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August Issue 2011
ACQUISITION INTERNATIONAL The Voice of Corporate Finance
Crompton Greaves Acquires Sweden’s Emotron Group For €57.8m
Also in this issue... • Forming Private Equity Funds • The International Arbitrator • Islamic Finance in a Global Economy • Doing Business in the Isle of Man
www.acquisition-intl.com
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Adding value throughout the entire transaction cycle. URS/Scott Wilson approaches asset ownership and management with the entire lifecycle in mind. Our services range from environmental, health, safety and operational due diligence assessments to quantify the costs of liabilities prior to purchase, to remediation strategies to reduce or remove financial provisions from the balance sheet, thereby increasing return on investment. With over 20 years’ experience supporting the industrial, financial and public sectors, our awardwinning team advises on over 150 multi-asset, crossborder transactions each year. For more information, contact Nick Howard at nick_howard@urscorp.com or +44 (0) 161 237 6050.
URSCORP.EU
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Doing Business in the Isle of Man
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Editor’s comment
Contents
Normally when writing the August issues Editor’s letter, I find myself referring to summer holidays and company shut down’s but certainly not this month! Who would have thought that August 2011 would go down in history for not only the United States raising their debt celling but also the streets of the United Kingdom being brought to a stand still by rioters?
News
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Deal Guru
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Lead Mandate
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The US agreement means there will not be another fight over the debt limit until 2013, but more importantly where will the now AA + country make their cuts in public spending and how will it effect Global M&A? Only time will tell but Acquisition International’s Journalist, Robert Hearne explores the possibilities on page 4 of this issue. Across the water, widespread rioting, looting and arson occurred in the UK, first in several districts of London, then later across parts of England, from 6 to 10 August 2011. The riots have led to the countries’ Prime Minster, David Cameron appointing ‘Zero tolerance' U.S. cop Bill Bratton to help toughen up UK policy. The Prime Minster reportedly said in an interview that the riots were a huge event in the life of the nation and it’s definitely going to change things. Unfortunately the only changes seen so far are on the small business owners and the major corporation’s profit and loss sheets, begging the question, what damage has the riots done to the already weak UK economy? August also marks an exciting time for AI, a new website and the launch of the “Acquisition International 2011 Legal Awards.” In our first year, we have taken a fresh, honest and transparent approach to the awards selection process, so that an AI legal award reflects the ever changing legal landscape. You maybe a hard working Lawyer or possibly an accountant that worked on a deal with a great Lawyer or simply a CEO who appointed a life saving Lawyer who got the deal done! Who ever you maybe, please don’t forget to nominate and help define today’s legal landscape! www.acquisition-intl.com/new/index.php/awards Enjoy the issue! Charlotte Abbott, Editor charlotte.abbott@acquisition-intl.com
Crompton Greaves Acquires Sweden’s Emotron Group For €57.8m
Sector Spotlight International Business Crime Defence What’s in a Name? Forming Private Equity Funds The International Arbitrator Islamic Finance in a Global Economy Doing Business in the Isle of Man Rebuilding the Global Construction Industry Franchise Litigation and Franchising Disputes Review The New Order of Corporate Governance Designing Global Climate Regulation The Swiss Fund Industry The Property Litigator International Merger Control The New Era of Fund Administration International Merger Control Company Formations The Channel Islands Fund Industry Destination: Germany The Irish Fund Industry Managing Transfer Pricing Risks in M&A Transactions
Deal Diary
12 13 14 16 17 18 22 24 26 27 28 30 32 34 32 39 40 42 43 44 48
How to contact AI AI welcomes news and views from its readers. Correspondence should be sent to Acquisition International, Blakenhall Park, Barton under Needwood, Burton on Trent, DE13 8AJ. Telephone 0844 809 4788 or email reception@acquisition-intl.com. For more information visit www.acquisition-intl.com Production by Grapevine Print & Marketing Ltd. 01903 531 531.
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News
Weil appoints London Partner as Head of International Arbitration
Juliet Blanch Brings Extensive International Arbitration Experience to Her New Role International law firm Weil, Gotshal & Manges announced it has appointed London disputes partner Juliet Blanch as its head of international arbitration. Juliet, who joined the firm last year from the London office of McDermott, Will & Emery, has worked on arbitrations and commercial litigations across Europe for a wide range of clients. Barry Wolf, executive partner of Weil, commented on the appointment: "Juliet is very well regarded in the international arbitration community. She was the natural choice to run this group because of her extensive experience and her outstanding reputation." Weil's London managing partner, Michael Francies, added: "Arbitration is a global practice with a great deal of activity for multinational corporates across the main centers in Europe, Asia and the US. Juliet's experience in all three centers, particularly Asia, makes her an obvious choice to lead this important initiative." The event you can’t risk missing at GCU London. Recognised risk management expert Tony Blunden is to give a free masterclass next month at GCU London, providing a great chance to learn from a true industry expert. He is one of several high profile guest professors to be snapped up by the University – his inaugural lecture is one of a series of masterclasses aimed at showcasing the professors to a non-specialist audience.
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Hitting the ceiling “Late on Friday evening, Standards & Poor finally did what they had been talking of doing for months by downgrading US treasury bonds from the AAA status to AA+. Given that this is the first time the US has dropped from the highest status since 1917 when rating agencies began, we might have expected discussions in the media to have had a more apocalyptic tone. However, these are no ordinary times. Instead, discussion in the news media has treated this as just another piece of bad news in the financial world. We have become accustomed to such disastrous events over the past four years. Sad, no? S & P left no uncertainty as to where the blame lies for their decision, pointing the finger squarely and un-shakingly at the US Congress and politics in Washington. Referring to the political wrangling over the debt ceiling crisis a week earlier, S &P said they were “pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics.” Washington did what it always does when it gets criticized: send out its troops to the world’s media on mass to question and seek to undermine the reputation of S & P, answering nothing about the accusation levelled against them. The public might be rightly annoyed. We are tired of cheap mud-slinging and deeply concerned about our futures. We need answers. “S & P stated that the agreement reached in Washington to raise the debt ceiling did not go far enough in terms of its programme for cuts in government expenditure. They forecast that US debt to GDP ratio will increase from the historic high it is currently at of 74% to 79% in 2015, and to continue rising thereafter. If we look at the Congressional Budget Office’s own statistics we learn that the “cuts” will mean that over the next ten years, government spending will in fact increase by 7.5 trillion, and not by the 9.5 trillion expected prior to the debt ceiling debate. A 7.5 trillion increase is a 2 trillion “cut” in Washington double-speak. The truth is that the US government will continue to overspend, but this overspending involves less overspending than they previously expected to overspend. If that sounds
together and times it by 7.5. Feeling dizzy? Pull yourself together! “As we have seen by the sharp and consistent falls in shares on the stock markets across the world, everybody else seems to agree with the assessment of the S & P. Confidence in the US economy’s ability to repay its debts is low, as there is little faith that it can sustain the tax burdens placed upon it, of which debt interest is becoming increasingly unsustainable. Successive US governments have resorted to borrowing to pay for such things as social security, education and health. Take the so-called “fiscally conservative” Reagan administration which raised the debt ceiling 17 times, or the so-called “spend-thrift” George W. Bush administration, which raised it 7 times. The pattern has become all too familiar: the government spends more money than the economy is producing. The markets seem to be saying enough is enough. “So there is only one option, and that is for the US to reign in its profligate spending which has ballooned over the last three decades or so. Yearly trillion (that word again) dollar deficits look set to become the norm over the next decade by the Obama administration unless spending on entitlements can be drastically curtailed and taxes raised across the board. 60% of US government spending goes on wealth redistributions such as welfare and pensions, and not on productive investments such as education or infra-structure projects to help quicken economic activity. This will inevitably rise over the next thirty years as the baby boomers retire. Almost half of US voters pay no tax. Roughly half these non-taxpayers either earn too little or have sufficient deductions to offset their wages. The rest receive tax credits - they are given money for not producing anything of value to their fellow citizens or indeed anybody in the world. Oh boy. Is it any wonder that people are reluctant to invest in an economy that is so burdened? “On a lighter note there are still green shoots in the world economy. India and China are emerging fast and Brazil was upgraded another notch, whilst Colombia was upgraded to investment grade. Further, there is still plenty of liquidity in the US and Europe, but politics must work hard and fast to settle the legitimate concerns of the market. As for the US overspending, the Herbert Stein maxim is surely appropriate: “if something cannot go on forever, it will stop”. The questions are when and what will the fallout be given that the
confusing, just take from it one word: overspending. Actually, take another word from it too: trillion. Now put those two
world economy is so heavily intertwined with the US? Hold onto your hats folks!” Robert Hearne
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News
Investor Appetite for Indian M&A Trebles in First Half of 2011 Compared to 2010
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ndia experienced a significant trend reversal in cross border deals with activity shifting from outbound to inbound investment during the first half of 2011, according to research from leading financial and business advisor Grant Thornton UK LLP. In the first six months of this year foreign companies and their subsidiaries announced deals involving Indian targets with a total value of US$17.4 billion, more than three times that of the same period in 2010 (2010: $5.4bn). The average deal size also jumped in 2011 to $306m versus $123m in 2010 and $29m in 2009 for the period. "The interest from abroad in Indian
entities is only set to increase"; said Anuj Chande, Head of South Asia Group at Grant Thornton UK LLP, "with interest expected to come from South Korea and Russia as well as the regulars such as US, Europe and Japan. We see the opportunities within the infrastructure market and related sectors as substantial, with the government bringing in more private players and earmarking about US$1trillion to spend on the sector in coming years." In addition, the research showed that the private equity houses were particularly active in the first half of 2011 with deal values totaling in excess of $5bn, almost one and a half times the deal value and volume of H1 2010 and nearly three times the deal value
Emerging markets stock exchange M&A activity to accelerate The emerging markets will drive the next wave of transformational change and dealmaking in the exchanges sector. This is according to a new report by PwC, ‘Trading blocs – what next for the stock exchanges?’. The report suggests the most viable growth options for Western exchanges are to focus on developing post-trade clearing and settlement capabilities or fostering ties with emerging market players.
activity will be driven from the emerging markets as local exchanges seek growth opportunities outside their home markets.
High operating leverage and heightened competition have suppressed margins across the sector and will continue to provide a compelling economic rationale for consolidation. Much of the new competition in Europe has been enabled by regulatory changes, such as Europe’s Market in Financial Instruments Directive (MiFID), allowing new entrants with low-cost business models to seize market share.
In addition to serving local companies, Hong Kong and other leading Asian exchanges have already seen an increasing number of dual-listings from Western corporations keen to access the region’s growing capital bases. For example, the Asia Pacific region has seen significant growth in the value of share trading over the last decade, reporting a 20% rise in values between 2000 and 2010. In comparison, the Americas and EMEA region both saw a decline in values by 14% and 6%, respectively.
Shamshad Ali, partner at PwC, said: “Talk of an end to consolidation in the stock exchange sector may be largely true for the more mature Western European markets, but Asia and Latin America are likely to see significant M&A in the future - if regulatory hurdles can be overcome. “Over the next five years, significant M&A
“As economic growth in the emerging markets continues to outstrip the traditional markets, exchanges in Asia and Latin America have the obvious benefit of being positioned within the heart of this growth surge.”
Shamshad Ali, partner at PwC, said: “The difficulties encountered by bidders in several recent aborted mergers among Western exchanges have led to a number of businesses questioning their next move. Given the shift in global growth and associated capital flows, traditional
and volume of the corresponding period in 2009. A large proportion of PE activity remained focused on the real estate and infrastructure sector, however this was predominantly in large infrastructure projects such as airports, highways and roads as opposed to 2010, where it was primarily in the commercial and residential space. "Looking forward to the rest of the year and 2012, we could well see those private equity Institutions who started investing in 2006/2007 looking for opportunities to churn and some profitable exits, especially given the attractive valuations and growing global interest in the market"; commented Chande. H1 2011 witnessed 317 M&A deals with a combined value of $27bn against 385 deals with a total value of $29bn during the corresponding period in 2010.
exchanges cannot afford to ignore the dominant role the emerging markets are likely to play in the future exchanges landscape. They will need to look closely at different models to compete against, or collaborate with, their emerging market counterparts.” Despite strong growth predictions in the Asian region, a number of hurdles to M&A remain. Crucially, Asia is not a single market and. therefore, does not have a single regional regulator. It has therefore not developed the cross-border market liberalisation measures that would pave the way for more straightforward cross-border mergers. In addition, local considerations, such as constraints on foreign investment, are a crucial barrier to further intra-regional consolidation. Shamshad Ali, partner at PwC, said: “The big unanswered questions are how many major exchange groups can the markets support and how will regulators respond to increasing concentration in markets, some of which are fundamental to the economic success of the economy.” Top emerging market exchanges to watch: • Brazil • Hong Kong • Singapore • Shanghai • The merged Russian exchange
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The Deal Guru
The
DEAL
GURU Abdalla Hamed
Opportunities in Libya
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n the first of a new series, Acquisition International speaks to Dr. Abdalla Hamed, a financial expert about the war that has taken place between Gadhafi regime and Anti-Gadhafi’s protesters and the opportunities currently available in Libya.
Over the next six issues, Dr. Abdalla Hamed, a chartered accountant and General Manager of Consultancy House will elaborate and detail the current situation in Libya to give the corporate finance world a deeper understanding of the financial situation and obstacles that faces the country at this time. It will also identify current opportunities in the area and explore the possible solutions. Libya before 17th of February From 1st of September 1969 until 17th of February 2011, the country was controlled by Colonel Gaddafi who overthrew the royal government and established the republic of Libya. In the last five years or so, the second oldest son of Colonel Gaddafi, Dr. Safi Al Islam, start talking about the reform of Libya under a program named "The FUTURE of LIBYA" designed by Prof. Michael Porter with his Monitor Consulting Group and implemented by Dr. Mahmoud Jibreel, the Chairman of Economic Development Board before he joined the transitional council.
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Since then many changes have happened and many contracts have been signed with number of international firms in key sectors spanning housing, infrastructure and telecommunication, totaling 200 billion Libyan Dinar ($160 billion USD). The numbers of International firms working according to the Libyan Chamber of Commerce in 2010 were over 2000 companies from almost all over the world. Libya after 17th of Feb After 17th of February, and just few days after President of Egypt, Hussni Mubark, was forced to step down due to public pressure to end his regime, after the People of East Libya protested for the end of Gaddafi's regime in Libya. After confront between protesters and policemen, things went out of control and resulted in the burning of public buildings including police stations, courts and other government buildings. This resulted in the police leaving the streets for safety reasons allowing the thieves, who been freed from Jail by the help of their families and friends, to steel everything they can include foreign companies and their equipment. Few days after, A transitional council and local councils were created in the areas which were out of regime control try to store security and manage living obligations, Even though, other economical
and technical problem start to show up because of several reasons including the following : Inflations in the price and different in exchange rates Libya is a consumer market and heavily depends on the imported goods from overseas. Before the up rising, these imported goods used to be transported into one of the working sea ports in Libya. Now and after 17th of February, all ports (Except Benghazi's port sometimes) are closed; therefore, the only method is to use neighboring countries such as Egypt and Tunis. This has affected the price of goods and transportations costs, and short supply, imported goods have become very expensive in Libya, coupled with a falling exchange rate (Before 17th of February, £1 can be exchanged for 1.95 LYD, now £1 is about 2.80 LYD). Limited cash in banks During the un rest, people started to withdraw all there saving because of the insecurity situation, leaving a shortage of cash in Banks. Therefore, the bank have now applied a limit withdraw rule to control the shortage of cash. Now, and no matter what balance you have in your account, you are allowed to withdraw a maximum of 1000 LYD (about 600 USD) per month per account. These has created serious issues
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The Deal Guru
for companies as they still have to pay salaries and overheads, whilst being unable to use bank services such as overseas transfers and saving accounts.
resource. A savvy deal maker may be able to arrange with transitional council, local councils or local businessmen to deliver direct to distributors.
Limited financial resource to the transitional council With expensive imported goods and a cash shortage, the transitional council and its executive office (After the recognitions of 30 countries) have tried to meet the basic demands for foods, medicine and other basic life requirements. However, the limited resource of money and the difficulties of freeing the frozen Libyan money has to led to a situation where they are unable to meet their people demands.
Refurbishing and constructing: Refurbishing damaged buildings and construct new ones is another possible business opportunity, as the transitional council don’t have enough resources to deal with the daily life requirements, so will not be able to pay for the contractual work. There are number of solutions that can be done, one being, an agreement between the transitional council and the Libyan International fund, which has been created by number of countries. Another solution may be an arrangement between Tripoli's governments as they control most of the oil (if not all) or the transitional council could work with the international community or organizations, such as United Nation.
-Other issues: There are number of other issues that have affected the situation in Libya. Insecurity and damages of governmental buildings has driven many employees to stay home. Also many of the protesters/ fighters are not army officials, but civilians (Engineers, doctors and workers) who have left their work to fight, equaling to a shortage in the supply of labor in key institutions such as hospitals and schools. Current opportunities in Libya: The current situation in Libya has left companies with many business opportunities in the market, especially with limited competition and the exit of international companies in the market. Therefore, companies who are ready to take the risk will be able to take advantage of the current situation in Libya. Some of these opportunities are: Goods, Foods and medicines: The high demand and lack of supply of goods, foods and medicines has created an abundance of opportunities in these sectors. You may wonder why Libyan companies are not taking advantage of these hot opportunities. The key reason is the lack of cash from banks (as mentioned earlier) and that the Libyan government used to buy directly from producers, now the transitional council has failed to do so, because of the lack of time and financial
Hospital managements and equipment’s supply: Hospitals, like everything else in Libya has been burgled and vandalized whilst the country has been fighting and as mentioned earlier many doctors have left their career to fight, leaving hospital understaffed and ill equipped. Accounting and law firms: There is an opportunity for accounting and law firms in Libya’s current market to help companies that have experienced financial loss/ damages to start preparing for the court cases and compensation reports, a service that Consultancy House provides. These services include conducting an inventory of damages, stolen materials, equipment’s and preparing reports to send over to the authorities. We also prepare compensation reports and claim company’s loss due to the situation. Other opportunities: There are many other opportunities, over the next 5 months, Consultancy House will highlight and focus one key opportunity, so that fellow deal makers and advisers can take advantage of the opportunities in Libya.
Abdalla Hamed abdalla@consultancy-house.com www.consultancy-house.com 57-58-59 Al Fatah Tower, First floor, Tripoli, Libya Tel:+218 21 335 1246/7 Mobile: +218 91 381 2004
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Sector Talk
Healthcare and Pharmaceuticals
S
ince 2006, 10% of all buyout deals globally have been completed in the healthcare and pharmaceuticals sector, with this figure increasing to 13% of all deals in 2011 to date. The number and value of healthcare and pharmaceuticals deals has mirrored the overall buyout landscape, with high deal flow characterised by mega deals such as the acquisitions of HCA, Alliance Boots and Biomet in the boom-era of 2006-7, followed by a sharp dip in activity in the aftermath of the global financial crisis. While activity has picked up from 2010 onwards, the aggregate value of deals is still a long way off boom-era levels. Interestingly, buyout deal-flow currently stands at $22.4bn from 195 healthcare and pharmaceuticals buyouts in 2011 to date, already surpassing the value of deals in this sector in the whole of 2010, which witnessed $20.6bn worth of deals completed. The largest healthcare and pharmaceuticals deal in 2011 to date is the announced $6.3bn acquisition of Kinetic Concepts by Apax
Partners, CPP Investment Board, and the Public Sector Pension Investment Board. This deal represents the largest buyout across any sector in the post-Lehman landscape. In relation to deals by region, the majority of deal-flow has traditionally been focused on North America-based companies, with transactions in the region accounting for approximately two-thirds of all healthcare and pharmaceuticals deals since 2006. Additionally, of the 10 largest healthcare and pharmaceuticals deals since 2006, eight are North American-based. European deals have accounted for 28% of private equity-backed buyouts in this sector since 2006; however, in 2011 to date only 23% of healthcare and pharmaceuticals deals have been based in Europe. The Asia and Rest of World region has represented 9% of healthcare and pharmaceuticals deals since 2006, yet only represents 4% of the aggregate value of deals in the sector during this time period, with larger deals typically limited to the more established North America and Europe regions.
Number of Healthcare & Pharmaceutical Buyout Deals by Region: 2006 - 2011 YTD
Aggregate Value of Healthcare & Pharmaceuticals Buyout Deals by Region: 2006 - 2011 YTD ($bn)
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Sector Talk
Proportion of Healthcare & Pharmaceuticals Buyout Deals by Region: 2006 - 2011 YTD
10 Largest Healthcare & Pharmaceuticals Buyout Deals: 2006 - 2011 YTD
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Lead Mandate
Crompton Greaves
Acquires Sweden’s Emotron Group For €57.8m A
vantha group’s engineering firm Crompton Greaves (CG) ltd recently acquired Sweden-based Emotron group for an enterprise value of € 57.8m, marking their 9th acquisition in last seven years. The deal was financed by a mix of debt and equity, with the latter portion being dug out of internal accruals. Acquisition International speaks to CG’s CFO Madhav Acharya about how the deal has now completed the Company’s Industrial Systems portfolio. CG, India's leading manufacturer of electrical equipment manufacturing in India with a diverse portfolio of products viz. transformers, switchgears, motors, and also consumer products like Fans, Appliances, Pumps, etc has acquired over the last seven years, Pauwels (2005) Ganz (2006), Microsol (2007), Sonomatra (2008), MSE power system (2008), Power Technology Solutions (2010), three business units of Nelco namely Traction Electronics, Drives and SCADA (2010), QEI Inc. (2011)and Emotron (2011), resulting in a strong presence in the western European market, especially in
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Germany and Benelux region. Emotron is a power electronics and engineering company, engaged in manufacturing of variable speed drives, soft starters, shaft power monitors and customised products, and providing project solutions Madhav comments: “With the Emotron acquisition CG has taken a big step by building capability for a global presence in offering comprehensive energy saving solutions with latest power electronics technology. “With rising energy costs and a global focus on energy efficiency, low Carbon emissions coupled with global legislations for energy efficiency it is expected to catapult the global market for VFDs from 10Bn USD in 2010 to USD 16 Bn till 2014. “This acquisition completes the Industrial systems portfolio for CG in terms of product offerings and this was one of the key reasons to pursue this deal.
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Lead Mandate
“The integration process is already underway between Emotron and CG, which is an essential key success factor in any combination exercise. Madhav Acharya Madhav.acharya@cgglobal.com www.cgglobal.com 6th floor, CG House, Dr. Annie Besant Road, Worli, Mumbai – 400030, India Tel: +91 - 22 - 24237751
“Continuity of management always plays a crucial role in achieving desired results and alignment of systems and processes that best suit both the businesses, so the existing Emotron management will be retained and supported by the existing management of the Industrial systems business group.” What will this deal mean for customers and suppliers of the business? What changes will they see? “Since the Emotron Drives can be coupled with the motors manufactured in India, CG will be able to offer an integrated solution to its industrial business customers. Till now, these products were bought from other players and combined with own offering of motors. Now, the full offering will be manufactured by CG. Suppliers may also witness higher demand in terms of volumes due to the addition of new markets for sales.” What other synergies do you foresee from the transaction? “CG already has its operations based in Europe & offers variety of motors and generators for Industrial markets. With this combination, both companies are expected to substantially gain and become a major force to reckon with in the Global VFD/ Industrial Motors market. “This acquisition also enables CG to offer integrated solutions along with its profound application domain knowledge of motors in India. Present market for VFDs in India is
estimated to be USD 400 Mn & is likely to grow rapidly with industry focusing on green products. This acquisition fills the gap in the automation solutions space for CG’s Industrial business.” Are you looking for further acquisitions and if as so are they in the same or a different sector? “CG’s Industrial systems portfolio is complete with the acquisition of Emotron. However, given an opportunity that meaningfully enhances our scale and scope, we will always be interested. Today, CG has a solid Balance sheet and may look to leverage it in the future for strategic acquisitions. “There are also a few gaps in the Power and consumer businesses and we may look at both cross border and domestic acquisitions in those spaces also.” How will you assess whether the deal has been a success when you look back in one year's time? “CG is looking to significantly scale up revenues from this acquisition with an equitable distribution between Distributors, OEMs and System Integrators.” On a lighter note, what is the best piece of advice given to you? “Success is a direct consequence of companies' improved management of the M&A process, from target selection and pricing, to due diligence to implementation. In the future, this learning curve will certainly continue. So, while gaining competitive advantage through M&As is now a legitimate business strategy for growth, long-term success will depend on increasingly sophisticated M&A capability.”
