August 2012 /
In this Issue/
10
DEAL GURU:
6
SECTOR TALK:
Making Deals Happen Private Equity-Backed Telecoms & Media Deals
70 SECTOR SPOTLIGHT: Q2 Mid-Year Review
GALLEGO, MARTOS & QUADRA-SALCEDO — Acquisition International talks to Rodrigo Martos Prat, co-founder and partner of the Spanish boutique legal firm. / 8
www. ACQUISITION-INTL .com
ATTRACTING FOREIGN INVESTMENT
— AI talks to Ajibola Olomola, Partner and Head of Transaction Services and Outsourcing Unit at KPMG in Nigeria / 12
FULL OF EASTERN PROMISE
— Cross Border Activity in Turkey / 16
Mkono & Co
Advocates in Association with
Mkono & Co. Africa is a leading East-African law firm headquartered in Dar es Salaam, Tanzania. Founded in 1977 by the firm’s managing partner, Honourable Nimrod E. Mkono, the firm has gradually developed to become Tanzania’s leading law firm and a prominent corporate, commercial and financial practice in the East-African region. Mkono & Co.’s growth is reflected by the unique and dynamic team of lawyers coming from the US, Europe, India and from all over Africa. The firm has a unique mix of common law and civil law practitioners which is key to its move to the East African and Great Lakes Region. The firm is recognised by international professional directories and has received multiple awards for its legal leadership and quality of services. The firm has been ranked in Tier one by Chambers Global since 2000 and counts several lawyers ranked as leaders in their field.
Head Office: 8th Floor, EXIM Tower, Ghana Avenue. PO Box 4369, Dar Es Salaam, Tanzania
Tel: +255 22 2118789-91, 2194200 & 2114664 Fax: +255 22 2113247 & 2116635
info@mkono.com
www.mkono.com
CONTENTS:
August 2012
Editors Comment Following the recent announcement that the UK has indeed entered a double-dip recession, what does the future really hold? Until at least the middle of the next decade, global growth is likely to slow to approximately 3 percent per year on average–a rate somewhat below the average of the last two decades. A recovery in advanced economies will be more than offset by a gradual slowdown in emerging ones as they mature, with the net result that global growth will slow. But the biggest risk ahead for the global economy is not this slower overall growth in output but a slowdown in average output per capita, which will determine how fast living standards can be supported and raised. The greatest challenge for the global economy in this slow growth environment is to raise productivity without losing job opportunities for the millions who are looking for reasonably paid jobs to support their living standards. The growth rate of per capita income globally has been around 2.5 percent since the beginning of the century but sometime between 2017 and 2025, this rate will fall below 2 percent. In contrast to the past half century, that slowdown will also be accompanied by slower growth in population. This month, we have a fast-paced issue which rounds up the findings from our experts for the end of Q2; details how business is doing in the popular holiday destinations of Cyprus and Turkey; and takes a look into the complications surrounding double taxation law. There are also plenty of recent deals to whet your appetite and prove that, although slow, global M&A activity is certainly not dead. Enjoy the Issue, Charlotte Abbott, Editor charlotte.abbott@acquisition-intl.com
How to get in touch AI welcomes news and views from it’s readers. Correspondence should be sent to; Address/ Acquisition International, Blakenhall Park, Barton under Needwood, Burton on Trent, DE13 8AJ. Tel/ 0844 809 4788 Email/ reception@acquisition-intl.com Website/ www.acquisition-intl.com Find us on/
ACQUISITION INTERNATIONAL
CONTENTS — August 2012
ON THE COVER - GALLEGO, MARTOS & QUADRA-SALCEDO: /08
Acquisition International talks to Rodrigo Martos Prat, Co-founder and partner of the Spanish boutique legal firm.
NEWS: /04
The latest news stories from around the world.
DEAL GURU: /10
TheJudge Litigation Funding Brokers — Making deals happen
SECTOR TALK: /06
Private EquityBacked Telecoms & Media Deals Powered by Prequin.
DEAL DIARY: /86 The latest M&A from around the world.
SECTOR SPOTLIGHT: /70
Q2 Mid-Year Review
12/ Attracting Foreign Investment 14/ The Changing Role of Forensic Accountancy 16/ Cross Border Activity in Turkey 17/ Bouncing Back — Malta 18/ The Importance of Protecting IP 20/ Selling Your Stake in Business 22/ Financial regulation in Switzerland 24/ The Growth of Litigation Funding 28/ Dispute Resolution in the Mining Industry 30/ The Asset Based Finance Industry 32/ Asset-Based Lending in the US and Beyond 34/ Spotlight — Afik Turgeman 35/ Eastern European Review 37/ Forming Companies and Doing Business 38/ Employment Law and HR Issues 40/ Healthcare M&A Report 41/ M&A and Immigration 42/ M&A Trends in Media & Information 43/ Pension Obligations and Issues 44/ Doing Business in a Trans. Country 45/ Resolving Disputes in the Aviation Industry 46/ Resloving Disputes in Real Estate 49/ Transfer Pricing 50/ Introducing the Interim Executive 51/ Executive Searching/Longterm Recruitment 52/ US as a Domicile for Captive Insurance 54/ Doing Business Around the World 56/ Comprehensive Due Diligence 58/ Managing Future Uncertainty 61/ Spotlight on the Arab League 62/ Rewriting the rules on Insolvency 66/ Double Taxation Agreements 70/ Q2 Mid-Year Review
August 2012 /
3
NEWS:
from around the world
INFRARED CAPITAL PARTNERS Acquires UK solar parks with debt from banking club. London-based InfraRed Capital Partners Limited (InfraRed), one of the UK’s leading environmental infrastructure investors, has acquired three groundmounted solar parks in Cornwall with debt financing from a consortium of banks – Royal Bank of Scotland Corporate & Institutional Banking (RBS CIB), HSBC Bank Plc and Santander Global Banking and Markets (SGBM). Also known as solar farms or photovoltaic power stations, solar parks are large-scale photovoltaic systems that supply power into the UK national grid. The three parks in Cornwall offer up to 15MW in power and will provide enough energy to meet the demand of
5,000 homes. The plants were originally developed by SGBM’s Asset & Capital Structuring team in partnership with Low Carbon Solar, a local developer. All three of the solar parks were accredited prior to 1 August 2011 and are unaffected by the on-going announcements and changes to the UK Feed in Tariff (FIT) regime1 (FIT looks to pay independent energy suppliers income for contributing energy into the UK national grid). Looking ahead, while it is forecast there will be no large-scale solar projects such as these completed under the FIT regime going forward (as the applicable new FIT tariffs do not encourage the required level of investment), the allocation of two
Renewable Obligation Certificates to solar energy projects under the government’s larger scale renewable investment scheme, the Renewable Obligation, coupled with falling technology costs, provides sufficient incentive for investment into UK solar, at least for the immediate future. While each of the three banks in the consortium has contributed equal funding, RBS CIB has been appointed as agent, security trustee and account bank for the deal. SGBM acted as technical bank, being responsible for the review and analysis of the technical aspects of the project.
FOUR CAPITAL PARTNERS launches low volatility global equity strategy. Four Capital Partners has launched its new low volatility global equity strategy, Stable Global. Four is currently talking with third parties to attract cornerstone investments, but in any case, the live portfolio will start in September with a USD50m segregated account. Four’s wider portfolio, Active Global, has been going since December 2010. Colin McQueen, head of the global team, says: “The focus of the Stable Global strategy is to deliver attractive real returns (CPI + circa six per cent), but with much lower volatility and downside risk than the wider
equity market. The portfolio will concentrate on the most stable portions of the equity market (roughly 30 per cent) consisting of companies with the most robust businesses, with low cyclicality, low capital requirements and strong balance sheets. The portfolio should consistently exhibit lower volatility than the overall equity market. It should also perform better than overall equities in a weak or moderately rising market, but may lag in a sharply rising market.” Derrick Dunne (pictured), a founding partner of Four, adds: “There is clearly a growing demand for a high
quality low volatility global equity product, particularly in the current climate. The potential for real returns from equities looks very attractive relative to other asset classes such as index-linked or conventional bonds. One of the main drawbacks for many institutional investors is the higher volatility of returns from equities and the memories of recent losses. We are confident that Stable Global Equity can help to bridge that gap and deliver on its performance objective. Colin has been investing in global equities very successfully, in up and down markets, for over 20 years.”
HIGH NET WORTH INDIVIDUALS flock to Syria. Singapore’s 40 richest individuals collectively are worth USD59.4bn, representing a nine per cent year-onyear increase in wealth, according to the latest figures published by Forbes Asia. Singapore company formation specialist Rikvin is optimistic that the presence of high net worth individuals (HNWIs) bode well for businesses in Singapore. In Forbes’ list, Robert and Philip Ng, owners of the Far East Organization, retain their top ranking with an estimated net worth of USD9.2bn. In addition, the
4
/ August 2012
five richest individuals in Singapore have remained unchanged. However, the list features eight newcomers, five of which have made their fortune in property. The most notable addition to Singapore’s list is the 30-year-old Facebook co-founder, Eduardo Saverin, who was ranked eighth with a net worth of USD2.2bn. Another newcomer, India-born and new Singaporean citizen Bhupendra Kumar, the owner of Spice Group, was ranked number 23 with an estimated wealth of USD755m. Budget hotel chain chiefs - Hotel 81’s owner Choo Chong Ngen, along with Fragrance Hotel owner Koh Wee Meng also made it to the list at 25th and 15th place respectively. They each possess an estimated
fortune of USD690m and SGD1.25bn respectively. “The wealth earned by many of the individuals in Forbes’ list is in part due to Singapore’s keen insistence to maintain a fertile business ecosystem as well as its open door immigration policy to high calibre professionals and investors. As demonstrated in the list, investors are an invaluable asset and part and parcel of maintaining a competitive economy. This is in part why Singapore has been making a concerted effort in courting and retaining investors and HNWIs through various schemes,” says Satish Bakhda, head of Rikvin’s operations.
ACQUISITION INTERNATIONAL
NEWS:
from around the world
CFTC SETTLES ACTION over forex scheme against Douglas Elsworth Wilson. A federal court in California has entered a consent order that requires defendants Douglas Elsworth Wilson of Poway, California, and three companies he controls and manages, Elsworth Berg Capital Management (EBCM), Elsworth Berg Inc, and Elsworth Berg FX jointly and severally to pay USD3,965,670.71 in restitution to customers as well as a USD1.5m civil monetary penalty. The order also imposes permanent trading and registration bans and permanent injunctions against further violations of federal commodities law, as alleged. The order follows a US Commodity Futures Trading Commission civil complaint filed on 27 July 2011 in the US District Court for the Southern District of California. The order finds that the defendants solicited over USD4.4m from over 60 customers to trade commodity futures contracts and foreign currency. According to the order, the defendants misappropriated customer
funds, committed solicitation fraud, and issued false statements in the commodity futures and forex scheme. Specifically, the order finds that defendants misrepresented to customers and prospective customers that regardless of Elsworth Berg’s commodity futures or forex trading results, the return of customers’ investment principal was guaranteed at the end of a five-year period through use of a purportedly innovative “Collateral Reserve” structure, which owned life insurance policies on third parties. The order further finds that Wilson and EBCM issued false statements to some customers that overstated the value of their investments. Wilson and EBCM misappropriated approximately USD72,000 in customer funds and used the money for purposes other than trading, according to the order.
OVUM REVEALS WEALTH MANAGEMENT INSTITUTIONS to invest heavily in digital channels through bumpy recovery. IT spending by the global wealth management industry will reach almost $35bn by 2016, and will include heavy investment in digital channels, predicts Ovum. While the economy is recovering, organisations should be focusing on the opportunity to increase revenue and improve trust among customers. With this in
mind, digital channels are being developed to improve customer loyalty and cross-selling opportunities, while lowering servicing costs. • Between 2011 and 2016 UK and Ireland’s spending will grow at a compound annual growth rate (CAGR) of 7.3 per cent.
• Investment in Internet and presence technologies by UK and Ireland’s high net worth banking and financial planning businesses will reach $80.1m. • Retail brokerage and retail asset management organisations will increase their investment to $63.8m and $42.8m respectively.
RECI PROFIT drops to GBP0.7m in the quarter to June 2012; NAV up 8.2% in four months to July 2012 Real Estate Credit Investments (RECI) made a profit of GBP0.7m in the quarter ended 30 June 2012, compared with GBP4.5m in the previous quarter, according to the company’s latest interim management statement.
interest income received and GBP0.6m in mark to market gains) which is reported as GBP3m of operating income (based on the yield of the assets) and a GBP1.6m negative fair value adjustment.
The Titan 2006-4FS bond has repaid in full earlier than expected, and a bond backed by London commercial property has seen a 50 per cent repayment of principal at par and a significant increase in the market price.
RECI’s NAV per share of 119p as at 31 July (15 July: 112p), represents a 6.3% increase over the second half of the month and an increase of 8.2% since the start of the company’s financial year (1 April, 2012).
The positive performance, subsequent to the quarter end, in the bond portfolio was a result of both significant early bond repayments and mark to market gains in the portfolio.
The increase in NAV was also supported by an iTraxx Main short that helped mitigate the effects of the Eurozone crisis.
The company recorded a net gain in the bond portfolio of GBP1.4m for the June quarter (being GBP0.8m
The two largest increases come from asset purchases made in the past 12 months.
ACQUISITION INTERNATIONAL
August 2012 /
5
SECTOR TALK:
Private Equity-Backed Telecoms & Media Deals
PRIVATE EQUITY-BACKED TELECOMS & MEDIA DEALS — Powered by The telecoms & media sector is comprised of companies operating in the telecoms, communications, media, advertising and digital media sectors. Data from Preqin shows that this sector has witnessed over 850 buyouts globally since 2006, representing an aggregate deal flow of over $250bn during this period.
NUMBER AND AGGREGATE VALUE OF PRIVATE EQUITY-BACKED TELECOMS & MEDIA BUYOUTS GLOBALLY: H1 2006 - H2 2012 YTD (as of 15-Aug-2012) Period
No. of Deals
Aggregate Value of Deals ($bn)
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012
71 70 87 72 80 49 37 58 49 71 74 57 68
24.6 63.1 65.9 30.8 12.8 6.3 1.4 3.8 3.3 14.7 12.5 9.2 6.7
Deal activity in telecoms & media was strongest during H2 2006 – H1 2007, at the height of the buyout boom era, with 70 telecoms & media deals valued at $63.1bn in H2 2006, followed by $65.9bn worth of deals in H1 2007. Following this peak, deal flow in the telecoms & media space mirrored the wider buyout sector by witnessing a marked fall in activity due to the onset of the global financial crisis in 2008. The sector reached a low of 37 deals valued at $1.4bn in H1 2009, a huge decline from the levels of telecoms & media deals witnessed two years earlier.
NUMBER OF PRIVATE EQUITY-BACKED TELECOMS & MEDIA DEALS BY REGION:
2006 - 2012 YTD (as of 15-Aug-2012) Region
2006 2007
North America 74 Europe 50 Asia & ROW 17
83 60 16
2008 2009 2010 2011 2012 YTD 60 50 19
44 34 17
63 42 15
64 46 21
51 30 11
In the months following this decline, deal flow in the telecoms & media sector increased to above $3bn in deals in H2 2009 and H1 2010, before surging during the second half of 2010 and reaching a post-Lehman peak of 71 deals valued at $14.7bn. These elevated levels of telecoms & media deals continued in H1 2011 before witnessing a gradual slow-down in activity in the following months, reaching 68 deals valued at $6.7bn in H1 2012, almost half the value of deals announced during the post-Lehman high of H1 2010. As of 15 August 2012, 23 telecoms & media deals valued at $4.6bn have been announced.
