, expected in October 2012, First Dental Health will become a member of the Principal Financial Group.
‘‘
The Paints business has a leading market position in Central America with strong local manufacturing capabilities and a broad range of quality product lines, which are widely used for residential and commercial applications. The sold business includes nearly 800 employees who work across Central America and in production plants and laboratories in Costa Rica, Honduras and Panama.
DESERT COMMERCIAL
‘‘
l H.B. Fuller Company (NYSE:FUL) announced today that it has completed the sale of its Central America Paints business to Compania Global de Pinturas S.A., (“Pintuco”), a company of Grupo Mundial, for $120 million. Following fulfillment of all conditions associated with the divestiture, the deal closed on August 6, 2012.
FIRST DENTAL HEALTH
‘‘ ‘‘
CENTRAL AMERICA PAINTS
The Principal Financial Group to Acquire First Dental Health
FIRST FOUNDATION BANK ACQUISITION OF & MERGER WITH DESERT COMMERCIAL BANK
Legal Adviser to the Purchaser
Legal Adviser to the Purchaser
Legal Adviser to the Purchaser
Environmental Due Diligence Provider
Legal Advisers to the Vendor
ACQUISITION INTERNATIONAL
September 2012 /
89
DEAL DIARY:
M&A from around the world ENERGINET.DK
FINTRAX
FROSTKRONE
l Energinet.dk’s acquisition of ten regional transmission companies in Denmark, which are owned by a total of 41 different sellers, has been made public. Bech-Bruun has advised Energinet.dk during the entire process.
l Fintrax Group Holdings has been acquired by Exponent Private Equity for a consideration of €170 million from majority shareholder the Barry Family Trust and Management.
l AXA Private Equity, the leading European diversified private equity firm, announces today that it has acquired the entire share capital of frostkrone Holding GmbH alongside the company’s management, which is reinvesting. The previous majority shareholder, Argantis Beteiligungs GmbH, a private equity firm focused on German SMEs, now fully exits from the company.
Anders Stubbe Arndal and Caroline Pontoppidan, both partners haeded the team at Kromann Reumert. Anders heads Kromann Reumert’s energy law practice group and is also an experienced advisor in M&A matters. Caroline specializes in M&A, adjacent stock exchange law in addition to commercial and company law.
John Coman
They were representing Danish Energy Association acting on behalf of the 41 owners of 10 regional electric power transmission network companies.
‘‘
Our main challenge was the Regulatory forced sale as a result of EU law. Solved by negotiating a voluntary deal within the framework.
‘‘
The shares in the 10 regional electric power transmission network companies were sold to Energinet.dk, a state-owned company, in consideration of DKK 5.709 billion, adjusted for net debt, working capital, tax, dividend etc. With this transaction, all Danish electric power transmission networks (“the energy highways”) are now owned by the Danish State.
‘‘
Bech-Bruun represented its long-standing client, Energinet.dk.
We faced numerous unchartered legal challenges and significant project management and timing issues. We resolved these by dividing our large multidisciplinary team into smaller teams. Each team had an individual focus area, e.g. drafting and negotiating 32 agreements with 41 sellers or conducting 11 due diligence exercises. Moreover, we applied sharp project management skills and effectively collaborated with Energinet.dk and its advisors. The tight time frame was achieved by complying with negotiation and due diligence milestones.
Peter M. Andersen
‘‘
Per Hemmer
Our 28 member team was led by Energy Law partner, Per Hemmer and M&A partner, Peter M. Andersen.
Per Hemmer - phe@bechbruun.com Peter M. Andersen - pma@bechbruun.com www.bechbruun.com
Paul White
John Coman and Paul White, Senior Partners in the corporate department of A&L Goodbody led the team advising the vendors of the Fintrax Group on the sale. They were assisted by Paul Fahy a partner in the Tax Department, Charlie Carroll and Padraic Roche, associates within the corporate department, and Michelle Halton an associate in the IP/ IT department were also involved. A&L Goodbody had not previously acted for the Fintrax Group but won the mandate through prior private equity buyout expertise in the market and contacts within the Fintrax Group. A&L Goodbody will continue as legal advisors to the Fintrax Group.
The deal was an extremely competitive auction process with 10 original bidders reduced to one preferred bidder. Thereafter the Fintrax Group and Exponent worked together to complete the transaction against an extremely challenging deadline. Raglan Capital acted as exclusive corporate advisors to Fintrax Group and was hired by Gerry Barry majority shareholder. Cathal Friel (Managing Director) and John Bowe (Director) lead the deal jointly from Raglan Capital and Christian Klinkenberg (Associate Director) was also part of the Raglan deal team. Raglan Capital ran a very aggressive multi-stage auction for the business which after getting over 50 parties to sign NDA’s in phase 1 had received over ten offers (both trade and PE) which met the majority of shareholder expectations. In phase two they gave 10 parties access to management presentations and an online data room. Again 10 fully funded offers for the business were received at end phase 2. In phase 3 two parties were given mutual exclusivity with cost underwrite, a vendor Share Pur¬chase Agreement and allowed complete DD with first to be able to sign agreement and complete (cash in bank) on same day acquiring the business. Phase 3 was a six week process in which Raglan Capital ensured both parties ran very hard. The ultimately successful bidder, Exponent, was given a 72 hour exclusivity window to complete the transaction. As advis¬ers, Raglan, delivered an excellent result for the shareholders of Fintrax in just over 7 months from start to finish.
Energinet.dk acquisition of ten transmission companies
EXPONENT ACQUISITION OF FINTRAX
Legal Adviser to the Purchaser
Legal Adviser to the Vendor
Corporate Financial Adviser to the Vendor Financial Adviser to the Purchaser & Financial Due Diligence Provider
Legal Adviser to the Management Team
Financial Adviser to the Vendor
frostkrone and its subsidiary, Bornholter, produce and market frozen finger food and snack products such as mozzarella sticks, cream cheese jalapeños, chilli cheese nuggets and sushi. The company has a highly diverse product portfolio based on cheese, fish, vegetables and baked goods, and markets its products in food retail outlets and the food service sector. With its workforce of 102 employees, the frostkrone Group generated sales of approximately €36 million in 2011. AXA Private Equity mandated maconda as advisor for commercial due diligence. From the side of maconda the team was led by Fabian Bäuerle as project manager. Frozen finger food and snacks are amongst the fastest growing product categories in the frozen food market. frostkrone is one of the few companies that focus exclusively on finger food and snacks, successfully covering this attractive niche with an extensive product range. Having to assess size and growth potential of this niche market, maconda leveraged not only on its intimate knowledge of food industry and retail, but also on a network of industry experts as well as carefully conducted market interviews. As foreign expansion is one of the major drivers of future growth for frostkrone, maconda was faced with a challenge to analyse and assess a multitude of European markets in a very narrow time frame. Fabian Bäuerle
The transaction was executed by the Berenberg Bank Strategic Advisory/M&A Advisory team. Berenberg Bank has acted as exclusive financial advisor to Axa Private Equity on the acquisition of frostkrone.