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International Business Crime Defence
International Business Crime Defence T
he global recession has placed businesses throughout the world in environments conducive to fraud, corruption and financial crime. Acquisition International speaks to Jeremy Summers, Partner Business Crime and Regulation, Russell Jones & Walker London about International Business Crime Defence.
“From landmark cases such as Maxwell through to negotiating the first ever civil recovery order with the SFO on behalf of Balfour Beatty in 2008, our Business Crime & Regulation team have over 25 years of practical experience defending individuals and companies involved in regulatory investigations and prosecutions. “ How severe is the problem of business crime in your jurisdiction? “The UK is acknowledged as one of the preeminent global financial centres. The profile and opportunities that presents will equally provide temptation for those who wish to seek improper financial reward. “Fraud is believed to cost the UK up to £50 billion annually and the problem cannot therefore be underestimated. “However the regulatory and enforcement regimes in place in the UK are amongst the most sophisticated anywhere in the world and, generally financial crime and in particular corruption is not viewed as being endemic as may be the case in other parts of the world.
Jeremy Summers j.summers@rjw.co.uk www.rjw.co.uk/businesscrime
“However the confiscation regime that will almost inevitably apply post any conviction, is arguably more draconian that in the US. In particular the Courts have frequently adopted a very wide approach to the “benefit” that a criminal can be said to have obtained from his or her criminal conduct often going far beyond any sum that he or she may ultimately have received. One example was a client I represented who had allowed her money exchange to be used to launder drug trafficking money. The business handled almost £10 million in tainted funds of which she received not much more than £100,000. The law enable the Courts to take the £10 million or at the very least as much of that sum as her assets could repay. “Equally the UK’s money laundering regime itself is tougher that any other. An executive who learns of a contract that was tainted by corruption, albeit not through any wrongdoing on his part, but then allows his company to receive the sums due under the contract would be liable to conviction for one of the principle money laundering offences prescribed by The Proceeds of Crime Act 2002. This carries a maximum sentence of `14 years whereas the person responsible for the corruption itself would only face 7 years (increased to 10 under the Bribery Act 2010).”
“As always however the fraudster is constantly evolving tactics most obviously in the use and abuse of IT systems. The challenge for the authorities here as elsewhere is to keep up with the pace of change.
What are your predictions for the future of business crime defence within your jurisdiction? “The Bribery Act 2010 was intended to, and undoubtedly will, change the face of UK corporate responsibility. Whilst it is not expected that there will be a significant number of prosecutions under the Act there will be some if only to “discourage the others”. No company facing the risk of an unlimited fine, confiscation of profits and possible indefinite debarment will want to be doing the discouraging.
“The problem confronting the UK at present, in particular against the backdrop of severe cuts in public spending, is whether the authorities will be left with sufficient resources to provide for the effective detection and prosecution of business crime.
“As such there will be work associated with putting in place appropriate compliance systems to ensure that companies have in place adequate procedures to avoid liability for the corporate offence of failing to prevent bribery which is brought in by the Act.
“The Serious Fraud Office, whose very future was until recently uncertain, is supposedly the UK’s lead enforcement agency in this area. However it has already suffered significant budget cuts and it remains to be seen whether this in itself may have fatally compromised its effectiveness. Certainly a number of senior personnel have left in recent months and that level of expertise will not easily be replaced.”
“The fact of the offence itself represents a sea change in British corporate criminal liability and no business can sensibly ignore the risks that this offence now poses.
How strict are the penalties in your jurisdiction for the companies who are found guilty? “In comparison to the US, British sanctions for white collar crime appear notably lenient. Relevant offences, for example under the Fraud Act 2006 or the Bribery Act 2010 carry a maximum sentence of 10 years so well below the 150 years imposed on Bernie Madoff.
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“The Act may also prompt (and again that is the intention) greater self reporting of potential wrong doing in an attempt to avoid or mitigate the sanctions that might follow. This similarly is an area that could reasonable lead to increased work for suitably experienced lawyers in this field. “As already indicated the unknown factors hanging over the area are what will is there to properly enforce the law, who will be asked to do so and will they be given sufficient resource to enable the task to be undertaken properly and effectively.”
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What’s in a Name?
What’s in a Name? M
any of the world’s most successful companies rely on their trademarks to make them visible in the marketplace. The best trademarks are instantly recognizable and conjure up in the minds of existing or potential customers things like quality, dependability, or at the very least the source of the goods or services on offer. Companies spend copious amounts of time and money developing trademarks and creating widespread demand; they are extremely valuable assets and they pose difficult valuation problems when buying and selling a business. Acquisition International speaks to Jonathan Wyness, a registered UK and EU Trade Mark Attorney and Senior Partner at MW Trade Marks Ltd, 4 Bloomsbury Square, London, WC1A 2RP. “We specialise in the protection and maintenance of trade mark portfolios in the UK, throughout Europe and beyond. “Our clients vary from sole traders and startups to large multinational brand owners. All our clients use trade marks and recognise the need to clear them for use and then to register them as a precursor to using or licensing them. “MW Trade Marks Ltd has an enviable reputation for providing proactive; commercially driven advice at competitive rates (please refer to our website for a selection of testimonials from some of our clients). We are large enough to be able to handle big projects and portfolios but small enough to give a personal and tailored service. “Our overheads are low, so we can pass on these savings to our clients and we offer a free initial consultation to all new clients at which we review your business and help you to develop a strategy for protecting your intellectual property that fits your budget.” What is the process of developing and registering a trademark? “First, the client comes to us with some ideas for a new trade mark. We will help narrow them down to those which are inherently registrable (as opposed to descriptive). Then we will search the register in the UK (and other countries of interest to the client’s business) to ascertain whether the
same or similar mark has already been registered for the same or similar goods or services. “If we can clear the mark for the client’s use, we will then apply to register it using the most cost-effective strategy for the countries concerned. The application process can throw up oppositions and objections which we navigate around before the mark becomes registered. The trade mark law and procedure, as well as costs, vary from country to country but there is a system for registering a mark throughout the EU by filing only one application and a cost saving route for registering a mark in over 80 of the major markets (further details available on request).” How does a company protect its brand from third party infringement? “Registering the brand is the most important step for protecting a brand from infringement. Trying to stop an infringer when you don’t have a registration can be a much more expensive, uncertain and time consuming process. Once a mark is registered most infringers will stop when put on notice of these statutory rights. If they don’t, the next step would be to file a claim at the courts. Again, most infringers will capitulate when they are served notice of the claim.” How is brand equity achieved and what methods do you use to determine its worth? “Brand equity is built up through sustained and consistent use of a mark on products or services of stable quality and strong demand. A rigorous approach to the selection, registration and enforcement of the brand is vital to ensure that the brand equity is not diluted by competing and similar brands. Patent, design and copyright protection can also play a part in helping a business to build equity and exclusivity in a brand. Determining a brand’s wealth is something we have experience with. We work closely with a specialist brand valuation company, Brand Finance Limited – www.brandfinance.com. There is now an ISO standard to govern the process of brand valuation and this includes the legal aspects of brand protection.” What does a Trademark adviser bring to the deal table? “We bring buying, selling, merging or licensing with a business will include an assessment of the
value of the brand(s). The value of the brand is related to the scope of its protection. A business which uses a mark which was not cleared for use and which has not been protected could be at risk of being forced to change the brand and all the cost, legal and rebranding issues that involves. “ So ensuring that a business is built on strong trade marks which have been cleared and registered in the relevant markets and for the correct categories of goods or services is essential. A good trade mark advisor will carry out this due diligence. It is also essential to ensure a smooth transfer of the title to the trade marks and this is again something which a trade mark advisor can take care of. The information which this advisor provides can be an important bargaining tool in the deal negotiations. Holes in the protection could help drive down the price for a business, franchise or license.” As cross border deals increase and the world’smarketsinterminglethroughonline mediums, what are the major trademark pitfalls that a company must address when implementing their trademark across international boundaries? “Brand owners can sometimes be slow to search and register their brands overseas. They can even find themselves selling over the internet into other countries when they have not checked the trade mark position there. This can lead to problems when the trade mark turns out to already be taken in some overseas markets (and it is not uncommon for competitors or trade mark hijackers to seize the opportunity to poach a mark from under a client’s nose). So brand owners need to plan ahead, seek trade mark advice early and to put down their markers with searches and applications in current and target markets. It can be far more expensive to buy back your mark or to rebrand than it is to put in place a good trade mark protection strategy early on.”
Jon Wyness jon@mwtrademarks.com www.mwtrademarks.com 4 Bloomsbury Square. WC1A 2RP Tel: + 44 (0) 207 745 7377 Fax: + 44 (0) 207 760 7078
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Forming Private Equity Funds Mark van Dam
Forming Private Equity Funds
Marco de Lignie
Mark van Dam T: +31 20 5785 460 E: mark.van.dam@loyensloeff.com Marco de Lignie T: +31 20 5785 605 E: marco.de.lignie@loyensloeff.com www.loyensloeff.com
W
hether you are a new or an experienced manager, the process of forming a private equity fund is complex. From the moment an appropriate management vehicle is formed to establishing a tax-efficient fund structure, it is always necessary to seek advice from a formation expert. Acquisition International spoke to Mark van Dam and Marco de Lignie, partners in the Investment Management practice group of Loyens & Loeff in the Netherlands. Loyens & Loeff’s Investment Management practice group consists of 5 partners in the Netherlands, 2 in Luxembourg, and in total about 50 associates. Marco de Lignie, tax lawyer, specialises in all tax aspects of fund formation and carried interest structuring and frequently acts as tax counsel in buyout and venture capital transactions. He also acts as tax counsel in M&A, corporate restructuring, and structured finance transactions, with special focus on US, UK, and Dutch multinational groups. Mark van Dam, attorney, specialises in investment management and particularly private equity fund formation. He has particular experience in international private equity fund formation. Can you please explain the Private Equity fund formation process and the role you play within it? “We act for both fund general partners and sponsors and investors. When acting as counsel to the general partner, we advise on fund terms and structure from a legal and commercial perspective based on our market knowledge. We draft all legal documentation and assist our client in drafting other marketing materials such as the private placement memorandum. We invest in ensuring that our knowledge of market terms is up to date with a database of all funds we have either formed or reviewed.” Can you please describe the laws and regulations that govern the formation of a private equity funds in your jurisdiction? “Apart from general corporate law for legal entities and the partnership laws for partnerships, and tax law, as it currently stands, there is no specific regulatory or other regime applicable to private equity funds which therefore are unregulated if they meet the requirements of certain exemptions which are easily met. However, with AIFMD
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(Alternative Investment Fund Managers directive) this will change and AIFMD as a result is expected to have a relatively significant impact on the Netherlands as it will require many managers to obtain a license, where they currently do not have any regulatory authorization.” “In the Netherlands, the corporate law (book 2 of the civil code) and our partnership law are proposed to be changed considerably in the near future which, in respect of the corporate law, will make the use of corporate vehicles more attractive as the corporate law will become more flexible than it currently is.” Who is a typical investor? Which sectors are currently attracting investment in your jurisdiction? “Typical investors we see are (i) international fund of funds and institutional fund managers, (ii) international pension funds and endowment (iii) Dutch pension funds, (iv) family offices (particularly Dutch) and (v) other institutional investors (including the EIF, EIB and EBRD). “In our jurisdiction, investments are in all sectors, including buy out, special situations, venture, real estate and infrastructure, although buy out is probably strongest and attractiveness of funds varies considerably per manager and its track record.” “We recently formed H2 Equity Partners IV, a special situations fund of EUR 400 million in commitments. The file is noteworthy because the fund was oversubscribed and it provides evidence - as are many other funds - that Dutch fund structures for Dutch managers are marketable and internationally accepted.” What gives you an advantage over local and global competitors in your areas of expertise? "Our strength is (i) our knowledge of market terms, (ii) the combination of our tax expertise with corporate law and regulatory law, which is unmatched by any Benelux law firm, (iii) our track record of both local and international funds (iv) and our resulting knowledge of both international and national investors issues and demands. To respond to our client’s needs we have – compared to other firms – the largest team in the Benelux, which allows us both the breadth and the depth of expertise required for all the investment management work."
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Forming Private Equity Funds
their management fees as well as the succession plans that are in place. Investors are also focused on a manager's deal flow capability and projected investment pace.” Julian Ashworth Partner T: +1 345 914 6360 E: julian.ashworth@walkersglobal.com www.walkersglobal.com
A
cquisition International speaks to Julian Ashworth, partner in the Investment Funds Group with Walkers in the Cayman Islands, who primarily focuses on private equity matters.
Walkers offers unmatched experience in the private equity fund marketplace acting for almost seventy percent of the world’s largest and most successful private equity houses. The firm advises upon the formation of funds and alternative investment vehicles and all aspects of the transactions undertaken by them. This includes advice on general partner, management, fund raising and carry structures, secured lending, due diligence, mergers and acquisitions and IPOs and other exit strategies. What are some of the current trends you have recognised regarding PE fund formation activity and what issues are of concern to investors? “We have seen a notable increase in the number of fund launches amid an improved rebound globally in fund formation activity, particularly in the emerging markets. Fund sizes are more modest as fundraising remains challenging. The key issues currently dominating investors' attention are due diligence, both at the commitment phase and with regard to portfolio investments, while advisory committees remain in prominence. Investors are keen to understand how managers are deploying
“We have noticed a trend towards more specialist funds in recent times with less fund exposure to global macro events. Latin America and Asia have featured particularly among the emerging markets with infrastructure and agriculture funds in Brazil and real estate, biopharma and life sciences popular in China. In the more traditional markets we have seen growing interest in mezzanine finance funds, commodity based investments and venture capital funds in bio sciences and life sciences, as well as growing interest in the energy and natural resources sectors in, for example, Canada.” “There has been debate as to the significance of the Institutional Limited Partners Association's revised investment guidelines released in January 2011. The guiding principles of alignment of interest, governance and transparency have been broadly endorsed. Several of the specifics, however, such as waterfall mechanics, GP clawbacks and advisory committee powers remain contentious because they are seen as inflexible and even impractical in certain circumstances. As a result, the guidelines appear to be evolving into a platform for GPinvestor negotiations rather than an industry checklist. A particular fund's final specifics will generally be bespoke and ultimately shaped by the outcome of GP-investor negotiations. Can you please define and highlight the primary tax obligations regarding private equity fund formation in your jurisdiction? “There is currently no direct corporate taxation in the Cayman Islands. In addition, Cayman-domiciled investment vehicles are able to apply for a tax exemption undertaking for a period of up to 50 years (in the case of exempted limited partnerships) with effect that from such date, no law thereafter enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to that partnership or to any partner in respect of that partnership.”
available in your jurisdiction? What are the primary advantages and disadvantages of each fund and how do investment objectives differ? “The vast majority of Cayman-domiciled private equity funds are organised as an exempted limited partnership which may be formed for any lawful purpose. As such, there are no impediments to the objectives which a Cayman-domiciled PE fund may pursue.” Can you please describe the laws and regulations that govern the formation of a private equity funds in your jurisdiction? “There are a broad range of laws which are applicable to Cayman-domiciled vehicles. The private sector is currently working with Government to update and revise our laws. In a partnership context, one of the anticipated consequences is that the applicable law will defer more generally, and within appropriate limits, to the commercial terms agreed by the GP and investors in a partnership agreement. We expect these revisions will provide both sponsors and investors with further benefit and greater certainty in structuring a fund vehicle in the Cayman Islands.” Do you have any predictions regarding PE fund formation activity within both your jurisdiction and from a global perspective? “From an offshore perspective, we are seeing increased demand for Cayman-domiciled products. We expect this demand to continue given the Cayman Islands' willingness to embrace the requirements of new onshore regulatory regimes (particularly in the US and Europe), coupled with its reputation as a jurisdiction which evolves to meet the needs of a dynamic industry and is underpinned by robust and transparent regulatory, AML and tax information exchange regimes.”
What are the different types of PE funds
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The International Arbitrator
The
International Arbitrator B
usinesses all over the world are increasingly turning towards ADR mechanisms such as arbitration to settle disputes, moving away from the traditional approach of litigation via the courts. Arbitration is time-saving, confidential and cost-effective; it has become a vital means of protecting commercial interests. Acquisition International speaks to Claudia Hutina, senior partner at Drakopoulos Law Firm about international arbitration. Drakopoulos Law Firm has been involved in different cases, covering a complete range of litigations at all levels of national and international civil and administrative judicial review bodies, before arbitration courts and tribunals. “Our law firm represents predominantly large multinationals in the field of Food & Beverage, Health and Medical, Real Estate & Construction, Energy and Environment, Information Technology, Telecommunications, Banking & Capital Markets; the governmental organizations were not in our area of interest so far. “In terms of successful recent arbitration cases, I would mention the case involving a prejudice of multimillion EUR, judged by the Court of Arbitration in Cluj, the object thereof being the construction and restoration of a public market in Romania. It would also be worth mentioning that we have obtained excellent results in several disputes before the National Council for Solving Complaints in Public Procurement matters. What makes you the right arbitrator? “Accumulated professional experience as litigator in different areas of law are essential for understanding by contrast the avenues for alternative dispute resolution especially if supplemented by an interest in appreciating the root of the problem in each dispute combined with the highest motivation for achieving the most fair result in the circumstances.”
“The arbitrations we have handled were primarily based on the UNCITRAL Model Law and the WIPO rules for arbitration (UDRP Rules).” How have advances in technology changed the way you work? “The impact of new technology is felt in every field and arbitration has taken advantage of technological progress as well. Thus, in Romania, for example, the new Code of Civil Procedure which regulates arbitration and is scheduled to enter into force on October 1st, 2011, provides for the arbitration procedure the possibility to use electronic means of communication so as to allow for an expeditious settlement of the cases.” Although still considered a less expensive means of dispute resolution, there is growing concern that arbitration proceedings are becoming more costly both in time and money, what are your thoughts? “Even if arbitration continues to be viewed as a positive alternative to the state’s jurisdiction we consider that the small number of practitioners in this field will generate a gap which will soon start to form between the demand for and offer of this type of services and such gap might lead to cost increases. How has the global downturn impacted both the type and the volume of work in your jurisdiction? “A first effect of the global downturn has been the increase in the number of litigations and, on what business law is concerned, it has been ascertained that traders pay more attention to the review of business documents and this has led to an increase volume of work. It has been noted as well that there is a stronger tendency towards introducing the arbitration clause especially in agreements with high stakes involved or when international partners have a legal training in ADR.”
What experiences do you posses in terms of international disputes and the laws of different nations? “We have been involved in many cases in different jurisdictions; there are notable cases that we have successfully defended, as a recent one judged by the ICC Paris against Deutsche Telekom for a multifaceted issue involving several procedural and jurisdictional aspects including conflict of laws issues, and a case before the Arbitration and Mediation Center – WIPO, for example, by recovering on behalf of our client, Career Builder LLC, a domain name registered in bad faith by a third party.”
Claudia Hutina chutina@drakopoulos-law.com www.drakopoulos-law.com
Which major institutions’ rules have you handled arbitration under?
7 David Praporgescu, District 2, 020965, Bucharest, Romania
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Islamic Finance in a Global Economy
Islamic Finance in a Global Economy W
ith over 430 banking institutions spread over 75 countries, Islamic finance has grown at an unprecedented rate. It has found its place in the global banking industry and experts believe that now, more than ever, there is a market for non Muslims who share in the values embraced in Islamic economics. It’s certainly a significant time for the industry; having survived the global financial crisis the world is watching to gauge the effect of the recent political and social unrest in the Middle East and North Africa, one of the key financial hubs for the sector. Acquisition International speaks to Hamid Yunis, a senior partner at Taylor Wessing, who heads a number of initiatives within Taylor Wessing including its Islamic Finance Group and, from London, its Middle East Regional Practice. Taylor Wessing’s Islamic Finance group’s expertise is wide ranging, and covers both international and domestic UK transactions. The areas they specialise in are: (a) Real Estate Investment and Development: using many different techniques, e.g. Murabaha (including commodity and reverse structures), Ijara and Tawarruq. (b) Financing Generally. (c) Funds (Investment and Private Equity/ Real Estate Funds): The firm has acted on a number of private equity and investment funds including the use of Musharaka and Mudaraba structures. (d) Consultancy Advice. (e) Capital Markets: Taylor Wessing has provided detailed capital markets advice in particular in relation to Sukuk issues. (f) Derivatives: Taylor Wessing has also provided advice in relation to certain derivative products using the Arboun and Salaam structures.
Please summarise the primary statutes and regulations that govern Islamic finance? Who and how are these laws enforced? “This is a difficult question to answer because the primary statutes and regulations will depend on which jurisdiction you are talking about and where and how one is operating. “For instance, in the UK, the government has recently passed legislation (primarily tax legislation) with a view to creating a level playing field for property transactions. In other countries, Islamic law is enshrined in the constitution (i.e. Pakistan, Sudan and Saudi Arabia) and in other markets; dual regulations apply (i.e. UAE).”
capital has been introduced into many different forms of transactions ranging from real estate developments and investment through to purchasers of businesses and private equity. That capital has increasingly originated from Islamic jurisdictions.” What factors have driven the appetite for Islamic Finance over the last few years? Is this trend set to continue? “We think that there will be a growth in Islamic finance over the coming years but that growth will not be at the same velocity as was the case in the early to mid 2000s. “The growth will slow down and there will be a consolidation of the market. However, innovation will still be introduced but not at the same speed that it was previously.”
What are the primary differentiators between Islamic and westernised finance? “The obvious differentiator between Islamic and westernised finance is on the following principles: • interest should not be payable; • the transaction should not be speculative; • there needs to be certainty on the underlying asset; and • there needs to be a clear risk apportionment which prevents one party being in a more beneficial position than the other. “To that extent, there is also a move towards a “back to basics” banking type approach which is commensurate with what is happening in the conventional markets.”
Hamid Yunis – Senior Partner Tel: +44 (0)20 7300 4088 Fax: +44 (0)20 7438 0614 Mobile: +44 (0)7901 518 139
What impact has Islamic finance had on cross border growth opportunities in your jurisdiction? Please use examples to highlight your answer. “There has been an increase in the use of Islamic finance on cross border transactions.
h.yunis@taylorwessing.com www.taylorwessing.com Taylor Wessing LLP 5 New Street Square London EC4A 3TW
“In our main jurisdiction, which is the UK,
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Offshore Series
Doing Business in the
Isle of Man Over recent years the region has actively diversified its economy to ensure continuing prosperity and growth and in spite of the global downturn, it has held on to its AAA credit rating. Acquisition international speaks to the islands experts…
K
PMG LLC is a member firm of KPMG International and has representation in most International Financial Services Centres and has been established in the Isle of Man for over 35 years. Russell Kelly is a Director of KPMG LLC in the Isle of Man, responsible for Transaction Services. Knox House Trust Limited is an independent, privately owned Trust and Corporate Service Provider that was created in early 2011. Anthony Page, Director, Knox House Trust Limited.