BREAKDOWN OF PRIVATE EQUITY-BACKED TELECOMS & MEDIA DEALS BY REGION:
2006 - 2012 YTD (as of 15-Aug-2012) Region
2006 2007
North America 52% Europe 35% Asia & ROW 12%
52% 38% 10%
2008 2009 2010 2011 2012 YTD 47% 39% 15%
46% 36% 18%
53% 35% 13%
49% 35% 16%
55% 33% 12%
Source: Preqin
6
/ August 2012
ACQUISITION INTERNATIONAL
SECTOR TALK:
Private Equity-Backed Telecoms & Media Deals
AGGREGATE VAUE ($BN) OF PRIVATE EQUITY-BACKED TELECOMS & MEDIA DEALS BY REGION: 2006 - 2012 YTD (as of 15-Aug-2012) Region
2006
North America 45.5 Europe 34.1 Asia & ROW 8.1
2007
2008
2009
2010
2011
2012 YTD
64.0 28.5 4.1
8.3 7.2 3.6
1.8 1.1 2.2
11.3 5.4 1.3
8.0 11.3 2.4
8.0 1.6 1.7
When assessing deal flow by region, North America is the most prominent area of activity for telecoms & media deals, with over 50% of the sector’s deals based in the region in recent years. During 2012 to date, as of the 15t August, there have been 50 telecoms & media deals in North America valued at $8bn, representing 55% of all deals globally. Europe is the second most prominent area for telecoms & media deal activity, with over a third of all deals since 2006 taking place in the region.
Source: Preqin
BREAKDOWN OF PRIVATE EQUITY-BACKED TELECOMS & MEDIA DEALS BY TYPE:
2012 YTD (as of 15-Aug-2012) Type
No. of Deals
Aggregate Deal Value
LBO Add-on Growth Capital Public to Private
37% 42% 13% 8%
69% 18% 4% 8%
Source: Preqin
In 2008, Europe represented 39% of all telecoms & media deals; however, this proportion has slowly decreased in recent years, with 33% of all telecoms & media deals in 2012 to date accounted for by Europe-based deals, the lowest proportion for the region in the past six years. Asia and Rest of World-based deals account for 12% of global deals in 2012 to date. In the years following the financial crisis, this proportion spiked, with 18% of all telecoms & media deals in 2009 occurring in the Asia and Rest of World region, before decreasing slightly in subsequent years. Of the 92 telecoms & media deals announced in 2012 to date, leveraged buyouts are the most prominent, representing 37% of the number and 67% of the aggregate value of these announced deals. Add-ons account for 42% of deals, a clear indication of fund managers’ desire to bolt-on companies to their current holdings in order to strengthen and add value to their portfolio companies. Thirteen percent of all telecoms & media deals in 2012 to date have been growth capital injections, while 8% of the number and value of deals have been public-to-private acquisitions. The largest telecoms & media deal in 2012 to date is the recently announced $3.3bn acquisition of Getty Images by the Carlyle Group from Hellman & Friedman. The deal will give the Carlyle Group a controlling interest in the firm, while Getty Images co-founder and chairman Mark Getty and the Getty family will roll substantially all of their ownership interests into the transaction.
10 LARGEST TELECOMS & MEDIA BUYOUTS GLOBALLY BY DEAL SIZE:
2012 YTD (as of 15-Aug-2012) Firm
Investment Type
Deal Gate
Getty Images
Buyout
Knology
Deal Size
Investors
Bought From/ Exiting Company
Primary Industry
Location
Aug-12 3,300 USD
Carlyle Group
Hellman & Friedman, Farallon Capital Management
Digital Media
US
Add-on
Apr-12
1,500 USD
Avista Capital Partners, Northwestern Mutual Capital Management, SL Capital Partners, WideOpenWest, LLC
-
Telecoms
US
AT&T’s Yellow Pages Directory Business
Buyout
Apr-12
950 USD
Cerberus Capital Management
AT&T
Advertising
US
WaveDivision Holdings
Buyout
Jun-12
925 USD
GI Partners, Oak Hill Capital Partners
Sandler Capital Management
Telecom Media
US
MACH
Add-on
Jul-12
550 EUR
Carlyle Group, Syniverse Technologies
-
Telecoms
Luxembourg
City Telecom's Telecom and Broadband Business Onelink Communications
Public To Private Buyout
Apr-12 Jun-12
5,000 HKD
CVC Capital Partners
City Telecom
585 USD
Liberty Global, Searchlight Capital Partners
AlpInvest Partners, Crestview Capital Partners, MidOcean Partners, Northwestern Mutual Capital Management
Telecoms Communications
Hong Kong Puerto Rico
Axel Springer Digital Classifieds GmbH Archway Marketing Services
Buyout Buyout
Mar-12 237 EUR Jul-12 300 USD
General Atlantic
Axel Springer AG
Investcorp
Black Canyon, Tailwind Capital
Media Marketing
Germany US
Ryan Seacrest Media
Growth Capital
Feb-12
Bain Capital, Clear Channel, Thomas H Lee Partners
-
Media
US
300 USD
Source: Preqin
ACQUISITION INTERNATIONAL
August 2012 /
7
ON THE COVER:
Lead Mandate — Gallego, Martos & Quadra-Salcedo
LEAD MANDATE
— Gallego, Martos & Quadra-Salcedo
Rodrigo Martos Prat is Co-founder and partner of the Spanish boutique legal firm Gallego, Martos & QuadraSalcedo. He works alongside the other two founders of the firm Mr. Javier Gallego Larrubia and Mr. Andrés de la Quadra-Salcedo Janini (Head of the Litigation department). Here, Rodrigo talks exclusively to Acquisition International about a landmark transaction in which Gallego, Martos & Quadra-Salcedo participated. PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS.
Gallego, Martos & Quadra-Salcedo is founded on the concern to provide personal legal advice of the highest quality to Spanish and international companies, family offices, investors and private clients whose special needs demand expert legal services. The Firm’s aim is to bring to the legal services sector a multidisciplinary consultancy that is focused on both the substantive and procedural aspects of corporate law, where our top priorities are to provide quality of service, legal certainty and dedicated personal attention from the Partners. We have a wide range of experience providing corporate legal services in M&A transactions and restructurings, anti-trust and unfair competition, day to day corporate advice, insolvencies (debtor and creditor side) and in the settlement, in and out of court, of all types of disputes, and in coordinating large scale and/or complex litigation or arbitrage procedures.
qualified taylor made services with personal attention and direct dedication of its partners through an horizontal structure that can be absolutely competitive in quality and prices against international or local big law firms. WHICH PARTY WERE YOU REPRESENTING ON THE THALES INFORMATION SYSTEMS S.A.U DEAL AND WHAT RELATIONSHIP DO YOU HAVE WITH THE COMPANY? We were representing Aurelius AG. Aurelius AG has trusted us on different acquisition deals in Spain (Legal Due Diligence, negotiation of the SPA and closing) and on the following of the day-to-day of their investments from the legal perspective. WHAT ROLE DID YOU PERFORM ON THE DEAL? AND HOW DID YOUR APPOINTMENT COME ABOUT? I was the legal adviser to Aurelius in the preparation of a “red flag” due diligence report based on Spanish Law covering corporate, tax and labour issues, and on the coordination and supervision of an Argentinean equivalent due diligence carried out with the assistance of a best friend firm based in Argentina, assistance in the legal issues connected with the future operation of the target companies, in the swift negotiation and in the execution of the SPA which was subject to the fulfilment of certain closing conditions, and to the subsequent closing of the transaction.
WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE?
WHAT PREVIOUS EXPERIENCE DO YOU HAVE ON SIMILAR DEALS, EITHER BY TYPE OR BY SECTOR?
We firmly believe in building on our combination of the personal, dedicated attention associated with the traditional lawyer and the creation of teams of highly qualified specialists, coordinated and managed by the firm’s partners to deal with each case.
We are currently advising private equity funds or investors from Germany, Holland, UK, Australia, Portugal, Spain, etc. on their acquisitions or sales in Spain and in the follow-up and building of the business they own in our country. We are highly specialized in acquisitions of affiliate Spanish companies from multinational groups which are facing difficulties and on small-midcap acquisition and sale transactions with or without leverage.
/ August 2012
HOW WERE YOU ABLE TO ADD REAL VALUE TO THE TRANSACTION?
Through providing direct, full and almost exclusive implication on the matter, together with quality advice and all of it bounded together with reasonable rates.
HOW WERE YOU ABLE TO SECURE THE ROLE?
Building on our core competences in corporate law, we work with highly qualified specialists in tax, employment and administrative law, coordinated and managed by the firm, enabling us to cover fully every aspect of legal advice required for each case with total guarantee.
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Multijurisdictional coordination of the due diligence process and advice on post-completion issues was important and was coordinated by the firm through a best friend firm located in Argentina. Timing was also an issue, it required from my direct involvement in the transaction by providing direct and immediate advice on the SPA negotiations and providing immediate drafts that allowed signing in a one day session.
We were appointed by Aurelius AG after having advised them on a former deal in Spain of a similar nature which is confidential. Actually we are still currently working for the acquired target and on new acquisition deals for said client.
My partner Javier Gallego and myself have carried out an important number of M&A deals of a different nature and volume whether directly whilst working for our firm or in the past as associates in Clifford Chance. We have advised financial investors and especially private equity firms on many major deals carried out in Spain in the last ten years and on several small and midcap transactions as well as in many buy and build projects.
The three founding partners have taken advantage of their former experience working for international first rank law firms such as Clifford Chance, Cuatrecasas and CMS Albiñana, to incorporate a legal boutique that is able to provide highly
WHAT WERE THE KEY ISSUES YOU HAD TO DEAL WITH? HOW WERE THOSE RESOLVED?
Company: Gallego, Martos & Quadra-Salcedo Name: Rodrigo Martos Prat Email: rodrigo.martos@gmqabogados.com Web: www.gmqabogados.com Address: Santa Engracia 122, 3ºA, 28003, Madrid, Spain Telephone: + 34 914 585 777
ACQUISITION INTERNATIONAL
Thought Leader Global
ON THE COVER:
Lead Mandate — Red Rock
info@thoughtleaderglobal.com www.thoughtleaderglobal.com
Acquisition and Integration for Supply Chain Leaders
2nd annual Tax Planning Strategies and Experiences
4th Merger Integration Management Forum
September 27-28, 2012 Amsterdam
October 11-12, 2012 Amsterdam
November 15-16, 2012 Amsterdam
www.thoughtleaderglobal.com/ supplychain.pdf
www.thoughtleaderglobal.com/ tax.pdf
www.thoughtleaderglobal.com/ merger.pdf
Practical Training on Post-Merger Integration & Planning from a Supply Chain Perspective
In-House Perspectives: Planning, M&A Planning, Intangibles, Emerging Markets, TESCM
Advanced Strategies to Maximise Value from M&A and Reorganisations
Case Study: l Lessons Learned and Challenges Faced in a Global Supply Chain Integration l How to Position your Supply Chain Organisation for M&A Activities l How to be Involved as ‘Supply Chain’ Early on in the Deal l Supply Chain as a Key Synergy Driver l Target Assessment and Due Diligence: Creating a Supply Chain Due Diligence Checklist l Operating Model Design for Supply Chain Companies
Salvatore Ferragamo Group Tax Due Diligence: Acquisition Essentials ABB Valuations & Impact on Post-Deal Integration Danish Tax & Customs: Communication with Tax Authorities: Before, During & After Implementation of Tax Planning Strategies Gruppo Lactalis Intra-Group Finance Strategy and Cash Pooling AmDocs Tax and Regulatory Issues in FACTA Gucci Group Developing a Simple/Flexible Transfer Pricing Model that Supports Business Expansion BMR Advisors M&A in India & Emerging Markets Medtronic TESCM in an M&A Environment Kerry Group Intangible Asset Planning as a Primary Component of Deal Value Centrica Implementing Significant Corporate Restructuring in a Fast Paced Environment Bayer Current Legal Framework and Case Law on Cross Border Loss Utilisation Piaggio Developing a Strong Tax Risk Policy for Asia Perkin Elmer Tax Strategies for Latin America UFS Investment Company Russian International Tax Developments
Case Study: l Experiences from a Supply Chain Redesign l Risks and Dependency Assessment, Challenges typical to Supply Chain l Structuring and Managing Integration Programmes Case Study: l Culture and Communications: Experiences from Cultural Challenges l Major Causes of M&A Failure ACQUISITION INTERNATIONAL and How to Avoid Them
Telekom Austria Identifying, Evaluating and Preparing to Realise Synergies in the Pre-Closing Phase BNP Paribas Fortis Strategy Execution as a Key Driver for M&A Success Statoil Conducting Cultural Due Diligence and Change Management Siemens Turnarounds: Linked to M&A and Integration Success Areva T&D Managing Integrations of Family-Owned Companies Electrolux Maintaining M&A Strategic Intent and Dealsourcing Equens Focusing on Synergy Creation during Integration: Best Practices Alcatel-Lucent & Konecranes New Business Start-ups and Venture Acquisition Philips Performance Measurement Strategies for the Integration Phase Stora Enso Integration of the Finance Function Ericsson Successful IT Integration: Exceeding Cost Savings Targets (with Carve-Out Strategies) Syngenta Sustainable Compliance: Is it Possible to Achieve while Integrating a July 2012 / 9 New Business?
DEAL GURU:
Making deals happen but removing litigation risks
MAKING DEALS HAPPEN — but removing litigation risks
Litigation is a costly process but arguably it is never more so than when the legal battle is frustrating a major transaction, merger or acquisition. Naturally, the existence or threat of impending litigation against a business will, whether proceedings have been issued or not, lead third party investors or purchasers to pause before completing a deal which could see them sharing the downside of an expensive legal dispute.
parties can be scared off by large compensation claims even though the real exposure is probably going to be much lower, once quantified. Specialist LBO insurers have the means to accept risks over liability and quantum that third party investors may not be so willing to accept.
Despite the fact litigation can be a real deal blocker, many investors and lawyers are not aware that there are bespoke insurance products available designed specifically to help bridge these problems. These products are known as Litigation Buy Out Insurance (LBO) and After-the-Event Legal Expenses Insurance (ATE).
• LBO policies can be organised to provide millions of pounds worth of indemnity to cover the damages awarded against the Insured if they lose the case. • The premiums are between 5-10% of the amount of cover. • The cover lasts for a finite term based on the length of time in which a claim could be brought or for how long it will take for the case to conclude (e.g. 6 years). • Some insurers will consider covering legal defence costs as well as the liability for damages. • LBO policies can be taken out prior to the formal commencement of litigation or even where the potential for litigation is only theoretical. • Most, if not all, insurers will require the Insured to retain some element of risk with the insurer whether that is rated within the premium, in the form of a policy Excess or by a pro-rata contribution to the final exposure.
LITIGATION BUY OUT
This is especially true if the claim is brought against you in a jurisdiction that has cost-shifting rules; this means that you have to factor in the liability to pay your opponent’s legal fees if they are successful against you. These costs may be as much as your own or, as if often the case, more.
LBO – PRODUCT FEATURES
The principle problem for interested external parties may not be the mere existence of litigation or even a legal assessment that says the target company is almost certainly liable for whatever act, omission, breach or wrong that is alleged. The issue may simply be uncertainty around the amount it will all cost. The constituent part of the overall cost that is the main obstacle to closing a transaction is usually the exposure to damages. The compensation award is a variable that does not have a binary outcome and it can cause a dramatic swing threatening the economic viability of a deal. Whilst you can try to negotiate a discount or a rebate in certain situations to accommodate your risk as an investor, what most people want is a cap that provides a back-stop position. From a worst case scenario standpoint, it is then far easier to negotiate appropriate discounts and rebates with confidence. LBO products can create this cap. The ability of lawyers to predict a company’s liability to pay compensation is an art and not a science, depending on the subject matter of the case. The uncertainty over the damages exposure is usually compounded at the beginning of a dispute by the fact that the original letters of claim or Particulars of Claim (produced and served once legal proceedings are initiated) understandably puts the claimant’s best case forward. The result is that third
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AFTER THE EVENT LEGAL EXPENSES INSURANCE The costs associated with litigation are not limited to the damages award you may become liable to pay, should the claim against you succeed. Very often the legal expenses incurred in merely defending a claim can be substantial and sometimes more than the sum in dispute.