AXA PRIVATE EQUITY ACQUIRES STAKE IN FROSTKRONE
Commercial Due Diligence Provider
Legal Adviser
Buy-side M&A Adviser
Financial Adviser to the Management Team Environmental Adviser
Structure/Tax Adviser
Financial Adviser to the Management Team Virtual Data Room Provider
Insurance Provider Risk & Insurance Due Diligence Provider
90 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world FUHU
ICI PAKISTAN
Janalakshmi
l ORIX Ventures, a leading provider of debt and equity capital for growing technology companies nationwide, and Fuhu, Inc., the creator of the nabi tablet, the world’s first full-featured Android tablet for kids, announced today the closing of a $10 million venture debt financing.
l A consortium led by Lucky Cement Ltd, Pakistans largest cement producer, has successfully bid $152.5 million for a 75.81 per cent stake in ICI Pakistan. The bid translates into Rs14.4 billion; an acquisition price of Rs205/share for ICI Pakistan.
l Bangalore-based microfinance institution Janalakshmi Financial Services Pvt Ltd has raised another Rs 80 crore ($14.6 million as per current exchange rate) in its Series C round of funding, taking the total amount raised in Series C to Rs 145 crore. The second tranche comes a year after the microfinance institution raised the first tranche led by Citi Venture Capital International (CVCI).
Play: the nabi 2 provides the most comprehensive kids entertainment solutions with its Spinlets+ Music and Spinlets+ TV apps, in addition to console-quality HD games, hundreds of ebooks, and much more. Grow: The nabi 2 teaches kids to make good choices, rather than limit them. With Chore List, parents can manage their children’s weekly priorities and reward them for completed tasks. As kids complete tasks and master educational lessons, they earn nabi™ Coins, which they can redeem in Treasure Box to buy amazing games, apps, music, videos and accessories. For Life: the nabi 2 tablet offers solutions to make parents’ lives easier with nabi™ Sync and nabi™ Cloud, where photos, apps, games and shows can be synched with a Mac or PC, and also saved to the cloud. Steven G. Small, a partner with Levy, Small & Lallas, represented ORIX Venture Finance LLC in the debt financing provided to FUHU, Inc. Mr. Small has represented ORIX in debt financing to technology companies for over ten years. He is a graduate of Harvard College and Harvard Law School, and he has specialized in representing commercial lenders for over 35 years.
They said that at the acquisition value of Rs14.4 billion ($152.5m); Lucky’s investment in ICI Pakistan should amount to Rs7.2 billion. Experts believe an investment of this size has the potential to hurt Lucky’s payout capacity going forward and poses a risk to 4QFY12 DPS. The acquisition bid at $152.5m translates into a purchase price of Rs205 for ICI Pakistan. As a result, the consortium has to make a tender offer (50% of the remaining float i.e. 12.1%) at a minimum of the acquisition price. That is 30% above the last closing price. Meanwhile, the Yunus Brothers Group (YBG), a leading conglomerate of Pakistan, has also announced the acquisition of 75.81% shareholding in ICI Pakistan Limited from Omicron B.V., a 100% owned subsidiary of AkzoNobel N.V. Netherland. The Share Purchase Agreement between the parties was signed in Amsterdam, the Netherlands. The bid value of this acquisition is USD 152.5 million (payable in equivalent Pak Rupees) which will be subject to certain adjustments based on lock box mechanism for cash and indebtedness to be ascertained as per the terms of the agreement. Mohsin Tayebaly & Co. Barristers and Advocates acted as the exclusive buyside legal advisors to Lucky Cement Limited Consortium. The Firm’s role involved advising on structuring; conducting due diligence of the target company, contract negotiations, Irfan Mohsin Tayebaly processing Regulatory approvals and advising on public offer under Pakistan take-over laws. The overall legal advisory team was led by the Firm’s Senior Partner Mr. Irfan Mohsin Tayebaly whereas the legal Due Diligence team was led by Mr. Umair R. Vadria, Partner.
The current funding was led by existing investor Caspian Advisor’s India Financial Inclusion Fund (IFIF) and a new investor - GAWA Microfinance Fund. Existing investors CVCI and hedge fund Tree Line Asia Master Fund (Singapore) Pte Ltd also participated in this round. Enam Shares & Securities Pvt Ltd also took part in this round of funding. Unitus Capital was the lead financial advisor and arranger to Janalakshmi and its shareholders for the transaction. Debanjan Banerjee, Partner, lead the team at Fox Mandal & Associates.
‘‘
We were representing Jan Lashmi Financial Services who have been a client of ours Since 2011.
Our firm issued a legal opinion on the validity of the transaction based on the current indian laws vis- a-vis foreign investment legal regime, corporate authorisations and corporate governance issues for Janlaxmi Financial Services. Mr. Gerald Manoharan, Partner was leading the team at J.Sagar. Ms. Ankita Ray and Mr. Prashant Kumar, Associates were other team members.
‘‘
This was a vendor due diligence, and we therefore represented Janalakshmi Financial Services. We have worked with Janalakshmi Financial Services since last 2 years.
‘‘
Learn: nabi 2 was designed for learning, offering statestandardized core curriculum for kids K-5th grade in Math, Science, English and Social Studies. There are more than 2,500 lessons and 30,000 practice questions that allow kids to master a subject at their own pace. In addition, parents know exactly where their kids excel and need help with the detailed analyticsbased N-SITE report.
Capital market sources said that Lucky Cement has a 50 per cent stake in the buying consortium while four Yunus Brothers group companies (i.e. Yunus Textiles, Gadoon Textile, Lucky Textile and Yunus Brothers Company) have the remaining 50 per cent.
‘‘
“Fuhu, Inc. is redefining how children interact with technology in ways that are uniquely innovative and inspirational,” said Michael David, Managing Director & CoHead of ORIX Ventures, the division of Dallas-based ORIX USA Corp that provides both debt and equity financing for growing companies. “We know there is incredible growth in the children’s technology vertical, and we are excited to support Fuhu, Inc. as it continues its category dominance in this dynamic market with the nabi 2 tablet.”
No, problems were faced during the DD exercise. The documents and clarifications were provided on time. Further, the officials of Janalakshmi Financial Services were forthcoming in responding to our queries and document requests.