What factors are attracting companies and wealthy individuals to the Isle of Man? What are the key benefits of locating here? Russell Kelly: “Key attractions of the Isle of Man are the taxation regime and legal system that is based on English law. This is supported by high quality professional services and a world class telecoms infrastructure, together with very good links to the UK and a good quality of life.” Anthony Page: “The Isle of Man is an established international finance centre, with a secure base built on political stability, low taxation and a firmly established fiscal and regulatory environment independent of the UK.” In reference to your area of expertise, how do local laws in
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your jurisdiction differ with those of other offshore financial centres? Anthony Page: “The Isle of Man is continually striving to ensure it remains at the forefront of the offshore financial services industry and the island’s Government and Regulators take a proactive approach towards encouraging inward investment and economic growth for the Island.” What is the primary challenges facing clients in your jurisdiction today? How have you adapted your services to meet these needs? Russell Kelly: “In the M&A sector the issue very much surround the availability of new finance and the continued availability of existing finance. This puts a greater focus on performing work on working capital forecasts and also on business reviews for banks. These factors are in addition to continued pressure on costs and trying to maximize revenues.” Anthony Page: “Due to the Island’s competitive tax system, the Isle of Man is under constant scrutiny from the UK and further afield. The island is triple ‘A’ rated with both Standard & Poor’s and Moody’s and has developed excellent working relationships with international bodies such as OECD, FATF and IMF. The Island continues to work with these organisations to lead the way in terms of achieving an appropriate balance of a business-friendly
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Offshore Series
James Cunningham-Davis james@cavendishtrust.com www.cavendishtrust.com 31-37 North Quay Douglas, Isle of Man, IM1 4LB Tel: +44 1624 679000
environment whilst taking account of international standards of financial supervision.”
diversified via the Shipping & Yacht Registry, the Aircraft Registry and the space and satellite industry.
What code of ethics do you adhere to and who regulates them? Has the region been under pressure to adhere to international regulation? Anthony Page: “Knox House Trust Limited is fully licensed by the Isle of Man Financial Supervision Commission (“the FSC”) and the FSC is committed to applying international standards of regulation and supervision across all areas of regulated activity.”
The Isle of Man continues to be recognized across the world as a wellregulated high-quality financial centre offering innovative products and a wide range of business solutions. What factors have driven this? Russell Kelly: “This has been driven by a well regulated environment and a pragmatic and open approach from the government that has demanded the highest levels of regulatory regime be in place.”
What steps over recent years has the Isle of Man taken to actively diversify its economy to ensure continuing prosperity and growth in spite of the global downturn? Anthony Page: The Isle of Man Government has been very keen to ensure that there is not an over reliance on the finance industry and has successfully
What are your predictions for the future of the Isle of Man as a leading offshore destination? Russell Kelly: “I think that the Isle of Man has some challenges ahead both domestically and internationally, but will continue to work at diversifying the economy, whilst maintaining a high standard of regulatory and legal infrastructure.
Russell Kelly russellkelly@kpmg.co.im www.kpmg.co.im Tel: +44 1624 681000
Anthony Page Anthony@khtlimited.com www.khtlimited.com Knox House, 16-18 Finch Road, Douglas, Isle of Man IM1 2PT. Tel: +44 1624 631710
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ngela Martin Moran is Managing Director of The Hive Creative Services and is the Creative Director responsible for the creative development and overview of all client material.
Founded in 2000, The Hive CS quickly established a less prescriptive method of bringing highly creative and bespoke marketing to SME's and International Corporations. From day one we have been at the forefront of sustainable and environmental business issues, achieving cost and material savings by working for clients who have strong sustainability values. What are the key benefits of locating here? Having relatively recently relocated to the Isle of Man, we are in a unique position to remember why and how we arrived here. Using a Corporate Service Provider for our life and company relocation helped hugely in setting up our business with all its legal requirements being met. It also helped us integrate more easily into the business community with introductions from the Isle of Man Business Centre and Business Incubator. At every stage we were encouraged to relocate and succeed. As The Hive is in a non-geographical sensitive industry, we relocated to the Isle of Man purely for new business opportunities, tax benefits but above all the island lifestyle. The Isle of Man is a stunning place to live and work. The people are more approachable and reachable than in big cities and business is done without fuss. Any pressure felt is what you apply to yourself. It is an island that gives you all the help you need to be a success and really is a gem in the Irish sea.
What steps over recent years has the Isle of Man taken to actively diversify its economy to ensure continuing prosperity and growth in spite of the global downturn? The IOM Government seem able to successfully tap into the next big thing when it comes to diversification. The island offers huge benefits to the film industry, space industry and e-gaming sector growth with several international main players having their head offices based in the IOM. What are your predictions for the future of the Isle of Man as a leading offshore destination? “Personally, I believe it will grow into 'the' major player in the business location world. There really are only benefits of being here with your business. Help is always at hand, if you need information there is always someone there to assist. I can honestly say I have not once felt like a number whilst being here. Access all areas.”
Angela Martin Moran angela@thehive.uk.com www.thehive.uk.com 2 Bay View Apartments, Bay View Road, Port Erin, Isle of Man IM9 6LF Tel: 01624 830 789 Tel: 0844 579 6986 Skype: thehivecs
Blue Sea International has been established to provide a professional, efficient and flexible fund administration service to clients globally. We are an independent company and able to offer flexibility that our larger competitors may only aspire to. This benefits clients as we are able to provide a bespoke service to each of their individual needs. Blue Sea International offers a full range of services including the establishment of collective investment schemes and their management, administration, shareholder services, accounting and valuation. Blue Sea International provides a full range of services, including: Formation - advice on structuring, review and comment on all fund documentation, provide assistance with authorisation and with the selection of auditors, project manage the launch of the fund. Valuations and Accounting - pricing of portfolios, calculation of NAVs and share/unit prices, fund accounting, placing hedging and foreign exchange transactions, verifying trade information, calculation, collection and payment of expenses and income, preparation of financial statements, reconciliation of stocks and cash, performance fee calculation. Investor Services - client transaction processing, due diligence and KYC, settlement and registration, reconciliation and control, shareholder and intermediary maintenance and reporting, processing of distributions, payment of commissions, entry/exit fee calculations. Company Secretarial Services - maintenance of corporate records, convening board and shareholders meetings, drafting and circulation of board minutes and resolutions, execution of corporate documents, resolutions, statutory corporate filings and returns. Blue Sea International Limited 31-37 North Quay, Douglas, Isle of Man, British Isles IM1 4LB T: +44 (1)624 627247 F: +44 (1)624 627248 www.bluesea.co.im Blue Sea International Limited is licensed by the Isle of Man Financial Supervision Commission.
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Thinking beyond tomorrow
Hawksford International is a leading independent wealth structuring company with the expertise, experience and resource to create and manage structures that withstand the challenges of today's demanding global environment. Working closely with our private and commercial clients and their advisors, we thrive on the challenges that building and administering sophisticated, effective structures bring.
Preserving & Enhancing Wealth
Trusts & Alternative Structures Investment Funds Managed Trust Companies Family Office Probate & Wills Employee Solutions
www.hawksford.com Hawksford International 15 Esplanade St Helier Jersey JE1 1RB Channel Islands Telephone: +44 (0)1534 740182 Email: Rebecca.Stannard@hawksford.com Hawksford International is the Registered Business Name of Hawksford Trust Company Jersey Limited which is regulated by the Jersey Financial Services Commission.
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Rebuilding the Global Construction Industry
Rebuilding the Global Construction Industry
T
he construction and engineering industry is emerging from what has been the worst global recession in decades but many firms, having repositioned their business during the downturn have become leaner, stronger and more strategic than ever before, in fact, KPMG’s 2010 Global Construction Survey found most firms to have a somewhat bullish outlook towards recovery in 2011. Acquisition International speaks to the experts... David Bateson is Partner-in-Charge, Mallesons Stephen Jaques, Hong Kong. “We are one of the leading law firms in Hong Kong in construction and also one of the largest. In our construction department, we currently have 3 partners and 15 associates. We do both front end (drafting and preparation of construction contracts) and construction disputes, but the majority of our work is in disputes. Apart from construction, we handle corporate and banking.
“We are currently working on the largest construction arbitration in Hong Kong, in relation to a major Hong Kong infrastructure project. We have just completed an arbitration in Hong Kong concerning a major infrastructure project in the Philippines. We are also advising contractors on tenders for major projects in Hong Kong, mainly on the new Mass Transit Railway work, and on power projects in China and Vietnam. We are currently also doing an arbitration in Dubai, against the Dubai Government. Building Business The Hong Kong construction industry has been in the doldrums in the past several years, with primarily private building projects supporting the industry. However, since the global financial crisis, the Hong Kong Government has been pushing through many major infrastructure projects, some of which have already commenced. As such, construction activity is expected to be high over the next few years. “Also, given the high real estate prices in Hong Kong, the Government may consider building more public housing as part of the cooling measures on housing prices.
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“Traditionally, the building and construction industry is not one which attract investors in Hong Kong. If there is any M&A activity, it is usually the acquisition of a specialised or high-tech area of contracting by an established contractor. “If anything, any M&A activity will likely to be in the specialised or high-tech areas. There has not been a great change in using environmentally friendly materials, nor any substantial increase in “green” buildings - it depends on the building owner on a case by case basis. For most building owners in the private sector, the bottom line would be cost. The Government would need to lead any “green” initiatives.” Public Sector “Public sector purses have not tightened in China and Hong Kong. On the contrary, China announced a stimulus programme of RMB4 trillion, a large portion of which would be spent on infrastructure projects including the high speed rail. In Hong Kong, the Government is similarly pushing through many major infrastructure projects, including many rail and road projects, and the HK-Macau-Zhuhai Bridge. “Over the next 12 months the labour and construction professionals are likely to be in demand in Hong Kong over the next few years, and there will be a need for labour and professionals from overseas.”
David Bateson david.bateson@mallesons.com www.mallesons.com T +852 3443 1018 F +852 3443 1299 13/F, Gloucester Tower, The Landmark, 15 Queen's Road Central Central, Hong Kong
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Rebuilding the Global Constructio Industry
V
ictor Constantinescu is Head of Real Estate and Construction Law Practice at BirisGoran SCPA, a Romanian law firm and one of the leading firms for real estate projects on the Romanian market. “Our firm can offer advice on the full life-cycle of a real estate investment: tax structuring, due diligence and acquisition, financing, development and construction management, regulatory matters, leasing and ultimate exit, as well as litigation. “We advised on largest build-to-suit industrial facility in Romania for 2011. Specifically, we advised the owners of Timisoara Airport Park in a long-term lease for an industrial build-to-suit facility for French auto parts giant Valeo. This is a landmark transaction in the area set to create dozens of jobs. We also advised the sellers in the largest office transaction for 2011, the sale of Astoria Business Center to Bluehouse Capital. The above are some of the 2011 transactions, among many others. How has the building and construction industry re positioned itself over the last 18 months? Has there been more new housing build starts or has the planning process eased to assist in speeding up the recovery? “The industry is far more cautious. The speculative investments during Romania’s boom period of 2005 to 2008, when anyone would build an office or shopping mall, although the economics or location would not support the decision, are all gone. The construction industry now has to focus on bidding for quality, build-tosuit facilities with sound commercial footing. Essentially, we are seeing a return to basics.
“Many players are trying to re-position themselves for infrastructure projects. Substantial sums of money have been earmarked by the EU for Romania to build motorways and update aging infrastructure. Thus, there are numerous opportunities in this field. “We have not seen any bursts of housing activity or revisions to the planning process.” Which building and construction sectors are currently attracting investors and why? “Build-to-suit facilities, primarily in the logistics and retail market, are attracting investors because they make the most commercial sense. Investors want stability and leading tenants can deliver that in the form of long-term leases and appropriate guarantees. If the project has sound commercial mechanics, it will attract investment. “Other sectors include infrastructure, particularly motorways/municipal roads, but also water networks, updating aging energy plants, etc. With EU funding available, upcoming elections, and increasing realization that investments will come only if the infrastructure is available, these sectors are seeing increased activity. “Energy projects – renewables, etc. -- are also attracting considerable attention. This is a market that is also set to expand considerably.” What are your predictions regarding building and construction in Romania over the next 12 months? “Romania is a large market and one of the few countries in Europe that took a number of necessary austerity measures. While this has led
Victor N. Constantinescu vconstantinescu@birisgoran.ro wwww.birisgoran.ro 77 Emanoil Porumbaru Street, RO-011424, Bucharest - Romania Tel: +40 21 260 0710
94, boulevard Flandrin 75116 PARIS, FRANCE Tel. + 33 1 56 26 00 40 Fax + 33 1 56 26 50 21 e-mail : avocats@frilet.com the country to climb slowly out of the recession, there is still a “disconnect” between expectations of buyers and sellers, i.e., buyers are complaining that seller expectations are too high and land prices are making projects nonfeasible. Banks’ real estate portfolio’s and financing are also still in limbo, with few meaningful foreclosures that observers had hoped would bring a required adjustment of expectations. As such, the number of transactions pales in comparison to other countries in the region. “With that being said, however, an adjustment is occurring and transactions are beginning to take place again. But investors are taking a harder look at the fundamentals: the numbers, the legal and technical due diligence, and wider market trends. With this maturization of the market, I am optimistic to see an increased number of projects reaching fruition. Romania is too big of a market to ignore.”
Ms. Miho Niunoya Senior Partner Fukoku Seimei Bldg. (Reception: 12F) 2-2-2 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011 Japan Tel: +81-(0)3-5501-1163 Email: miho.niuyona@aplaw.jp Web: www.aplaw.jp I am Miho Niunoya, a senior partner of the Japanese law firm, Atsumi & Sakai. Atsumi & Sakai is the first independent Japanese law firm to create a foreign law joint venture, which permits us to advise on the laws of Japan, England, New York, California, Ohio, the PRC, Germany and the State of Victoria (Australia). We have been involved in many PFI (Private Finance Initiative) projects, including the first water supply plant PFI project in Japan. In Japan, the construction industry reached a peak in 1992 and has been declining since then; being half the peak level in 2010. In order to revive the construction industry, the government has stated its policy to facilitate the restructuring and consolidation of small size construction companies, to stimulate the commencement of PFI and PPP (Public Private Partnership) projects in which construction companies can be involved and to promote the sale of construction expertise overseas. The March 11 earthquake and tsunami in Japan had an obvious impact on construction
business and low levels of activity characterized the first half of 2011. However, the industry is recovering and it has been estimated that 44 trillion yen will be invested in the construction industry in 2011; a 7.3% increase on 2010. In addition, on May 24, 2011, the new PFI law was enacted and introduced, among other things, a flexible system to accept proposals from the private sector with regards to PFI/PPP projects and a concession system which should stimulate the use of PFI/PPP in Japan. Implementation of the new PFI Law is expected to be completed by the end of November 2011. The government has stated that it will use PFI and PPP structures much more actively and that the target figure for PFI/PPP projects during the next 11 years is 10 trillion yen; roughly twice the volume of PFI/PPP projects commenced in the previous 11 years. Given the government’s stated policy to increase the use of PFI/PPP projects and the rebuilding required to recover from the earthquake and tsunami, it is expected that the construction industry will become much more active this year and in 2012.
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Franchise Litigation and Franchising Disputes Review
Franchise Litigation and Franchising Disputes Review G
eoff Shaw leads the Cassels Brock commercial litigation department where the main focus of his practice is franchise litigation. A few of his notable cases include acting for a number of franchisors to successfully restrict departing franchisees from doing franchise business in a restricted geographical region contrary to their non-competition covenants and defending franchisors in class proceedings. The Cassels Brock Franchise Law Group ensures its clients understand the legal issues and fundamental aspects of franchising and related distributions models. “Our dedicated practice group is recognized across Canada and around the world for its extensive practical experience in all facets of franchising, from local start-up to international expansion. “We regularly represent clients buying and selling one or more individual franchises, up to and including whole franchise systems, as well as others who service the franchise sector such as the major banks. “Our franchise lawyers have expertise in every sector of franchising including entertainment; restaurant; fast food; retail; and service.” How does your firm stand out from competitors in terms of the services you offer? “Cassels Brock is a recognized leader in Canadian franchising. We have represented over 250 franchise systems from around the globe. Our lawyers and our group are recognized internationally by peers and industry publications as being among the best. Cassels Brock was named the top
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regional law firm acting for the defense in class action cases by a national newspaper in an article entitled "Class actions: A High Stakes Game with Growing Potential."
“A key step that should be taken is considering a multi-faceted approach to the avoidance and resolution of disputes before they turn into litigious matters.”
Why are franchise agreements so complex? “Franchise agreements are complex because there is a need for a Franchisor to retain discretion as to the future conduct of a franchisee. This discretion is important because it maintains the goodwill that a Franchisor has in its brand and products. In order to maintain discretion, terms are drafted into Franchise agreements that attempt to forecast future contingencies and issues and then predict how they will be governed. This adds complexity to the document.
Positive or negative, what are your predictions for the future of franchise law within your jurisdiction? “Franchise Regulation is here to stay in Canada. Relationship laws that set out disclosure obligations at the Franchise acquisition stage and good faith obligations over the operational life time of the relationship exist in almost half of the provinces in Canada. There are more to come. The day when a Franchisor can hop scotch through the legal requirements on its own are long over. Yet Franchising remains a growing method of doing business in Canada and it continues to be an excellent way for innovators and entrepreneurs to get their ideas and product to market and beyond. At Cassels Brock, we serve a vital function in allowing Franchisors to establish business and resolve disputes in Canada.”
“Franchise agreements are also complex because of the degree of regulation that is present in Canada over Franchising.” What is the most common point of the agreement that the franchisee/ franchisor fall out upon? “The most common areas of dispute arise when there are differences of opinion between a franchisor and a franchisee as to how the franchisor’s discretion to control matters is to be carried out. This occurs in terms of financial matters such as royalties and the costs of supplies. It also occurs in operation issues and renewal of franchises. “Other areas of concern and dispute arise from encroachment, ad fund use and internet sales.”
Geoffrey B. Shaw gshaw@casselsbrock.com www.casselsbrock.com Tel: 416-869-5982
What steps can the franchisor/franchise take to avoid disputes in the future?
Scotia Plaza, 40 King Street West, Toronto, ON M5H 3C2
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Franchise Litigation and Franchising Disputes Review
Russell Ford law@owenwhite.com www.owenwhite.com Tel: 01753 876800 Fax: 01753 876876 Senate House, 62 - 70 Bath Road Slough, Berkshire SL1 3SR
R
ussell Ford is a solicitor and partner in Owen White, a leading UK law firm specialising in franchising. Russell has advised franchisors and franchisees since 1993. He acts predominantly for franchisors in pursuing claims for damages against exfranchisees, seeking injunctions to enforce post termination restrictive covenants, and in defending group actions. He has obtained somewhere in excess of 60 injunctions against ex-franchisees who have attempted to set up in competition, use the trademarks, or retain customer databases and telephone numbers. Russell has also acted for group actions of franchisees and has been involved in two of the leading franchise cases in recent years namely, Peart Stevenson Associates v Holland (2008) and MGB Printing & Design Limited v Kall Kwik UK Limited (2010).
Germany & in Austria PF&P RECHTSANWÄLTEBüro Gasteig: Bärnbichl 11A-6382 Gasteig/Kirchdorf i.T. Tel: +43 (0) 5352 617 53 21 flohr@pfp-legal.de www.pfp-legal.de Partnerschaft, Ulm - AG Ulm, PR 29 Sitz: Hörvelsinger Weg 51, 89081 Ulm
“Most franchise agreements last for a period of at least 5 years. It is Russell’s view that tensions can arise in the relationship particularly after 2 years and in networks where franchisees pay a percentage of their turnover as a management services fee. Many franchisees initially pay a relatively low amount of money for management support but receive a great deal of attention from their franchisor as they learn the ropes. After 2 years some franchisees need less care and attention or arrogantly believe they understand the system well enough to go it alone. But as their businesses grow
they pay an increasing amount of money for management services. This can lead to a sense of discontent amongst franchisees who wrongly feel that they are better off without the franchisor and want to carry on running the business without the restrictions of the agreement. “Because of the unequal nature of the franchise relationship and the franchisees acquisition of skills and local goodwill as they build their businesses, franchising tends to attract litigation. What is crucial in reducing conflict is for franchisors to build a brand which has a value itself which franchisees recognise, to continue to provide management support to successful franchisees who have been trading for some time and to deliver a careful and clear message at the outset of the relationship. Franchisees should know that the franchisor initially subsidises them in terms of the amount of time and support provided for the income received. The franchisee should appreciate that as they become more successful they may need less support but they will be paying more for it. If they take that message on board before they have become franchisees then it reduces the likelihood of tension at the 2 year stage. “Owen White have built a substantial client base of franchisors by providing a very cost effective service. We are ranked by Chambers Guide to the Profession in the top half dozen firms in the UK but our charges are probably amongst the lowest of that top six. We provide a partner led service which is very responsive to client needs and is results driven.”
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The New Order of Corporate Governance
Jesús Humberto Medina-Alva jhmedina@central-law.com honduras.central-law.com 1ª Calle entre 9ª y 10ª Avenidas, N.O. Edificio Nova Prisa segundo nivel local 26. PO BOX 10 , San Pedro Sula,Honduras
The New Order of Corporate Governance
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ince the onset of the global financial crisis corporate governance has gone through a series of significant changes. Legislation and regulations have been introduced around the world as governments and policy makers try to make efforts to right some of the wrongs that led us into recession. Acquisition International speaks to Jesús Humberto Medina, Presiding partner and Head of the Banking and Corporate Team at CENTRAL LAW Honduras -Medina, Rosenthal & Fernández about the new order of Corporate Goverance. “My practice is devoted largely to complex transactions, corporate and finance legal advisory in Central America and Dominican Republic (M&A, Syndicated and Securing loans, Contracts, Trusts; Tax compliance reviews, tax audits, due diligences and tax litigation). I have in-depth knowledge of labor, immigration, and intellectual property law and of the regional foreign investment legislation derived from local laws and international treaties such as DR CAFTA. “A typical client is a businessman who wishes to set up a corporation to develop his business. We advise not only about the corporation itself but also about intellectual property rights and tax issues, which are also relevant when forming a new business.” What are the Primary sources of law, regulation and practice concerning corporate governance in Honduras? “Corporation source of law is the Code of Commerce No. 73, 1950 (enacted by National Congress); Banks and financial Institutions source of law is the Financial System Law Decree 129- 2004 (enacted by National Congress) and Financial System Resolution Nº 300, March 15th 2005 (enacted by Insurance and Banking National Commission);
How do the regulatory authorities enforce these laws and regulations? And how do their regulatory authorities supervise them? “The National Commission of Banks & Insurance enforces all financial institutions and insurance companies. “Though banks and insurance companies have their own laws and agreements, banks and insurance companies are built under a corporation structure, which is based in the structure, stipulated in the Commercial Code.” Can you please define and explain the rights and relationships of shareholders in your jurisdiction? And who has more power and voting rights, the shareholder or the board? “The Shareholders exercise their power through Shareholders Assemblies. The assemblies are the SUPREME government organs. It expresses the collective will of the company. Through ordinary assemblies it appoints and removes managers and commissary, discusses and approves balance, determinates emoluments (remuneration) for managers and commissaries when it is not stipulated in the bylaws. In extraordinary assembly it modifies bylaws and authorizes the issuance of bonds and obligations. “Shareholders that represent at least the 25% of the company´s shares may ask managers or commissaries for a Shareholder´s General Assembly to discuss the matters they deem pertinent. If managers or commissaries don´t call for that assembly within 15 days after receiving the petition, the shareholders may request it to a Judge.
Tel: +(504) 2550-2155 +(504) 2550-2800
of profits have not been properly addressed. If managers or commissaries don´t call for an assembly, within 15 days after receiving the petition, then the shareholder may request it to a Judge. “Shareholders that represent at least 25% of the represented shares in an assembly may ask to postpone for three days the vote of any matter that they consider not being sufficiently informed in an assembly. This right can be exercised only once per subject. “The management organ (Single Administrator or Board of Directors) must comply with the resolutions of the Assemblies. “The Commissary exercises the legal overview of the company and must also see that the shareholders rights are protected. “Shareholders may require meetings of shareholders to be convened, resolutions to be put to shareholders against the wishes of the board or the board to circulate statements by dissident shareholders.” Have you seen any evidence in your jurisdiction of an overall shift towards responsibility by the board and corporate control? “Corporate control limits the power of the board. The Board cannot do what they wish and they must comply with the corporate control and regulations when making any decision.”
“Insurance and Reinsurances companies source of law is their own law enacted by the
“Nevertheless, a shareholder of a single share may ask for a shareholders´ general assembly when these have not been called for two consecutive periods; or, if in the actual
How important is corporate disclosure and transparency in today’s corporate society? “Corporate disclosure and transparency are very important in today´s corporate society. It encourages and facilitates business between companies and with banks. It ensures that the company is protected from
Insurance and Banking National Commission, companies must have their own Corporate Governance Rules.”
assemblies, matters regarding balance discussion and approval, appointment of managers and commissaries and distribution
those minor members who have different thoughts or interests that are against those of the company.”