With both LBO and ATE insurance, the insurer needs to be convinced that the would-be Insured has a strong legal case to either defeat the claim against them completely, or limit the cost. If that is the case, both these products can unlock a commercial deal which is in paralysis over the existence of a legal dispute. M&A lawyers may not necessarily be familiar with litigation related insurance products so it is worth asking them to investigate the options if you need a little more certainty over the financial consequences of an existing legal threat.
ATE is designed to cover legal costs. Primarily it is used by claimants rather than companies defending claims against them. However, it can be adapted for use by defendants, especially where the defence is a complete defence or there is a strong counter-claim against an opponent with enough money to pay costs. The unique aspect of ATE insurance is the premium payment terms: • The premium is only payable if the case is successful (as defined in the policy document) • The premium rarely needs to be paid upfront because it is contingent upon ‘success’ which of course, is only determined at the end of the case. • The premium is usually recoverable by the winning party in England & Wales as part of the costs that the losing party is ordered to pay. This position is set to change for policies taken out after April 2013 due to new legislation. ATE cover is available for disputes being heard outside of England & Wales, including international arbitrations.
Company: TheJudge Litigation Funding Brokers Name: Matthew Amey Email: Matthew.amey@thejudge.co.uk Web: www.thejudge.co.uk Address: 90 Fenchurch Street, London, EC1M 3ST Telephone: +44 (0) 845 257 6058
ACQUISITION INTERNATIONAL
ON THE COVER:
Attracting foreign investment
ATTRACTING — foreign investment Ajibola Olomola is Partner and Head of Transaction Services and Outsourcing Unit at KPMG in Nigeria. Here, Mr Olomola talks to Acquisition International about attracting foreign investment and the impact it has on the country.
KPMG Professional Services is the KPMG International member firm in Nigeria. The partners and people have been operating in Nigeria since 1978, providing multidisciplinary professional services to both local and international organisations within the Nigerian business community. Mr Ajibola Olomola, a Partner at the firm as well as the Head of Transaction Services and Outsourcing Unit, explains further the firm’s role in Nigeria and a little about its history. “KPMG has been working together with the Central Bank of Nigeria to develop the policies targeted at reforming the banking and other financial services industry and has also been involved in negotiations with various other statutory agencies to ensure a seamless implementation of the banking reforms. “In addition, the firm has assisted various local and international banks operating in the country under the erstwhile universal banking regime to restructure their operations, in line with the new banking reforms.” Foreign Investment in Nigeria is principally governed by the provisions of the Nigerian Investment Promotion Commission Act and the Foreign Exchange (Monitoring and Miscellaneous) Provisions Act. “Foreign investment in Nigeria is essentially encouraged by the lack of restriction on foreign shareholding thresholds, the guaranteed freedom from expropriation by the government, and the freedom to repatriate profits and capital subject to compliance with established administrative procedures,” says Olomola. “Tax and export incentives exist in the form of tax holidays, tax exemption on certain items and profits, and for transactions carried out in certain designated locations.
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Reduced tax rates on certain income due to residents of tax treaty countries are also available, amongst others. These incentives are monitored and enforced through the respective government agencies saddled with the responsibilities.” While 2007 was a record year for foreign direct investment (FDI) in Nigeria, the later years witnessed the cascading impact of the global economic crises as there was significant evidence of pressure and weakening of investment, corporate and project finance in the country. This was manifested in the fall in stock market and oil prices and the rise in bank interest rates. Data from the Central Bank of Nigeria (CBN) annual report in 2010 shows a steep decline of 78.1 percent in foreign direct investment, and a significant increase of 87.2 percent, in portfolio investments into the Nigerian economy. This is the third consecutive year of decline in FDI inflow into the country. The global economic uncertainty did not however negatively impact on the appetite of foreign investors for investment in paper assets in Nigeria. “The trend witnessed in Nigeria is altogether not unconnected to the recent trends of global foreign investment, which appears to be focused on diversification and primarily geared towards China and other emerging economies,” continues Mr Olomola. “We are optimistic that foreign investment in the Nigerian market will steadily improve in the coming years, in view of the continuing reforms to revamp the local economy. This optimism is evidenced in the increasing interest of foreign investors in the banking sector in view of the reforms targeted at strengthening their financial base. The
government in making efforts to raise funds for the reforms and has successfully sold out on 8 rounds of debt auction in present year, with the last sovereign bond valued at N93billion ($604.3million). These bonds have been bought by both local and foreign investors. “The government has also embarked on various reforms which include the recent policies targeted at the power sector and efforts to curtail the rise in inflation rates. However, issues around political stability, civil and ethnic unrest may threaten these efforts were not urgently addressed. Medium- to long-term prospects also hinge on the ability to address key reforms successfully in Nigeria in order to advance infrastructure development and broaden the economic base through enhanced private-sector participation.”
Company: KPMG Professional Services Name: Ajibola Olomola Email: aolomola@kpmg.com Web: www.kpmg.com Address: 18A Temple Road, Ikoyi Lagos, Nigeria Telephone: +234 1 271 8933
ACQUISITION INTERNATIONAL
Reason says: this acquisition is too costly.
Instinct says: not as costly as missing out.
Business decisions are rarely black and white. Dynamic organisations know they need to apply both reason and instinct to decision making. We are Grant Thornton and it’s what we do for our clients every day. Contact us to help unlock your potential for growth. Š2012 Grant Thornton UK LLP. All rights reserved. Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Services are delivered independently by member firms. Full disclaimer available at grant-thornton.co.uk
SECTOR SPOTLIGHT:
The Changing Role of Forensic Accountancy
THE CHANGING ROLE — of Forensic Accountancy
-----------------------------------------------------------------------David Alexander is Partner, Head of Fraud & Financial Crime at Smith & Williamson. He discusses the challenges faced by Forensic Accountants in the current climiate. -----------------------------------------------------------------------To survive in an age of austerity, we all have to be smarter about not only the way we do business but also where we do business. For some businesses this is reflected in the way in which they approach fraud risk locally and internationally, with many organisations establishing or formalising in-house teams dedicated to countering financial crime which may affect their business and mitigating fraud losses.
This provides forensic accountants with a number of challenges, as they are decreasingly used as the first line of defence against fraud or as the first port of call in an investigation. But this also provides opportunities, as forensic accountants can offer their expertise on increasingly more complicated business practices, as well as advise on fraud and corruption prevention controls.
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Technology is an example of an increasingly complex area in countering fraud. Digital evidence is easier and quicker to access than the traditional physical evidence and a wellestablished information technology system is a boon to an investigation. However, when the fraudster is tech-savvy, and covers up their digital footprint, expert forensic technology is required to uncover useful information. Digital information is not limited to evidence either. Forensic accountants, on behalf of their clients, use digital information to support their due diligence investigations for businesses seeking international trading partners, new locations for expansion or relocation and to increase their markets beyond national boundaries. This is to ensure the counter party is legitimate, has a good reputation and is a partner the business wants to be associated with. There is still a risk that due diligence and fraud prevention is treated as a tick box exercise, but this is where the forensic accountant needs to demonstrate the value of his expertise and add value to his clients and their fraud and corruption prevention strategy. -----------------------------------------------------------------------Michael G. Kessler is the founder and principal of Kessler International, the world’s premier forensic accounting and investigative consulting firm. -----------------------------------------------------------------------For almost a quarter of a century, Kessler International has been the world leader specializing in forensic accounting, computer forensics, brand protection and corporate investigations. Established in 1988, Kessler International’s satisfied clients are
comprised of an extensive and distinguished list of Fortune 500 companies, government agencies, and prestigious law firms worldwide. Kessler’s diverse staff includes accountants, certified fraud examiners, certified forensic computer examiners, CPAs, certified internal controls auditors, former prosecutors, former law enforcement agents, attorneys, certified forensic accountants, , licensed private investigators and researchers. We remain an independent, privately owned corporation with a proven approach that is quality driven, discreet, thorough and extraordinarily successful. Accounting software is essential for efficient supplemental data analysis, inquiries and reporting. Since Kessler’s inception in 1988, tremendous gains have been made in the tools and technology available to Forensic Accountants. Keeping up to date with these ensure that clients are receiving the best possible and most accurate information in an expeditious manner. While nothing can replace an individual eye or gut instinct, seasoned accountants know how to incorporate technology appropriately and effectively, and Kessler recognizes and incorporates important advances into their systems regularly. Advances in computer forensics services enable forensic accountants to obtain data currently in digital format which in the past was maintained in paper format.
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Changing Role of Forensic Accountancy
Advances in computer forensics services enable forensic accountants to obtain data currently in digital format which in the past was maintained in paper format. Michael G. Kessler
The field of forensic accounting has grown exponentially over the past two decades. It has become more important than ever for those who wish to commission a forensic accountant to question and investigate for themselves the experience and qualifications of the firm or individual they wish to use. So many firms are hiring one accountant with little or no forensic accounting experience or credentials and claiming that they now offer forensic accounting services. Kessler International predicts that the growth of the demand for forensic accounting and auditing services will also grow exponentially, as sophisticated frauds and swindles are increasingly perpetrated worldwide by a progressively more savvy community. -----------------------------------------------------------------------Simon is the national Head of Fraud and Financial Crime at BDO LLP and has over 25 years of fraud, banking and financial crime investigation experience, which involved the tracing of billions of dollars of assets within over 20 jurisdictions. -----------------------------------------------------------------------During recent years, and particularly since the onset of the recession, there has been a change to the role of the specialised fraud investigator within a forensic accounting practice. The most notable change is not down to the specifics of the actual investigation work, it is around the additional work in managing reputational and regulatory risk and increasingly, counselling and supporting the clients through the event. Corporate entities are often under so much pressure to meet the varying demands of its diverse stakeholders that they are
ACQUISITION INTERNATIONAL
reluctant to bring in their legal advisors or law enforcement agencies in the first instance. They are now more focussed on risk and reputation management and want to know “Who did it”, “how did they do it” and “what can we do now”. My role now often involves more emphasis on the management of the client’s reputational issues. In the last few years there has been a notable aversion to large corporate entities reporting fraud. In 2011, reported fraud decreased for the first time in over 10 years. Whilst on the face of it, the decrease appears to paint an optimistic picture and give an outward impression that our country’s ongoing battle against fraud is finally paying dividends, my experience actually shows a complete different picture.
Company: Smith & Williamson Name: David Alexander Email: david.alexander@smith.williamson.co.uk Web: www.smith.williamson.co.uk Address: 25 Moorgate, London EC2R 6AY Telephone: 020 7131 8290
To me, the message masks the real story of how priorities within business and in society, in general, are changing. In my opinion this is also corroborated with the suggestion of giving prosecutors more discretion around whether to bring a case to court and whether it would be an efficient use of time and funds. Fraud is one of the most complex and costly cases to bring to trial and this move would result in a reduction in fraud relation prosecutions and a larger focus on the civil courts.
The role of the forensic accountant from a fraud and financial investigations perspective is therefore, not necessarily changing in the way that we investigate and the methodologies used, it is changing in that our services are widening. In addition to investigatory services, I am often engaged to review a potential risk these days and offer preventative advice.
Company: Kessler International Name: Michael G. Kessler Email: mkessler@investigation.com Web: www.investigation.com Address: World Headquarters, 45 Rockefeller Plaza, Suite 2000, New York, NY 10111 Telephone: 212-286-9100
Company: BDO LLP Name: Simon Bevan Email: simon.p.bevan@bdo.co.uk Web: www.bdo.co.uk Address: 1 Bridgewater Place, Water Lane, Leeds, LS11 5RU Telephone: 0113 244 3839
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15
SECTOR SPOTLIGHT:
Full of Eastern Promise — Cross Border Activity in Turkey
FULL OF EASTERN PROMISE — Cross Border Activity in Turkey Metin Bonfil is the Founder and Managing Partner of Total Finans, a Global M&A firm based in Turkey. Here, Metin comments on 2012 Cross Border Activity in Turkey.
PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS. We are a Turkey specialized M&A firm with no specific sector focus, though our activities parallel investment flows into Turkey i.e. consumer driven investment themes as well as finance and industry. We have also been the exclusive partner of Global M&A International (www.globalma.com) for Turkey for the last 11 years. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We have more experience, we are more focused and stay true to the business: we try to deliver win-win outcomes. CROSS-BORDER DEALS TEND TO BE MORE PROBLEMATIC THAT TRADITIONAL DOMESTIC TRANSACTIONS; CAN YOU PLEASE HIGHLIGHT THE MAIN CHALLENGES YOU FACE ON A DAY TO DAY BASIS WHEN WORKING ON A CROSS-BORDER DEAL? In Turkey, it is more the other way around, where local players are concerned about revealing information to a potential suitor who may be a competitor, but feel more at ease with foreign entrants. WHAT ARE THE MAJOR BUY AND SELL-SIDE CHALLENGES ASSOCIATED WITH CROSS-BORDER DEALS? Right now, I think a key challenge is to satisfy seller expectations in terms of price. Also, many good companies who are just beginning to open up to investors would like to sell minority, yet investors seem to seek control or 100 percent stakes.
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/ August 2012
On the reverse side, Turkish entrepreneurs have less concern about minor non-compliance issues but it is hard to explain that to foreigners. WHY OVER THE LAST FEW YEARS HAS THE MAIN FOCUS BEEN ON COST CUTTING AND RESTRUCTURING? AND WHY HAS THIS NOW SHIFTED BACK TO GROWTH? We see the main theme driving investor appetite for Turkish assets has been growth. We have a strong consumer market and stick out like an island of growth so close to Europe. WHAT FACTORS HAVE CONTRIBUTED TO SURGE IN PLANNED CROSS-BORDER DEALS IN 2012? I believe international players were too focused on China before, and now they feel they have neglected our region. Now, with the debt crisis in Europe and China shifting from an outsourcing play to a consumer play and, with the accumulation of cash in the balance sheets during the last two years, multinationals are back in the game for growth markets.
HOW HAVE TECHNOLOGICAL IMPROVEMENTS FACILITATED GROWTH IN CROSS-BORDER DEALS? Without emails, track changes and VDRs I don’t know what we would be doing. IN TERMS OF CROSS-BORDER INVESTMENT COMING INTO YOUR JURISDICTION, WHAT IS CURRENT LEVEL OF PRIVATE EQUITY INVOLVEMENT? We see substantial interest from PE side. I cannot gauge the size but I believe recent money raised for Turkey seeking assets is not less than $2-3 billion. DO YOU HAVE ANY PREDICTIONS FOR 2012, IN TERMS OF CROSS-BORDER ACTIVITY? ANY 2012 HOT SPOTS? We think activity will continue; there is an expectation that investors from the Gulf will appear in bigger numbers but it is slow in coming.
WHICH GLOBAL SECTORS ARE ATTRACTING INVESTORS? In the Turkish case anything that has to do with the consumer. The private equity buys of Pronet (Cinven), Koton, Orka are good examples. Also, the general theme that you can use Turkey as a hub to expand into the Middle East and North Africa is valid. TAV, a regional player in airport management was participated by Aeroports de Paris. We have a good deal of new private equity money raised for Turkey looking for investments in consumer and online space. However, it is not easy to find deals in technology sector.