ORIX Ventures Provides Fuhu, Inc. with New Funding
LUCKY CEMENT LTD BID FOR 75.81% STAKE IN ICI PAKISTAN
Bangalore MFI Janalakshmi raises $14.6M from GAWA, IFIF & others
Debt Provider’s
Legal Adviser to the Acquirer
Risk & Insurance Due Diligence Provider
Legal Adviser to the Purchaser
Debt Provider Financial Adviser to the Purchaser
Legal Adviser to the Equity Provider
Financial Adviser to the Purchaser Legal Adviser to the Debt Provider’s Financial Due Diligence Provider & Tax Adviser Financial Due Diligence Provider
Legal Adviser to the Purchaser
AZB & Partners ACQUISITION INTERNATIONAL
September 2012 /
91
DEAL DIARY:
M&A from around the world JRS PETROLEUM RESEARCH l Ikon Science Ltd - The global technology company (www.ikonscience.com) has acquired today the Australian company JRS Petroleum Research Pty Ltd (www.jrspet.com). JRS develops integrated software for image log analysis and geomechanics, and offers services to the industry from its offices in Adelaide and Perth. These capabilities complement Ikon Science’s advanced rock physics, geopressure and quantitative interpretation technologies and workflows.
‘‘
This acquisition is part of an ongoing strategy to broaden our capabilities by integrating Ikon Science’s traditional strength in Pore Pressure Prediction with Geomechanics to encompass both reservoir and well bore solutions,” said Martyn Millwood Hargrave, Chief Executive Officer. “JRS will continue to operate as a stand-alone consultancy while providing technology, advice and services to enhance the reservoir-related offerings of Ikon Science’s software and regional services business.
‘‘
JRS is a leader in consulting, training and software in the field of Geomechanics and its application to oil and gas reservoirs. JRS was founded in 2001 by experts from the ‘stress group’ at the Australian School of Petroleum at Adelaide University. Co-founder Professor Richard Hillis, PhD is a noted authority in in-situ stress determination. Led by the internationally-recognized experts Drs. Jerry Meyer and Scott Mildren, the staff of the JRS consulting team are recognised leaders in the field of geomechanics. The consultancy targets the oil and gas exploration and production industry providing geomechanical and image log related services. JRS has developed its own proprietary software as a platform for processing and analysis. The company applies its expertise to increasing the efficiency of oil recovery, reducing drilling costs, minimising exploration risk and solving problems related to CO2 sequestration, geothermal energy and coal bed methane. Following the acquisition, Prof. Richard Swarbrick, Ikon Science’s global director of geopressure, has been appointed chairman of the JRS board of directors. Atrico, where Ivan Gustavino is the Managing Director, was representing JRS Petroleum Pty Ltd and its shareholders. Atrico advises technology companies on strategy, growth and transactions. Atrico specialises in sub $50 million transactions.
Ikon Science Ltd acquireS JRS Petroleum Research Pty Ltd Deal Advisers for JRS
Technology Company Advisors
K+U PRINTWARE l Strategy and M&A Specialists Board Advisors Closes Clover Acquisition of K+U Printware Board Advisors Deutschland GmbH announces that the M&A transaction between Clover Holdings, Inc., the world’s leading provider of vertically integrated, closed-loop environmental solutions and K+U Printware GmbH has now been successfully closed. K+U Printware GmbH was founded in 1990 and is headquartered in Ettenheim, Germany. Along with Collecture, its business is focused on the collection and remanufacturing of high quality toner cartridges in the DACH region of Europe. In this transaction, Board Advisors Deutschland acted as the exclusive Corporate Finance and M&A advisor to K+U Printware GmbH and its shareholders. Stefan Gaiser was the lead partner in the project. K+U’s expertise in the European corporate and public sector markets working closely with distribution partners will help Clover Europe expand its customer portfolio while enabling diversification into other channels. “K+U has been one of the leading European manufacturers of supplies over the last decade. Its addition to the Clover group is a further endorsement of Clover’s commitment to providing a sustainable and well-resourced sales and distribution network to our Western and also Eastern European business activities,” says Mark Perry, Managing Director of Clover Technologies Group Europe. Collecture was founded in the year 2000, as a subsidiary of K+U Printware, and is focused on the collection of printers, cartridges, mobile phones and small electronics. Collecture’s collection and processing activities are diverse and a natural evolution of Clover’s global development of environmental solutions for its customers increasing range of valuable used assets. Perry explains, “This acquisition is an important element in our European collection platform as we continue to enforce and strengthen our ability to provide compliance in every aspect of waste management and used asset management.” c.loeslein@boardadvisors.eu www.boardadvisors.eu
Clover Acquisition of K+U Printware Clover Holdings, Inc.
LUOTTOKUNTA l On 10 August 2012, Nets entered into an agreement with Luottokunta’s shareholders to acquire Luottokunta, Finland’s largest payment card solutions company with 500 employees. The deal is now subject to approval from the Finnish Financial Supervisory Authority and by the general meeting of Nets. KPMG provided financial, IT and tax due diligence services alongside synergy evaluation, SPA and valuation assistance to long-standing audit client Nets Holdings. The team was led by Sanjay Thakkar (UK) Jacob Lie (Denmark) and Michael Bruhn (Denmark) who were supported by a wider KPMG team including various technical specialists and local Finnish expertise. The deal team at Nordea was led by Jan Lund Sorensen, director in debt capital market. Nordea DCM represented the buyer on the financing side. we have a long-standing relationship with Nets. Due to legislative challenges in regards to target, as they have a Jan Lund Sorensen banking licences, financing structure had to be changed during the process and a working capital facility was introduced. Financing was finalized as a club deal between the borrowers closest relationship banks with Nordea debt capital market coordinating the two trache credit facility. Leading the team at Bech-Bruun was Søren Meisling, Partner. He commented, “we were representing Nets who has been a client of BechBruun for many years. It has been an unusual process characterised by strong competitiveness which at Søren Meisling times has hindered an open dialogue between Nets and Luottokunta. One of the main challenges has been the regulatory requirements and approvals from financial authorities. We have at an early stage initiated constructive dialogues with the authorities in order to satisfy their requirements. Further, maintaining Luottokunta’s key customers has been an important issue to Nets and has been addressed by having great focus on their retention during the process”. www.bechbruun.com Søren Meisling - sme@bechbruun.com
Nets acquisition of Luottokunta Debt Providers
Has Acquired K+U Printware GmbH Legal Adviser to the Purchaser
Financial Adviser to the Purchaser Deal Adviser for Ikon
Sole Corporate Finance and M&A Adviser to the Shareholders of K+U Printware GmbH Financial Due Diligence Provider
92 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world MOVEA
l Morgan Sindall Group plc today announces that its Investments division, Morgan Sindall Investments Limited (‘MSIL’), has sold its NHS LIFT and medical properties investment interests in Community Solutions Investment Partners Limited (‘CSIP’) and CSPC 3PD Limited (‘CSPC 3PD’) and has acquired the 50% shareholding in Community Solutions Management Services Limited (‘CSMS’) held by its joint-venture partner, Barclays European Infrastructure Fund II LP (‘BEIF II’). The total consideration received by the Company is £23.9m. MSIL has sold its shares in CSIP to Equitix Healthcare 2 Limited (‘Equitix’) and its shares in CSPC 3PD to MedicX Properties VII Limited (‘MedicX’), a subsidiary of MedicX Fund Limited. The cash consideration received on completion is above the directors’ current valuation for the investments and represents a valuation discount rate on the future cash flows within the Group’s range for such rates of 7-9%. For the year ended 31 December 2011, the investments contributed £1.2m in operating profit and had a book value of £11.7m. The Addleshaw Goddard LLP team was lead by projects partner Ruth Snell who led the multi disciplinary team closing the 3rd of 4 major LIFT portfolio secondary market acquisitions for Equitix (working with Ben Cashin who Ruth Snell lead the Equitix team). Novel features included negotiating the ongoing joint venture arrangements between Equitix and Morgan Sindall allowing both parties to work together in respect of new opportunities in the LIFTCo areas through CSIP.