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Designing Global Climate Regulation
Designing Global Climate Regulation
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limate change law has developed so quickly and now merits its own practice area in many of the world’s major law firms. The law and its regulation have expanded as countries adopt domestic and international laws to reduce greenhouse gas emissions by shifting to less carbon-intensive industries and cleaner methods of production. Effective regulation is complex and involves a wide range of bodies from governments to environmental authorities all around the world. Acquisition International speaks to Olyana Gordiyenko, counsel at Baker & McKenzie – CIS, Limited, Kyiv (Ukraine) who is responsible for legal support of the projects on climate change and renewable energy about designing global climate regulation. “Weareafullservicefirmwithaccesstospecialist teams, including tax, antitrust, finance and other supportingpracticeareacapabilities,whichmaybe of importance in this particular area. Our typical client is a multinational company expanding its business to the emerging markets, including Ukraine, and major Ukrainian enterprises, which aim to develop their business in line with the international best practices.” What are the primary domestic laws enforced in your jurisdiction to reduce greenhouse gas emissions? “Inthebeginningof201oUkraineannouncedits commitment to the greenhouse gas emissions reductionby20percentby2020andby50percent by 2050 from the total CO2 emission emitted in 1990, provided that the international project (for instance,jointimplementationprojects)andmarket (for instance, emissions trading) mechanisms are in existence. According to the State Environmental Investment Agency (the responsible governmental agency),Ukraineisreadytoconsiderandcommitto higher percentages of the reductions in case if the Ukrainian economy is given an access to financial and technological resources for implementation of low-carbon energy-efficient technologies. However, Ukrainian law does not currently set forth a target reduction on CO2 emissions for the
industryandthesteelsectortobeachievedbyeither 2012 or any other commitment period.” What international agreements are currently in play between the leading countries of the world? “Ukraine is party to the United Nations Framework Convention on Climate Change (the “UN Convention”) dated 9 May 1992 (ratified by Ukraine on 29 October 1996) and Kyoto Protocol dated 11 December 1997 (ratified by Ukraine on 4 February 2004). Furthermore, Ukraine is party to the Vienna Convention for the Protection of the Ozone Layer dated 22 March 1985 and its Montreal Protocol on Substances that Deplete the Ozone Layer; the Convention on Long-Range Transboundary Air Pollution dated 13 November 1979 and some of the Protocols thereto (Protocol on the Reduction of Sulphur Emissions or their Transboundary Fluxes by at least 30 per cent, dated 8 July 1985, Protocol concerning the Control of Nitrogen Oxides or their Transboundary Fluxes, dated 31 October 1988; Protocol concerning the Control of Emissions of Volatile Organic Compounds or their TransboundaryFluxesdated18November1991,in particular). Separately,Ukrainesignedanumberofregional andbilateralagreementsregardingecologicalsafety and climate change with different states and organizations, e.g., Agreement on Cooperation in the Area of Ecology and Environment Protection dated 8 February 1992 (CIS), the Framework Agreement between the Government of Ukraine and NEFCO dated 17 September 2009.” What policies / incentives are currently beingusedtopromotelesscarbon-intensive industries and cleaner methods of production? “Ukrainian renewable resources potential is not utilized in full yet. At present a share of the renewableenergysources(RES)isonly0.8%ofthe total energy consumption in Ukraine. The most developed ones are wind and small hydro installations. In2006thegovernmentofUkraineadoptedthe Energy Strategy of Ukraine until 2030, which
Olyana Gordiyenko Olyana.Gordiyenko@bakermckenzie.com www.bakermckenzie.com Renaissance Business Center, 24 Vorovskoho St., Kyiv 01054, Ukraine Tel: +380 44 590 01 01
identifies the development of the RES as a main factor for strengthening the energy security and as theimportantobjectiveforcountervailingtheglobal climate changes. The Energy Strategy establishes theindicatorsforutilizationoftherenewableenergy sources(basicscenario)in2010-3,842tce,in2020 - 12,054 tce and in 2030 - 35,53 tce. Toachievethistarget,in2008afavourablegeedin-tariff system (so called “green tariff”) has been established in Ukraine, which applies for purchase ofelectricityproducedbyrenewableenergysources producers until 1 January 2030. Thelevelofthegreentariffissetatdifferentlevels fordifferentcategoriesofrenewableenergysources, andisexpressedintermsoftheretailelectricityprice for class 2 customers, or the peak hour retail electricitypriceforclass2customers(forthree-zone tariff classification), which was effective on 1st January 2009 multiplied by a green tariff factor. To receive green tariff all renewable energy producers must sell their output in the Wholesale Market(WEM)ofUkraine.TheWEMofUkraineis currently based on the Single Buyer Model, therefore selling energy on the WEM meansselling it to the Wholesale Buyer/ Wholesale Supplier – EnergomarketStateEnterprise.Forthis,generators mustobtainagenerationlicense(issuedbyNERC), sign the Wholesale Electricity Market Members’ Agreement – WEMMA (the multi-party contract which specifies the rules of trades and settlement), andconcludeanelectricitypurchase-saleagreement with Energomarket (template contract, approved by NERC). Legislationregulatingthetechnicalrequirements for the operation of RES-E generation is not well developed in Ukraine yet. The construction of a power plant requires a significant number of approvals by different state agencies and municipalities, including permit for land use, permit for construction, environmental permits etc. Technical requirements for any renewable energyinstallationinUkraineareestablishedbythe Rules for technical exploitation of electrical plants and networks.”
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The Swiss Fund Industry
Daniel Häfele daniel.haefele@acolin.ch www.acolin.ch Stadelhoferstrasse 18, 8001 Zürich Tel: +41 44 396 96 93
Christian Ballabio christian.ballabio@fidinam.ch www.fidinam.ch Via Maggio 1, 6900 Lugano (Switzerland) Tel: +41 91 973 13 43
Philippe Bens philippe.bens@caceis.com www.caceis.com Chemin de Precossy 7-9 CH-1260 Nyon / VDSuisse Tel: +41 22 360 94 47
The Swiss Fund Industry
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witzerland plays a prominent role in the international fund business and according to the Swiss Funds Association; volumes in the fund business are almost back to pre-crisis levels. The country is extremely well positioned with regard to asset management and a lot of work has gone into promoting the country as a location for funds, largely revolving around key initiatives such as “white money”, CISA, KID and AIFM. Acquisition International speaks to the experts. Fidinam & Partners SA is part of the Fidinam Group, the largest privately held consulting company based in the Italian speaking part of Switzerland. Christian Ballabio is the managing partner and CEO of Fidinam & Partners SA, Lugano. ACOLIN founded 2006 is an independent fund distribution service provider, FINMA regulated as legal representative of foreign funds in Switzerland, currently representing 25 management companies. ACOLIN with offices in Zurich, Luxemburg and London is currently operating in 6 European countries. Daniel Haefele is Chairman and CEO of ACOLIN Fund Services AG.
CACEIS has a long history of working with asset manager clients based in Switzerland via its Luxembourg subsidiary. However, in 2006, the CACEIS group took the opportunity to acquire Switzerland's leading third party fund administrator, today known as CACEIS Fastnet (Suisse).This local presence not only served to extend the group's coverage in the most important global fund markets, but also enabled us to better serve local clients in terms of market insight, product design and relationship management. CACEIS Fastnet (Suisse) is also proud to have been the administrator of the first Real Estate Sicav in Switzerland. Philippe Bens is Managing Director or CACEIS Fastnet (Suisse), the Swiss subsidiary of the international asset servicing group, CACEIS and is Head of Regional Coverage for the Swiss market. What gives you an advantage over competitors in your particular area of expertise? Philippe Bens: Aside from the obvious benefits of working with a
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provider that is present across Europe, the US and Asia, CACEIS Fastnet (Suisse) has a major advantage over competitors in terms of the IT systems its services rely on. The CACEIS Group has been keen to spread best practices and tools throughout its organisation and there has been a strong impetus to provide uniformity in our services wherever they are delivered. For this reason, CACEIS Fastnet (Suisse) clients benefit from the Sunguard GP3 platform which enables us to handle all the servicing needs of complex investment products, calculate risk ratios and VaR and monitor performance aspects closely through performance attribution reports. “The competitive advantage these systems give us as well as our clients have enabled us to maintain our long-standing position as Switzerland's premier Real Estate administrator on terms of assets.” Daniel Haefele: “With more than 600 asset managers, offering collective investments in Switzerland, the market is principally saturated. Therefore access to distribution is key for our international clients like Barclays Capital, Macquarie or Hermes, ACOLIN is the only legal representative in Switzerland offering instant access to a readymade distribution network to more than 300 banks, (800 in Europe), substantially shortening time to market, cutting related cost and supporting their marketing efforts. Please describe a typical client and explain how their demands have changed since the onset of the downturn? Christian Ballabio: “Due to the financial situation in the most European countries and the strong real estate market, there is an increasing interest on initiatives with focus on direct holding of real estate properties. In this case the collective investment schemes are taxed with special rules, ending-up with very interesting effective tax rates. Philippe Bens: Typical CACEIS Fastnet (Suisse) clients are asset management companies or branches of leading private banks such as Banque Privée Edmond de Rothschild or La Banque Bonhôte & Cie. These two clients manage Real Estate funds for which we handle all
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The Swiss Fund Industry
administrative aspects. Since the crisis, we have seen clients far more concerned with the security of the services we provide. For instance, we know that the robust nature of the GP3 Real Estate platform is appreciated by our clients. We have also noted that clients' due diligence processes on our Real Estate services have become far more detailed and focus heavily on security. Another aspect for which we have seen increased interest since the crisis is our capabilities in terms of reporting and budgeting, which enable clients to keep a close eye on the portfolio at all times. Please summarise the primary laws and regulations that govern the fund industry in Switzerland? Daniel Haefele: “Fundbusiness in Switzerland is organized according to the Federal Act on Collective Investment Schemes (Collective Investment Schemes Act) [CISA], the Ordinance on Collective Investment Schemes (Collective Investment Schemes Ordinance) [CISO] and the FINMA Ordinance on Collective Investment Schemes (CISO-FINMA).” Who regulates funds in your jurisdiction? Is there a code of ethics to adhere to? Philippe Bens: “The fund industry in Switzerland is regulated by FINMA, the Swiss Financial Market Supervisory Authority which does have its own code of conduct, but has recognised the Swiss Fund Association's self-regulation regime as a minimum standard. “The SFA's self-regulation measures comprise the Code of Conduct for the Swiss Fund Industry, which is actually the core component of the self-regulation regime, as well as supplementary guidelines relating to clearly defined individual functions, and model documents for the management and distribution of collective investment schemes.
management and administration of collective investment schemes, the investment of the assets of a collective investment scheme, communication with investors and distribution. “It also gives more specific guidance on duties required by law, such as due diligence, duty of loyalty and duty of disclosure. “There are also "Guidelines for Real Estate Funds" which tie real estate funds more closely into the SFA's self-regulation regime, over and above the terms of the Code of Conduct. The guidelines attach particular significance to the accurate valuation of properties - a key quality criterion for real estate funds. “With its special information factsheet "Key Data for Real Estate Funds", the SFA seeks to ensure that investors are given standardised, comparable information, thus contributing to the highest possible degree of transparency with regard to the product offering on the Swiss fund market. “ How interesting is the taxation of collective investment schemes in Switzerland? Christian Ballabio: “With respect to taxation, contractual funds, SICAVs and limited partnerships for collective investment are treated as being transparent and do not constitute an independent taxable entity in their own right (exeption in case of direct real estate property). Assets and income are only taxed directly at the level of the investor on the basis of the provisions applicable in the investor's tax domicile. In Switzerland the same rules apply -as far as possible - as in the case of investments in other securities. For investors resident in Switzerland, the respective cantonal tax laws must also be observed.
deemed to be non-transparent and are subject to tax in their own right. Being likened to “other legal entities”, collective investment schemes with direct property ownership are taxed as legal entities, but with reduced tax rates. “Given that collective investment schemes with direct property ownership are already taxed, there is no taxation at the level of the investor. From a tax point of view, neither income nor assets from collective investment schemes with direct property ownership are assigned to the individual investors. For this reason, no withholding tax is charged on the distribution of income from direct property holdings. “Provided that the total income exceeds the income from direct property ownership, the income from units in collective investment schemes is taxable. The difference in value between the total net assets of a collective investment scheme and that of its direct property holdings is also assessed for tax. In this regard, the same tax rules apply as for collective investment schemes without property ownership. The same applies for wealth tax.” How have key incentives such as “white money”, CISA, KID and AIFM driven volumes in the fund business back to pre-crisis levels? Daniel Haefele: “Swiss wealth and asset management industry is forced by the new regulations to continuously increase professionalism and quality of services to an even higher level as already internationally recognized for.”
“In addition to this, within the area of voluntary self-regulation, the SFA issues specialist recommendations and information as well as guides and checklists.
“In case of collective investment schemes with direct property ownership, the collective investment scheme is recorded in the land register as the owner (in case of contractual funds, the fund management company is entered with reference to the
What are your predictions regarding funds and regulation in Switzerland for the rest of the year, for example the proposals for the detailed rules underlying the Alternative Investment Fund Managers Directive? Daniel Haefele: “Until the end of the year, Swiss Government and regulators will present an entirely new set of more stringent regulations, adapting to
“The Code of Conduct covers the main functions of the fund business such as the
connection with the real estate fund). From a tax perspective, collective investment schemes with direct property ownership are
international regulations, such as AIFMD and UCITS V. New private placement rules will drastically reduce market access.”
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The Property Litigator.
The Property Litigator D
isputes in the acquisition, management and disposal of all types of property are extremely common and litigation is an unavoidable reality in today’s property landscape. The recent uncertain economic times have created fresh challenges for all those who own, occupy or deal with both commercial and residential property and there have been some interesting developments in property case law arising out of the recession. Acquisition International speaks to Lara Nyman, Senior Associate solicitor with CKFT and head of the Property Litigation Department about today’s property market. CKFT has always had a strong client base within property litigation. Lara Nyman acts for a broad spectrum of clients ranging from property developers, financial institutions, administrators, insolvency practitioners, asset managers as well as high net worth individuals and Trusts with their own property portfolios. The firm continued to act on a number of high profile cases over the last year and has had a several contested High Court trials including four Court of Appeal whilst others have settled at mediation on favourable terms. What are the most common types of property dispute leading to litigation? “In our experience the most common type of serious property disputes involve landlords and tenants. On the whole we act for landlords seeking to protect the assets and ensure that the investment generates the income stream permitted under the lease, whether it is commercial, residential or mixed use premises. Typically, landlords seek to ensure that tenants comply with the obligations set out in the lease and seek to enforce breaches of covenants such as user, alienation and repair as well as recovering arrears of rent and service charge. “Equally where we act for tenants, our experience is that whilst there are deals to be done, tenants will defend unsubstantiated claims rigorously. Tenants are also keen to ensure that landlords are held accountable for their covenants particularly in the case of disrepair. “Another highly litigious area within property litigation is
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Lara Nyman lnyman@ckft.com www.ckft.com 25 - 26 Hampstead High Street, London NW3 1QA Tel: 0207 317 7279 (DDI) Tel: 0207 431 7262 (Switchboard)
neighbour disputes such as boundary issues, party wall matters, trespass, easements and rights of way, which applies to both commercial and residential property. “Professional negligence claims and construction disputes are also often contentious because of the role of the insurers. Unless matters settle during the pre-action protocol stage, they often result in litigation settling at a late stage of the proceedings and more often then not, after mediation.” How has the global downturn impacted both the type and the volume of work in your jurisdiction? “In view of the firm’s client base, we continue to provide sound legal advice on a variety of matters concerning residential, commercial and mixed used premises and the quality of such instructions has not been affected by the current economic climate. To the contrary, our property litigation work continues to grow and we believe this is largely attributable to the service provided by CKFT. “In addition to acting for corporate clients, over the last year we have acted for a significant number of high net worth individuals on matters ranging from breach of covenant, adverse possession, rights of way, trespass and/or nuisance, enfranchisement and rights of first refusal, dilapidation claims, service charge disputes and other management issues. “The expectation is that this level of high quality property litigation will continue during the forthcoming year and we are already seeing this in the number of new instructions received for both existing and new clientele.” Have you worked on any cases that involved rent review disputes? “CKFT has been engaged on several reported cases concerning dilapidations, rights of light, professional negligence claims involving property professionals and estate agency claims. CKFT continues to provide a wide range of property litigation advice to its clientele in respect of substantial property portfolios including enforcement of lease covenants, service charge disputes, rent reviews, fraud, breach of planning, second renewals to name but a few.
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The Property Litigator.
A
cquisition International speaks to Dev Desai, Senior Solicitor at McGrigors LLP about today’s property landscape.
“Our property litigation team provides services to everyone from multinationals to ambitious SMEs and high net worth individuals. We act for landlords, tenants, developers and occupiers in connection with disputes arising out of both commercial property and high value residential property. “As part of a mulit-national and multipractice firm, we are also a constant source of support to our colleagues in other teams and offices within the firm. We are particularly excited by the recent opening of our Qatari office and there has been much talk of "sitevisits" that coincide with the 2022 world cup! Have you worked on any cases that involved rent review disputes recently? “We regularly act for landlord and tenants in relation rent review disputes concerning commercial premises. Clients appreciate our sharp legal analysis in this complex legal area and our strategic advice. “Recently we have acted for a major professional services firm concerning the determination of the term of the hypothetical tenancy for the purposes of the rent review. This year we also successfully represented a major technology client concerning complex arguments around the extent to which incentives and allowances from the headline rent can be taken into account in a rent review.
grounds to challenge development proposals, both at the consenting stage and once a project becomes operational. Energy and waste development are two areas which are particularly vulnerable to this type of challenge, but the need is wider - for example statutory nuisance complaints for allegedly "unneighbourly" development. For McGrigors this has led to an increased demand for our services in the preparatory stages of projects - for example, through undertaking legal reviews of environmental assessments to limit the risks of successful challenge further down the line - as well as the need to integrate planning and environmental expertise into our litigation offering.” Have you had to expand your services due to the huge rise in cross-border M&A Activity? In which international regions do you have experience? “McGrigors delivers legal services to overseas national and multi-national clients. Our extensive international reach allows us to deliver and manage legal services virtually anywhere in the world with particularly strong relationships in Europe, the United States and Canada, and growing connections in the Asia Pacific region. As a firm, we have noted that cross-border merger activity has risen markedly over the last two years. One of the firm's key sectors in which McGrigors operates is energy sector which has experienced particularly noticeable international M&A activity.
Can you please explain how the recent planning changes and environmental regulation on the development and use of land has effected property litigation? “The overall effect has been an even greater need for specialist planning and environmental input into property litigation,
In addition to our existing European practice, we have expanded our capabilities in relation to the following regions: • Middle East and North Africa - we set up an office in Qatar in March 2011, and we regularly advice Middle Eastern investors on investments into European funds and real estate; • Russia, Ukraine and the CIS region - we have expanded our Russian and Ukraine desks with the recruitment of an additional Russian-speaking lawyer. We now have 5 native born Russians in our London office, all of whom are UK qualified and two of whom are also Russian qualified; • United States - we have formed a 'principal partner' relationship with US law firm Husch Blackwell. This gives access to over 600 lawyers in locations across the United States; and
as well as a proper appreciation of European law principles. In recent years, objectors have increasingly sought to rely on environmental
• China - we are increasingly working with Chinese investors and institutions who are active in the property sector.
“McGrigors is also well-known in relation to rent reviews, having successfully represented the landlord claimant in the leading case of Metropolitan Property Realizations v Atmore Investments (2008). In that case, the arbitrator's binding decision was set aside for not taking account of a valuation issue which neither party drew to the arbitrator's attention during the arbitral proceedings.
Dev Desai dev.desai@mcgrigors.com www.mcgrigors.com 5 Old Bailey, London, EC4M 7BA Tel:020 7054 2781
Win or lose, how do you ensure the satisfaction of your clients? "In the vast majority of cases, it is not a simple case of "winning and losing". A "win" for our clients tends to be the result which is most beneficial to their business and personal needs. Therefore, to obtain client satisfaction, we align ourselves with our client's needs so that we really understand what winning means to them, and then give pragmatic advice to achieve it. "Of course, like any service industry, our clients also expect value for money. We find that one of the best ways of achieving this for our client is to provide clear advice at the very beginning. If a client does not have a strong case, we make sure that he is aware of this at the outset and help him resolve it quickly, with costs and damages below what he might have expected. The client can be satisfied with the ultimate result even though the judge may decide the case for the opponent. "In addition, it is crucial that the client is able to contact you whenever he wishes to discuss a dispute. If you always return calls quickly and address queries head on with succinct and clear advice, the client is likely to be satisfied even though, at times, we can't deliver the news he had hoped to hear!"
Thirty One
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International Merger Control
International Merger Control M
erger control is critical to the success of any M&A transaction and finding the right law firm to devise a strategy that will lead to the best possible outcome is a key consideration for any firm. Submitting a case to the competition authorities can be a complex process; with the huge increase in cross border M&A activity, evidence often has to be presented to numerous authorities, each placing demands on the lawyer to provide evidence, and identify a strong case to achieve clearance. It’s a constantly evolving and dynamic area and it is essential for solicitors to keep up with domestic and international developments in order to best advise their clients. Acquisition International speaks to the experts. Koep & Partners was established in 1982 by now Senior Partner Peter Frank Koep. The firm specialises in general corporate and commercial work, litigation, property law and natural resource law. We regularly advise clients on mergers control and also regularly publish in this area. Meyer Van Den Berg is an associate at Koep & Partners, Windhoek, Namibia and is currently reading for a PhD in petroleum law at the University of Cape Town. What gives you an advantage over local and global competitors in your areas of expertise? “Apart from acting for some of the largest national and international companies, we also publish regularly in the fields of mineral and petroleum law, merger control, anticorruption and environment in accredited academic journals and practice-oriented journals. We also work closely with government officials.”
governed by the Competition Act 2 of 2003 and the Rules passed in terms of section 22 of the Competition Act. The Competition Act deals with the establishment of the Commission, restrictive business practices and mergers. The purpose of the Competition Act is set out in section 2 of the Act and includes ensuring that small undertakings have an equitable opportunity to participate in the Namibian economy and promoting a greater spread of ownership, in particular to increase ownership stakes of historically disadvantaged persons. The Competition Act does not contain any jurisdictional thresholds and is applicable to all mergers. “ 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? “Section 67 of the Competition Act states that, if a regulatory authority, in terms of any public regulation, has jurisdiction in respect of any conduct relating to restrictive business practices or mergers within a particular sector, the Commission and that authority must negotiate an agreement to co-ordinate and harmonise the exercise of jurisdiction over competition matters within the relevant industry or sector and to secure the consistent application of the principles of this Act, and in respect of a particular matter within their jurisdictions, may exercise jurisdiction by way of such an agreement. Such an agreement must be published in the Government Gazette. As far as we have been able to ascertain, no such agreements have been published. “
Please summarise the primary statutes and regulations that govern merger
How costly is the process in terms of time and money? “The filing fee can be expensive, depending on the size of the transaction. This fee is nonrefundable and range from N$1,500.00 to
control in your jurisdiction. What are the jurisdictional thresholds? “Merger control in Namibia is primarily
N$500,000.00. Once a merger notification is filed, a determination can take between 30 and 120 days.”
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Hugo Meyer van den Berg meyer@koep.com.na www.koep.com.na 33 Schanzen Road, Windhoek, Namibia Tel: 00264.61.382.800
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International Merger Control
T
omer Berreby is a graduate of the Tel Aviv University, LL.B. He is an associate at Michael Shine & Partners He specializes in the fields of Competition Law, M&A's, Land Conveyance and Corporate Law.
“The IAA's Commissioner has remained that competition is necessary in times of crisis as much as in times of economic flourish, and that maintaining competition will in fact hasten the end of the crisis.