Company: TOTAL FINANS Name: Metin Bonfil Email: mbonfil@totalfinans.com Web: www.totalfinans.com Address: Kasap Sokak 12/9, Esentepe 34394 Istanbul, Turkey Telephone: +90 212 275 0175
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Bouncing Back — Malta
BOUNCING BACK — Malta The Maltese region is a prime location for investment. It offers advanced communication systems, a native Englishspeaking workforce, a favourable tax and fiscal regime as well as political stability, making it an ideal near-shore location for mainland Europe and particularly the UK. -----------------------------------------------------------------------Dermot S L Butler is Chairman at Custom House Group, and a member of AIMA and MFA. Here he fills us in on the factors which have contributed to Malta’s recent growth in the financial services sector. -----------------------------------------------------------------------At Custom House we provide all the normal administrative functions, but also provide very good client service, including customized reports and similar, which I think sets us apart from the competition. Typical clients for us include small to medium sized alternative investment funds (start-up to $500 million, although we do have several larger). Malta was excellently prepared for entry into the EU in 2005 and has a pragmatic, business-friendly, but strong regulator, good education and cost advantages. It has a strong legal and regulatory framework, as well as a highly skilled workforce, adequate infrastructure (telephone connections), good DTTs, low costs and is a good place to work. The country has signed up DTTs and MoUs with China and can provide a good base for financial products in the Gulf area for those that are nervous of the effect of the “Arab Spring”. The Maltese government has established the region as one of the safest and best-run financial centres in the world. The regulator has done all he can to both comply with EU regulations, other sensible regulation and accommodate good quality businesses that have an intelligent compliance culture. With regard to outbound M&A I think Malta, as an attractive EU center, will grow, both from new business and from business transferring from other jurisdictions. -----------------------------------------------------------------------Trevor Westacott works for CentreCom, part of the World Aviation Group, in Malta. -----------------------------------------------------------------------Malta offers more than financial incentives to foreign investors; it offers a complete environment that is conducive to business. There is the island’s location in the Mediterranean, its excellent air and shipping facilities, a highly-educated and skilled workforce, a proactive business environment, and English as the business language. Malta’s legislative and regulatory systems, its advanced telecommunications infrastructure and a multitude of highly skilled professionals in every field, have helped Malta win both investment and international recognition. An EU State on the doorsteps of Southern Europe and North Africa, Malta has developed into one of the most progressive and efficient business locations in Europe Near Shoring Versus Off shoring Farming work out to locations on the edge of the EU has generated a new piece of business jargon, “near shoring” (or near sourcing). A number of British Companies such as Crimson Wing and Lloyds Register, that joined the global outsourcing vogue and had shifted work to India and the Philippines earlier this decade, have
ACQUISITION INTERNATIONAL
over the years moved back to Europe specifically from the Philippines and India to Malta. The problem in the Far East, lies in the language, English is widely spoken but not widely understood. In Malta English is spoken as a native language. Moreover there has often been a problem with cultural barriers. Employees and customers were unable to understand each other and socio-cultural linguistic barriers have even led to conflict. Near shoring to countries like Malta offer many of the benefits of offshoring with far less problems. At Centrecom we are a multi-lingual International Contact Centre company offering back and front office services through our Contact Centre, Malta. We know that our clients are unique both in their requirements and objectives, so we create individually tailored solutions. Our aim is to always add value to your business not by just meeting, but by exceeding your expectations. As a global organization we are always open for business, using the latest technology to service your customers wherever they may be. “The decision to move work to Malta was based on an equation of time and quality. Money matters, but a cheaper location can cost more in the long-term. Malta is not cheaper than the Philippines, but here we have complete predictability. And if a project slows up because we cannot communicate properly with staff in Manila then it can cost us more anyway,” Grant Macleod – Lloyds Register -----------------------------------------------------------------------Christopher J. Naudi is Head of Tax at Ernst & Young Limited in Malta and a member of the Institute of Financial Services Practitioners. He fills us in on the current opportunities in Malta. -----------------------------------------------------------------------Malta is ideally placed as a stepping stone between the EU and other jurisdictions. With no withholding taxes on dividends, interest or royalties embedded in our tax laws and our wide treaty network more and more investors are choosing Malta as a place to do business from. In addition, the reputation of the Island has remained strong and our banks have faired very well compared to other jurisdictions during the global recession that we experienced in recent times. In comparison to other European countries who work within the financial services industry, Malta remains very competitive when it comes to costs. In addition, Maltese laws, which are fully in line with EU regulations and directives, are written both in Maltese and English, allowing investors to easily gain an in-depth understanding of our laws. The Maltese work force is very dynamic and most people speak English and Italian fluently allowing for better and faster communication. Malta has shown that it is solid and dependable throughout the global recession and the Arab Spring with most of our Mediterranean neighbours facing financial or political challenges over the last 18 months, the Island has remained steady with growth levels
being registered despite the international challenges being faced around us. Our financial services industry continues to thrive with several insurance companies choosing Malta as the place to either locate their European headquarters or their affiliated insurance (captive) business. Malta’s secret is that it is nimble when it comes to processing and servicing business applications. All involved parties from serviced providers to local authorities recognise that our clients and potential clients are important to us.
Company: Custom House Global Fund Services Ltd. Name: Dermot S L Butler Email: dermot.butler@customhousegroup.com Web: www.customhousegroup.com Address: 25 Eden Quay, Dublin 1, Ireland Telephone: 00 353 1 878 0807
Company: Centrecom Name: Trevor Westacott Email: trevor.westacott@worldaviationgroup.eu Web: www.worldaviationgroup.eu Address: Aviation Centre, First Floor, St. Thomas Street, Luqa, Malta LQA5000 Telephone: (356)2364 4444
Company: Ernst & Young Limited Name: Christopher J. Naudi Email: chris.naudi@mt.ey.com Web: www.ey.com Address: Regional Business Centre, Achille Ferris Street, Msida MSD 1751, Malta Telephone: 00356 2134 2134
August 2012 /
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SECTOR SPOTLIGHT:
The Importance of Protecting IP
THE IMPORTANCE OF — Protecting IP
may be available for a new product in terms of patent and design protection; and work out portfolio strategy to protect a company’s IP. In difficult economic times, companies give more emphasis to their IP. We expect an increase in opposition and dispute work. Two key trade mark COJ cases, ONEL and the IP TRANSLATOR will issue this year and are likely to have a significant impact upon the breadth of protection sought by trade mark applications and also the vulnerability of existing registrations to non-use revocation actions.
-----------------------------------------------------------------------Danubia Patent & Law office is the oldest and largest Intellectual Property (IP) Law firm in Hungary. -----------------------------------------------------------------------The firm has over 20 Hungarian and European patent attorneys with technical degrees covering all fields of technology, and together with the co-operating Law firm: Sar & Partners have about the same number of lawyers specialized in IP litigation.
20 years’ experience, based at firm Elkington and Fife LLP. -----------------------------------------------------------------------We are a leading Patent and trade mark firm handling patent, trade mark and Design applications and oppositions before the UKIPO, EPO and OHIM. We act for a large range of Blue Chip Multi-National companies including Corning Inc., Dow Corning, Proctor and Gamble, Samsung, BASF SE, Cisco Systems Inc.
Danubia serves domestic and foreign clients, where the firm assists foreign clients in obtaining IP rights before the European Patent Office, before the OHIM (Community Trademark and Design Office) and before the Hungarian Intellectual Property Office. On the top of the listed prosecution work Danubia is strong and experienced in enforcing (or defending) client’s IP rights mainly when injured in Hungary. Danubia also assists foreign clients in organizing IP policy of their Hungarian subsidiaries including inventor’s remuneration and licensing. Our specialty is the high professional level combined with reasonable prices. In providing the services ad hoc teams are formed for each complex question where the client seeks advice, whereby a high level of service is provided in every specific issue concerned.
We specialise in: - Patent drafting, - EPO Opposition work; - Patent and trade mark portfolio advice; - Freedom to use an opinion and due diligence. - UK and CTM trade mark oppositions and filings; - Trade mark searching
Before the start of any litigation or complex problem, Danubia helps elaborating an appropriate strategy tailored to the task concerned, and the advice generally comprises alternatives with advantages and disadvantages including the chances of success. As generally known, more than 60-70% of the total value of modern companies is constituted by the companies’ IP rights, therefore the optimum handling of these rights are of vital interest. Danubia is aware of the high responsibility and has elaborated working methods matching these requirements. Danubia has a very sensitive policy concerning handling of conflicts of interest. In dubious cases Danubia refrains from representing the parties in order to avoid any later conflict. As the firm is highly experienced and has been representing cases of delicate nature and of vital importance to the client for over more than 6 decades, the professional staff listens to and understand the client’s problems and tries to address them in short and easy to understand ways. -----------------------------------------------------------------------Mark Hiddleston is a Partner and trade mark attorney, with
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Many of our Fee Earners are acknowledged experts in their fields, many having worked previously in-house in large multinational corporate IP Departments, Law firms or the EPO. We pride ourselves on giving high quality responsive advice which is commercial in nature and geared to the needs of our client. Here at Elkington and Fife we can pick up issues that commercial lawyers may not appreciate. We can often advise quickly upon whether there is a real IP issue and conduct searches to check the status of Intellectual Property. If there is an overseas dispute disclosed by the Vendor, we can seek advice from our worldwide network of attorneys quickly. A common danger is the failure of a Vendor’s business to adequately protect its existing IP. In the trade mark area, the Vendor may not have registered its trade marks in all relevant markets, or could potentially be infringing prior trade marks. We can search quickly and assess the position. If a business is successful, third parties inevitably will seek to trade off or piggy back off that established reputation. By registering their trade marks and brands, a business can protect those trade marks to prevent third parties using a name close to them. If a company develops a new product, that product can be protectable potentially by patent or design. In this case the ability of a third party to copy or produce a product close to that may be limited. We can advise upon availability for use and registration of a new mark or brand; the protection that
-----------------------------------------------------------------------Honey & Blanckenberg is a long established full service law firm in Zimbabwe which has a prominent intellectual law practise pre-dating the country’s national independence in 1980. -----------------------------------------------------------------------Honey & Blanckenberg has a dedicated Intellectual Property Law Department which advises domestic and foreign clients on the registration, protection and enforcement of intellectual property rights (IPRs) in Zimbabwe and in the regional intellectual property office of ARIPO, which has 17 member states. Honey & Blanckenberg stands out from its competitors because it has a full Department dedicated to the practice of intellectual property law, and which Department is headed by legal practitioners with litigation experience as well as extensive knowledge of intellectual property law. The firm’s competitive edge derives from the fact that it provides a fast, efficient and knowledgeable service, and detailed and timely responses to clients’ many varied queries about intellectual property protection in Zimbabwe and ARIPO. Intellectual property rights (IPRs) are the most valuable assets of businesses because they provide rights holders with: - a competitive advantage when negotiating collaborative ventures with other entities, - a potential source of revenue as they can be licensed out for royalties or sold to a third party to raise capital or mortgaged for finance, - a nucleus to exploit commercial potential of a new innovation, and - a monopoly that does not permit competitors to blatantly copy a business’s IPRs without risk of legal action for wrongful invasion of those rights. Honey & Blanckenberg is able to assist clients protect their IPRs by: - advising the categories of IPRs available for protection in Zimbabwe and ARIPO, - advising the customs mechanisms for protecting businesses from the threat of counterfeit products and branded products which infringe IPRs registered or well known in Zimbabwe, - filing, prosecuting and maintaining IPRs in Zimbabwe and ARIPO, and - litigating for protection and enforcement of national IPRs as well as those entered in Zimbabwe under the national or regional phase of the Patent Cooperation Treaty, the Harare Protocol on Patents, Industrial Designs and Utility models and, the Banjul Protocol on Trade Marks.
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Importance of Protecting IP
-----------------------------------------------------------------------Gabriel Oussi is the founder of Oussi Law Firm in Damascus, Syria. -----------------------------------------------------------------------Organization of the industrial property rights started with Paris Convention 1883 which does not go beyond the rights related to patent rights, industrial pictures and samples, trade marks and geographic indicators, the undisclosed information, the commercial names and addresses and the fair competition. Perhaps what gains the interest of the public and private entities is the mark which indicates a manufacturer, trader or service provider. From this point we find that the mark has gained the appreciation of the public because it is a symbol of confidence. The consumer looks at it with respect and appreciation. Also it is considered an intrinsic part of the commercial reputation. According to Resolution No. 152/LR dated 19/07/1939, Syria was one of the first states which signed Paris convention concerning protection of the industrial property which was issued on March 20, 1883. On 09/10/1946 the Legislative Decree No. 47 was issued, and it was amended by the Law No. 28 dated 03/04/19080. It discussed all points of the intellectual property and stayed in force until 2007 when the Law of protection of the trade marks and geographic indicators No. 8 was issued on 12/03/2007 as a result of the economic developments taking place in Syria and in the region which made it not possible to apply that law. So there was a need to issue a new law, which is the above mentioned Law No.8. Of the features of this law is that it has created a court to decide upon the disputes resulting from the trade marks and it has given the owner of the worldly reputed mark in Syria, even if not registered, the right to ask the competent court to cross out or prevent others from using a mark similar to it, in addition to other matters which were not stated in the former law. This law is considered a step forward to keep abreast with the world economic development. Recently, the law of patents has been issued and it is considered another step on the road of reform. -----------------------------------------------------------------------R. Danny Huntington is a partner with Rothwell Figg Ernst & Manbeck PC, and one of the most experienced attorneys in the firm. -----------------------------------------------------------------------At Rothwell Figg Ernst & Manbeck, our guiding principle is to provide the highest quality professional services on a timely basis at a reasonable charge. Our professional fees usually are based on the actual amount of time expended on a project, which generally is determined by the difficulty of the project. It is our practice to apportion projects or parts of projects among persons in the office who are capable of performing the work at the lowest billing rate. We often find that utilizing the assistance of well-trained paralegals is cost-effective for our clients. For many companies, IP is their most valuable commodity. It serves not only to protect its products and services from competition, it can also be used defensively to prevent competitors from obtaining their own intellectual property and suing for infringement. In some companies IP can be as much as 90% of the value of the company, particularly for famous trademarks. The value of IP can also be seen from several recent examples of companies who decide to market their patents when they find they cannot compete in the marketplace in selling products. In some cases the patents have sold for more than the company was worth. A well designed IP program can protect the essential technology and good will of a company by covering what the company does, as well as not allowing competitors to
ACQUISITION INTERNATIONAL
make competitive alternatives. However, sometimes it makes more sense to obtain revenue from licensing in addition to manufacturing, and to form strategic alliances to obtain other valuable IP. As in every other facet of business, money spent in one area is not available to spend in another. A well designed IP program will obtain maximum benefit without having to spend an inordinate amount of money. Over the next 12 months a massive amount of work will be done to understand and develop strategies for use of the Leahy-Smith America Invents Act (AIA). The filing of patent applications will generally be the same as before because most companies will want to preserve the ability to file in countries outside the US. However, the new possibilities for attacking patents both before they are issued, as well as after, will give companies a great deal of flexibility to either prevent the issuance of patents or to attack them in the US Patent and Trademark Office (USPTO). Many companies are expected to prefer this rather than having to attack them in a US district court, often before a jury that does not typically have the technical knowledge to competently understand and evaluate the patent claims asserted to have been infringed. Included in the new proceedings in the USPTO are Inter Partes Review (IPR) and Post Grant Review (PGR), both of which are expected to be very similar to the current proceedings in the first stage of a patent interference. Although the AIA requires the USPTO to recover its costs in conducting these proceedings and thus the official fees will be substantial, they will allow a company to attack a patent for a fraction of the cost of defending an infringement litigation. The big question is whether the USPTO will be able to hire enough judges to handle all of the IPRs and PGRs expected to be filed.