‘‘
l Movea, a leader in motion processing and data fusion technologies, today announced it has secured a new round of funding in the amount of 6.5 Million Euros led by Intel Capital, together with existing Investors iSource and GIMV. “This new round of funding will help provide the necessary resources for Movea to continue to grow and develop cutting-edge technology,” said Sam Guilaumé, CEO of Movea. “The support from such industry leaders validates our vision of convergence from mobile devices - such as tablets, smartphones and Ultrabooks - to Set Top Boxes, Activity Monitoring and Car Infotainment, etc. We’re pleased to welcome Intel Capital as an investor and value this recognition of Movea as a leading edge company in the development of motion processing and data fusion technology to enable this convergence.” Commenting on the deal, Marcos Battisti, Managing Director Intel Capital Western Europe and Israel, said: “Intel Capital is pleased to have led the latest funding round in a dynamic company such as Movea. Movea’s solution is on the forefront of technology developments that are being aimed at enriching user experience, which is one of the main differentiators in consumer devices. We strongly believe we will be able to assist the company’s growth as we add, besides capital, access to Intel Capital’s expertise and extensive network.” Marks&Clerk France presentation: The team was led by Christian Nguyen-Van-Yen (Managing Partner).
‘‘
We represented Movea and the existing investors. We have worked first with the Series A and B investors when they first invested back in 2007 and from then with the company to help it C. Nguyen-Van-Yen secure IP protection of its assets.
‘‘
MORGAN SINDALL
‘‘
Paul Smith, Morgan Sindall Chief Executive, commented These transactions enable the Group to recycle its capital into other developing markets and investment opportunities, whilst at the same time providing the opportunity to work with Equitix on new healthcare developments in the future.
We have assisted Movea’s management and Board of Directors in their discussions on the IP and licensing aspects of the transaction.
MSIL SELLS SHARES IN CSIP & CSPC 3DP TO MEDICX PROPERTIES VII LTD
Movea Secures 6.5 Million Euros in Series C Funding led by Intel Capital
Christian.Nguyen@fr.marks-clerk.com www.marks-clerk.com
Legal Adviser to the CSIP Purchaser
NOVA MEDICAL l Goldman Sachs and New Enterprise Associates have jointly invested about $54 Mn in GTI promoted – Nova Medical Centres Private Limited for minority stake. Goldman Sachs has invested $40 Mn, while NEA has made add-on investment of $14 Mn. The investments will be used to further expand the company’s specialty surgery and fertility businesses. As a part of deal, Ankur Sahu and Harsh Nanda, Executive Director at Goldman Sachs, will join the Board of Nova. With the investment, Nova will accelerate the expansion of across the country both organically as well as through acquisitions. NEA had earlier invested $15 Mn into the company. This Feb, Nova Medical Centres acquired Helios Hospitals, an obstetrician and gynecologist hospital in Chennai. Nova Medical Center was founded by New York-based private equity firm GTI Group LLC and Mahesh Reddy. Established in 2009, Nova develops, acquires, owns and operates day/short-stay surgical centers in partnership with surgeons across India and the Middle East. Vaibhav Parikh, partner and head of Fund Investment practice, led the team at Nishith Desai Associates which comprised of Rajesh Simhan and Simone Reis, Senior Associates and Akshay Bhargav, Associate. The Firm represented Goldman Sachs in this Vaibhav Parikh transaction. The Firm has an existing relationship with Goldman Sachs having inter-alia represented them on their investment in Renew Wind Power, being the single largest PE investment in the renewable energy space in India. As in any other deal, there were a number of challenges especially since this was the fourth round of investment in the company. There were protracted negotiations to determine the interse rights between the investors and the promoters.
GOLDMAN SACHS, NEA INVEST IN NOVA MEDICAL Legal Adviser’s to Goldman Sachs
IP Due Diligence Provider Legal Adviser to NEA
Wadia Ghandy
Legal Adviser to the Seller Legal Adviser to the Equity Provider
International Counsel for Goldman Sachs
Financial Due Diligence Provider Financial Adviser to the Seller
ACQUISITION INTERNATIONAL
Legal Adviser to the Purchaser
Joffe & Associés
Commercial Due Diligence Provider
September 2012 /
93
DEAL DIARY:
M&A from around the world NOVUS LEISURE
OKK
PHO
l Premium bar and nightclub operator Novus Leisure has been sold by majority shareholders Barclays Ventures (“BV”) and RBS Strategic investment Group (“RBS”) for £100 million to new investors LGV Capital and Hutton Collins, who have backed the existing management team. Haymarket Financial lead and arranged the £42.5m of debt facilities required for the transaction.
l NCC Construction in Norway has entered into an agreement to acquire the Norwegian construction company OKK Entreprenör AS. OKK’s core operations focus on the production of housing units and commercial properties. OKK operates in Oslo and in the Drammen region southwest of Oslo. OKK generates annual sales of approximately SEK 1 billion and has 350 employees.
l Isis Equity Partners (“ISIS”), investing funds from the Baronsmead VCT’s, is pleased to announce the £5.2m staged commitment to Pho, the independent restaurant group that specialises in Vietnamese street food.
Andy Fyffe
Latham & Watkins represented BV, RBS and the Novus Leisure management team as sellers in the transaction with a deal team led by London corporate partner Martin Saywell with associates Benedict Nwaeke and Emily Martin. Advice was also provided by partner Sean Finn and associate Helen Cox on tax; partner Sam Hamilton and associate Adrian Chiodo on finance matters; and partner Stephen Brown on employee benefits.
‘‘
Ian Borman and Simon Fulbrook, partners in the Finance Department lead the team at S J Berwin.