Yaacov Houdijk has a Master in Law from the “Vrije” University, Amsterdam (LL.M., 2002). He is an associate at Michael Shine & Partners. He specializes in commercial law, trusts, international taxation, competition law, regulation of securities and Hi-Tech Transactions.
“In 2010, the IAA's Commissioner has published a manifesto in which it related to the existing Israeli "Failed Enterprise Doctrine", which deals with cases involving merger of a failed company into another purchasing company.
Michael Shine & Partners has been a long standing leader in the field of Israeli Merger Control and has played an active role in this ever growing field of legal expertise.
“In the said Manifesto, the Commissioner aimed at clarifying the principal legal path and the specific terms by which the IAA will review and/or approve an application and/or a merger between a company and a failed company, that would have been otherwise (if the failed company was not failing) harmful for competition. That Manifesto was meant to provide the Israeli business community certainty in reviewing merger opportunities in the midst of the economic hardship faced by many Israeli companies.
“Our firm specializes, among others, in representation of high profile multinational entities, both worldwide leaders in their market field, in the midst of encompassing merger acquisitions, as well as growing businesses, wishing to explore expansion opportunities, and up to small developing businesses (including venture capitals), contemplation present and/or future commercial involvement in thriving Israeli market.” “The Global Economic Crisis has rattled Israeli Economy along with the rest of the world, and has brought about with him suggestions to forsake the somewhat harsh and uncompromising scrutiny policy headed by the IAA pertaining to mergers. However, the IAA has remained diligent and consistent in scrutinizing mergers, preparing and imprinting bills to amend the current Anti Trust legislation, and enforcing sanctions against violators, including Israel's five largest banks.
“In current times, Israel is facing a major crossroad, which is likely to have an impact on both the legal and regulatory policies of Israeli Economy. On the one hand, Israel is now experiencing a flourishing and stable economic market, which has successfully managed to avoid the continuing negative effects associated with the economic global crisis, as some other countries are still experiencing until today. On the other hand, the Israeli economy is still a highly centralized economy, which lacks competition and presents high barriers to entry to most of the country's paramount market fields.
Tomer Berreby tomer@shinelaw.com Yaacov Houdijk yaacov@shinelaw.com office@shinelaw.com www.shinelaw.com Tel: +972 9953 1953 Fax: 09-953 1954 Life Plaza Building 6 hachoshlim Street, Herzlia Pituach. 46120, Israel
Jorge Luis Inchauste abogados@gg-lex.com www.gg-lex.com Tel: (591-2) 2770808 Casilla Postal 9332, La Paz, Bolivia “In view of a few central key developments, among which one can name the encompassing regulatory reform which Israel's commercial markets has gone through in the last few years, including Israeli banking system and Israel's capital markets and securities' regulation and sanction reform, and Israel joining the OECD as of last year - it seems that the legal and regulatory framework for entities involved with the Israeli market is due to become ever more strict in order to allow competition to grow and reduce barriers to entry for new players wishing to enter the Israeli market.”
Gönenç Gürkaynak Citlenbik Sokak No: 12, Yıldız Mah, Besiktas, 34349 Istanbul, Turkey Tel: +90 212 327 17 24 Email: gonenc.gurkaynak@elig.com Web: www.elig.com ELIG, Attorneys-at-Law aims at providing its clients with high-quality legal service in an efficient and business-minded manner. All members of the ELIG team are very fluent in English. ELIG focus on the interests of their clients, and strive for finding flexible legal solutions that fit the ever changing needs of their clients in their international and domestic operations. Gönenç Gürkaynak, LLM, Esq. Partner, ELIG Attorneys at Law
Commission (Competition Directorate-General) to apply relevant measures if the Competition Board believes that transactions realized in the territory of the European Union adversely affects competition in Turkey. Such provision grants reciprocal rights and obligations to the parties (EU-Turkey), and thus the European Commission has the authority to request the Competition Board to apply relevant measures to restore competition in relevant markets.
Please summarise the primary statutes and regulations that govern merger control in Turkey. What are the jurisdictional thresholds? “The relevant legislation on merger control is the Law on Protection of Competition No. 4054 dated 13 December 1994 (the Competition Law) and the Communiqué No.2010/14 on mergers and acquisitions Requiring the Approval of the Competition Board, published by the Turkish Competition Authority on the 7th October 2010."
“The Commission has been reluctant to share any evidence or arguments with the Turkish Competition Authority, in a few cases where the Competition Authority explicitly asked for them.”
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? “Article 43 of Decision No. 1/95 of the EC Turkey Association Council (Decision No. 1/95) authorises the Competition Authority to notify and request the European
How has the economic crisis altered merger control in your jurisdiction? “The practical impact the global credit crisis has had on the competition law environment in general and consequently on our firm’s work, has been to reduce the volume of mergers and acquisition filings to a certain extent while increasing the number of investigations initiated by the Turkish Competition Board.”
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The New Era of Fund Administration
Andre Le Roux andre.leroux@maitlandgroup.com www.maitlandgroup.com Tel: +27 (0)21 681 8010 Maitland House 1, River Park, Gloucester Road, Mowbray, Cape Town, South Africa.
Ian Asvakovith ian@pfsglobal.com www.pfsglobal.com Tel: (877) 386-3107 1604 Spring Hill Road, 3rd Floor, Vienna, VA 22182.
Denzil Boschat pepf@rbc.com Tel: +44 (0) 8000 566 550
Frank Franiak franiak@woodfieldllc.com www.woodfieldllc.com Tel: (847) 385-2203 3601 Algonquin Road, Suite 900 Rolling Meadows, IL 60008.
Phil Masterson managerservices@seic.com www.seic.com/ims Tel: +353 1 638-2435 Styne House, Upper Hatch Street, 2nd Floor, Dublin 2, Ireland.
Central Securities Depository Malta Stock Exchange plc email csd@borzamalta.com.mt www.borzamalta.com.mt Tel: (+00356) 2569 6000 Bor!a ta’ Malta, Castille Place, Valletta VLT 1063 MALTA
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The New Era of Fund Administration
T
he financial crisis touched every part of the asset management industry and whilst their role became increasingly important, fund administrators were among the worst affected. As well as impacting revenues, the crisis has reshaped the industry with investors and regulators calling for advances in transparency, flexibility and technology. Acquisition International speaks to the experts… Maitland is a privately owned, international firm providing wealth services to both private and institutional clients from offices in 11 locations across Europe, South Africa and the Caribbean. Our approach ensures we devise optimal, tailor made strategies and solutions for the creation, preservation and management of our client’s wealth and commercial success. Andre Le Roux, is head of Business Development.
1992, originally as part of the Abacus Financial Services Group, itself part of Coopers & Lybrand until 1998. Abacus was acquired by RBC in 2005. Denzil Boschat is Director at RBC Fund Administration (CI) Limited. Woodfield Fund Administration is a fullservice fund administration firm dedicated to providing comprehensive investor services and accounting services to private investment funds. Frank Franiak is President and Chief Executive Officer Woodfield Fund Administration, LLC. Philip T. Masterson is Senior Vice President in SEI’s Investment Manager Services division and as President of the AIC funds, a $15 billion mutual fund family. Phil is responsible for the division’s international (i.e., ex-US) strategy, business development, client service and delivery.
Robert Vella-Baldacchino is Deputy General Manager with the Malta Stock Exchange (‘MSE’), a licensed regulated market infrastructure and central securities depository providing cost-effective securities services solutions ranging from a market listing and/or dealing facilities, to clearing and settlement and registrar and administration support services, to customised and bespoke custody services.
Andre Le Roux: “We administer the full spectrum of funds including daily priced mutual funds, segregated pension fund mandates, single strategy hedge funds, fund of hedge funds and private equity funds. Clients contract with Maitland to reduce technology investment and operational risk, access a platform for product construction and innovation and to focus resources on portfolio management and client service.”
Piedmont Fund Services is a full-service fund administrator for hedge funds, private equity funds, and fund of funds. The firm was founded in 2005 by a group of former Big 4 accountants and hedge fund professionals who collectively have several decades of experience in the asset management industry. Ian Asvakovith is the Co-Founder and Managing Director of Piedmont. RBC’s fund administration team is a specialist provider of third party fund administration to closed-ended alternative
Robert Vella-Baldacchino: “The MSE has been dealing with exchange listing of retail mutual funds, vetting fund constitutional documents and providing market announcements and other periodic performance reports in keeping with continuing listing requirements since the first locally set up fund was listed in 1995. It also offers to assist in the administration of funds through the maintenance of share registers, subscription and redemption processing, processing of dividend payments and other corporate actions,
investment arrangements, including private equity and property funds. The team has provided fund administration services since
issuing and mailing of client statements of holdings and corporate secretarial services, among other services.”
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Ian Asvakovith: “We work with a wide range of clients from start-ups with less than $10 million in AUM to a large institution with multi-billion dollar in AUM. Often time, we find ourselves gravitating toward entrepreneurial managers because we enjoy a unique opportunity to partner with a new fund from its inception.” Denzil Boschat: “Our core expertise is in fund accounting and reporting and this is underpinned by our strong accounting roots. We specialise in client and investor relationship management, compliance, data management, accounting and financial reporting, registered office services, directorship and corporate secretarial, and transaction processing services. We are also able to draw on the broader experience of RBC, with access to legal, investment, wealth management and capital markets professionals.” Frank Franiak: “Our edge is that we combine a high level of competence and experience with an extraordinary commitment to customer service. We try to treat each client’s fund as if it were our own and constantly work to improve our product. In addition, the hallmarks of our services include: integrity, independence, highly qualified and knowledgeable people, accuracy and clear, documented procedures for all processes, and a reasonable cost.” Who is typical client? Andre Le Roux: “Our clients are Fund Managers. These range from small start up single manager hedge funds to large institutional pension fund managers. Our service allows clients to offer the full range of fund manager solutions on one platform.”
cost structure, and offer additional services as their business grow.” Denzil Boschat: “We primarily work with alternative funds, mainly closedended private equity and property funds, which are predominantly, although not exclusively, offshore. Our existing client base ranges from boutique fund managers to major institutions, although since the financial crisis, we have seen more funds from the boutique end of the market and also more private arrangements from ultra high net worth investors and family offices.” Philip T. Masterson: “Our clients cover a wide array of strategies, locations and sizes. We are well-equipped to accommodate many different structures, including UCITS, QIFs, collective investment trusts, U.S.-registered ’40 Act funds, exchange-traded funds, hedge and private equity vehicles, separately managed and institutional private client accounts and anything in between.” Please describe your personal experiences of the financial crisis and highlight how your client’s demands have changed since the onset of the downturn. Robert Vella-Baldacchino: “A number of our international hedge funds experienced redemptions and side-pocketing.
Robert Vella-Baldacchino: “Malta’s economy itself did not experience any significant damage from the recent financial crisis mainly due to the fact that Maltese banks enjoyed substantial liquidity and adequate capital and pursued prudent lending policies. Exposures to asset-backed securities or institutions that failed were small, while lending in foreign currency to residents was limited. “In the wake of the crisis, fund clients have in my view become ever more aware of the importance of keeping in close view the funds’ investment policies, objectives and restrictions so as to gauge the level of risk they would be taking on through their investment exposures.” Frank Franiak: “The fall of 2008 was a difficult and challenging time in one way or another for most of our clients. Even those that did well in the market during this period were subject to intense scrutiny by investors who were understandably nervous and who wanted to speak with us at length about various issues in relation to the funds that w serve. In addition there were a few more severe situations that involved funds whose assets were housed at places like Lehman. We spent a great deal of time providing advice and counsel to both our clients and their investors during this period. In general, I would say that clients have become far more sensitive to financial controls and accounting procedures since that time. This has resulted in a much higher level of scrutiny of both funds and administrators than was the case prior to the downturn.”
Ian Asvakovith: “We work exclusively with alternative investment fund clients. For startup managers with less than $25
“More importantly the case for independent third party administration has changed dramatically in that the decision has shifted from being informed by internal perspectives to being driven by the requirements of external stakeholders. Increasingly, appropriate and effective segregation of duties is a fundamental and non-negotiable requirement of investors and, whereas size and reputation were sometimes grounds for exemption, even this is changing. The events of the global financial crisis and incidents such as the Goldman Sachs and Madoff scandals, have highlighted the fact that there is no substitute for appropriate segregation of duties combined with competent and independent oversight. Regulators around the world are demanding far greater levels of investor protection. This is manifesting itself in the increasing need for independent
“The rise of regulation means a flight to regulated products and managers who can
million of AUM, we can offer our “Emerging Manager Program” which is designed to help new managers get started at a lower
valuations, improved transparency and more comprehensive reporting requirements.
demonstrate a controlled and compliancedriven environment. Thoughtful risk management weaves through all of our
Robert Vella-Baldacchino: “Among its typical clients, hedge funds and ETFs (in addition to retail funds) continually look out for increasing their marketing reach to investors, particularly professional and qualified investors, through an Exchange listing and clearing and settlement arrangements that may accompany other MSE support services.”
Philip T. Masterson: “Post-crisis, 2010 and 2011 have been the years of regulatory reform with sweeping changes touching virtually all aspects of the financial services industry. The economics for managers have changed and more managers are outsourcing non-core services—even those that were once thought to be off-limits, such as middleoffice functions. To help managers stay focused on their core competencies, and make operational outsourcing more compelling, we’ve added additional capabilities such as OTC derivatives processing and liquidity management.
Thirty Five
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The New Era of Fund Administration
solutions, and is the reason why our workflow technology is such a critical differentiator for us. “Additionally, SEI’s strong “Culture of Compliance” is embedded in every facet of our service offering as a significant part of the value we bring to our clients. It goes beyond simply presenting the rules and facts around regulatory governance. Instead, SEI develops a consultative interpretation of those rules and outlines the impact on our clients’ business, such as identifying best practices around operations, distribution and business strategy. We believe that the ability to quickly identify, analyse and adapt to changing conditions is critical for both SEI and our clients to succeed in today’s market.” What are the primary challenges in this Post–Madoff era? Andre Le Roux: “To add to the complexity of the situation these developments have taken place rapidly evolving regulatory and statutory environment. Administration has become a fast changing and demanding business activity. This has served to raise the bar in terms of the critical mass or scale required to provide these services in-house on a cost effective basis. This has resulted in significant recent consolidation of the sector as smaller administrators simply cannot compete with the new infrastructural demands.” Ian Asvakovith: “For first-time fund managers, capital raising efforts may prove to be a significant challenge. As investors look to mitigate the “Madoff risks”, they will often ask for separation of duties on certain key processes. A control over cash disbursement is a good example. Is there an independent party who reviews and approves outgoing wires to prevent the risk that managers could misappropriate the funds? Having a third party administrator oversees this process helps to mitigate the risk.” Denzil Boschat: “The Post-Madoff world is all about exercising appropriate caution and building trust. Investors have money and fund managers would like access to that money to launch funds and make investments.
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“Post-Madoff (and post-financial downturn generally), investors are much more cautious. They carry out additional risk analysis both at the initial point of investment and on an ongoing basis. A third-party administrator, such as RBC, assists greatly in this process. Aside from other drivers for outsourcing (i.e. cost and time saving, access to accounting and administrative expertise backed by tried and tested procedures and systems), the independence of the administrator has been crucial. Our role is to gain a full understanding of every aspect of the fund so that we can provide meaningful information in a clear and transparent way. Being part of a major financial institution has assisted us as investors respect the RBC name and they can trust us to ensure that we will ensure that our piece will be executed with the utmost integrity.” Frank Franiak: “The growing complexity of every aspect of the business. For example, we are seeing funds with ever more complex fee structures and allocation methodologies. 2) An increase in the service requirements of fund managers and their investors. An example of this is the requirement for greater transparency by investors that necessitate production of more detailed and complex portfolio reports. 3) Investor concerns regarding accounting and valuation issues and financial control issues within a fund. For example, due diligence meetings with investors now require significantly more time than the typical meeting did prior to the fall of 2008.” Philip T. Masterson: "In the postMadoff era, investors’ commitment comes with substantially increased expectations. Investors are demanding more than ever before from their managers, and we’ve coined this development the Era of the Investor. Now, managers need to provide greater transparency and more frequent disclosure, and we’ve facilitated this through our technology solutions. The economics for managers have changed and more managers are outsourcing non-core services—even those that were once thought to be off-limits, such as middle-office functions. Additionally, the rise of
regulation means a flight to regulated products and managers who can demonstrate a controlled and compliancedriven environment. Thoughtful risk management is paramount and it’s something that we at SEI are continually focused on." Why is your jurisdiction conducive to the fund industry? What type of fund in particular? Robert Vella-Baldacchino: “Malta is a highly developed financial centre. Financial services and financial intermediation and related sectors currently account for circa 12% of GDP -a figure set to double in the next decade. It offers excellent possibilities for low-cost financing of investment transactions and international activities. All domestic and foreign transactions are handled swiftly and reliably by Maltese and foreign banks within real-time gross payment systems or other inter-bank transfers availing of the latest technologies. “Businesses set up in Malta also benefit from a tax efficient environment, a full imputation system of tax incurred abroad and a compendium of double taxation treaties with over 50 countries. “The total number of Maltese licensed funds is increasing annually, with the total number of active funds (including subfunds) growing to 410 in 2010. 108 new funds licences (including sub-funds) were issued in Malta during 2010. The majority of the new licences (102) were professional investor funds. Another 5 licences were issued to UCITS.” Frank Franiak: “Although regulation in the US is changing and increasing, it is still relatively inexpensive and easy to open a private investment fund in the US. This is particularly true in the case of smaller funds managed by entities that are not required to register with the SEC. This applies to most US private investment funds regardless of strategy. Woodfield also provides services to Cayman and BVI based funds. Both of these jurisdictions have streamlined regulations that make them attractive jurisdictions to fund managers.”
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Who licenses funds in your jurisdiction? Is there a code of ethics to adhere to? Andre Le Roux: “We operate on a “domicile agnostic” approach and thus are able to and do cater for funds from multiple jurisdictions. Our major regulator, the FSB, is a member of IOSCO and implements “fit and proper” requirements for all industry participants.”
brainstorming sessions to look for unique and/or better approaches to meeting client needs.”
How do you keep up with the rapid regulatory advances to ensure that your clients are getting the best possible service? Andre Le Roux: “In keeping with our Funds Focus, one of our differentiators is that we have teams of funds lawyers in multiple jurisdictions who along with senior executives form part of our Investment Funds Workgroup. Regular and ongoing communications with the regulators in the various jurisdictions takes place. Amongst other functions, this group is tasked with identifying and assessing regulatory advances, their impact on the services we provide and how best to align ourselves with these advances.
“Not all technology is created equally. This is why we take an open-architecture approach to evaluating systems instead of having one single technology solution across all asset classes or products. Technology needs to accommodate managers’ current needs and be flexible enough to anticipate their future plans. We follow industry best practices, but are open-minded in terms of choice of systems and in how we build and maintain clients’ technology solutions. Our internal experts ensure that we fully understand the technologies in the marketplace and their strengths and weaknesses. We also understand how they work together and can be combined to our clients’ best advantage.
What methods do you use to develop innovative strategies? How hard is it to meet investor’s needs? Andre Le Roux: “We have developed critical mass across a broad forum of fund types, strategies and products. We provide both asset and liability administration services. These two factors have allowed us to establish ourselves as a “platform for product construction and innovation”. Clients are thus able to use us as a “one stop shop” of fund administration and product administration. The key to this has been the use of best of breed technologies, high levels of automation and the acquistion of “product specialists” who understand the market place as well as our clients. We seek to become thought leaders in our space. By the very nature of our activities, we are exposed to practices and developments across the industry and are consequently well placed to act as purveyors of best practice. Many clients have discovered that they have to look no further than ourselves to identify opportunities to improve some of their own business practices. They have found to their benefit that it has allowed them to access a conduit of best practice, and scalability far greater than they have been able to deliver themselves.”
“Our clients have come to depend on us to provide the operational stability for their current businesses, while simultaneously helping them lay the groundwork for moving smoothly to the next level. Particularly in volatile and uncharted waters, they count on our experience to help them succeed.”
Ian Asvakovith: “We believe that investors will increasingly demand greater reporting transparency and a simple capital statement may eventually be out of fashion. Our product development team is currently working on the next version of our online reporting portal, which not only provides useful information about an investor’s account, but also provides an investor the ability to view an attribution dashboard with drill-down ability. At the same time, our clients are still able to control the level of transparency that meets their comfort level.” Frank Franiak: “There are two approaches to developing innovative strategies that are used here at Woodfield. One is simply through a continuing dialogue with our clients and their investors. It is amazing how often clients lead us to innovative approaches to solving their problems. The second is through a process of creative
What makes you the right fund administrator? Philip T. Masterson: “Our innovative, open and technology-driven approach transcends our physical boundaries, defines our strategic partnerships with clients, and separates us from the competition.
What are your predictions for the future of the fund administration industry in your Jurisdiction? Andre Le Roux: “Historically whereas the decision of a fund manager to outsource or not was largely a matter of business strategy, changes in the operating environment, investor requirements and regulatory oversight has shifted the balance sharply towards independent third party administration. Ultimately, even if the business drivers and case for internal administration stack up, it is no longer regarded as best practice. We therefore see both significant consolidation as well as the requirement for fund administrators to “move up the value chain” and provide ever increasing services to their fund manager clients.” Robert Vella-Baldacchino: “The fund administration industry in Malta will continue to grow in line with the expectation of increasing numbers of funds seeking to set up in Malta (whether in respect of newly registered structures or international funds redomiciling into Malta). The industry will continue to expand its contribution to Malta’s annual value-added figures and GDP.” Denzil Boschat: “Offshore centres have continued to come under scrutiny and this was exacerbated by the financial crisis. It is therefore very encouraging that Jersey remains the premier offshore financial centre (per the GFCI index) and that it is working closely with bodies, such as the OECD, to ensure continued improvements in regulation, taxation, transparency and compliance. “We believe that Jersey will continue to consolidate its position as a market leading jurisdiction and that many fund managers will see Jersey as a market of choice when they are choosing where to domicile their fund.”
Thirty Seven
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The New Era of Fund Administration
A
ugentius is a specialist Private Equity and Property Fund administrator. The business has been in existence since 2002 and has now grown to over 150 staff in 5 locations, administering funds for over 70 managers. Acquisition International speaks to David Bailey, Managing Partner, Augentius Fund Administration
Please describe your personal experiences of the financial crisis and highlight how your client’s demands have changed since the onset of the downturn. “We have experienced a decrease in transaction volumes – during the last two years volumes of investment/divestment have decreased resulting in fewer drawdowns and distributions to investors. Over the last 6-9 months activity levels have started to increase although it is not known whether activity levels will decline again as a result of recent market/economic uncertainties. “We have seen an increase in reporting and transparency , as investors are seeking greater transparency as portfolios/ investments and Managers/GP’s must be able to deliver more information on a frequent basis. This in itself can create difficult demands/workloads on managers and is resulting in a number of managers moving to outsource the administrative functions to professional administrators, who have a high level of technical ability and systems, to ensure that investor demands can be met. “Throughout the period, Augentius has continued to grow. A steady stream of new clients has joined including a number who have been transferred from other administrators. There has been a definite flight to quality and recognition that fund administration is best carried out by professional administrators. What are the primary challenges in this Post–Madoff era? “The vast majority of Private Equity and Property Funds are still administered “inhouse”. Although this is changing slowly, the post-Madoff era is putting additional pressures on managers. “The biggest change relates to legislation and the industry will have to adapt to the requirements of the Dodd Frank and AIFMD
Thirty Eight
legislation. Augentius has been actively involved in the crafting of Part II of the AIFMD, contributing to the discussion process with ESMA and participating in the discussions in Paris to ensure that Part II processes take into account specific requirements of the Private Equity and Property sectors “Under the AIFMD, by 2013 every European Fund will have to appoint a Depository who in turn will participate in certain aspects of the fund. This in turn will require all Private Equity and Property managers to review their processes and ensure their Depository is involved at all stages.” How do you keep up with the rapid regulatory advances to ensure that your clients are getting the best possible service? Augentius is considered to be The leading European Private Equity and Property fund administrator. As a consequence it is imperative that we keep up with current legislation. We maintain a Technical Team who are constantly reviewing new changes and communicating these to our staff. In addition, we share details of technical changes with our clients via email shots and Technical Newsletters (see past copies here). “In addition, our Technical Team maintain a review on all changes to accounting standards and all changes are agreed with the Funds auditors, prior to the commencement of the Fund audit.” What makes you the right fund administrator? “Augentius is known within the marketplace for the delivery of high quality fund administration services from its range of domiciles. This is supported by the fact that Augentius has achieved SAS70 Type II approval for its operational activities in its London, Guernsey, Luxembourg and New York offices. Augentius is one of the very few administrators who has achieved this recognition specifically for Private Equity and Property fund administration. “The high level of service is delivered by qualified people, using the very best technology available to the very highest operational standards.”