Company: Rothwell Figg Ernst & Manbeck, P.C. Name: R. Danny Huntington Email: dhuntington@rothwellfigg.com Web: www.rothwellfigg.com Address: 607 14th Street, NW, Washington, DC 20005, United States of America Telephone: (202) 783-6040
Company: Gorodissky & Partners Email: BiriulinV@Gorodissky.ru Web: www.gorodissky.com Address: B. Spasskaya Str., 25, bldg 3, Moscow 129090, Russia Telephone: 7 (495) 937-6116 / 6109,
Company: Danubia Patent & Law Office LLC Name: Dr. Arpad Petho Email: central@danubia.hu Web: www.danubia.hu Address: 16 Bajcsy-Zsilinszky út, Budapest, H-1051 Telephone: (+36 1) 411-8700
Company: Mark Hiddleston Name: Elkington and Fife LLP Email: mark.hiddleston@elkfife.com Web: www.elkfife.com Address: Thavies Inn House, 3-4 Holborn Circus London, EC1N 2HA, United Kingdom Telephone: +44 (0)20 7936 8800
Company: Honey & Blanckenberg Name: Sara Moyo Email: sara@honeyb.co.zw Web: www.honeyb.co.zw Address: 200 Herbert Chitepo Avenue, Harare Telephone: +263 4 735281-6
Company: Oussi Law Firm Name: Gabriel Oussi Email: go-law@oussico.net Web: www.international-referral.com/ userprofiles/GabrielOussi Address: P.O Box: 2506 Salhiye – Shouhada- No.18, Damascus - Syria Telephone: 00963 11 33500090\1
August 2012 /
19
SECTOR SPOTLIGHT:
Four Questions To Consider When Selling Your Stake in Business to a Private Equity Fund
FOUR QUESTIONS TO CONSIDER — When Selling Your Stake in Business to a Private Equity Fund Unlike Western developed economies, Ukraine has only recently started to unlock its potential in the area of attracting investments from Private Equity Funds (“PEFs”).
Therefore, on the one hand, every more or less serious Ukrainian business (“Business”) has a good chance to attract the attention of a PEF. On the other hand, owners of a Business (“Owners”) often know little of the nature and goals of PEFs. Moreover, not all Owners have good knowledge of instruments of English law (the governing law for most deals with PEFs). Thus, if an experienced lawyer (or, at least, an experienced financial advisor) is not engaged by an Owner from the outset, the result may be:
2. WHAT ROLE WILL THE PEF PLAY IN RUNNING BUSINESS? Apart from injecting money, the PEF will try to increase the valuation of the Business (and, thus, increase its future return) by enhancing the efficiency of the day-to-day operation of the Business.
precedent or, at least, result in additional indemnities.
All parties need to agree at the outset on the ways of achieving such efficiency. In particular, whether the PEF will have some responsibility over the operational activities of the Business (by nominating some of the Business’s officers (e.g., a Chief Financial Officer)) is an important question.
4. ARE YOU PREPARED TO GIVE PERSONAL GUARANTEES (OR OTHER TYPE OF SECURITY)?
• A lot of time being wasted for nonnegotiable matters, while matters which may be negotiated for the benefit of Owners are not negotiated at all • The deal falling apart or, at least, getting suspended for some time • After the deal closes, an Owner realising that life with PEF is not something he/she thought it would be when negotiating transaction documents. This, at best, may result in unpleasant talks with the PEF or, at worst, may lead to a corporate conflict adversely affecting the Business
• Board-level representation in a holding company and, possibly, even in important Ukrainian companies • The right to veto on key matters of the Business. Negotiating the list of such matters is one of the most time-consuming parts of negotiations • Strong informational rights (access to information and regular financial reporting)
In order to avoid the above situations, it is important to clearly understand the answers to the following questions:
3. WHAT LEVEL OF RISK IS THE PEF WILLING TO ACCEPT?
1. WHAT IS THE INVESTMENT HORIZON AND EXIT STRATEGY OF THE PEF?
PEFs are not longterm strategic investors. Therefore, at the time of the “wedding” they already have a clear understanding of the timing and specifics of the “divorce”, which the Owner must also clearly understand. As PEFs’ core aim is to maximise the return on their investment in the short term (3 to 7 years), the PEF will insist on its right to exit from the Business through the sale of its shares to third parties or, based on the put option, to other shareholders. PEFs will also prefer to have a drag along right in respect of other shareholders. While, in return, PEFs may agree to a call option and other shareholders’ drag along rights, they will do so only if the minimum level of return on their investment is guaranteed.
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/ August 2012
In any event, every PEF will insist on:
Among the different possible purchasers of a Business, PEFs are likely to be the most sensitive to the level of risk they are willing to accept and ways to reduce it. Therefore, PEFs will almost never agree to purchase a stake in a Business without conducting legal and financial due diligence. Moreover, PEFs will insist on broad warranties and a long list of indemnities covering all significant deficiencies discovered during due diligence or during the preparation of the disclosure letter. This is another good reason for the Owners to conduct their own due diligence prior to negotiating the deal in order to identify all problematic areas, which, if not solved, may well influence the price of the deal with a PEF, delay completion of the deal due to additional conditions
The reverse approach will apply to any future sale by a PEF of its stake in a Business when the PEF would be unwilling to give any warranties or indemnities other than capacity and title warranties.
PEFs will always require some type of security: retention of some portion of the purchase price, pledge of some assets (including Owner’s shares in the Business), bank guarantee, suretyship of a third party or personal guarantee of the Owner. Such security will mostly cover two areas: • The PEF’s losses from breach of warranties • Due fulfilment by the Owner of his/her ongoing obligations (usually contained in the shareholders’ agreement) IMPORTANT: You must be aware that in negotiations PEFs are represented by experienced managers who, even without the support of lawyers, navigate the transaction documents quite well and understand the legal and practical implications of most of the legal provisions contained in them. Therefore, unless you have strong experience of doing deals under English law, do not try to negotiate legal concepts with the PEF’s managers without your lawyer’s participation.
Name: Mykola Stetsenko Email: mstetsenko@ avellum.com Telephone: +380 44 220-0335
Name: Yuriy Nechayev Email: ynechayev@ avellum.com Telephone: +380 44 220-0335
Company: Avellum Partners Web: www.avellum.com Address: 19-21 Bohdana Khmelnytskoho Str., 01030, Kyiv, Ukraine
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
DEEP & FAR
Attorneys-at-Law 13th F1., No. 27, Sec. 3, Chung San N. Rd. Taipei 104, Taiwan, R.O.C. Tel: +886-2-2585-6688 Fax: +886-2-25989900/25978989 email@deepnfar.com.tw Deep & Far was founded in 1992 and is one of the largest law firms in this country. The firm is presently focused on the practice in separate or in combination of all aspects of intellectual property rights (IPRs) including patents, trademarks, copyrights, trade secrets, unfair competition, and/or licensing, counseling, litigation and/or transaction thereof. Since this firm edges itself into the IPRs field, the firm quickly comes to fame. As an illustration, this firm often is one of the largest sources from which foreign filing orders originate. The fascinating rise of this firm begins from the founder of Deep & Far attorneys-at-law, C. F. Tsai, who is the one first patent practitioner in this country who both has technological and law backgrounds and is qualified as a local attorney-at-law. The patent attorneys and patent engineers in this firm normally hold outstanding and advanced degrees and are generally graduated from the top five universities in this country and/or the university in the US. Our prominent staffs are dedicated to provide the best quality service in IPRs. As a proof, about one half of top 100 incorporations in this country have experiences of seeking patented their techniques, but more than one fifth of the top 100 incorporations are/were clients of this firm. Furthermore, Hi-Tech companies in the science-based industrial park located at Hsin Chu play an important role in booming the economy of this country. About one half of which have experiences in seeking patented their techniques, and out of more than 60% of the patent-experienced companies in that park have ever entrusted their IPR works to this firm. We have experienced in seeking IPR-protections for our clients in more than 100 territories all over the world. We have thousands of IPR-cases respectively prosecuted before official Patent Offices of major industrialized countries. This firm not only is the most competent in IPR-related matters in this country but also is very familiar with IPR-practices in major industrialized countries. As a matter of fact, this firm oftentimes tries and makes precedents of new claim-drafting styles. While we might have become wonderfully famed locally with remarkable appreciation and respects, we would like to extend our services for internationalized or quality service-requiring foreign conglomerated giants, corporations or individuals. We strongly believe that we will win more applause from clients all over the world.
www.deepnfar.com.tw
ACQUISITION INTERNATIONAL
August 2012 /
21
SECTOR SPOTLIGHT:
Understanding the revision of financial regulation in Switzerland
UNDERSTANDING THE REVISION — of financial regulation in Switzerland While Switzerland is not a member state of the EU, it obtains access to the internal market by adapting its policies and regulation to meet EU standards. As the EU Alternative Investment Fund Managers Directive (AIFMD) is to be implemented in EU member states until mid-2013, a revision of the Swiss regulatory framework, the Collective Investment Schemes Act (CISA), is currently being debated.
ZĂźrich / Switzerland
The purpose of this article is to present you with an overview over the major changes that can be anticipated as of today as well as the way these changes may affect you as a foreign fund manager distributing into Switzerland.
STATE OF THE DEBATE IN THE SWISS LEGISLATIVE PROCESS
As you may be aware, the Swiss members of parliament are not full-time politicians. They convene each season to so-called sessions (winter, spring, summer, autumn) for a few weeks to debate and pass legislation on chosen topics.
In-between sessions expert working groups prepare draft legislation to be discussed and passed. At the same time, lobbyists, interest groups such as professional associations,
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/ August 2012
unions, NGOs and the like are given the opportunity to express their opinion. The amended Collective Investment Schemes Act (CISA) has been presented by the Swiss Government early this year to the Council of States (equivalent of the Senate in various other nations). In its summer session the Council of States has amended the governmental proposal in several points and passed it along to the National Council. The debate in the National Council is scheduled for its autumn session of this year. Should the CISA also pass the National Council, the Swiss Government as well as FINMA will issue and publish a corresponding Collective Investment Schemes Ordinance (CISO) which is currently being drafted. Then and only then, in late October/early November we have assurance on how the new regulation will affect you and what concrete measures have to be taken. It is the aim of the authorities that the new CISO will enter into force by end of this year with a maximum delay for implementation until June 30th 2013.
DISTRIBUTION INTO SWITZERLAND: OPT-IN FOR WEALTHY INVESTORS
regardless of his or her personal wealth situation. Before, an individual with CHF 2 million investment capital was considered a qualified investor. But individuals will receive the right to opt for the status as qualified investor.
Distribution to qualified investors remains more or less the same as under the old regime. There are currently no limitations to foreign fund managers foreseen to present and sell their products to this investor segment. But please be aware that this is one of the points which are under heavy debate. Depending on the outcome of the debate, the CISO may still leave room to FINMA to ease or toughen the regulations when drafting implementation ordinances and guidelines.
The amended Swiss CISA will no longer differentiate between distribution and private placement. CISA speaks only about distribution to public investors or qualified investors. In the new regime a public investor is every individual investor,
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Understanding the revision of financial regulation in Switzerland
SWISS DOMICILED ASSET MANAGERS UNDER FINMA SUPERVISION Swiss based Asset Managers, managing Collective Investment Schemes (CIS) will become fully FINMA regulated regardless of managing Swiss, EU or offshore domiciled funds, UCITS, or non-UCITS. Swiss based Asset Managers will thus have to fully comply with regulatory requirements similar to EU-FM or AIFM regulation.
This point of the amended CISO has a clear political majority. Debated remains whether CISO should apply to asset managers with fund aum of CHF 500+ million or CHF 100+ million. If the Swiss based asset manager is a consolidated subsidiary of a foreign fund manager regulated by an authority recognized as equally to FINMA (bi-lateral recognition), FINMA may renounce direct supervision of such a foreign held Swiss asset manager.
LEGAL REPRESENTATION FOR ALL FOREIGN FUNDS The new CISO will request that all CIS distributed (whether to individual or qualified investors) must appoint a legal representative in Switzerland. There will be no need to register products distributed only to qualified investors. But there will be a duty to appoint a legal representative, where Swiss investors can get information about the foreign CIS.
However, there are two major changes which need your attention: 1) If you manage CIS out of Switzerland, you will get regulated according to AIFMD. 2) If you privately place or distribute to Swiss investors, you will need to appoint a representative. We will be able to provide you with more information as soon as we see the final proposals to the National Council prepared by the parliamentary commission.
What remains completely unclear at this stage is the amount of concrete tasks, duties and responsibilities the legal representative will have under the new regime. But this point is heavily debated and could be overruled again by the National Council or by the FINMA ordinance implementing the CISA. The correction of the governmental proposal described above passed the Council of States with a thin majority of only 1 vote (17/16 votes).
TWO CHANGES WHICH NEED YOUR ATTENTION It is not advisable to already draw conclusions let alone define measures or strategies based on this still ongoing and therefore unpredictable process. Too many points are still entirely open.
Company: ACOLIN Fund Services AG Name: Daniel Haefele Email: daniel.haefele@acolin.ch Web: www.acolin.ch Address: Stadelhoferstrasse 18, CH-8001 Zurich Telephone: +41 (0) 44 396 9693
distributing success ACOLIN - your partner for fund distribution What we do • • •
Registration and legal representation of your funds in Switzerland Distribution channel and commission management Marketing and sales support
Why choose ACOLIN • • • •
Reduces your costs of market entry Shortens the time to market Provides access to major distribution channels in Europe Opens the door to institutional and wholesale investors
www.acolin.ch www.acolin.co.uk
ACQUISITION INTERNATIONAL
ACOLIN is the first independent fund distribution service provider, based in Switzerland with offices in Luxemburg, London and Madrid, operating crossborder into European markets. For fund managers based in the United Kingdom and Ireland, we provide local assistance for designing the best distribution strategy and ongoing support.
ACOLIN (UK) Limited Lorcan Murphy, Managing Director +44 (0) 203 397 2722 lorcan.murphy@acolin.co.uk
ACOLIN Fund Services Daniel Haefele, CEO +41 (0) 44 396 9693 daniel.haefele@acolin.ch
August 2012 /
23
SECTOR SPOTLIGHT:
The Growth of Litigation Funding
THE GROWTH
— of Litigation Funding
-----------------------------------------------------------------------Duane McGaw is CEO of Argentum Litigation Services Limited (“Argentum) -----------------------------------------------------------------------Argentum specializes in providing third party litigation funding solutions for commercial disputes in the UK and Australia and international arbitration. Our funding can be deployed at any stage of the litigation process (including pre-action) depending upon the specific requirements of the litigants and their legal team. Although the litigation funding market in the UK is relatively new (when compared to the US and Australia), the legal profession is rapidly waking up to the benefits it can have for clients and law firms. At Argentum we are of the view that litigation funding has an invaluable place in the legal landscape of the future. Importantly, it promotes access to justice for litigants that would otherwise be under-resourced or it enables more sophisticated corporate litigants to reduce their financial exposure to a dispute. We anticipate substantial growth in litigation funding in the coming years. The greatest obstacle for litigation funding to date has been a lack of awareness amongst legal practitioners. As clients become increasingly commercially sensitive and litigation budgets tighten following the economic downturn of 2008, law firms must adapt to new ways of funding claims in order preserve their revenue streams. When considering cases for litigation funding Argentum focuses on risk mitigation, capital protection and diversification of its portfolio. This, in turn, enables us to offer competitive rates for the funds that we deploy. The cases we fund are subject to rigorous due diligence by a team of legal and finance professionals. Argentum is a UK based wholly owned subsidiary of Argentum Investment Management Limited (“AIM”). AIM is the exclusive investment advisor and manger to Argentum Capital Limited, a closed ended fund listed on the Channel Islands Stock Exchange. With a stable, transparent and credible investment platform, and control over our own funds, we are well positioned to be a market leader as this exciting industry gains momentum. -----------------------------------------------------------------------Leslie Perrin is Chairman of Calunius Capital LLP. -----------------------------------------------------------------------The Calunius Litigation Risk Fund LP (the “Calunius Fund”) was launched in December 2010 and has become globally recognised as a leading brand in large scale commercial litigation and arbitration funding across a broad geographical mandate. Calunius Capital LLP acts as the exclusive investment advisor to the Calunius Fund. As an asset class, Litigation Funding is non-correlated to other markets and, despite its idiosyncrasies and complexities including the inescapable fact that each individual deal is subject to total loss, in a properly managed diverse Fund portfolio of a sufficient number of cases, it offers interesting returns that should be highly stable in aggregate. Demand for litigation funding comes from two main sources;
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/ August 2012
• David v Goliath; there is huge litigation funding demand from of small to medium sized enterprises that have contractual and other disputes with much more powerful and well-resourced entities. These entities find themselves unable to finance such litigation with all its risks; • Solvent entities who wish to manage the downside risks of litigation. These businesses are able to finance litigation but are unwilling to do so. As they see it, financial risks arising from other sources (interest rates, foreign exchange, etc.) are routinely managed by well-run businesses by hedging. Why should dispute risk be any different? Litigation funding thus becomes an integral part of the proactive management of financial risk in successful corporations.
the benefits of litigation funding, so has the demand for our Groups services grown. Areas such as Group/Collective Actions require careful and expert management to achieve the objective. A very substantial group action would not have been initiated without our Group’s expertise and drive. It is nearing a successful conclusion and both funding and group management have been crucial and Litigation Management has been a vital ingredient in pursuit of the case. Litigation funders can add value to the process by acting as an additional member of the team, using experience to assist with budgetary and project management to ensure that the litigation becomes a means to an end rather than an end in itself.