‘‘
We were representing Haymarket Financial on the financing of the transaction for Hutton Collins and LGV. We were brought into the transaction just over a week before closing and so we had to complete the transaction on a very tight timetable
‘‘
‘‘
Partner Ian Borman said: we have an expanding Leveraged Finance team focused on the European midmarket and we are very pleased to have completed this transaction for Haymarket Financial as the latest in a string of new money transactions. Leading the team at Zolfo Cooper was Paul Hemming – Partner, Ian Edward of Edward Associates our independent Leisure Advisory Partner also worked on the case.
‘‘
‘‘
We worked for Hutton Collins initially and then LGV and Hutton Collins when the two joined forces. Bank debt in any deal is difficult in the current economic environment.
The acquisition of OKK is in line with NCC’s growth strategy in Norway, which encompasses all business areas. NCC is already a powerful player in the Oslo region and aims to further strengthen this position. “The development resulting from the high rate of population growth caused by urbanization and the overall need for additional housing units in Norway are factors contributing to the strong growth expected in both Oslo and the Drammen region”, says NCC’s CEO Peter Wågström. The acquisition of OKK will provide NCC with a stronger geographic base and create the necessary conditions for future growth in Oslo and Buskerud. The acquisition will also complement NCC’s existing expertise in residential production, renovation and building services.
The Sunday Times describes the food at Pho as “an orchestral broth, with bright, clean additions of herb, lime and chilli” with the evening standard saying “it all adds up to a brilliant meal in a bowl”. Pho was awarded ‘best emerging concept’ at this years retailers’ retailer of the year award. The first Pho location opened on St. John Street, Clerkenwell, London, in June 2005. Stephen and Juliette Wall set up the business after travelling to Vietnam and being inspired by the culture and cuisine. Pho now has a total of seven sites across London and the South East (Clerkenwell, Fitzrovia, Soho, Westfield Shepherds Bush, Westfield Stratford, Brighton and Spitallfields), with Spitallfields a recent addition in July 2012. Stephen and Juliette will continue to lead the business and oversee all aspects of the operation, and the investment by Isis will support them to continue to grow and develop the business.
The acquisition is contingent on the approval of the Norwegian competition authority and is subject to various conditions that must be fulfilled before the transaction can be completed. For further information, please contact Peter Wågström, CEO,NCC AB, Tel. +46 (0)8585 530 40 Peter Gjörup, President, NCC Construction Norway, Tel. +47 452 94 411 Greeg Nordqvist, Head of Mergers & Acquisitions, NCC AB, Tel. +46 (0)8 585 520 59 bordvik@admincontrol.no www.admincontrol.com
Novus Leisure acquired by Hutton Collins Partners and LGV Capital
NCC acquires construction operations in Norway
Debt Provider
Legal Adviser to the Purchaser
Stephen Mason
Baker Tilly Corporate Finance LLP provided financial due diligence services to ISIS EP LLP. The work was led by Stephen Mason, who heads up Baker Tilly’s financial due diligence services in London. Stephen was supported by Karen Buckley and a tax due diligence team led by Steve Corrin.
‘‘
Novus Leisure is the UK’s largest private bar and nightclub operator having a portfolio of 52 primarily London-based premium bars, including Balls Brothers and Tiger Tiger outlets and Polynesian themed nightclub Kanaloa. Novus Leisure also operates nightlife guide website www.latenightlondon.co.uk.
Pho serves traditional Vietnamese food in an informal, fast casual environment, specialising in Vietnam’s national dish, pho, a tasty and nutricious noodle soup. The menu also features other authentically prepared Vietnamese dishes, coffees, beers and fresh juices.
Michael Fine, Director, lead the team at Javelin Group who were representing Isis.
‘‘
We have been doing Commercial & Operational Due Diligence and portfolio company performance improvement work with them for 8 years. PHO RECEIVES £5.2M COMMITMENT FROM ISIS Corporate Finance Adviser
Commercial Due Diligence Provider
Financial Advisers to the Equity Provider Financial Due Diligence Provider
Legal Provider to Company
Vendor Due Diligence Provider Legal Adviser to ISIS Financial Adviser to the Vendor Tax Adviser
Legal Adviser to the Debt Provider
Saga Corporate Finance
Newco Tax
Virtual Data Room Provider
Admincontrol 94 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world RADIANT ANTENNAS
Solly Slom together with Jack Phalane led the team at Fluxmans. They are partners of the firm specialising in mergers and acquisitions. Fluxmans was representing Poynting Antennas. Poynting has been a client of Fluxmans for over 5 years. Jack Phalane According to Jack, the transaction had its nuances but there was nothing unusual on a transaction of this nature.
POYNTING ACQUIRES RADIANT
l Oilfield-services equipment maker National Oilwell Varco Inc. (NOV) agreed to acquire Robbins & Myers Inc. (RBN) for $2.55 billion, a deal that will expand the company’s offerings of tools, pumps and valves used in oil production.
Boot Barn stores are located in the Western half of the United States while RCC has a strong presence in the Midwest and the South. The combined company will be the largest specialty retailer in the industry, with stores coast to coast. RCC Western Stores is one of the nation’s oldest and most respected western lifestyle retailers and was founded in 1948 as Rapid City Clothing in Rapid City, South Dakota. Over 64 years, RCC Western Stores has expanded into 12 states from North Dakota to Florida. We have a tremendous amount of respect for Bob Hoover and his top notch management team, along with the strong company they have created. The management and customer service philosophies mirror Boot Barn’s, making RCC Western Stores a perfect fit, not only in terms of product offering, but also in commitment to the community and western lifestyle,” said Peter Starrett, Chairman and CEO of Boot Barn. “Our two businesses are very complementary and this transaction allows us to serve an even broader customer base with our world class product assortment,” he added. “RCC and Boot Barn customers value quality, integrity, family and country. Together, the combined team at RCC and Boot Barn will continue to work hard to bring the best brands at the best prices to each market, along with an exceptional customer shopping experience.
Robbins & Myers shareholders wil receive $60 a share, a 28% premium to Wednesday’s close. Shares of the maker for equipment for energy, chemical and industrial producers were up nearly 27% at $59.31 in recent pre market trading. Shares have never traded above the offer price.
‘‘
At RCC Western Stores, our commitment has always been to provide our customers with the best, and we believe that by joining the Boot Barn family our customers will find excellent values on an even wider product offering in our stores, said Bob Hoover, President and CEO, RCC Western Stores. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
BOOT BARN ANNOUNCES AGREEMENT TO ACQUIRE RCC WESTERN STORES
National Oilwell Varco has grown to become the sector’s dominant equipment maker through mergers. Both companies have benefited over the past year from demand in the oil and gas sector, which uses increasingly complex methods to extract fuel from hard-to-reach reserves.