David Bailey david@augentius.com www.augentius.com Tel: +44 207 397 5453 Two London Bridge, London SE1 9RA
Michael J. Liccar mliccar@liccar.com www.liccar.com Tel: (312) 922-6600 231 South LaSalle Street Suite 650, Chicago, Illinois 60604
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Thuo G.N. Associate Advocate Litigation Department thuo@njorogeregeru.com www.njorogeregeru.com Tel: +254 (020) 2718482/3/4 Fax: +254 (020) 2718485 Cell: 0722 206 884 Njoroge Regeru and Company Advocates P.O. Box 46971-00100, Nairobi
A
cquisition International speaks to Mr. Eric Kanui, Mr. Paul Njoroge, Ms. Priscilla Goes and Mr. Karu Kariuki, all of Njoroge Regeru & Company Advocates Kenya (the Firm) about “setting up shop” in Kenya. Mr. Eric Kanui commented: “Within Kenya, more often than not, a client requiring the legal services of an Advocate is well educated and exceptionally comprehensive of the quality of performance required during the execution of a particular task allotted to an advocate. In consequence to a variety of reasons; such as security and legality of process; most clients opt to conduct a thorough background search on a particular firm before engaging the same to represent them in their legal work. For instance, ascertaining material particulars such as the levels of legal expertise required for a task, time frames, and reasonable costs attendant to the services to be rendered, are all archetypal factors that a typical client in search of legal representation will take into consideration. In relation to clients wishing to establish companies within Kenya, a majority take the initiative to generate a basic outline as to what the functions of their intended companies once formed, will be. Once the same is presented to an advocate, the legal expertise required to furnish the company’s establishment is availed to the client; who on many occasions may not be entirely versed with what legal knowledge may be applied to such process. As far as company related matters are concerned, a typical client will be, inter alia: • Astute in his field of practice within the business arena. • Rather perceptive of legal requirements such as registration and incorporation. • Aware of the necessity and importance of employing the services of an advocate. • Conscious of various factors such as time, efficiency, legality and the likes. Please describe the legal requirements when it comes to setting up a company in Kenya? Mr. Paul Njoroge: “Companies established in Kenya are under a legal obligation to comply with the provisions of the Companies Act; Chapter 486 of the Laws of Kenya.
Company Formation
Forming Companies in
Kenya shareholders) or a Private Limited Company which should consist of at least two members. “Regardless of the nature of the company, the Kenyan Companies Act instructs that there may only be three types of companies that may be incorporated within Kenya. These are as follows: • A company limited by shares • A company limited by Guarantee • A non – limited company What can your jurisdiction offer to prospective companies? Are there any Tax benefits? Or any Socioeconomic benefits for foreign companies settling in your jurisdiction? (Authored by Ms. Priscilla Goes) “Prospective foreign companies may establish a business within Kenya by either registering a branch of their parent company or founding a company on the basis of it being an entirely novel business. Once formed, the company will operate under and will abide by the rules and regulations stipulated by the Kenyan Companies Act and/or any other legislation relative to its operations. “There are certain tax incentives available in Kenya, but none are specific to prospective foreign companies. Whilst operating in Kenya, companies benefit from an accelerated capital allowance known as Investment Deduction (ID) on new investments; which is enjoyed by way of an initial claim in the year of primary use. Additionally, the Income Tax Act entails provisions tailored for an Industrial Building Allowance (IBA), an annual allowance on a straight line basis at 25% of the net cost of any Investment Deduction of an industrial building. Other tax benefits include a Wear and Tear allowance (WTA). “Another benefit is the availability of Export Processing Zones (EPZ’s referred to in other jurisdictions as Free Trade Zones (FTZ’s)). Businesses trading within Export Processing Zones are regarded as being outside the Kenyan Taxing Jurisdiction. Companies operating under such a pretext enjoy a 10 year tax holiday so to speak and reduced corporate tax for the 10 years following. An example is the zero rating of goods from the Export Trading Zone under the Value Added Tax Act.
“Section 4 of the Companies Act specifically stipulates that
“Socioeconomic benefits include a highly educated, readily available and large work force, strategic location on the map (with the capital city Nairobi serving as the main hub for transportation and finance and communication in East and Central Africa), rich social culture and
individuals wishing to establish a company within the Kenyan Jurisdiction have an option of starting either a Public Limited Company which should consist of at least seven members (also called
a well established and profitable local and foreign business sector. All in all, it is evident that Kenya offers a varied spectrum of benefits to a prospective foreign company.”
Thirty Nine
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The Channel Islands Fund Industry
The Channel Islands Fund Industry T
he Channel Islands play a prominent role in the international fund business and in addition to providing traditional fund structures; they have worked hard to establish themselves as jurisdictions of choice for the provision of specialist funds. Investor demands for improvements to the transparency and supervision of funds, coupled with major new regulatory initiatives in the Post-Madoff era are having a major impact on the industry globally; however this bodes quite well for the Channel Islands, where managers have a choice when it comes to complying with regulations such as Alternative Investment Fund Managers Directive (AIFMD). Growth is expected in the region as many EU-based fund managers are expected to branch out into off-shore locations to avoid the burden of full AIFMD compliance. Acquisition International speaks to the experts… ABN AMRO (Guernsey) Limited has been established in Guernsey since 1978. For over 20 years, it has provided custodian/trustee services to Guernsey and non-Guernsey domiciled schemes. Mariana Enevoldsen is Director of Banking Services at ABN AMRO (Guernsey) Limited. RBS International has become a preeminent force in the Channel Islands fund industry over the last decade with a focus on the alternative asset classes, specialising in the provision of banking and treasury services to fund administrators and directly to fund houses. RBS International’s proposition spans Guernsey and Jersey and has continuously outpaced the Funds industry growth in both jurisdictions
through an exceptional service platform and other strategic service offerings to assist fund clients. Mike Lewis is a Relationship Director of Corporate Banking at RBS International. Both ABN AMRO (Guernsey) Limited and RBS International are regulated by the Guernsey Financial Services Commission (“GFSC”). What gives you an advantage over competitors in your particular area of expertise? Mariana Enevoldsen: “We act as custodian/trustee to Guernsey and nonGuernsey domiciled schemes. As we only provide custodial services, we are an attractive proposition for independent fund administrators who prefer to work with a custodian that poses no competitive threat. “We have a dedicated team who provide a high quality service. In addition, we issue an AAF01/06 report on our global custody operations. This assurance report is carried out by our auditors, KPMG.” “We have a dedicated team of relationship managers and first class inhouse global custody facilities. As part of our ongoing commitment to providing a high quality service, we issue an AAF01/06 report on our global custody operations. This annual report, which contains details of our control procedures and an assurance statement from our auditors, is crucial now that investors perform more thorough due diligence checks on schemes and their service providers.” Please describe a typical client and
Mariana Enevoldsen mariana.enevoldsen@gg.abnamro.com www.abnamro.gg P.O. Box 253, Martello Court, Admiral Park, St Peter Port, Guernsey GY1 3QJ Tel: 01481 751900
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explain how their demands have changed since the onset of the downturn? Mariana Enevoldsen: “We act as custodian/trustee for a variety of schemes with particular expertise in the provision of custodian/trustee services to thoose investing in hedge funds. Since the onset of the economic downturn, many of the underlying hedge funds have experienced liquidity issues resulting in the suspension, gating or side pocketing of these investments. This has been a challenging time from an operational perspective for the schemes themselves and their services providers alike.” Mike Lewis: “A typical client would be a private equity house with commitments extending into billions, usually with a local administrator interface. The fund houses are predominantly London based and we would develop a relationship with the administration team offshore to take care of all operational requirements and with a more strategic focus at a deal team level. Fundamentally, requirements have not changed during the period, but activity levels have naturally increased and we are now offering a wider range of innovative solutions matched to specific transactional nuances. Clients have always demanded the highest level of service in a dynamic and competitive industry and this remains imperative.” How has investor demands for transparency and supervision impacted the fund industry in the Channel Islands? Mariana Enevoldsen: “Guernsey has always enjoyed a proportionate level of
Mike Lewis mike.lewis@rbsint.com www.rbsint.com 1 Glategny Esplanade, Po Box 62, St Peter Port, Guernsey, GY1 4BQ Tel: 01481 702565
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The Channel Islands Fund Industry
supervision from the GFSC. The GFSC has a robust but yet pragmatic approach to regulation which has enabled Guernsey to position itself as a flexible jurisdiction with a strong protection of investors regime. This has given promoters and investors the level of assurance they require.” What makes the Channel Islands such popular location for those in the fund industry? Mariana Enevoldsen: “The main factor that makes the Channel Islands and Guernsey in particular a popular location for the fund industry is the high level of expertise available. There is a wide choice of service providers, including the top tier custodians and fund administrators. Their services are strongly supported by highly rated firms of lawyers and accountants and by the Channel Islands Stock Exchange. This infrastructure has been further enhanced by the creation of the Guernsey Registry and the continuous development of our legal and regulatory framework.” Mike Lewis: “As the regulatory changes being implemented or mooted by the European Union are becoming a deterrent for
many fund houses, the Channel Islands continue to be viewed as a popular destination for the fund industry. The Islands already have a depth of resource in terms of fund administration and other professional advisors, all of whom have experience and strong reputation in the industry, making the Channel Islands a real draw for the funds industry. A balance of structuring advantages, credible regulation, established infrastructure and professional expertise with more obvious practical benefits.” How have the Channel Islands established itself as a jurisdiction of choice? What specialist funds has it made provisions for? Mariana Enevoldsen: “In Guernsey, closed ended Private Equity and Venture Capital funds are prevalent but there is also a strong open ended funds sector.” Do you foresee the introduction of regulation similar to that of AIFMD? And how will AIFMD compliance impact growth in your jurisdiction? Mike Lewis: “AIFMD is less onerous than first feared and business as usual is expected until 2017 under the private placement regime. Thereafter, subject to
further revisions, the Islands look to be well positioned to continue to prosper.” What are your predictions regarding the local fund and asset management sector for the rest of the year? Are there any hot opportunities for the region’s finance sector? Mariana Enevoldsen: “The economic crisis in 2008 had a negative effect in the financial markets in general. Guernsey was not immune to the economic downturn and the fund sector saw AUM’s decreasing and fund launches stalling. However, AUM’s are now steadily climbing and new fund enquiries are being received. It is also worthwhile noting that many of these enquiries relate to the launch of schemes investing in more esoteric asset classes such as forestry, art and so on.” Mike Lewis: “The Private Equity space is likely to see growth increasing as funds increase their capital deployment. A number of substantial new funds having closed this year at commitment levels exceeding expectations demonstrating a return of investor confidence and appetite for this asset class, albeit with undertones of a ‘flight to quality’.”
CORPORATE & COMMERCIAL TRUST & FIDUCIARY FUNDS INSURANCE PROPERTY DISPUTE RESOLUTION INSOLVENCY
Offshore PO Box 69, 18-20 Smith Street St Peter Port, Guernsey GY1 4BL Tel +44 (0)1481 713371
www.babbelegal.com
Forty One
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Destination: Germany
Destination:
Germany G
ermany looks set to seize the UK’s crown as Europe’s biggest mergers and acquisitions market. While other European economies emerge slowly from recession, Germany is surging ahead, fuelled by a strong exporting and industrial sector. The euro’s recent slide is certainly helping German manufacturers, as their products become cheaper and more competitive abroad. German M&A has been strong so far this year, largely due to the surge in cross-border activity, a trend which is predicted by many to continue through the course of 2011. Acquisition International speaks to Alexander Loos, partner at Hogan Lovells International LLP, office Düsseldorf. He specialises in Corporate and Commercial Arbitration with a focus on Energy, Natural Resources and Infrastructure. His working languages are German and English. He understands French, Spanish and Portuguese. His professional experience and practice are focused on the equipment for, the erection and commissioning of industrial plants, especially power plants, seaports and chemical factories including pertinent corporate work for joint ventures and consortia. Alexander is practicing in arbitration since 1981 and has gained experience as counsel, as arbitrator and as chairman in more than 120 cases,
Forty Two
institutional and ad hoc arbitrations, including many under the auspices of the LCIA, ICC, the German DIS and the AAA. He is a Fellow of the Chartered Institute of Arbitrators since 1993. Alexander is continuously listed as one out of Germany's leading lawyers for arbitration/mediation by Handelsblatt (2009 – 2011) as well as by PLC Which Lawyer 2010, Best Lawyers Germany 2010 and by JUVE Handbook 2010/2011. He is described as "an excellent litigator" (Client) and "... always achieving great results". Germany's economy overcame the financial crisis sooner than any other nation in the Western world and its commercial drivers, mainly exports have pushed forward the demand for M&A, acquisition of carve-outs and distribution systems. The German economy is benefiting from rigorously reduced production costs (due to reasonably modest policies of German trade unions and conservative concepts for social security and taxation). Foreign investors concentrate on automotive suppliers and machinery production, both extremely successful. Hogan Lovells International LLP is one out of very few law firms with a truly global reach. It has 43 offices in the Americas, Europe, the Gulf States and East Asia.
Dr. Alexander Loos alexander.loos@hoganlovells.com www.hoganlovells.com Kennedydamm 24, 40476 Düsseldorf, Germany
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The Irish Funds Industry
The Irish Funds Industry
D
espite the country’s current economic situation, Ireland is still well-recognised as a world class centre for the fund industry. Servicing domestic and non-domestic funds with assets under management of over $1 trillion, the industry now employs over 8,000 people in locations beyond its Dublin base.
Killian Buckley www.kinetic-partners.com killian.buckley@kinetic-partners.com London Kinetic Partners LLP One London Wall, Level 10, London, EC2Y 5HB Tel: +44 207 862 0700 Fax: +44 207 862 0701 Dublin Kinetic Partners (Ireland) Ltd Iveagh Court, Floor 5, Block D Harcourt Road, Dublin 2, Ireland Tel: +353 1 475 0520 Fax: +353 1 475 0376 New York Kinetic Partners US LLP 675 Third Avenue, 10th Floor New York, NY 10017 Tel: +1 212 661 2200 Fax: +1 646 867 7879 Grand Cayman 1st Floor, The Harbour Centre 42 North Church Street, PO Box 10387, Grand Cayman, Cayman Islands Tel: +1 345 623 9900 Fax: +1 345 943 9990 Geneva Kinetic Partners (Switzerland) SA 30 Quai Gustave-Ador 1207 Geneva, Switzerland Tel: +41 22 715 28 40 Fax: +41 22 715 28 41 www.kinetic-partners.com
Ireland’s An Taoiseach Enda Kenny has spoken out that growth in the investment funds industry will underpin future growth against the economic challenges it faces and he argued that the country remains very much open for business. That said there are challenges ahead; Acquisition International speaks to Killian Buckley, in Kinetic Partners’ Dublin office, about the Irish funds industry. Kinetic Partners was formed in March 2005 as a provider of professional services to the asset management, banking and broking industries. The award-winning firm has grown to over 115 people across five locations including London, Dublin, New York, Grand Cayman and Geneva and has attained its reputation as the leading provider of services in these chosen markets. After six years in operation, the Dublin office continues to advise asset managers, service providers and investors on all aspects of the Irish funds industry. When Irish funds are rising Let’s get the bad news out of the way first. Yes, the domestic Irish economy is in bad shape. Yes, growth is looking shaky. Yes we owe a lot of people a lot of money. However, amidst the domestic gloom, we have the shining star that is the Irish investment funds industry. Have a look at these stellar figures, enough to make any Irish Minister for Finance cry; for good reasons for once. In 2010 Irish funds assets increased in size by 29% to €963 billion. Total assets of Qualifying Investor Funds (the de facto Irish hedge fund) grew by 35% to €153 billion. Ireland is the fastest growing of all the cross-border UCITS (the default international mutual fund model) domiciles, with 70 new investment managers launching 701 new funds and sub-funds in 2010. And, in case you didn’t realise, Ireland is the largest fund administration centre in the world anyway, with 43% of global hedge funds and 63% of European hedge funds administered in Ireland. This level of activity has kept Kinetic Partners busy. As a boutique provider of professional services to the asset management, banking and broking
industries, we are helping global asset manager clients launch funds, assisting with compliance and tax work and also providing auditing services to funds and their managers. There are many reasons that are worth looking at for this growth in Ireland. Firstly, Ireland has continued to ride the UCITS wave, with Irish UCITS funds distributed in over 70 countries globally. The reasons for the growth in UCITS have been well documented and Ireland does not buck the trend here. Kinetic Partners’ Irish office has seen a large number of new entrants to the UCITS market as clients. This ranges from traditional asset managers who are large players in their domestic markets but are looking to diversify their distribution network globally with a UCITS fund, to alternative asset managers looking to launch an onshore UCITS version of an offshore product. This is in addition to existing UCITS clients continuing to launch product off their platforms. Furthermore, we see plenty of scope for Ireland to take advantage of some of the efficiencies that UCITS IV, a recent EU regulatory directive, may create, both as a domicile for funds and for management companies. Tax is a key consideration when it comes to UCITS IV consolidation, and with a 12.5% corporate tax rate, and no tax on funds, Ireland offers a compelling advantage. Changes in Irish legislation have made it easier to re-domicile funds from other locations. These funds effectively “migrate” to Ireland by way of continuation, allowing managers to carry performance and track record with them. The process has been praised as simple and straightforward. This could act as a real marketing ploy for Ireland in the battle to become the alternative Investment Managers Directive (AIFMD) domicile of choice. AIFMD is another EU directive that looks to regulate the alternative investment fund managers doing business in Europe. Ireland is fortunate to have a readymade solution here in terms of its Qualifying Investor Fund product, which, it appears, will tick all the AIFMD requirements and make international distribution of products from Ireland to the world as easy as in any country. All in all the Irish funds industry is in rude health. Perhaps the strongest argument for doing business in Ireland though remains the original one; the skills, expertise and experience of those in the industry. Ireland may have taken a rollercoaster economic ride but fortunately the standards of service have remained as high as ever.
Forty Three
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Managing Transfer Pricing Risks in M&A Transactions
Managing Transfer Pricing Risks in M&A Transactions M&A deals also provide opportunities to harmonize existing transfer pricing policies. In developing consistency across the organization, a number of factors should be considered in determining which policies should be implemented.
M
ergers and acquisitions raise a whole host of transfer pricing issues. In M&A transactions, the interaction between transfer pricing and purchase accounting can play a critical role in determining the allocation of the purchase price among the target company’s tangible and intangible assets. Transfer pricing can also play an important role in selecting the financing structure of the proposed transaction. M&A deals also provide opportunities to harmonize existing transfer pricing policies. In developing consistency across the organization, a number of factors should be considered in determining which policies should be implemented. It is therefore of the upmost importance for such company’s to seek advice from leading experts to advise them on such aspects. Acquisition International speaks to the experts… Altus is an independent service provider of transfer pricing, valuation and business restructuring services. Through our global alliance we are able to provide our services in over 30 jurisdictions against competitive conditions. Roderick Veldhuizen is partner at Altus International BV. Ernst & Young’s global transfer pricing practice, with more than 1,500 full time specialists around the world, has a strong reputation in the market, particularly regarding transfer pricing planning, tax efficient supply chain management, postmerger integration, and controversy. Oliver Wehnert is a Partner with Ernst & Young GmbH and leads Ernst& Young’s transfer pricing practice in EMEIA.
Forty Four
Does your jurisdiction follow the OECD Transfer Pricing Guidelines? If not please explain what your jurisdiction does differently. Oliver Wehnert: “Although adhering to basic contents and principles of the internationally accepted OECD Guidelines, Germany has introduced its own additional regulations as well as stricter variations to those of the OECD. These German regulations are necessarily stricter with a high level of compliance needing to be undertaken, e.g. the vastly more strict German business restructuring regulations introduced in 2008, requiring valuations to be performed from both the perspective of the transferor and transferee.” What constitutes arm's length prices in your jurisdiction? And what is the analysis process? Roderick Veldhuizen: “A distinction should be made between transactions of goods, services, intangibles and loans. For each of these categories an arm’s length price can be determined by comparing the tested transaction to a similar transaction taking place in the market. Different approaches should be considered to determine an arm’s length price. Public databases such as Amadeus, Loanconnector, Royaltystat, CapitalIQ and PPAnalyser are commonly used for benchmarking purposes.” Oliver Wehnert: “The arm’s length principle and the standard transfer pricing methods (CUP, R-, C+ and TNMM, PSM) determine the setting and/or the documentation of transfer prices. The analysis to arrive at arm’s length transfer prices consists of a thorough analysis of the
industry, the company, as well as the functions and risks performed. Typically benchmarking analyses, using company or public data to confirm the arm’s length nature of intercompany prices, are performed taking into account the aforementioned aspects.” What role does transfer pricing play in selecting the financing structure of a proposed merger or acquisition? Roderick Veldhuizen: ““Further to the OECD guidelines cross-border intercompany financial transactions should take place at arm’s length. This includes the selection of Debt-to-Equity ratios of group companies and the interest rate charged on inter-company loans. Situations where healthy operating profits are turned in to negative taxable results because of interest charges should be avoided to prevent potential transfer pricing risks from occurring.” Oliver Wehnert: “In cases where intercompany financing is utilized to complete the acquisition or to conduct a debt push down, the focus is on the ability of the lending company to manage the relevant risks associated with such financing from both a financial and personnel perspective. Further, intercompany pricing related to the financing opportunities need to be at arm’s length, e.g. defended through the performance of a benchmarking study on comparable interest rates for leverage-buy out loans.” What role does transfer pricing play in a due diligence phase? Roderick Veldhuizen: “Transfer
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Managing Transfer Pricing Risks in M&A Transactions
pricing risks can easily be underestimated. The $3.4 Billion settlement between the IRS and Glaxo SmithKline Holdings (Americas) in 2006 illustrates the impact an incorrect transfer pricing structure can have. Involving transfer pricing specialists in the due diligence phase can prevent surprises or at least quantify potential transfer pricing risks. Furthermore a due diligence phase provides for an excellent momentum to address potential post merger transfer pricing and tax planning opportunities.” How do M&A deals harmonize existing transfer pricing policies? Can you please use past examples to highlight your answer. Roderick Veldhuizen: ““M&A deals are more often introducing transfer pricing complexity rather than harmonization. It is likely that both companies involved in a merger or acquisition will have differences in their transfer pricing approach or policy. Especially in situations where one company has a more centralised business model and the other a more de-centralise model, integrating both transfer pricing systems may be challenging. Addressing transfer pricing aspects after a merger or acquisition is crucial if you want to avoid transfer pricing issues in the long run and if you want to benefit from potential post merger opportunities to lower the effective tax rate.” Oliver Wehnert: “M&A deals can present significant opportunities to harmonize and optimize transfer pricing policies. Transfer pricing can present significant tax rate and compliance optimization opportunities when proactively included in the post-merger integration process. On the other hand, M&A deals usually highlight differences in transfer pricing policies applied by the buyer and the target. This might require further explanations and additional documentation and can also create real exposure on one side or the other.” Post-acquisition, are there any transfer pricing issues that need to be addressed? Roderick Veldhuizen: “Post acquisition, transfer pricing can prove to be a powerful tool for planning and tax optimisation purposes. Centralising or de-centralising responsibilities or risks in line with the new post-acquisition business strategy can provide opportunities to decrease the effective tax rate. By modelling various transfer pricing scenarios, tax consequences of various tax structures can be mapped and simulated. Such modelling can both facilitate and influence management in deciding what business model to choose and how to implement the new business model in a tax efficient way.”