As the market develops, the Calunius team, comprising a combination of experienced litigation and arbitration lawyers and investment bankers, is well placed to continue its market leadership and to develop its competitive advantages in the vanguard of this new financial service. Calunius Capital is a founder member of the Association of Litigation Funders of England & Wales and complies with the Association’s Code of Conduct. Leslie Perrin is Chairman of the Association. -----------------------------------------------------------------------Ben Hawkins is Managing Director of Commercial Litigation Funding Limited (CLFL) and its parent company, Access to Justice Group Limited (A2J). -----------------------------------------------------------------------CLFL provides funding for litigation with values in excess of £2m. It specialises in Group/Collective Actions, Arbitration proceedings and banking litigation. All litigation funders hedge risk via ATE insurance and our services are superior for Solicitors, Companies and individuals, because our management uniquely has in-depth experience of the Commercial ATE insurance market. The member companies of the A2J Group provide a one stop shop through its close relationship with a specialist ATE broker. The key elements that differentiate litigation funders are their abilities to offer: • In-depth expertise • Fast service • Adequate capital • ATE insurance facilities Whether you are a business leader or Board Member managing a company with a legal dispute, or a lawyer acting on behalf of one, the best way to secure funding is to utilise a company that has the experience to create a package to meet your needs. The litigation funding market is not yet booming except perhaps in Australia. Elsewhere the introduction and development of the market is growing as sufficient numbers of companies provide a service and more capital becomes available. Clients are more concerned at securing reliable and robust facilities to enable them to pursue their case rather than pursue driving a hard bargain. The relationship between funder and client needs to be transparent and mutually trustworthy. As clients and their legal advisers become more aware of
Company: Argentum Litigation Services Name: Duane McGaw Email: enquiry@argentumlitigation.co.uk Web: www.argentumlitigation.co.uk Address: Level 6, Augustine House, Austin Friars, London, EC2N 2HA Telephone: 0203 581 5001
Company: Calunius Capital LLP Name: Leslie Perrin Email: info@calunius.com Web: www.calunius.com Address: 11 Haymarket, London SW1Y 4BP Telephone: +44 20 3142 8330
Company: Commercial Litigation Funding Limited Name: Ben Hawkins Email: bhawkins@clfl.co.uk Web: www.litfunding.co.uk Address: Token House, 11/12 Tokenhouse Yard, London EC2r 7AS Telephone: 020 3051 8645
ACQUISITION INTERNATIONAL
DISPUTE RESOLUTION & LITIGATION FUNDING A successful business will limit financial risk and exposure in all areas of its operations, so why should litigation be any different? We have our own publicly listed fund with capital ready to deploy. Our litigation funding solutions are designed to limit or completely extinguish any financial risk to your business. To find out more contact us today.
Address: Level 6, Augustine House, 6A Austin Friars, London, EC2N 2HA Telephone: +44 (0)20 3581 5001 Email: enquiries@argentumlitigation.co.uk Website: www.argentumlitigation.co.uk
SECTOR SPOTLIGHT:
The Growth of Litigation Funding
-----------------------------------------------------------------------Jonathon Crook is Partner at Eversheds, heading Financial Services and Dispute Resolution and heading of Financial Services Regulatory Investigations and Enforcement team. -----------------------------------------------------------------------As a firm Eversheds prides itself on its expertise and transparent approach to costs and costs management which forms part of our award winning RAPID (Review, Advise, Plan, Implement, Deliver) project management methodology for handling disputes. We recognize that costs considerations are a major factor for any client involved in litigation and we are accustomed to devising creative and flexible costs solutions to meet our clients’ requirements. Independent research shows that 97% of our clients would recommend us for litigation. Eversheds has expertise across a huge range of disciplines which means we are able to take on a variety of cases, many of which are suitable for funding solutions. Because all of our lawyers are trained in effective casts management as part of RAPID we are able to give detailed and accurate costs projections to clients, insurers and funders for the purposes of devising the most appropriate funding solution. Critically, however, we get results – whether that be successfully pursuing a case to trial or achieving a positive settlement. Clients, funders and insurers will assume different levels of risk but ultimately all want to win - and we deliver on that. Most litigation funders operate on the basis of a similar model where they will fund a case and look to recover a multiple of their outlay based on a pre-agreed budget. The “return” to the funder will generally increase the longer the case proceeds to reflect the increased risk to the funder. Most funders have a minimum value of case they will fund. After the Event insurance may form part of the funding package. Whether litigation funding is suitable for a particular case needs to be assessed carefully. If the merits of the case are particularly strong so that an early settlement may be achievable then it may not be in the clients interests to pursue a funding option straight away – or it may be necessary to agree mechanisms which cap the funder’s return in the event of an early resolution. However, if a case is suitable for funding then the best way to ensure that a funder can be agreed is to provide the funder with detailed information as to the case, the merits and potential outcome to enable them to reach an early decision as to whether the case justifies the investment.
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/ August 2012
-----------------------------------------------------------------------Marius Nasta is Chief Executive of Redress Solution LLP, and is responsible for providing funding strategies for the corporate clients of the business. -----------------------------------------------------------------------Broadly speaking Redress is engaged by several types of clients: finance directors who want us to fund cases that would otherwise constitute a drain on the company’s cash flow; insolvency practioners who are looking to monetize what they perceive as good claims of insolvent companies; individuals who either cannot afford the cost of litigation or are able to fund their case but are looking to us to do so in order to hedge their exposure and deploy their cash to another end.
professional and institutionalised funders with a verifiable track record amounts to less than £300 million whilst demand is certainly in the tens of £ billions and will continue to outstrip supply for many years to come. The very few professional funders are able to demonstrate that if managed properly, litigation funding produces above average returns with limited downside which is not correlated to macro-economic factors.
As recognized and respected funders, we are usually able to secure After the Event insurance for the cases we invest in. This type of cover has several important effects: it mitigates the funder’s risk since the insurer will pay for the defendant’s cost should the case be lost; it sends a powerful message to the defendant since they will realize that “another pair of eyes” has looked at the case and has decided to invest in its outcome. For several years now, there has been a marked increase in the median litigation spend. In the UK alone legal costs per case have risen from £300,000 in 2009 to £500,000 in 2011. This means that companies now look at alternative ways of financing and hedging against litigation costs (see 2011 Litigation Trend Survey conducted by Fulbright and Jaworski with up to 400 corporate counsel in the US and Europe).
Company: Eversheds LLP Name: Jonathon Crook Email: JonathonCrook@Eversheds.com Web: www.eversheds.com Telephone: 0845 497 8172
The trend is accentuated by a number of bills to be enacted into law in England which will restrict the recoverability of costs from the other side in litigation and will also reduce access to funding from the government. International arbitration has recorded a 23% year on year increase in 2011 in the UK. Preferred seats for arbitration remain New York and London but popular venues also include Geneva, Paris and Stockholm. Companies based in civil law countries such as the Netherlands or France will continue to look for third party funding of their litigation and, in particular, their international arbitrations. The market is also characterised by a huge gap between supply and demand. In Europe, available funding from
Company: Redress Solutions LLP Name: Marius Nasta Email: mnasta@redresssolutions.co.uk Web: www.redresssolutions.co.uk Address: 62 Grosvenor street, London W1K 3JF Telephone: +44(0) 2074994301
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Growth of Litigation Funding -----------------------------------------------------------------------Nick Rowles-Davies is a Consultant at Vannin Capital. Admitted as a Solicitor in England and Wales, and in the British Virgin Islands, Nick is an accredited mediator and member of the Chartered Institute of Arbitrators. -----------------------------------------------------------------------Vannin Capital is a flexible and innovative litigation funder, taking on cases subject to the jurisdiction of the Courts of England & Wales, the EU, USA, and all of the Caribbean jurisdictions. Our investments can be agreed at speed without the need to raise individual funds or seek approval from a hierarchy of investment committees and we can often reach a decision in principle in as little as five days, providing the necessary documentation is available.
of Ely Place Chambers. We think the key to being a funder is having real money to invest and good risk assessment skills. Additionally you need exposure across a portfolio of cases as it is impossible to win every case. Litigation is not a science.
Vannin enjoys significant backing from leading private equity house, Bramden Investments and announced earlier this year that it was We can be less rigid in our investment criteria because we are increasing its immediately not a fund. available facility to the market from £25m to The Vannin team is £100m. This makes us unique in the industry in that probably the largest private it mixes business leaders with funder of litigation in the UK. eminent legal professionals so can relate to the needs of Bramden Investments originally allocated four years of funding these clients and lawyers. at £25m per year to Vannin. However, due to the volume of The team includes solicitor and barrister William Evans, a one-time partner at Irwin Mitchell and DLA who is now at Ely Place Chambers and deputy High Court Judge Nick Stewart QC
Since our launch in 2011, we have already committed in excess of our original year one allocation of £25m. The revised fourfold capital injection will see Vannin expand in the US, where it has already signed some high-profile cases. As well as high volumes of quality litigation in the UK and US, we are also seeing a good number of international arbitration cases. Our initial remit and capacity targets have expanded many fold since inception, with our original UK focus now being completely global. We’re serious about the litigation funding market and with full access to significant funding we will continue to make substantial investments during 2012 and beyond. Vannin Capital is also a funder member of the Association of Litigation Funders of England & Wales and complies with the Association’s Code of Conduct.
quality business we are receiving, this has now been increased to an overall facility of £100m to be drawn down when required and will be reviewed again, upwardly, within 12 months.
Company: Vannin Capital Name: Nick Rowles-Davies Email: info@litigationfunding.com Web: www.litigationfunding.com Address: Vannin Capital, 2nd Floor Capital House, Circular Rd, Douglas. Isle Of Man IM1 1AG Telephone: +44(0)1624 615111
Juridica is a lawyer-owned financial services company operated in an investment banking tradition and focused exclusively on capital and finance for corporations, law firms, lawyers, and claim-holders worldwide. Juridica arranges capital and provides innovative claim risk transfer and mitigation strategies and financial products to lawyers, law firms and businesses through its management of Juridica Investments Limited, a London Stock Exchange/AIM-listed claims investment fund. Juridica also partners and co-invests with other leading financial institutions and insurers in London and New York. Juridica adds more than financial value to cases, firms and legal matters through claim finance and monetization: it adds economic value through its strategies. Proprietary systems and software, and unique case evaluation systems, make Juridica a leader in law market finance. Juridica’s claims risk analysis and valuation systems allow it expertly to design financial arrangements that better align the interests of professionals and their clients in claim prosecution, management and monetization. Through over fifty years’ combined experience in finance and law product innovations, Juridica’s principals have developed an extensive, world-wide network of leading law, legal ethics, finance and consulting experts and scholars. Juridica calls on this network to assist in case and risk analysis, financial modeling and financial product design.
info@juridicacapital.com or +1 866 443 1080
www.juridica.co.uk ACQUISITION INTERNATIONAL
August 2012 /
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SECTOR SPOTLIGHT:
Dispute Resolution in the Mining Industry
DISPUTE RESOLUTION — in the Mining Industry -----------------------------------------------------------------------Mohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS). He graduated from the Faculty of Law of the University of Indonesia and holds a PhD in Shipping Law from the University of Hamburg. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? LGS has obtained Lloyd’s Register Quality Assurance certifications of ISO 9001:2008 for Quality Management systems and ISO 14001:2004 for Environmental Management systems to ensure that all aspects of the firm’s operations and the quality of services are on par with the most well managed companies and organizations in the world. WHY IS THE MINING INDUSTRY EVER-FLUCTUATING AND EVOLVING? IN WHAT WAYS DOES THIS SECTOR PRESENT OPPORTUNITIES AND FINANCIAL CHALLENGES TO THOSE WORKING WITHIN THE INDUSTRY?
The natural resource sector in general, and the mining sector in particular, is a popular target of populist legislative policies. As such, and combined with the effects of varying world demand, companies in the sector often come under pressure as the surrounding conditions undergo at times dramatic change. HOW HAS AN INCREASINGLY REGULATED BUSINESS ENVIRONMENT AFFECTED THE TYPE AND VOLUME OF WORK YOU CONDUCT ON BEHALF OF YOUR CLIENTS? EIncreased regulatory scrutiny is emerging as an issue of increasing importance in Indonesia. A number of government agencies have been particularly active in this sense, especially those relating to environmental compliance and forestry, and increasingly so in relation to corruption issues. WHAT ARE THE KEY CHALLENGES WHEN RESOLVING MINING DISPUTES AND HOW CAN THEY BE AVOIDED? Foreign plaintiffs often have a perception that they lose cases in Indonesia due to inappropriate conduct by the courts, while, in fact, the reasons are usually more closely linked to a lack of understanding of the Indonesian legal system and insufficient documentary preparation. As such, it is increasingly important for foreign plaintiffs to understand the Indonesian dispute resolution process rather than attempting to import western legal concepts that are
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often not recognized by the Indonesian legal system. WHY ARE SO MANY DISPUTES SIMPLY UNAVOIDABLE WITHIN THE MINING MARKET? Due to the differences of legal systems and legal realities, foreign clients need to have a close and intense working relationship with their Indonesian counsel to better understand any legal impact and options available under Indonesian law (which might not be similar to the impact and options in their own jurisdictions in the same situation), so that results and options can be realistically analysed and also commercially “translated”. -----------------------------------------------------------------------Nicholas Watts is a senior associate based in Singapore and leads Freehills’ dispute resolution practice in Southeast Asia (Region). -----------------------------------------------------------------------Our disputes team works closely with clients to develop strategic solutions to manage and resolve existing and potential disputes that may arise in the Region. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE?
a. assessing the appropriate dispute resolution process and outcome for our clients having regard the potential issues arising in the relevant jurisdiction where the contract will be performed. For instance, we identify whether the local courts are appropriate to resolve the dispute or whether international arbitration should be used, particularly given the greater enforceability of international arbitration awards. b. defining the scope of any potential mining dispute that may arise. This is because disputes and legal proceedings in the mining industry may not be confined to the private parties but may also involve the relevant regulators and other interested parties (such as competing concession holders in the case of an overlapping concession). HOW HAS AN INCREASINGLY REGULATED BUSINESS ENVIRONMENT AFFECTED THE TYPE AND VOLUME OF WORK YOU CONDUCT ON BEHALF OF YOUR CLIENTS? The corollary of increased regulation has been increased work from clients which are concerned to ensure that their business practices comply with relevant regulations. An example is the recent UK anti-bribery legislation. Typically, this sort of work is advisory.