‘‘
We feel that our combined manufacturing infastructure and portfolios of technology will further advance our presence in the oil and gas markets we serve, National Oilwell Varco chairman and cheif executive Pete Miller said. Jim Dillavou, Partner, Deloitte & Touche LLP, lead the Deloitte team for the Robbins & Myers transaction. Deloitte represented National Oilwell Varco with whom they have had a long standing working relationship. Jim Dillavou
‘‘
Robbins & Myers is a global company many different product lines providing equipment and services to the energy industry and industrial equipment to the process chemical, pharmaceutical, wastewater treatment and food and beverage industries. It has over 25 manufacturing facilities and over 50 subsidiaries and affiliates.
‘‘
The acquisition, due to its small size, falls below the transaction thresholds as set out in the JSE Ltd. Listings Requirements and therefore this is a voluntary announcement for information purposes only.
l Boot Barn, America’s favorite western and work wear store, has reached an agreement to acquire RCC Western Stores, including the company’s 29 stores and online retail website (www.rccwesternstores.com).
‘‘
Radiant, is a South African based company which specialises in the design, manufacture and supply of High Frequency (“HF”), Very High Frequency (“VHF”) and Ultra High Frequency (“UHF”) antennas and masts for both military and civil applications. In addition to HF, VHF and UHF antennas, Radiant’s range of products also includes antennas for Wireless Local Area Networks. Radiant’s products which have been designed for military use are used globally by a number of countries.
ROBBINS & MYERS
‘‘
l Poynting informed shareholders that Poynting, through its wholly-owned subsidiary, Poynting Antennas (Pty) Ltd. (“Poynting Antennas” or “the company”) has entered into a Sale of Business Agreement, dated 10 July 2012, with Radiant Antennas (Pty) Ltd. (“Radiant”) to acquire the business of Radiant as a going concern (“the acquisition”). Poynting Antenna’s will assume all assets of Radiant which include debtors, fixed assets, excluding one motor vehicle, stock, any pre-payments and Radiant’s right, title and interest in and to contracts, trademarks, goodwill and intellectual property rights and all liabilities of Radiant, excluding any shareholder loan accounts. Graeme Cunningham Davis, the founder and general manager of Radiant has entered into a contract of employment with Poynting Antennas and will add considerably to the growth of the company going forward.
RCC
NATIONAL OILWELL VARCO TO AQUIRE ROBBINS & MYERS
Debt Provider’s
Transaction Services
Legal Adviser to the Purchaser
Financial Due Diligence Provider
Financial Adviser to the Purchaser
Tax Adviser
Lawyers
Risk & Insurance Due Diligence Provider
Virtual Data Room Provider
ACQUISITION INTERNATIONAL
September 2012 /
95
DEAL DIARY:
M&A from around the world SENSEFLY
SERVICE KING
SCHUSTERMANN & BORENSTEIN
l senseFly joins the Parrot Group to strengthen its position as a leading provider of ultralight flying drone (also called UAV1) for mapping and GIS2 professionals.
l Global alternative asset manager The Carlyle Group (NASDAQ: CG), together with management and employees of Service King Collision Repair Centers, today announced they will acquire majority ownership in the largest independent U.S. chain of auto body repair shops. Founder Eddie Lennox will retain a significant ownership stake in Service King. Chief Executive Officer Cathy Bonner will become Chairman representing Mr. Lennox on the board of directors.
l AXA Private Equity, the leading European diversified private equity firm, is acquiring a holding in the Munich-based retail fashion company Schustermann & Borenstein (S&B). The Schustermann und Borenstein families will retain a significant financial stake in the company and will also continue to be in charge of business operations in the future.
‘‘
CPV Partners has provided legal advice to senseFly Sàrl in the transaction. Karim Piguet (partner) and Maxime Chollet (partner) led the transaction’s team at CPV Partners. The main challenges of this deal were generated by time restraints, complex IP matters, certain special features derived from the transaction structure and the numerous stakeholders involved. At CPV Partners, we are pleased to have facilitated a transaction with significant strategic potential between both parties. piguet@cpvpartners.com www.cpvpartners.com
Leading civil drone pioneers join forces Legal Adviser to the Vendor
Legal Adviser to the Purchaser
Adam Glucksman, Carlyle Managing Director and member of the Carlyle U.S. Equity Opportunity investment team, said,
In Service King and its team, we see the opportunity to help a proven operator break through to the next level of scale in a fragmented industry. I am thrilled to have found a partner in The Carlyle Group who shares my vision for expanding our company nationally,” said Mr. Lennox. “We purposely sought out Carlyle based on its record of value creation. Carlyle will continue our commitment to employee ownership and providing customers with the highest level of quality and service in the industry. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
The Carlyle Group and Management Partner to Acquire Service King Debt Provider’s
Environmental Due Diligence Provider
Legal Adviser to the Purchaser
Legal Adviser’s to the Debt Provider’s
Financial Adviser to the Vendor
Pensions and Actuarial Adviser
Daniel Schustermann and Daniel Borenstein, the managing partner and managing director of Schustermann & Borenstein respectively, comment as follows:
‘‘ ‘‘
We are delighted to have found in AXA Private Equity a strong and dependable partner for the company, with whom we can implement our growth plans and further our business activities together with our personnel. Wolfgang Pietzsch, Managing Director of AXA Private Equity comments:
We are very pleased that the families who own the traditional Munich-based company Schustermann & Borenstein have decided to partner with us”. “AXA Private Equity will support Schustermann & Borenstein as long-term investor and strategic partner and will help company management to successfully implement its strategy.
‘‘
says Jean-Christophe CEO and co-founder of senseFly.
We are pleased to partner with the Lennox family, management and employee-owners in further growing the business. Service King’s unparalleled commitment to its customers and focus on high quality service in the collision repair business attracted us to this investment.
‘‘
‘‘
We are witnessing a revolution whereby flying drones are no longer exclusive to the military but are quickly spreading into the civilian world. In 2010, Parrot surprised competitors and fellow researchers alike when they hit the market with their iPhone-piloted quadcopter for filming and gaming. The same year, senseFly revolutionized the job of surveyors by providing fully autonomous flying cameras capable of producing precise 2D and 3D maps within minutes. Both companies are focused on developing very lightweight drones with the strong belief that this is critical to their use by the public at large – far beyond the military. I am delighted that we can join forces to write the next chapters of this exciting revolution,
‘‘ ‘‘
Shary Moalemzadeh, Carlyle Managing Director and a member of the Carlyle Strategic Partners investment team, said,
In addition to two fashion stores in Munich which are accessible to members only, Schustermann & Borenstein owns the exclusive online shopping community BestSecret.com. The family shareholders and AXA Private Equity are planning to continue the company’s successful business growth on a joint basis.