Oliver Wehnert: “Significant transfer pricing issues to be addressed in post-acquisition projects are, amongst others, the treatment of intellectual property (e.g., by implementing a licensing system) and the tax efficient re-organisation of the supply chain, e.g., including transfer of entrepreneurial and routine functions, avoid exit taxation on such transfers and/ or to realize anticipated synergies post-acquisition. “ M&A deals are alive with Transfer Pricing implications; what issues have you come up against over the last 12 months and how have you overcome them? Oliver Wehnert: “Most issues are due to differences in transfer pricing policies applied by the parties, e.g. application of different transfer pricing methods in likely similar transactions, applications of different margins or mark-ups in similar intercompany transactions, application of different business models (centralized/ decentralized), application of royalties on corporate brands, etc. Such issues require careful planning in the scope of the harmonization process post-acquisition. The challenge is always to abolish such systematic differences and to align the different systems, i.e. change transfer pricing models without creating tax risks for pre-acquisition periods.” As we slowly recover from the economic downturn, do you have any predictions for the next 12 months, in terms of demand in your jurisdiction? Roderick Veldhuizen: “While companies are recovering from the economic downturn, it can be expected that governments will face budget deficits for the next few years. Although governments will look for additional tax income at all levels, corporate income tax is an easy target as it does not impact voters (in the short run). Many governments, including Italy, Spain and Denmark have increased focus on transfer pricing by enlarging their transfer pricing teams, introducing new transfer pricing regulations and increasing transfer pricing audits. It can be expected that this trend will continue in the next few years.” Oliver Wehnert: “As a result of the economic crisis the German tax authorities have become stricter in their regulations and more aggressive in tax audit situations with a particular focus on so-called extraordinary transactions (e.g. business restructurings or post-merger integration). Taxpayers can fully expect their post-integration structures to be critically reviewed by the authorities.”
Roderick Veldhuizen r.veldhuizen@altus-alliance.com www.altus-alliance.com Tel: +31 20 4040256
Oliver Wehnert oliver.wehnert@de.ey.com www.ey.com Tel: +49 211 9352 10627
Gustav Mahlerplein 60, 1082MA Amsterdam, the Netherlands
Graf-Adolf-Platz 15 40213 Düsseldorf, Germany
Forty Five
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Adviser Map
Ian Asvakovith ian@pfsglobal.com www.pfsglobal.com Tel: (877) 386-3107 1604 Spring Hill Road, 3rd Floor, Vienna, VA 22182.
International Air Transport Law – USA timothy.lynes@kattenlaw.com www.kattenlaw.com Tel: (202) 625-3686 Fax(202) 295-1118 2900 K Street NW, North Tower - Suite 200 Washington, DC 20007-5118
Inter A
Phil Masterson managerservices@seic.com www.seic.com/ims Tel: +353 1 638-2435 Styne House, Upper Hatch Street, 2nd Floor, Dublin 2, Ireland.
Frank Franiak franiak@woodfieldllc.com www.woodfieldllc.com Tel: (847) 385-2203 3601 Algonquin Road, Suite 900 Rolling Meadows, IL 60008.
Denzil Boschat pepf@rbc.com Tel: +44 (0) 8000 566 550
Andre Le Roux andre.leroux@maitlandgroup.com www.maitlandgroup.com Tel: +27 (0)21 681 8010 Maitland House 1, River Park, Gloucester Road, Mowbray, Cape Town, South Africa.
Forty Six
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Adviser Map
International Auditing & Assurance - Mongolia Enkhbold B. Manager Citico-Audit LLC citico@mongol.net
x m m 0 k, pe a.
Central Securities Depository Malta Stock Exchange plc email csd@borzamalta.com.mt www.borzamalta.com.mt Tel: (+00356) 2569 6000 Bor!a ta’ Malta, Castille Place, Valletta VLT 1063 MALTA
The Cross Border Tax Specialist – China Yoyo Zhongtianyue 2011-05-25 梁景旭 1989218abcd@163.com
Forty Seven
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Deal Diary
T
he recent drop in global stock markets will put significant pressure on companies pursuing or looking to complete an initial public offering (IPO) in the second half of 2011, according to PwC US.
With 79 completed IPOs generating $24.3 billion in proceeds through June 30th -more than double the amount raised for the first half of 2010 when there were 70 IPOs that generated $9.4 billion - the 2011 U.S. IPO market promised to be the most active year since 2007. However, according to PwC, increasing uncertainty around the global economic outlook may impact investor appetite for IPOs in the short term, hindering continued momentum in the U.S. IPO market. In the second week of August, there were 12 IPOs scheduled to price, with six companies postponing their offerings as of Wednesday morning. "At the close of the second quarter, we were optimistic that the proceeds from IPOs completed in the second half of the year would lead 2011 to eclipse the full year 2010 proceeds of $39 billion; however, disruptions in the overall market and a variety of recent macroeconomic events may present considerable challenges for companies looking to execute an IPO in the coming months," said Henri Leveque, Leader of PwC's Capital Markets and Accounting Advisory Practice. "The summer months, particularly August, are typically a slower time for IPO activity, so it will remain to be seen how quickly market stability and confidence returns and whether those companies waiting in the wings will move forward with their IPO plans come September. "The S&P 500 Volatility Index (VIX Index), which tracks volatility of S&P 500 index options and is a key indicator for investors' appetite for IPOs, jumped to over 47 on Tuesday, indicating increased caution for potential IPO investors. With the exception of a spike in March, the VIX Index had been on steady decline for over a year and was approaching 15, which is considered to be a favorable range for pricing IPOs. The lowest
Forty Eight
volatility in recent years was at the end of 2006 when the VIX Index approached 10, coinciding with a high point for historical IPO activity. According to PwC, the current jump may be cause for immediate concern; however, it doesn't come close to the October 2008 high of 89, when IPO activity was at an all-time low. According to PwC, if the VIX Index declines during the remainder of August through to early September, IPO Activity may recapture its prior buoyant levels of activity for the balance of 2011. Despite lingering uncertainty regarding the economic outlook, PwC notes that short-term market events typically should not impact the process companies undertake to prepare for an IPO. "Companies that successfully execute an IPO in the coming months will have taken a long-term approach and undergone careful planning, thereby helping them to be ready to successfully navigate unforeseen market events," concluded Leveque. "Potential issuers often underestimate the time and effort that goes into embarking on life as a public entity. No one can predict when the window will open or shut; however, companies that are well-prepared will have the flexibility needed to take advantage of market conditions and be able to access the IPO market when the timing is right." According to PwC, IPOs are considered to be one of the higher risk options for investments, due to a limited historical track record for some companies. "The underlying business of a potential issuer becomes more important in a difficult funding environment. Those issuers with businesses that are somewhat immune to economic downturns are more likely to be able to go to market than issuers that are heavily dependent on the consumer or general economic strength," said PwC's Leveque. "We expect to see solid companies with good business fundamentals succeed despite market volatility through IPOs and other viable avenues for investment, including the private placement market, which provides another avenue to bring cash from the side lines into the U.S. economy for jobs, research and development, investment in capital equipment, and the creation of more goods for sale and purchase by consumers or businesses."
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Deal Index
DEAL INDEX Action Agroup Banco Popolare Ceska Republika Com Hem Coventya Deniz Emiklilik GADA Groupe Amplitude Haltermann Products Kiwa KSM Castings Group Manag Mecathern Mezzo di Pasta
53 53 53 54 54 52 55 55 55 56 56 56 50 57
Monda Minerals 57 MyoPowers 58 Numericable 58 Opodo Group 51 P/f Havsbrun 59 Qualitec Engenharia da Qualidade 59 Sagemcom 59 Slater & Crabtree 60 Suomen Telecenter 60 Temperature Sensitive Solutions Systems Sweden 60 Ukrtelecom 61 Uniq 61 Wagner Analysen Technik 61 Webhelp 62
Forty Nine
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Deal Diary
Wendel acquires Mecatherm
T
hrough its subsidiary, Oranje-Nassau Développement, Wendel has acquired MECATHERM, valuing the company at €170 million, which corresponds to 9 times EBITA. Subject to an agreement on the documentation, following consultation with MECATHERM’s Works Council and receiving the necessary approvals from the competition authorities, the definitive acquisition of MECATHERM is expected to take place during the third quarter of 2011. Founded in 1964, with around 300 employees, a R&D laboratory and three industrial sites in France, MECATHERM develops, assembles and installs automated production lines for industrial bakery products (baguettes, artisan bread, cakes, etc.) worldwide. MECATHERM recorded 2010 full-year revenue of €91 million, of which nearly 75% from export.
“
The challenge we faced in reviewing the strategic positions of the Company was linked to the variety of geographies and clients in a market with little public information. “ Our expertise in industrial equipment and the high number of interviews in Europe, in North America and in Asia was critical. “The Company has developed a strong expertise in value added products both with high capacity lines, premium lines and variety lines. “The main issue was to determine the competitive levers required for each segment, (value of technology, value of manufacturing processes, value of size and experience for specific applications, value of managing a fragmented distribution channel, …), the market growth by segment and to define Mecatherm’s position in these different segments, in order to analyze its structural profitability and growth potential.
”
Jean Berg (Vice President) led the Estin & Co team, assisted by Geoffroy Rouillé d’Orfeuil (Manager).
“
Wendel is one of our key and longstanding relationships. Our intimacy with its senior management and its investment team led by Stéphane Bacquaert and Patrick Bendahan was critical to best advise them on the deal tactics and offer.
Wendel Acquisition Of Mecatherm Strategic Vendor Due Diligence Financial Adviser to the Equity Provider
Financial Due Diligence Provider Legal Adviser to the Vendor
“Wendel took a holistic approach of the transaction Their drive and focus on the key business aspects of the deal was great. Their early conviction about the merits of the management growth strategy was essential and gave them the comfort they needed to pursue the deal aggressively. As a result, they were able to take quickly well measured risks and to match the seller and management requirements in a simple transaction structure. “Wendel seamless decision making process and the commitment of its senior management and board were absolutely decisive given the strength of the competition for the asset.
”
Ondra Partner acted o behalf of Wendel on the deal. The Ondra team was led by Vincent Gaillard, one of its partners in Paris and Vincent de Boursetty, an M&A
Financial Adviser to the Vendor Tax Adviser Provider IP Due Diligence Provider Nuss Risk & Insurance Due Diligence Provider Commercial Due Diligence Provider Legal Adviser to the Equity Provider
Fifty
Associate in London.
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Deal Diary
eDreams and GO Voyages acquire Opodo Group from Amadeus
T
he Permira Funds and AXA Private Equity today announce the successful completion of the merger of eDreams and GO Voyages, and the acquisition of Opodo from Amadeus, to create one of Europe’s largest groups in online travel.
“
It is without a doubt one of the recent landmark deals in private equity in Europe. In addition to the particularities and complexities mentioned above, it is remarkable that, within a period of around a year, Permira and Axa PE have acquired separately eDreams and GoVoyages, respectively, then subsequently formed the Consortium, bid successfully for the acquisition of Opodo and finally completed the integration of the three groups.
”
Linklaters advised both the Permira funds and the Axa Private Equity funds on the deal, reinforcing a long lasting relationship with both parties.The team has been led by Alejandro Ortiz (partner and head of the corporate group in Madrid) and by Carmen Burgos (counsel in the corporate group in Madrid).Javier García-Pita (tax
eDreams, GO Voyages, Opodo will continue to operate and offer their services in a total of 27 countries, using their respective brand names which are well known and trusted by millions of travellers across Europe. Shared best practices will be applied across the Group to generate significant revenue synergies, broaden product offering and further improve the value proposition and customer service to millions of consumers. The companies integrating to form the new Group will maintain their teams in France, Germany, Italy, Scandinavia, Spain and the UK, thereby retaining the strong heritage and know-how of each company. All aspire.
partner in Madrid) coordinated the tax structuring of the deal, with Ben Crosse (banking partner in Madrid) coordinated the bank financing for the acquisition and the refinancing of the group.
“
Société Générale supported Permira and Axa Private Equity in this acquisition. Both financial sponsors had reached a preliminary agreement to merge GoVoyages (acquired by Axa in 2010) & eDreams (acquired by Permira in 2010) and launched a joint bid on Opodo to create the combined GEO group. As a leading bank in both GoVoyages and eDreams deals, Société Générale was approached by the 2 co-bidders to arrange the acquisition and refinancing debt for the contemplated transaction. Société Générale was appointed as Global Coordinator, Bookrunner, MLA and Agent for Senior Loan facilities and High Yield Bonds. We are proud to have supported both clients to create the largest independent European on-line travel agency market. We regard very positively the market dynamics that favour the online travel agency market.
”
eDreams and GO Voyages Acquisition of Opodo Group
In SG, there was an execution team (led by Jaime Cano, Director
Debt Providers
relationship team (led by Arturo Alonso, Head of Global Finance
of Leveraged Finance in Madrid, and Nathalie Bleunven, Managing Director of Acquistion Finance in Paris) and a in Spain and Portugal, Eric Meyer and Nick Heptinstall, both Managing Directors in charge of the relationship with Permira and Axa Private Equity respectively within the SG’s Financial Sponsor Coverage department in London and Paris). Jaime Cano and the rest of the Leveraged Finance team of SG in Madrid have a long-standing relationship with Permira having worked together in a several deals and particularly in those deals successfully closed such as Cortefiel and Dinosol in 2006 and in eDreams in 2010. It is important to highlight that SG has consistently achieved
Legal Adviser to the Purchaser Financial Due Diligence Provider
Legal Adviser to the Vendor
Risk & Insurance Due Diligence Provider
leading market shares in the Spanish Leveraged Finance market since 1997.
“
From the very start, Commerzbank were convinced that AXA PE and Permira had the vision and expertise to win the auction and successfully realise the complex combination of the three businesses to create this exciting new group. From a financing perspective, the main structuring considerations were to ensure the parallel syndication of senior secured financing with a high yield bond and to deliver continuity in the regulatory requirement for guarantees. Based on a strong track record in structuring bonding facilities, Commerzbank engineered an original solution that addressed the guarantee needs of the group.
”
The Commerzbank team was led by Scott Boothby (Head of Transaction Group,
Commercial Due Diligence Provider
Leveraged Finance) and coordinated by Laurent Oriol (Vice President, Leveraged Finance). Particular support was provided by the distribution team Sean Costello (Managind Director, Loan Capital Markets) and Alexander Merwart (Director, Loan Capital Markets).
Fifty One
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Deal Diary
MetLife acquires Deniz Emeklilik
E
uropean financial institution Dexia has agreed to sell Turkish insurance business Deniz Emeklilik to MetLife, for €162 million ($229.3 million).
“
The key challenge was that the investment decision would be mainly based on the future potential of a very young company, so our task was to make potential acquirors comfortable on the feasibility of an aggressive business plan.
”
Bank of America Merrill Lynch acted on behalf of the seller, Dexia and its Turkish subsidiary DenizBank on the deal. Filippo Foco, Head of European Insurance led the team.
“
The deal represents a continuation of Milliman’s longstanding relationship with MetLife. Milliman is among the world's largest independent actuarial and consulting firms, with 53 offices and 2,500 people in key locations worldwide.
”
MetLife was supported in this deal by actuarial firm, Milliman, providing actuarial due diligence and valuation of the life business of Deniz Emeklilik. The Milliman team was led by Harris Bak (Milliman’s New York office) and Scott Mitchell (Milliman’s Zurich office).
“
The transaction value makes it one of the major M&A deals in the Turkish insurance market to date. This was quite a complex transaction for all participants, as it involved numerous parties and interests in different jurisdictions, with diverse objectives and benefits to gain from the operation once concluded. Paksoy's considerable cross-border M&A transaction capabilities, experience with the regulators, teamwork and expertise made a significant contribution to reaching a successful signing.
MetLife Acquisition of Deniz Emeklilik
”
Paksoy represented MetLife on the deal. A team of lawyers, led by Mr. Serdar Paksoy (partner), Mr. M. Togan Turan (partner) and Ms. Stephanie Beghe Sönmez (foreign counsel), advised on the transaction.
Legal Adviser to the Purchaser
Legal Adviser to the Seller
Financial Adviser to the Purchaser
“
PwC represented MetLife on the deal by providing financial and tax due diligence services. As well as helping around various complex accounting and tax related matters. PwC has long standing relationship with MetLife both globally as well as in their local subsidiary in Turkey.
”
Engin Alioglu, Transactions partner based in PwC Istanbul led the team. Mary Helen Taylor ( partner -PwC New York) led the accounting team, with Anna Turkenich( partner PwC New York) leading the tax team.
Financial Adviser to the Seller
Financial and Tax Due Diligence Adviser
Pension and Actuarial Adviser
Fifty Two
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Deal Diary
Action accelerates international growth with 3i 3i, an international investor focused on private equity, infrastructure and debt management, and funds managed by 3i have agreed to take a majority stake in Action, the Dutch retailer, in order to support the company’s international growth. Action is one of the Netherlands’ leading retailers, with a unique store format summed up in the slogan: "Surprisingly comprehensive, amazingly affordable." “Our role was to provide a strategic assessment of the scalability of Action’s distribution and logistics network in the context of forecast growth” CB Richard Ellis acted on behalf of the buyer, Investor 3i on the deal. Marco Hekman, Managing Director and CEO the Netherlands led the team, assisted by Krijn Taconis, Executive Director Retail and Mark Fidler, Executive Director Valuation Advisory. Our role was to provide a strategic assessment of the scalability of Action’s distribution and logistics network in the context of forecast growth. This was crucial to the overall valuation and risk assessment since 3i needed to anticipate the nature and timing of any investments required, as well as forecasting future operating cost trajectories.
BaltCap puts €1.5m in Agroup
Banco Popolare Ceska republika acquisition
BaltCap, a Baltic States private equity and venture capital investor, has put €1.5m into Latvian IT company Agroup.
Funds advised by AnaCap Financial Partners LLP (“AnaCap”), the European private equity advisory firm that specialises in the financial services sector, have completed their purchase of the retail and commercial bank Banco Popolare Česká republika (the “Bank”), following regulatory approval from the Czech National Bank.
AGroup, established in 2008, has developed a human resource management software program called HRB. The program offers core HR functionality including payroll calculation and work time recording, while an updated version will add talent management, recruiting management and personnel evaluation features.
We have been successfully cooperating with BaltCap in several other transactions and matters, including formation of the fund, through which the respective investment was made (established within the JEREMIE initiative, being cofinanced by the EU structural funds), as well as have also assisted in the first investment of this fund.
This is the third bank that funds advised by AnaCap (“AnaCap Funds”) have acquired in two years, highlighting the group’s position as a leading private equity investor in the European banking sector. BBH successfully represented members of the AnaCap group in proceedings before the Czech National Bank (“CNB”) in connection with the acquisition of a qualified holding in Banco Popolare Czech Republic, a.s. The Team was lead by partner tomáš sedláček and off counsel zdeněk husták.
Attorneys at law BORENIUS assisted to BaltCap in structuring the respective deal, conducted legal due diligence, as well as prepared and helped negotiating the transaction documents and provided legal advice with regard to other transaction related issues. The transaction was lead
Having the very limited access into the collateral records, the identification of the particular property extent was the real challenge.
by the Senior Associate Zane Krecere.
LCP Consulting Ltd was pleased to support the due
zane.krecere@borenius.lv
diligence process, representing 3i. LCP has completed a
www.borenius.lv
partners with the valuation of Banco Popolare
number of such assignments for 3i, and subsequently
advokati@borenius.lv
collateral portfolio. American appraisal team was led
post acquisition change management. The LCP team was
Member of Borenius Group
by mr. Martin horčička, vice president, real estate
led by Michel van de Veegaete, Partner based in Benelux.
www.boreniusgroup.com
advisory group, czech republic.
3i Acquisition Of Action
BaltCap invests €1.5m in Agroup
Legal Adviser to the Purchaser
American appraisal provided AnaCap financial
AnaCap Financial Partners LLP Acquisition of Banco Popolare Česká Republika Legal Adviser to the Purchaser
Tax Adviser to the Purchaser
Financial and Operational Due Diligence Provider
Tax AdviserB
Risk & Insurance Due Diligence Provider
Property Adviser
Logistics Due Diligence Provider
Legal Adviser to the Vendor
Legal Due Diligence and Legal Assistance Provider to BaltCap
Property Valuer
Local Legal Advisor to Purchaser
Fifty Three
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Deal Diary
BC Partners to buy Sweden’s Com Hem
Barclays Private Equity acquires Coventya
Cimbria majority stake acquired
BC Partners has agreed to buy Sweden’s Com Hem in a more than €1.8bn ($2.6bn) deal that continues private equity’s moves into the cable sector.
Barclays Private Equity has announced that it has completed the management buyout (MBO) of the Coventya Group (or “the Company”) in partnership with the Company’s directors for an undisclosed sum. The transaction is subject to approval from competition authorities.
Axcel has concluded an agreement with EQT Opportunity, the Toftdahl Olesen family and other shareholders concerning the acquisition of Cimbria, which is a market leader within the manufacture of equipment and complete processing lines for the processing, handling and storage of grain and seed corn in Europe.
We addressed the complex infrastructure environment in Sweden through an extensive, survey based market model for B2B and B2C volume developments. Roland Berger represented BC Partners, with whom we have a longstanding business relationship. The team was led by Alexander Mogg, Head of the RB Infocom competence center, and Philipp Leutiger, Head of the Practice Group for Cable.
The Coventya Group is a leading company in the development and supply of electroplating and surface treatment. It has a turnover of over €90 million and operates in over 40 countries. Coventya prides itself on its responsive service and offers its many customers a wide range of OEM certified products based on innovative technology. Its main target markets are the automotive, oil industry, fashion and construction sectors. As a shareholder, Barclays Private Equity intends to pursue the Company’s ongoing development strategy, notably through acquisitions in emerging markets.
With the acquisition of Cimbria, Axcel wishes to further develop the enterprise and its market positions in both Europe and the rest of the world.
The Ernst & Young team provided financial due diligence to the Axcel with a focus on the significant value drivers in the financial development of the company. In addition the team assisted the buyer in considerations related to the closing mechanism of the deal. Jakob Fogt Partner, Lasse Fredborg Executive Director led the Ernst and Young team. Peter Ketelsen led the Kromann Reumert team that advised EQT Opportunity, the majority shareholder on the deal.
BC Partners Acquisition of ComHem
Barclays Private Equity Acquisition of Coventya
Debt Providers
Legal Adviser to the Equity Provider
Financial Adviser to the Equity Provider
Acquisition Of Cimbria Legal Adviser to the Purchaser/Equity Provider
Financial Adviser & Due Diligence to the Purchaser/Equity Provider
Axys Finance Legal Adviser to the Vendor Financial Due Diligence Provider
Financial Adviser to the Vendor
Commercial Due Diligence Provider Commercial Due Diligence Provider
Fifty Four
Environmental Due Diligence Provider
KRUGER
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Deal Diary
RBS Equity Finance acquisition of GADA
Majority stake in Groupe Amplitude acquired
HIG Europe acquires Haltermann Products
RBS Equity Finance, a private equity and mezzanine arm of nationalised bank RBS, has bought healthcare services firm GADA.
Apax Partners has acquired a majority stake in Groupe Amplitude alongside its current shareholders, founders Olivier Jallabert and Bruno Saint Paul, and Initiative & Finance.
HIG Europe has acquired Haltermann Products and its two production sites from The Dow Chemical Company for an undisclosed amount.
The deal is an exciting one for RBS SOF and The GADA Group. We look forward to seeing both the investment by RBS SOF and the company grow significantly in the next few years.
Founded in 1997, Groupe Amplitude has posted rapid growth. The French leader in its market, the company offers a full range of hip and knee implants as well as Amplivision, a cutting-edge navigation system for orthopaedic surgery.
Ashurst acted on behalf of RBS Special Opportunities Fund ("RBS SOF") on the deal, reinforcing a We have a solid and long-standing relationship with the team at RBS SOF. David Carter Partner, led the team, assisted by Catherine Passmore, Senior Associate and Nerys Evans, Associate.