Being “on the ground” in the Region provides our team with a deep understanding of the potential risks associated with transactions and projects and we frequently advise clients on risk mitigation and/or dispute avoidance strategies either during the transaction phase or during execution of their contracts/projects. WHO DO YOU TYPICALLY ACT FOR? DESCRIBE A TYPICAL CLIENT? Typically, we act for “blue chip” international energy companies that have invested in an emerging market, such as Indonesia. However, given our breadth and depth of experience, we are frequently asked to assist government owned companies in those jurisdictions in exploring investment opportunities in other jurisdictions within the Region and beyond and to than assist those clients when disputes arise. WHY IS THE MINING INDUSTRY EVER-FLUCTUATING AND EVOLVING? IN WHAT WAYS DOES THIS SECTOR PRESENT OPPORTUNITIES AND FINANCIAL CHALLENGES TO THOSE WORKING WITHIN THE INDUSTRY? There are several key factors that keep the mining industry in a constant state of flux. These include economic factors surrounding commodity prices and demand.
Company: Lubis Ganie Surowidjojo Name: Dr. Mohamed Idwan (‘Kiki’) Ganie Email: ganie@lgslaw.co.id Web: www.lgsonline.com Address: Menara Imperium 30th Floor Jl. H. R. Rasuna Said Kav. 1 Kuningan Jakarta 12980, Indonesia Telephone: +62 21 831-5005, 831-5025
An example of where economic factors come into play is where the price of commodities drop and parties have entered into long term supply agreements. Typically, the selling party will seek to renegotiate the terms and price of supply even in circumstances where express terms providing for a price escalation are absent. HOW ARE YOU ABLE TO ASSIST IN RESOLVING CONFLICTS AND DISPUTES WITHIN THE MINING INDUSTRY? We assist clients before a dispute arises by identifying appropriate mechanisms in their contracts to ensure that the potential risk implications of a dispute are minimised. This involves working with our clients in:
Company: Freehills Name: Nicholas Watts Email: nicholas.watts@freehills.com Web: www.freehills.com Address: 10 Collyer Quay, #15-08 Ocean Financial Centre, Singapore 049315 Telephone: +65 62369970
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
White Collar Crime Report
WHITE COLLAR CRIME — Report 23 Essex Street in London is a busy set of barristers Chambers specialising in crime and regulatory work. long been regarded as a centre of excellence especially in the field of ‘white-collar’ crime. Jonathan Lennon is a barrister at 23 Essex Street specialising in fraud, civil recovery and all areas of Proceeds of Crime.
Someone remind me I once said, ‘Greed is good’. Now it seems it’s legal. Gordon Gekko (Michael Douglas) in ‘Wall Street: Money Never Sleeps’.
There has long been a perception that the Gordon Gekko types have been getting away with it for years. Not anymore. There is an increased appetite for prosecuting and convicting those accused of ‘white collar crime’. So called white collar crime encompasses a wide variety of evils from insider
dealing, fraud, money laundering, tax-evasion, corporate offences, bribery and so on. As well as criminal prosecutions there is an increasing tendency to resolve, what are usually very large complex cases in the civil courts. 23 Essex Street has been involved in a numerous civil recovery cases, all the way to the Supreme Court, as well as VAT Tribunal work and other civil based procedures. Commercial fraud is also clearly an area that appears to be on the rise. It is true to say that, generally, criminal lawyers are suffering under the economic downturn – there is an unprecedented squeeze on fees from public sector work which is where the criminal Bar largely operates. However, 23 Essex Street seems to be bucking that trend. The set has got busier and busier and has recently increased in size to become one of the largest sets in the country. It has done so by careful expansion, retaining its core reputation in white collar crime. White collar crime is on the up – and whether prosecuting or defending specialist skills and knowledge is, more than
Crime | Fraud | regulation
Finely tuned legal expertise
AN ENoRMouS WEALTH oF TALENT AT EvERy LEvEL WiTH CLERKiNG To MATCH. LEGAL 500
23 Essex Street London WC2R 3AA T 0207 413 0353 E clerks@23es.com www.23es.com
82 King Street Manchester M2 4WQ T 0161 870 9969
City Gate East Toll House Hill Nottingham NG1 5FS T 0115 935 2233
It has
in any other area, required to properly advance such cases. For example; handling disclosure challenges in a pension’s fraud case, or turning FSA Regulations into a jury friendly tool, are skills that are only found in lawyers with that depth and background experience necessary to properly take on such cases.
Company: 23 Essex Street Name: Jonathan Lennon Email: clerks@23es.com Web: www.23es.com
SECTOR SPOTLIGHT:
The Asset Based Finance Industry
THE ASSET-BASED — Finance Industry Shadul represents Indian banks, international banks and overseas lenders/consortium in major bilateral and syndicated facilities of all types including acquisition/ asset/ project finance. Over the last three years, he has handled over 100 ship finance transactions and acted for various international banks advancing finance to Indian companies. We are a full service law firm established since 1895, specializing in corporate and all areas of commercial laws. The firm has a sound understanding of commercial and market realities, providing legal solutions of real commercial value.The firm is ranked among the leading law firms in India by various publications. To overcome challenges, we have, time and again, updated ourselves with the new circulars/ regulations/ guidelines issued by the Indian regulators to meet the challenging industry demand. Our turnaround time with regard to legal assignments is quick which give us edge over our competitors.
Company: Fenech & Fenech Advocates Name: Dr. Joseph Ghio Email: joseph.ghio@fenlex.com Web: www.fenechlaw.com Address: 198, Old Bakery Street, Valletta VLT 1455, Malta Telephone: +356 21 241 232 -----------------------------------------------------------------------Dr. Joseph Ghio is a Partner at Fenech & Fenech Advocate, Malta. -----------------------------------------------------------------------Malta’s international reputation in financial services, attractive fiscal regime, wide network of double-tax treaties with more than 60 countries, sophisticated legal framework and securitisation opportunities make the EU member an appealing jurisdiction for cross-border asset finance structures. The island’s legal system is a hybrid between Continental and Common Law principles offering a tax-efficient jurisdiction for special purpose borrowers while at the same time providing lenders with a robust security environment. Corporate profits in Malta are taxed at 35% but upon a distribution of taxed profits by way of a dividend shareholders can claim a 6/7ths refund of the Malta tax paid thereby reducing Maltese tax leakage to around 5%. Through a participating holding exemption Maltese holding companies can opt not to be taxed on profits derived from underlying equity or partnership holdings. Established in 1891, Fenech & Fenech Advocates is the oldest and one of the leading law firms in Malta providing valuedriven, tailored legal services across all practice areas. The firm has a strong asset finance practice advising lenders
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/ August 2012
and borrowers in cross-border deals typically involving lending by and security from Maltese special purpose vehicles and operating financial services outfits in capital raising, restructuring and M&A contexts. Drawing on the multidisciplinary expertise of the firm, the commercial, corporate, tax and security concerns of international lending syndicates and borrowers attracted to Malta’s offerings are addressed through seamless legal solutions. Having a largely international practice, Fenech & Fenech Advocates is rooted in tradition but committed to innovation and is a recognised leader in a number of other areas including Shipping and Maritime Law, Tax, Financial Services, ICT, Banking and Aviation. The firm’s services are complemented and supported by the Fenlex corporate services group providing company formation and administration services, back-office and corporate administration, trustee services and management consultancy, amongst others.
The future looks bright for our firm with several new instructions for banking related transactions such as for Project/Asset finance being received. With regard to the market trend and pursuant to the RBI reports, inflation remains the dominant and global concern. Expectations are food, energy and commodity prices will rise during 2012. As long as the company’s return on invested capital is higher than the cost of borrowing, it is advantageous for the company to borrow from the financial institutions. Leading Indian companies as well as small and medium size companies borrow moneys through external commercial borrowing route to finance its assets. The advantage to the Indian companies with regard to external commercial borrowing is that the cost of borrowing is cheaper than the local financing in India. As part of our banking practice, we advise clients on asset financing and ship financing; project financing; securitisation advice, structuring of security, drafting security documents and registering the same; litigation and arbitration related services in the banking sphere; and advice on foreign exchange laws, regulations and policies which relate to the banking sector. While subprime mortgage lending took a big hit in 2008, it is observed that asset based lending for businesses are making a comeback. Financial institutions in recent past have refused to issue loans to companies having weak debt to equity ratio. However, asset based lending has stepped in and is gaining momentum.
Company: Mulla & Mulla & Craigie Blunt & Caroe Name: Mr. Shardul Thacker Email: shardul.thacker@mullaandmulla.com Address: Mulla House, 51, Mahatma Gandhi Road, Flora Fountain, Mumbai 400 001, INDIA Telephone: (+91 22) 2262 3191
The complexities in banking and financial industry are many. Almost every week financial regulators (i.e. RBI, SEBI, IRDA etc.) in India issue new regulatory circulars that needs to be complied. The previous financial year saw an uneven pace of growth across regions/industry and uncertainty about the durability of recovery in economies persisted.
-----------------------------------------------------------------------Shardul Thacker is a senior partner in Mulla & Mulla and Craigie Blunt & Caroe. He has an extensive commercial and banking legal practice. ------------------------------------------------------------------------
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
The Asset Based Finance Industry
A central element of receivables-based financing is to ensure a “true sale”, i.e. a valid assignment from the originator to the receivables purchaser to enable the receivables purchaser to enforce the receivables directly against the debtor. Under German law, the true sale analysis is a substance over form analysis and requires the transfer of the debtors’ insolvency risk to the receivables purchaser.
Company: Shearman & Sterling LLP Name: Dr. Esther Jansen Email: ejansen@shearman.com Web: www.shearman.com Address: Gervinusstraße 17 60322 Frankfurt am Main Telephone: +49.69.9711.1621
As a consequence, this limits the possibility of re-assignments and credit enhancements which can be provided by the originator (such as deferred purchase price elements).
-----------------------------------------------------------------------Dr. Esther Jansen is a finance partner of Shearman and Sterling, based in Germany. -----------------------------------------------------------------------Asset based lending (ABL) originally emerged as a typical US structure to provide financing on the basis of assets, such as eligible accounts receivables and inventory. In Germany, receivables based financing traditionally took the form of factoring or securitisation transactions. However lending by credit institutions against a receivables base including German law receivables is clearly increasing. A common structural element of cross border ABL is the use of a special purpose vehicle, which purchases the receivables from originators in different jurisdictions and then borrows under an ABL credit line. The borrowing limit is determined by reference to a fluctuating borrowing base and a defined credit maximum. It is therefore key to structure a borrowing base with the right amount of eligible receivables. Main eligibility criteria comprise the jurisdiction of the debtor of the receivables, the receivables’ maturity and their assignability.
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be involved. In addition, the combined bank/bond financings that we have seen more often over the last couple of years increasingly provide opportunities to add financing based on receivables, which may even replace a revolving bank facility. As one of the leading law firms in international bank/bond financings, we are very well positioned to fit ABL transactions into very complex leveraged loan and/or high yield bond structures. With our global financing teams we provide the depth and breadth of knowledge to offer integrated solutions and effectively use the space for ABL.
Shearman & Sterling advises its clients in all forms of receivables financing, including German factoring agreements, ABS/ABCP structures and multinational ABL transactions. Esther Jansen, Germany based finance partner of Shearman & Sterling, points out: It is important for the client to understand the differences behind these structures to ensure that it gets the product that best fits its expectations not only in terms of pricing and costs, but also when it comes to complexity in handling and availability of funds. What distinguishes us is that we are not only able to advise on traditional German factoring arrangements and asset based commercial paper programs, but can draw up client tailored multi-national ABL solutions relying on our experience with both the structural and the specific local law issues in the US, the UK, Germany, France, Italy and other jurisdictions that may
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ACQUISITION INTERNATIONAL
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August 2012 /
31
SECTOR SPOTLIGHT:
Asset-Based Lending in the US and Beyond
ASSET-BASED LENDING — in the US and Beyond Since the late 1960’s, with the development of the commercial laws adopted by the various states of the United States in the form of the Uniform Commercial Code, “comprehensive” asset-based lending has evolved within the United States so as to become an established debt product commonly used by corporates of all sizes and credit quality, from small and medium size enterprises with a few million dollars of revenue to billions of dollars of revenue, and whether with a BB rating from the rating agencies or entering bankruptcy and everywhere in between. As reflected in the range of markets that it serves, the hallmark of asset-based lending is its flexibility. While loans are necessarily closely correlated to asset values, rather than other dimensions of corporate performance, terms for an assetbased facility have adapted so that the degree of information and monitoring runs on a spectrum tied to the liquidity of a company generated by such asset values, so that as such liquidity, commonly referred to as “excess availability”, based on the difference between loans outstanding and the borrowing base generated from the eligible assets of a company, increases, less reporting, fewer field examinations and appraisals are required and a company may be given greater flexibility to engage in certain types of transactions. Clearly, this flexibility has been integral to the significance of the role that asset-based credit facilities play in the capital structure of US companies. These attributes contributed to record issuances of asset-based facilities in 2011 in the US.
One structure for a smaller facility where assets are only in two or perhaps three jurisdictions with laws (including the insolvency laws) that are conducive to the elements of assetbased lending may be structured with revolving loans based on the separate borrowing base of each company and with cross-corporate guarantees to the extent such guarantees do not raise either tax concerns or concerns about compliance with corporate governance law. At the other end of the spectrum, for a larger company where there are businesses in four or more countries, it may make sense to borrow some of the aspects of a securitization facility. So, in such a facility, a bankruptcy-remote special purpose vehicle (SPV) would be established in a creditorfriendly jurisdiction. The sole function of the SPV would be to purchase the receivables from the operating companies located in the various countries on a “true sale” basis. However, unlike in a securitization, the funds used by the special purpose vehicle to pay the purchase price to the operating company originators would come from the proceeds of loans pursuant to an asset-based facility with the purchased receivables owned by the SPV as the borrowing base. In other cases, a receivables purchase facility or a more traditional factoring arrangement for a company in one country may be folded in alongside an asset-based facility in another country all as part of a single credit facility.
Source: Thomson Reuters LPC Asset-based lending is often a critical complement to other sources of capital for companies, being paired with high-yield bonds or term loans, or even mezzanine and subordinated debt to provide the capitalization for a business enterprise. In 2011 asset-based lending as a percentage of total leverage reached historical highs. Unlike in some other markets, the liquidity in the US asset-based lending market is robust, leading to intense competition among asset-based lenders in the US and often more borrower-favorable terms, including in particular as to the pricing of such facilities and leading to a drive to find new markets and products.
Sometimes, the way a company operates will be critical to making a asset-based facility viable. Corporate groups that use, or are prepared to use, “tolling” arrangements so that manufacturing affiliates are engaged by the corporate entity in another jurisdiction that retains ownership of the inventory may create a path for inventory to be included in the facility when it might not otherwise be possible in the applicable jurisdiction. As financial institutions and legal regimes throughout the world continue to evolve, asset-based lending is clearly a product poised to provide financing solutions for global companies.
As asset-based lending has become more competitive in the US market, there is cleary a push to find growth by expanding the use of the product throughout the world. Major US and UK financial institutions are moving to expand their global reach in order to provide asset-based lending to the businesses of their customers, which themselves have long ago expanded beyond solely domestic operations. Although UK institutions may currently face some institutional challenges in such expansion, the attendance at the 6th International Lending Conference held in London this past April sponsored by the Commercial Finance Association, the Asset Based Finance Association and the International Factoring Association from all of the major US and UK banks demonstrates that asset-based lending on the international front is perceived as an area of growth. The flexibility that is the hallmark of asset-based lending has enabled it to adapt in many circumstances to the requirements of local law regimes so as to provide multi-jurisdictional asset-based credit facilities. It has become particularly common to see asset-based facilities involving the US, Canada, the UK, the Netherlands and Germany, although other countries may be involved from time to time. 2011 and early 2012 saw several significant asset-based transactions involving Australia, for example. While such multi-jurisdictional facilities pose a number of legal and logistical challenges and require lenders to look at the total circumstances of a multi-national corporate enterprise, such facilities do get done. Different structures for such facilities have developed to address some of the challenges posed by the disparate jurisprudential traditions that exist throughout the world. Often such structures may involve a combination of different strategies. Clearly, one size does not fit all, and the bespoke cross-border facility using a combination of features is the rule rather than the exception.