‘‘
senseFly already masters all the key technologies of its mapping solution: autopilot design, control & monitoring software, and hardware integration. Today, its complete solution includes: • swinglet CAM: ultralight flying drone equipped with a high-resolution camera and senseFly’s proprietary autopilot that completely automates take-off, flight, image acquisition and landing; • e-mo-tion: flight control and monitoring software; • Postflight powered by Pix4D: Image reconstruction software capable of producing precise 2D and 3D maps.
‘‘
Two pioneers of ultralight drones for civil use, senseFly and Parrot, have joined forces to further develop their respective markets. Parrot has sold over 300,000 of its AR.drone quadcopters to the consumer market since its release in 2010; while the Swiss start-up, senseFly, has seen global and fast growth demand for its fixed-wing drones for the mapping and GIS market.
The parties concerned have agreed not to reveal details of the new holding. Kirkland Ellis advised AXA Private Equity on the corporate (M&A and equity) aspects of this deal. Volker Kullmann led the deal. PwC provided financial due diligence on the deal. steven.m.roberts@de.pwc.com www.pwc.com
AXA PRIVATE EQUITY ACQUIRES HOLDING IN SCHUSTERMANN & BORENSTEIN Legal Adviser to the Equity Provider
Legal Adviser to the Vendor
Milbank Financial Due Diligence Provider
Legal Adviser to the Vendor
Tax Adviser Commercial Due Diligence Provider Virtual Data Room Provider
96 / September 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world TCW
UC4
UKAR
l Global alternative asset manager The Carlyle Group (CG) and the management of The TCW Group, an asset management firm, today announced a definitive agreement to acquire TCW from Société Générale. As a result of the transaction, TCW management and employees will increase their ownership in the firm to approximately 40% on a fully diluted basis, better aligning interests with clients. Financial terms of the transaction, which is expected to close in the first quarter of 2013, were not disclosed.
l EQT Partners, the Swedish private equity group, has clinched a closely fought bidding battle to buy IT process automation company UC4 from the Carlyle Group for €220m, according to people close to the situation.
l Virgin Money has agreed to acquire £465 million of high quality NRAM mortgage assets from UK Asset Resolution (UKAR), the holding company for NRAM and B&B.
‘‘
David Lippman said, This is an exciting moment for TCW’s talented and dedicated employees, as we look to the future as an independent firm united in our focus on serving our clients. TCW is well positioned today to achieve our clients’ investment objectives because of the vision and efforts of our founder Robert Day and the leadership of Marc Stern. Robert’s commitment to independent, research-driven investment management remains at the core of our mission. Marc has dedicated his 22-year TCW career to building and growing the firm. Marc’s stewardship has enabled us to realize consistently strong returns for clients, growth in assets under management and, now with this transaction, significant employee ownership of the firm.
‘‘
IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
Austrian-based UC4 was acquired by the Carlyle Group in 1996. It helps companies automate their IT systems, something that is becoming crucial as businesses shift to running their computer systems remotely, or in the “cloud”. UC4, whose management team is based in the US, has annual revenues of about $100m and has more than 2,000 customers. Among its client base are blue-chip customers including BT Global Services, travel operator TUI and French banking group Société Générale. Earnings before of interest, tax and depreciation were thought to be around $25m. The business competes with companies such as IBM, Computer Associates and BMC , albeit having a slightly narrower focus on automation than its competitors. It is understood that EQT, which is partly owned by Sweden’s Wallenberg family, is keen to become a broader enterprise IT software business that could further challenge the leading global companies. EQT has made investments in the past few months, including the purchase of Vertu, the luxury mobile phone manufacturer, from Nokia and a $1.8bn deal to buy BSN Medical, the German medical supplies manufacturer, in June. The Carlyle Group was advised on the sale by Arma Partners, a boutique mergers and acquisitions house, making this deal the 12th to be brokered by Arma in the past six months. EQT was advised by Lazard. Lazard, too, has been on a run with its merger advisory business up 9 per cent in the first half of this year, in contrast with declines at investment banks overall.
The Carlyle Group agree to acquire TCW from Société Générale
EQT ACQUIRES IT AUTOMATION COMPANY UC4
Debt Providers
Insurance Provider
Once customers become part of Virgin Money, they will be able to benefit from its full range of products and services, including branch access at 75 Stores around the country. There will be no changes to customers’ terms and conditions as a result of the transfer. The transaction enables Virgin Money to deploy some of its excess liquidity to grow its mortgage book with high quality loans that complement the existing book structure. The acquisition will not significantly affect either the average LTV of the book, which currently stands at 64%, or the 3+month arrears position of the Virgin Money mortgage book, which stands at 0.31% (CML average 2.00%). The acquisition does not change Virgin Money’s organic growth plans or its stated target of providing £45 billion of new lending between 2012 and 2017. Jayne-Anne Gadhia, Chief Executive of Virgin Money said: “I am delighted to be able to welcome this new group of customers to Virgin Money and we will be making every effort to make the transition simple and straightforward for them. “This is an excellent acquisition for us. It is sensible deployment of some of our excess liquidity and allows us to grow our mortgage book with high quality mortgages. UKAR has confirmed that it intends to use the proceeds of the acquisition to further repay their government loan, in the best interests of taxpayers, and so this transaction offers a great example of our philosophy of making everyone better off.”
‘‘
We provided at short notice a sizeable team onsite at the vendor to carry out loan level due diligence covering lending quality and data integrity. This work in itself can be a challenge but with our considerable Tim Keast experience of 12 years as the UK’s largest firm in our field we are able to balance the vendor and client process needs
‘‘
‘‘ ‘‘
Marc Stern said, This major milestone in the evolution of TCW enhances our long-term position in the competitive asset management business. I am particularly pleased that we will materially increase employee ownership in TCW – a transformative change that will even more closely align our interests with those of our clients. We are putting in place a strong new management team led by David Lippman, a decisive and effective leader who has been instrumental in both the integration of MetWest and TCW and in the growth of our fixed income and mutual fund businesses.
The deal, which is expected to be announced on Monday, is one of few recent transactions where a sizeable European software company has been sold to a European buyer. Most recent large deals, such as Vista Equity Partners’ purchase of Misys and HP ’s acquisition of Autonomy , have seen European software assets snapped up by US buyers.
Virgin Money will be contacting those customers who will be welcomed to the business closer to the transfer date, which is expected to be before the end of the year. Until then, their loans will continue to be managed by NRAM.