The biggest challenge was the crossborder nature of the transaction – GADA has operations in the UK, Italy, Romania and Turkey. PwC were able to deploy a multi-disciplinary team that integrated UK and overseas transaction specialists. Secondary challenges were the data complexity of the GADA group – which distributes >5,000 unique products – and an extended transaction timetable. These challenges were addressed by a flexible approach, a senior and experienced team, and frequent dialogue with RBS and other advisers on the transaction
AVICENNE acted as commercial due diligence provider on the deal, analyzing opportunities and risks of the transaction, whilst developing a strategic plan and forcast for the next 5 years. Ali MADANI, Associate Director led the team. a.madani@avicenne.com It was a swiftly executed transaction thanks to a thorough preparation phase and an efficient contact phase involving trade buyers and PEHs from all over the world. Rothschild & Cie acted on behalf of Weinberg
WilmerHale acted on behalf of DOW Chemical on the sale of Haltermann Products to H.I.G. on the deal. The transaction was led by Dr. Rüdiger Herrmann (Partner) and Marcus Pickel (Counsel, both Corporate/M&A), together with Jochen Eimer, LLM (Counsel, Corporate M&A), Dr. Monika Richter (Senior Associate Corporate M&A), Dr. Astrid Pönicke (Tax).
on several projects since their inception The team was co-led by Laurent Baril (partner Rothschild &
Services team led the financial and tax due diligence
Cie) Laurent Buiatti (Managing Director Transaction
on behalf of RBS Equity Finance.
R) And Fabien Lenoir (Director Transaction R)
Legal Adviser to the Equity Provider
HIG plans to grow the company internationally in addition to its core German market and will look to continue to extend Haltermann's product portfolio.
Capital Partners with whom we’ve been working with
Jonathan Cooper, Partner within PwC’s Transaction
RBS Equity Finance Acquisition Of GADA
HIG was attracted to the deal due to Haltermann's strong brand in the chemicals industry, and ability to produce selected refinery products for a broad range of applications. The private equity house invested through its €600m HIG European Partners and appointed Dr Uwe Nickel, formerly board member of Clariant AG, to head up Haltermann.
Weinberg Capital Partners Acquisition of Groupe Amplitude
HIG Europe Acquisition of Haltermann Products Legal Advisers to the Equity Provider
Legal & Tax Adviser Financial Adviser to the Equity Provider
Financial Due Diligence Provider
Legal Adviser to the Vendor
Financial Adviser to the Vendor
Financial Due Diligence Provider
Financial Adviser Tax Adviser
Financial Adviser to the Vendor Commercial Due Diligence Provider Tax Adviser
Environmental Due Diligence Provider
Fifty Five
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Deal Diary
NPM Capital backs buyout of Kiwa from ABN AMRO
Cognetas sells KSM Castings to China’s CITIC Dicastal
Arx Equity Partners acquires Czech Electrical Gear Company Manag
Benelux-based private equity firm NPM Capital has backed the secondary management buyout of certification company Kiwa from majority shareholder ABN AMR Participaties.
Cognetas LLP ("Cognetas"), an independent mid-market European private equity firm has agreed to sell KSM Castings Group ("KSM") to China’s CITIC Dicastal Wheel Manufacturing Co., Ltd ("CITIC Dicastal"), one of the world’s largest suppliers of cast aluminum wheels for the automotive industry.
Arx Equity Partners has acquired Czech company Manag, which designs and manufactures electrical equipment and control systems in the refinery, chemical and pharma industries. Financial details of the transaction weren't disclosed, but Manag posted sales of €10 million for 2010.
In 2005, Cognetas led the management buy-out of KSM Castings, formerly ThyssenKrupp Fahrzeugguss, from ThyssenKrupp AG. KSM is recognized as a technology leader in the global light metal castings industry and has an excellent customer base consisting of blue-chip automotive OEMs and Tier 1 suppliers such as Volkswagen Group, Daimler, Benteler, Bosch, ZF and TRW. Under Cognetas’ ownership, revenue increased by 39% to EUR 401 million in fiscal year ending March 2011.
The transaction was completed by Citibank’s Local commercial bank department (“LCB”) and it was the first leveraged acquisition for that department in Czech Republic.
In 2006 ABN AMRO took over Kiwa from the Dutch water companies through the ACTA investment company. Kiwa is a certification company with related inspection and lab operations, complemented with training, technology and data services.
Kiwa showed significant growth over the period, we were asked to analyse the like-for –like growth versus growth through acquisitions. The vendor process was strictly managed with a very tight time schedule. We worked in close cooperation with management and corporate finance advisor to perform our vendor due diligence procedures. KPMG performed a vendor due diligence
Citibank Europe plc, conducting its business in the Czech Republic through Citibank Europe plc, organizacni slozka (“Citibank”) acted as the financing bank on the deal. Vit Svarc (LCB Relationship Manager) and Jan Firda (LCB Regional Manager) covered the transaction.
PwC Frankfurt/Munich acted as vendor due diligence provider to Cognetas, using an integrated team of financial, commercial and operational due diligence specialists.
representing management and shareholders, reinforcing a long relationship and performed the buyside due diligence back in 2006 for ABN AMRO Participaties. Koen Dinkla (partner KPMG Transaction Services) and Mark Pot (associate director) led the team.
Kiwa Secondary Management Buy Out Legal Adviser to the Equity Provider
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CITIC Dicastal Wheel Manufacturing Co., Ltd Acquisition Of Cognetas LLP
Arx Equity Partners Acquisition of Manag
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Financial & Tax
Fifty Six
Legal Advisers to ARX
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HgCapital acquires Mainio Vire HgCapital, the European sectorfocused private equity investor, has acquired Mainio Vire, Finland’s leading social care company, from MB Funds, a Finnish private equity fund. The acquisition represents a continuation of HgCapital’s thematic, sector-driven investment strategy, with Mainio Vire being HgCapital’s 6th investment in the health and social care services market.
Mainio Vire is the leading Finnish social care services company with excellent track record and it has all the prerequisites for continuing its strong growth. It was decided that the sale process will be very rapid and therefore it was critical for the successful execution that there were no delays at any stage. Consequently, the process was completed successfully within only around two months’ time.
Mezzo di Pasta acquired Bridgepoint Development Capital (‘BDC’) is to acquire with management Mezzo di Pasta, the leading pasta fast food chain in France, for an undisclosed sum. Founded in 2002 in Strasbourg, Mezzo di Pasta now has 126 outlets (121 in France and five under master franchises' agreements overseas), having grown rapidly in the last five years, and opening on average 24 new outlets per annum. Approximately 80% of the outlets in France are franchised with the balance being owned by the company. Hoffmann & Baretti worked on the request of Bridgepoint to lead the search for the recruitment of a CFO, Renaud PRODEL de LARIVIERE as Managing Partner of the Firm, he commented: “We were looking for a CFO that knew how to work in a business activity organized through franchise system/multi channel distribution as points of sales which local entities to supervise.”
HgCapital sells Mondo Minerals to Advent International European private equity firm HgCapital has agreed to sell Mondo Minerals, the world’s second-largest talc producer, to US firm Advent International. The sale is subject to employee consultation, and is expected to close within the next four months. The sale of Mondo will represent the firm's fifth realisation over the last 12 months, leading to an anticipated return for these five realisations of approximately 3.2 times combined gross original cost and an IRR of 24 per cent. Millingtom Advisory Partners acted as joint financial advisor to HgCapital on the deal. Rod Cantrill and Matthew Taylor, both Managing Directors led the team.
We helped prepare a message-driven structure for the management presentation to highlight the strategy and future potential of Mondo Minerals “We also worked alongside 6 senior executives from very different backgrounds to ensure a high-impact delivery of the Mondo Minerals story by every executive and by the team as a whole.
KPMG Corporate Finance acted as the sole financial adviser for the vendors led by MB Funds. Jukka Teikari, Partner, led the team, assisted by Harri
Kingstree acted on behalf of HgCapital and the
Räsänen, Senior Manager.
management of Mondo on the deal. The Kingstree team was led by Marc Monasch, Managing Director. Roskill provided commercial due diligence to the vendor.
HgCapital Acquisition of Mainio Vire from MB Funds
Bridgepoint Development Capital and Management Acquisition Of Mezzo di Pasta Legal Adviser to the Management Team
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Advent International Acquisition of Mondo Minerals Financial Due Diligence Provider Vendor
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Fifty Seven
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MyoPowers Medical Technologies SA Series B Investment MyoPowers Medical Technologies SA, a Swiss medical device start up developing artificial muscle technologies to treat sphincter dysfunction and incontinences has closed a CHF 16 million Series B investment round led by Truffle Capital. Series B investors include Swiss-based investment firm, BlueOcean Ventures and two private investors. All Series A investors, including Novartis Venture Funds, Gran Plasa SA and Initiative Capital Romandie, participated in this round of funding. Philippe Pouletty, MD, General Partner of Truffle Capital, said, “Myopowers has the potential to solve a major medical problem affecting the well being of millions of patients with a very well designed proprietary device.” He joins MyoPowers board of directors. According to the Chairman of the Board, Ivan Csendes, “The addition of Truffle Capital to the board, our Series B investors and the successful fundraising, positions MyoPowers as an upcoming major player to watch in the incontinence sector.”
MyoPowers Medical Technologies SA Series B Investment Legal Adviser to the Company
A Consortium Acquires Numericable Apax Partners, one of France’s leading private equity firms, and Deficom Telecom, a Luxembourg company comprising Deficom and Altice, have acquired the Belgian and Luxembourg operations of cable network operator Numericable. “Degroof Corporate Finance supported Apax in its negotiation with the target, Due Diligence process management and debt financing of the acquisition.” Degroof Corporate Finance, 100% subsidiary of Bank Degroof, acted as financial adviser to Apax Partners Midmarket SAS in its acquisition, in consortium with Deficom and Altice, of Numericable Belgium and Luxembourg. This transaction has been led by Henk Vivile, executive director at Degroof Corporate Finance, with the support of Matthieu Bocquet, manager and Antoni Slawecki, associate. Roland Berger prepared the strategic Due Diligence for the transaction. The team was led conjointly by Nicolas Teisseyre, Senior Partner, Jean-Charles Ferreri, Partner and Jérôme Colin, Principal.
Apax Partners, Deficom Telecom, Deficom. Altice Acquisition of Numericable M&A Adviser to Apax
Vattenfall Disposal Vattenfall has reached an agreement for the sale of Nuon Exploration and Production B.V. to Tullow Oil plc for a cash consideration of €300 million, subject to net working capital and post effective date adjustments. Nuon Exploration and Production B.V. currently holds interests in 35 producing gas fields in the Dutch North Sea as well as interests in the Den Helder plant and pipeline and other associated infrastructure. The deal will be effective as of January 1st 2011. In June 2008, Nuon acquired the gas fields through its acquisition of Burlington Resources Netherlands B.V. In the autumn of 2010 Vattenfall announced a new strategic direction for the Vattenfall Group. One of the key elements of this new strategic direction is a strong focus on the Group's operations on core markets and core assets. The main drivers for the new strategic direction are to create financial flexibility and to reduce CO2 exposure. The preparation and final implementation of the sale of the E&P assets is a result of this new strategic direction.
Tullow Oil Acquisition of Nuon Exploration and Production B.V. Legal Adviser to the Purchaser
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Strategic Due Dilligence
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Bakkafrost acquires P/F Havsbrun P/F Bakkafrost, the largest salmon farmer in the Faroe Islands, has received approval from the Faroese Competition Authorities for the acquisition of P/f Havsbrún and related companies. BankNordik reinforced a year long working relationship with Bakkafrost , working with them as their bank connection and as Corporate Finance Adviser ahead of a reconstruction in 2005 and the company’s IPO in 2010 together with Nordea Corporate Finance as jointlead managers. John Rajani, deputy CEO at BankNordik (former Head of BankNordik Corporate Finance) and Niels Juel Arge, present Head of BankNordik Corporate Finance led the deal team. Major challenges in connection with the acquisition included the intricate ownership structure of P/f Havsbrún as well as the fragmental ownership, which complicated the process of obtaining agreement with the seller. Other challenges included obtaining acceptance from Faroese competition and fish farming authorities, which led Advokatskrivstovan to draw heavily on its detailed knowledge to Faroese legislation and Faroese society in general.
Qualitec acquired
Acquisition of Sagemcom
Applus+ has acquired Qualitec, a Brazilian company specialized in nondestructive testing and inspection services for the oil, gas, chemical and pharmaceutical industries, among others.
Global alternative asset manager The Carlyle Group (“Carlyle”) has entered into exclusive negotiations for the acquisition of Sagemcom, a global high-technology group specializing in broadband communications and energy activities, from the Gores Group. Carlyle would invest through Carlyle Europe Partners III (CEP III), a €5.4 billion buyout fund focused on investment opportunities in Europe, and would own 70% of Sagemcom whilst management and employees would hold the remaining 30%. Further financial terms of the transaction were not disclosed.
Based in Belo Horizonte, in the southeastern Brazilian state of Minas Gerais, Qualitec has 200 employees and reached a turnover of BRL25 million (€11 million) last year.
The structuring of the transaction was quite complex due to some particularities of the business activities carried out by the target company but our legal advice provided to our client the necessary comfort to carry on the negotiations and close the transaction Neves, Soares & Battendieri acted on behalf of Applus Group to help structuring the transaction from a tax and contractual perspective. The team was
Fernando Goni, Managing Director of The Gores Group commented: “We want to thank the Sagemcom team for their hard work in building and growing such a successful business over the past few years. We enjoyed working with the team in Paris and are proud to have enabled the company to achieve this successful track record. We are confident that Sagemcom will continue to flourish and wish management and Carlyle success.”
led by Mr. Luiz Frederico Barbosa Battendieri (Tax) and Mr. Gustavo Pires Ribeiro (M&A), with the assistance of Mr. João Gabriel Vieira de Medeiros.
Mr Christian Andreasen, partner at Advokatskrivstovan, Frúutrøð 4, Tórshavn in the Faroe Islands, handled the legal matters in connection with the acquisition by P/F Bakkafrost of P/f Havsbrun. He was representing P/f Bakkafrost, a client for more than 15 years of Advokatskrivstovan.
Patrick Sévian, President of Sagemcom commented: "We are very excited at the prospect of partnering with Carlyle as we believe this will enable us to consolidate and strengthen the ambitions of Sagemcom, both through organic growth and acquisitions. In addition, we are proud that The Carlyle Group, a leading global institution in private equity, shares our employee ownership culture, which we consider as one of the engines of our dynamism, and which would be increased from 25 to 30% under the new structure.”
Bakkafrost Acquisition of P/F Havsbrun
Applus+ Acquisition of Qualitec
The Carlyle Group Acquisition of Sagemcom
Debt Providers
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Financial Due Diligence Provider Corporate Finance Adviser to Caryle
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Deal Diary
Slater and Crabtree acquired Group Rhodes has acquired of Slater and Crabtree Limited (S&C) on 6th June 2011, a company that manufactures precision engineered components for a blue chip customer base including companies such as David Brown and Camerons, both of which are also serviced by Group Rhodes. The two Companies have enjoyed an intertwined history with S&C focussing its early business on the manufacture of tooling for Rhodes presses. S&C was based in an adjacent building to Group Rhodes in Belle Vue, Wakefield before moving one mile to its current location on Thornes Lane in the 1960’s. Throughout this period Group Rhodes retained a minority share holding in the business and over recent years Mr Ian Ridgway (Chairman of Group Rhodes) held an advisory position on the Board. Whilst our due diligence investigations brought certain issues to light, there was nothing that could not be resolved by negotiation. The acquisition both safeguards the future of the Target’s business and strengthens the Buyer’s Group. Baxter Caulfield advised the Buyer in connection with all legal issues arising from the acquisition and the terms of the Share Purchase Agreement. The team was led by Stephen Newman, the firm’s Senior Partner, assisted by Emma Spragg. Richard Gillatt, the head of our property department, investigated the title to the Target’s premises in Wakefield.
Sentica Partners acquires Suomen Telecenter In a corporate transaction managed by the private equity investor Sentica Partners, the company Suomen Telecenter Oy becomes part of the group that includes MediaPex Oy, acquired in March 2010. Together the companies constitute by far the largest independent telemarketing player in Finland and aim to further improve and expand their service offering. The fund managed by Sentica Partners will remain the majority holder in the group’s parent company. In conjunction with the transaction, Jouni Huhdanperä, Managing Director of Suomen Telecenter (STC), and STC’s other key employees will become shareholders in the Group. Additionally, Mika Aro, one of the founders and a previous co-owner of STC, will become a shareholder in the Group and a member of the Group’s Board. Timo Salmela has been appointed the Group CEO. He brings in a vast experience in management duties at Nordic companies offering outsourcing services. Tom Sandman and Jouni Huhdanperä will continue as Managing Directors of MediaPex and STC, respectively. STC was sold by Tamares (the company of Poju Zabludowicz), Turo Levänen and Ariel Nemes and the company’s management.
Temperature Sensitive Solutions Systems acquired LK Finans and SEB Venture Capital have jointly acquired Temperature Sensitive Solutions Systems Sweden AB (“TSS”) from the company’s founder, Michael Thelvén. TSS is a leading provider of products and services for temperature measuring and control of temperature sensitive pharmaceuticals during and after transport. LK Finans is part of the Lagerstedt & Krantz group, active within production of products and services in the HVAC (Heating, Ventilation, and Air Conditioning), maritime and process industries. SEB Venture Capital is the venture capital arm of Skandinaviska Enskilda Banken. LK Finans and SEB Venture Capital were advised by Mannheimer Swartling in the transaction. The firm’s team was led by Jan Holmius, primarily assisted by Caroline Karlsson and Håkan Knutsson.
In business since 2003, Suomen Telecenter Oy has quickly grown to become one of the largest telemarketing companies in Finland. With a staff of about 250 professionals based in Tampere,Suonenjoki and Hämeenlinna, STC focuses on marketing for telecom operators. Its net sales target for the current year is over EUR 10 million.
Group Rhodes Acquisition of Slater and Crabtree
Sentica Partners Acquisition of Suomen Telecenter
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LK Finans and SEB Venture Capital Joint Acquisition of Temperature Sensitive Solutions Systems Sweden AB Legal Adviser to the Equity Provider
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Epic acquisition of Ukrtelecom for $1.3bn Epic, a Vienna-based investment house, has acquired a 93 per cent stake in Ukraine’s state telephone company for $1.3bn after rivals were excluded from the privatisation tender. The government offer values Ukrtelecom at just $10m more than the $1.3bn starting price that was set in the privatisation tender last December. Many top European telecoms groups that have expressed interest in Ukrtelecom over the years – including Deutsche Telekom and Norway’s Telenor – were prohibited from taking part because they are more than 25 per cent government-owned. A second tender condition prevented bidding by telecoms groups that had more than a 25 per cent share on the Ukrainian market.
Uniq acquired Greencore Foods Limited, a wholly owned subsidiary of Greencore Group PLC has acquired Uniq PLC. Uniq, which sells desserts, sandwiches and chilled foods to retailers including Marks & Spencer, is one of the day's biggest risers after an agreed bid from Irish rival Greencore. Greencore, who recently tried to acquire Northern Foods, is paying 96p a share for Uniq, valuing the business at £113m The deal has been funded by a rights issue and £53m debt refinancing. Earlier this year Uniq's pension fund took control of the business as part of a move to deal with its huge deficit, and subsequently put it up for sale.
Nützi Attorneys-at-Law acted on behalf of EPIC, with Victor L. Gnehm, Partner leading the team.
Uniq faced a massive challenge on the deal, as its pension deficit was 50 times its market capitalisation. It was clear that a conventional funding solution would not work and that a clean break solution was needed.
gnehm@nuetzi-law.ch
Hymans Robertson assisted in developing the debt
Orexo acquires Wagner Analysen Technik Orexo AB (STO:ORX) has, through its subsidiary Kibion AB, acquired the German company Wagner Analysen Technik GmbH (WAT). WAT is a leading manufacturer of IRIS instruments and substrates for diagnostic breath tests. The acquisition turns Kibion into a complete solutions provider of both diagnostic breath tests and instruments, with a leading position in Helicobacter pylori tests.
SKW Schwarz Rechtsanwälte was responsible for the legal due diligence and the completion of the SPA, with the issue of the corresponding documents (Schedules), Employment contracts and lease agreements and attended the company during the closing. SKW Schwarz Rechtsanwälte advised Kibion AB the first time. The contact was arranged by Lindahl Advokaten, a law firm SKW Schwarz cooperates with in a network of selected partners. Stefan Kridlo Partner of SKW Schwarz led the team
for equity swap which released Uniq from its obligation to fund the £400m pension deficit and enabled the sale of Uniq PLC to Greencore realising value for the pension scheme and Uniq’s existing shareholders. Hymans Robertson’s team was led by Clive Fortes, Partner and Head of Corporate Consulting, who has led the relationship with Uniq for over six years. clive.fortes@hymans.co.uk
Epic Acquisition of Ukrtelecom for $1.3bn Debt Providers Legal Adviser to the Purchaser
Greencore Foods Limited Acquisition of Uniq PLC Financial Adviser, Sole Sponsor and Joint Broker to Greencore
Orexo Acquisition of Wagner Analysen Technik Debt Provider
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Charterhouse Acquires Webhelp The UK investment fund Charterhouse has become the majority shareholder in the second largest French contact centre group, Webhelp, which is specialised in call centre outsourcing and has over 7500 employees in France, in Morocco, as well as in Romania. Barclays Private Equity initially acquired Webhelp in December 2005, with the company's management. Webhelp was created in 2000 and manages French language offshore contact centres. The sellers were advised by SJ Berwin LLP and the managers by Scotto & Associés. Charterhouse Capital Partners leads and invests in large European buy-outs and has been doing so since the early days of the buyout market in the 1980s.
CapMan invests in Russian-based Virial Plant The CapMan Russia fund, in collaboration with the Moscow-based nanotechnology investment company RUSNANO, has invested in Virial Plant, manufacturing nanostructural components and spare parts.
The Environmental and Social Action Plan (ESAP) and Stakeholder Engagement Plan (SEP) were developed addressing the gaps identified in the Company practices, in order to assist the Company to meet the requirements of the lender. Ecoline EA Centre provided Environmental and Social Due Diligence of the Virial Plant against the
Khotuleva, Ecoline EA Centre director. Intelliq conducted financial and tax due diligence of Virial Plant on behalf of Capman Guernsey (Russia) GP Limited. From Intelliq the project was led by Alina Zayko, Partner and Head Transaction support practice and operationally managed by Yuri Erokhin,
Ashurst LLP advised the UK fund Charterhouse with partners Guy Benda and Nicolas Barberis assisted by counsel Franck Coudert and associate Claire Paccagnini for the corporate aspects, partner Diane Sénéchal assisted by associate Thomas de Mortemart for the finance aspects, partner Christophe Lemaire assisted by associate Michaël Cousin for the competition aspects, and counsel Nataline Fleury for the employment law aspects.
Wynnstay Group plc has acquired Wrekin Grain to significantly expand its arable market scale, maintaining Wynnstay’s rapid growth since the former co-operative joined AIM in 2004. From early July the entire staff of Wrekin Grain will be integrated with Wynnstay’s grain trading arm, Shropshire Grain Ltd at its Shrewsbury arable headquarters to form GrainLink. In due course the grain trading activity of Yorkshire-based Woodheads Seeds – acquired by Wynnstay in 2010 – will also become part of the new company, further increasing its scale.
International Finance Corporation (IFC) requirements. Dr. Olena Borysova led the team, assisted by Dr.Marina
With over 128 transactions, worth an aggregate €38bn in transaction value, and with 89% of those investments realised, Charterhouse Capital Partners believe that their track record and experience combine to make us one of the most successful private equity firms in Europe.
Wynnstay acquires Wrekin Grain to increase national presence
Heralding the move as a valuable step forward for the Group and all its stakeholders, Wynnstay chief executive, Ken Greetham is confident GrainLink will build positively on the strong reputation for market knowledge and quality service established by all three of its parent businesses.
Manager of Transaction support practice. Castren & Snellman acted as legal advisor and signatory on behalf of CapMan on the deal.
Charterhouse Acquisition of Webhelp
CapMan invests in Russian-based Virial Plant
Wynnstay Acquisition of Wrekin Grain
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