Virgin Money agrees to buy high quality mortgage book from UKAR
Due Diligence Adviser’s Legal Adviser to Equity Providers (debt financing) Legal Adviser to TCW Financial Due Diligence Provider
Legal Adviser
Financial Adviser to Carlyle
Financial & Tax Due Diligence Provider
Legal Advisers
Virtual Data Room Provider
M&A
Lazard ACQUISITION INTERNATIONAL
September 2012 /
97
DEAL DIARY:
M&A from around the world
UES specialise in the rental and supply of marine and subsea support equipment to the Diving, ROV and survey sectors of the global offshore industry. The company provides both Diver and ROV operated tooling as well as fully integrated packages, comprising deck cranes, winches, power packs, survey and deployment equipment. UES has a market leading reputation for the quality of its subsea engineering, design and manufacturing capabilities. The company, which was established in 2006, is based in Foveran, on the outskirts of Aberdeen Following the acquisition of UES, ATR will have a turnover in excess of £20 million and ATR’s workforce will increase by 15%.
‘‘
Keith Moorhouse, chief executive of ATR, said: We are excited about welcoming Jeff and his team to ATR Group. UES is widely respected and has built up a significant track record for servicing the leading, specialist marine and subsea contractors. ATR is performing strongly and we have identified the subsea market as a key strategic area for many of our customers. We intend to invest substantially in UES for growth without losing its core focus and speciality. It’s about responding to customer needs and continuing to deliver.
‘‘
UES’s subsea rental offering and engineering capabilities are highly complementary to ATR’s existing surface rental and service offering. We’ve listened to our customers and I believe that this surface to subsea approach will provide them with an enhanced value-based proposition that meets their needs.
Ewan Neilson
Ewan C Neilson led the Stronachs LLP team, who is Head of the Corporate/ Commercial Department.
l Visteon Corporation (NYSE: VC) today announced that it has completed the sale of its automotive lighting business to Varroc Group, a global provider of automotive parts, for $72 million in cash, subject to price adjustments. The two companies announced plans for the sale on March 12. Rothschild served as financial advisor to Visteon in connection with the transaction. The Rothschild team was led by Ira Wolfson, Managing Director and co-head of its North American Industrial M&A business, and Joshua Goza, Director Ira Wolfson in Rothschild’s M&A department. Rothschhild conducted a competitve auction for Visteon Lighting with pariticpation from potential buyers across North America, Europe and Asia, demonstarting the scale and strength of Rothschild’s global capabilities. Squire Sanders represented Visteon Corporation, a long-standing client, in this transaction. The Squire Sanders transaction team was led by Daniel Berick and Cipriano Beredo. The sale was a complex carve-out transaction involving facilities and employees around the world, and Squire Sanders responded with a transaction team of corporate lawyers and specialists drawn from 12 of the firm’s offices. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
XMBRACE l Scheduling specialist Xmbrace has been acquired by Kirona Group (“Kirona”) Xmbrace is a leading supplier of automated workforce scheduling systems in the UK, with its primary product OPTI-TIME considered the leader in its chosen markets. The decision to acquire Xmbrace is a reflection of Kirona’s belief in the significant opportunities presented by enhancing its workforce job scheduling and management proposition.
‘‘ ‘‘
Commenting on the news, David Murray, Managing Director of Kirona Group said:
Kirona and Xmbrace have worked in partnership since 2006, delivering and supporting complex projects to a wide variety of high profile customers in the UK Social Housing market. During the time we have worked together, the similarity between both companies’ partner reseller strategy and company values became clear.
‘‘
l Global-leading oil and gas equipment services specialist ATR Group has completed its first strategic acquisition following its recent MBO supported by NBGI Private Equity. The acquisition of Underwater Engineering Services (“UES”) strengthens ATR’s existing subsea capabilities and demonstrates the Group’s commitment to investing in this dynamic, fast growing market.
VISTEON
‘‘
UNDERWATER ENGINEERING SERVICES
David Todd, Managing Director of Xmbrace, added,
The Xmbrace team looks forward to growing the important relationships with our customers and partners. Over the coming weeks we will be contacting them to share more detailed information about the exciting investment plans for the future of the combined business. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
ATR GROUP ACQUISITION OF UNDERWATER ENGINEERING SERVICES
VARROC GROUP ACQUIRES VISTEON CORP’S AUTOMOTIVE LIGHTING BUSINESS
Kirona & Xmbrace join forces
Debt Provider
Financial Advisers
Debt Provider
Legal Adviser to the Purchaser Financial Due Diligence Provider
Legal Adviser to the Debt Provider
Legal Adviser
Financial Adviser to the Vendor
Financial Due Diligence Provider Tax Adviser Virtual Data Room Provider Legal Adviser to the Vendor Financial Adviser to the Vendor
98 / September 2012
Virtual Data Room Provider
ACQUISITION INTERNATIONAL
DEEP & FAR
Attorneys-at-Law 13th F1., No. 27, Sec. 3, Chung San N. Rd. Taipei 104, Taiwan, R.O.C. Tel: +886-2-2585-6688 Fax: +886-2-25989900/25978989 email@deepnfar.com.tw Deep & Far was founded in 1992 and is one of the largest law firms in this country. The firm is presently focused on the practice in separate or in combination of all aspects of intellectual property rights (IPRs) including patents, trademarks, copyrights, trade secrets, unfair competition, and/or licensing, counseling, litigation and/or transaction thereof. Since this firm edges itself into the IPRs field, the firm quickly comes to fame. As an illustration, this firm often is one of the largest sources from which foreign filing orders originate. The fascinating rise of this firm begins from the founder of Deep & Far attorneys-at-law, C. F. Tsai, who is the one first patent practitioner in this country who both has technological and law backgrounds and is qualified as a local attorney-at-law. The patent attorneys and patent engineers in this firm normally hold outstanding and advanced degrees and are generally graduated from the top five universities in this country and/or the university in the US. Our prominent staffs are dedicated to provide the best quality service in IPRs. As a proof, about one half of top 100 incorporations in this country have experiences of seeking patented their techniques, but more than one fifth of the top 100 incorporations are/were clients of this firm. Furthermore, Hi-Tech companies in the science-based industrial park located at Hsin Chu play an important role in booming the economy of this country. About one half of which have experiences in seeking patented their techniques, and out of more than 60% of the patent-experienced companies in that park have ever entrusted their IPR works to this firm. We have experienced in seeking IPR-protections for our clients in more than 100 territories all over the world. We have thousands of IPR-cases respectively prosecuted before official Patent Offices of major industrialized countries. This firm not only is the most competent in IPR-related matters in this country but also is very familiar with IPR-practices in major industrialized countries. As a matter of fact, this firm oftentimes tries and makes precedents of new claim-drafting styles. While we might have become wonderfully famed locally with remarkable appreciation and respects, we would like to extend our services for internationalized or quality service-requiring foreign conglomerated giants, corporations or individuals. We strongly believe that we will win more applause from clients all over the world.
www.deepnfar.com.tw