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Company: Otterbourg, Steindler, Houston & Rosen, P.C. Name: David W. Morse Email: DMorse@oshr.com Web: www.oshr.com Address: 230 Park Avenue, New York, NY 10169 Telephone: (212) 905-3641
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Spotlight — Afik Turgeman
SPOTLIGHT — Afik Turgeman Afik Turgeman is an Israeli law firm, that was recently chosen as a member of the esteemed organization, the EuroAmerican Lawyers Group (www.EALG.com), an association of independent law firms founded in 1985 with over 30 members worldwide.
Doron Afik, senior partner of Afik Turgeman and head of the M&A department, comments. The world-wide financial crisis creates many Mergers & Acquisition opportunities, but also a need for more sophisticated solutions for legal escorting of such transactions. In today’s market, where businesses are trying to minimize their costs, but still would like to consummate the market opportunities, firms worldwide are required to cut costs (sometimes below their profitability level) and still loose clients because of the cost of transaction. We interview attorney Doron Afik of the Israeli law firm of “Afik Turgeman” (winner of the AI M&A firm of the year in both 2011 and 2012), who have developed an “out-of-thebox” solution for this new market need – Afik Turgeman supplies M&A legal management services for transactions worldwide, using local offices for the fine-tuning of the transaction and for the local due-diligence work. WHY WOULD A UNITED KINGDOM CLIENT PREFER TO WORK WITH YOUR FIRM AND NOT USE ITS UK ADVISOR? We are approached by both clients and law firms worldwide. One of the disadvantages of the local firms (not necessarily in the UK) is that they are adapt to the local laws and sometimes know their client and their way of thinking too well – they cannot really think “out-of-the-box” for their clients. Our firm’s expertise is international M&A and we have worked world-wide – we are not tied to the “old” solutions already given to the client, but are able to sometimes bring “fresh” ideas, which may be vital in international transactions, especially in today’s volatile market.
The risk does not exist for two reasons. First, the client will always need its local law firm. The client will need to continue working in its local market, and we cannot compete in that market. If the client seeks a new firm, the chances of switching from its local firm are high. If its local firm is in fact making the referral, the chances are that it will be the one used by us for the local aspects of the transaction and (even if it does not lead the transaction) it will do some of the work and retain the client for later work.
a deal worth over 30 million Euros. Our firm managed the transaction, which involved 11 different legislative systems. For over a month I was travelling between Stuttgart, Budapest, Bucharest, Luxembourg and Amsterdam. While local lawyers were involved, the customer had one lawyer who prepared the main frame and conducted the main negotiations. Without using this method, the transaction would likely have taken much longer, cost at least twice as much, and not all issues would have necessarily been resolved.
IF YOU CANNOT GIVE LOCAL ADVISE TO THE CLIENT LATER, ISN’T IT BETTER TO USE ITS LOCAL ADVISOR WHO CAN CONTINUE ESCORTING IT IN THE FUTURE?
IS THE METHOD ALSO AFFECTIVE WHEN NOT SO MANY JURISDICTIONS ARE INVOLVED?
Not necessarily. In fact, in some cases we are approached specifically because the client or the law firm would like the local firm not to be at the front in the transaction. The client and its local firm will need to work with the counterparty in the future and sometimes it is even better to use an external expert to do the “dirty work” of negotiation, thus preventing any “bad-blood” between the parties in future joint work. AS AN ISRAELI FIRM, HOW ARE YOU ABLE TO ADVISE IN TRANSACTIONS THAT ARE NOT SUBJECT TO ISRAELI LAW? The language of M&A is not limited to a specific law. We will always retain local advise in each of the jurisdiction involved, for the fine-tuning and the local law related issues. It will be either the local law firm with which the client works, or any other firm that we can recommend to the client. The fact that we are members of the Euro-American Lawyers Group enables us to get local advice by excellent counsels in most jurisdictions.
Price is also a factor. Due to the currency rates, our prices, as an Israeli firm, will be considerably lower compared with any UK, European or American law firm of our standard.
CAN YOU GIVE US AN EXAMPLE OF A TRANSACTION OF THE TYPE YOU MENTIONED ABOVE?
ISN’T IT A RISK FOR A LAW FIRM TO “SEND” A CLIENT YOU WAY? DOESN’T THE LAW FIRM RISK LOSING THE CLIENT?
A car-industry conglomerate active in several countries in Eastern Europe and held by Western European companies sold an entire branch of its activity to a German company in
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/ August 2012
Yes. For example, a French company hired our services for a complex transaction for the purchase of an American postchapter-eleven company and its German subsidiary. We provided the main-frame of the work and used an American colleague and a German colleague for the local issues, each of which supplied a limited amount of work, despite the complexity of the transaction. The client received a very swift and smooth transaction at a price which was less than half of what it would otherwise have paid.
Company: Afik Turgeman Name: Doron Afik Email: doron@at-law.co.il Web: www.at-law.co.il Address: Afik Turgeman, 3 Daniel Frisch St., 25th Floor, Tel Aviv 64731, Israel Telephone: +972-3-6090609
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Eastern European Review
EASTERN EUROPEAN — Review -----------------------------------------------------------------------Aura Giurcaneanu is Partner, Head of Audit and Assurance, KPMG in Romania. -----------------------------------------------------------------------We are a member firm within the global KPMG network, KPMG in Romania opened its first office in 1994 and now employs more than 600 people, including both local and expatriate staff, in Bucharest, Timisoara, Cluj, Iasi and Constanta. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? KPMG in Romania is a member firm within the global KPMG network, which has offices in 152 countries and nearly 145,000 staff worldwide. So we combine detailed local knowledge with the international skills and experience we can draw on from other KPMG firms. KPMG was also the first network of professional services firms to align its services along industry lines and focuses on delivering highquality, coordinated services to organisations in key lines of business. Companies in different industries can have very different needs - that is why KPMG member firms place an emphasis on industry focus. We also have specialised staff with many different skills and backgrounds, and we are flexible – we adapt our services and develop new ones to meet the needs of clients as market conditions change. For example, in the current economic context, business leaders increasingly need and can benefit from assurance services which go beyond the traditional financial statement audit. Shareholders, boards of directors, management teams, and creditors have learned that more assurance is needed to manage their risks and uncertainty, therefore we focus on the particular needs of users to provide tailored services using the right mix of skills from Assurance, Tax and Advisory. WHAT FACTORS CONTRIBUTED TO EASTERN EUROPE’S ECONOMY GROWING BY A HEALTHY 4.6% IN 2011? These countries generally have competitive labour markets and are still emerging economies, with a lot of potential for growth. Romanian growth in 2011 was a modest 1.5% according to the CIA Factbook. HOW WELL IS YOUR COUNTRY PREPARING FOR THIS YEAR’S PREDICTED SLOWER GROWTH ACROSS EASTERN EUROPE OF 3.1 %? WHICH INCENTIVES AND POLICIES HAVE HELPED BOOST THE REGION’S GLOBAL COMPETITIVENESS OVER THE LAST FEW YEARS? Most countries in the region have introduced flat rates for corporate and personal income tax in the past decade, including Romania. This has boosted competitiveness and made it an attractive investment destination. EU funding has been a boost, although the take-up rate has been better in some countries than in others. In Romania, the take-up rate of EU funding is quite low, but nevertheless the continued availability of such financing presents an advantage to investors. WHAT ARE THE CHANCES THAT YOUR JURISDICTION RISKS A “GREEK SCENARIO”?
ACQUISITION INTERNATIONAL
Romania is not in the Eurozone, and for the moment it is not facing a sovereign debt crisis, having made good progress with reforms agreed with the EU and IMF. The Romanian banking sector has been relatively immune from the Eurozone’s problems as Romanian banks do not have high exposure to sovereign debt in the countries facing problems in the Eurozone. WHERE DO YOU SEE YOUR COMPANY AND YOUR JURISDICTION’S ECONOMY IN THREE YEARS’ TIME? KPMG has plans for growth, and we continually adapt our services to meet changed market needs. For example, since the start of the recession, we have developed our Restructuring services, to help companies focus on their core business. We have found that many clients have been attracted to KPMG since the start of the global downturn, because we offer quality. In terms of the Romanian economy, there is much potential for development, and a stable legislative and political environment, as well the prospect of European funding will have a significant positive impact. -----------------------------------------------------------------------Milan Radovic, CEO, Nova Banka Banja Luka, Bosnia and Herzegovina. -----------------------------------------------------------------------In the past years the stability of the European Union has been increasingly called into question. Sovereign yields in southern Europe have risen sharply amid further erosion of the investors’ base. The whole European economy is faced with the lack of confidence, not just in the banking system, but in the sustainability of public finances, growth and political process that governs the crisis response as well. Regarding that, by the end of June 2012, the European Council affirmed the strong commitment to do what is necessary to ensure the financial stability of the euro area, particularly by using the EFSF/ESM funds in efficient manner in order to stabilise markets, respecting each Member States commitments. Bosnia and Herzegovina is faced with the indirect consequences in terms of reduced access to international money markets and more stringent conditions for borrowing. The changed conditions of borrowing will affect the real sector, which will result in a reduced growth forecast, which is evident in job cuts and reduced investments.
The annual growth of the monetary aggregate M2 accelerated further from 4.9% in January to 5.1% in May. Annual inflation fell to 1.9% in May, down from 2.4% in February, bringing the 12-month moving average inflation rate to 3.1%. Market short-term interest rates for loans to the corporate sector remained broadly unchanged reaching 7.1% in May, while the interest rates for households fell marginally from 10.1% in January to 10% in May. On the other hand, interest rates for the corporate sector deposits have decreased from 2.8% to 2.6%, while interest rates for household sector deposits remained broadly unchanged over the last 4 months, reaching 3% in May. Annual credit growth moderated further and reached 5% in May. Credits to both corporate sector and households contributed to this evolution. Credits to the private enterprises rose only marginally by 0.5% year-on-year in May, as compared to 1.8% in January, while credits to households moderated to 6% year-on-year in May, from 6.9% in January. In the meantime, deposit growth also slowed down, reaching 2.9% year-on-year in May. Deposits from the corporate sector rose by 0.2%, compared to 0.9% in January. The corporate identity of the Nova Banka is stable, but only has been partially built, and in the next four years it will be undergoing through the significant challenges that need to be used for building more positive image and reputation, and in order to consolidate the brand, as well.
Company: KPMG (Romania) Name: Aura Giurcaneanu Email: agiurcaneanu@kpmg.com Web: www.kpmg.ro Address: DN1, Bucharest-Ploiesti Road no. 69-71 Telephone: +40372377733
After a sharp contraction in the first two months of 2012, industrial production continued to fall, but the output decline moderate somewhat. Manufacturing industry experienced 8% year on year output decline in the first five months of the year. Judging from available indicators, domestic demand remains on a downward trend. Labour market conditions remained difficult. The level of registered unemployment reached 43.9% in April after peaking at 44.2% in February. Despite this slight improvement – largely due to seasonal factors – the unemployment rate was higher by 0.6 percentage point yearon-year.
Company: Nova Banka JSC Banja Luka Name: Milan Radovic, CEO Email: office@novabanka.com Web: www.novabanka.com Address: Kralja Alfonsa XIII 37/A, Banja Luka, Bosnia and Herzegovina Telephone: + 387 51 33 33 22
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Nasri H. Barakat Arbitrator, Umpire and mediator l II&RCS, Inc.
In 1994, Nasri H. Barakat established his practice as a full-time commercial, insurance and reinsurance arbitrator and umpire. As president of II&RCS, Inc, International Consultants, he continues to provide arbitration and litigation support for complex international disputes, expert testimony, run-off and liquidation services to the insurance and reinsurance industry.
Mr. Barakat has more than 40 years of insurance and reinsurance experience in the U.S., Europe and the Middle East. He has participated as arbitrator, umpire and mediator in a large number of arbitrations involving commercial, insurance and reinsurance disputes. Mr. Barakat is an ARIAS-US certified arbitrator and umpire. He is also listed on the “Roster of Neutrals” of the American Arbitration Association’s commercial domestic (AAA) and International (ICDR) panels, the USCIB, AIRROC and CPR panels. His extensive exposure to international commercial business includes major industry privatization of several Middle Eastern countries applying for admittance in the World Trade Organization (WTO).
His keen knowledge of the Islamic Sharia Law and abilities to fluently read, speak and write French, Arabic and English put him in a unique position to serve on certain international panels. Prior to founding II&RCS, Inc., Mr. Barakat served as president of National American Insurance Company, vice-president of Chandler Insurance Company Limited (an Offshore Reinsurance Company) and vice-president of Old American Insurance Services, Inc. of Dallas, Texas. He also held executive and other positions with Republic Insurance Company of Dallas, Texas and ITT Hartford.
Mr. Barakat is a non-practicing attorney.
SERVICES Arbitrations Mediations Litigation Support & Management Reinsurance Inspections Insurance Inspections Expert Testimony Due Diligence Collections Liquidation Management Run-off Management
www.nhbarakat.com
CONTACT
353 East 72nd St., Apt. 4D New York, NY 10021 Tel: (646) 707-0157 Fax: (646) 224-8404 Cell: (214) 912-9848 Email: iircsinc@ipa.net nasrib@yahoo.com or nasrib@nhbarakat.com
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ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Forming Companies and Doing Business
FORMING COMPANIES — Forming Companies and Doing Business
SERBIA
-----------------------------------------------------------------------Legal Advisory Group is a Belgrade based law firm providing wide range of legal services from the scope of corporate and business law, which includes services in the fields of M&A, private equity, commercial contracts, intellectual property law, ICT, labor and employment law, privatization, real estate, civil and business litigation, tax planning and structuring. -----------------------------------------------------------------------Despite the on-going financial and economical slowdown, Serbia records increase of interest of foreign investors. There are several reasons for this: increasing efforts of the government in attracting FDI by creating business friendly environment. Serbia has one of the lowest corporate tax rates in Europe of only 10%, with the VAT rate of 18%. There are numerous incentives for investors: grants of EUR 4.000-10.000 for each newly employed person, exemption from corporate tax for 10 years for investments above EUR 7 million in fixed assets when employing at least 100 employees, 5 years tax exemption for concessions. In addition, investors are exempted from tax when employing disabled people, people under 30 and above 45 years. The tax loss stated in the tax return can be carried forward and offset against future profits over a period of 10 years. One of the key reasons investors choose Serbia for their new business endeavors lies in the fact Serbia has very skilled and qualified workforce. Low average salary, acceptable salary burden of 62% and the Free Trade Agreement with Russia that enables companies from Serbia to export many goods to Russia duty free, make Serbia investment friendly country. Bilateral Investment Treaties signed between Serbia and 32 other countries further safeguard the protection of foreign capital. Setting up a business in Serbia is very easy in terms of necessary documentation and time. As of recently, Serbia has one-stop-shop for registration of a business. Apart from notarization of a founding act and signature specimen for legal representatives, all other procedures are to be done in the Business Registers Agency (the BRA). Any person, legal or physical, foreign or domestic, can be a business owner. Foreign companies in Serbia are guaranteed equal legal treatment as domestic companies. They are allowed to invest in any industry and freely transfer all financial and other assets including profits and dividends. Serbia recognizes several company types (limited liability company, joint stock company, partnership, limited partnership, entrepreneurship). The procedure before the BRA lasts up to five workdays and includes obtaining of tax identification number. Newest changes to the Company Law set the minimum founding capital of a LTD to only RSD 100 (less than EUR 1). In addition, the BRA website contains the most detailed information on all registered companies. The most common company type in Serbia is a limited liability company. This due to the fact that the administration of a LTD is easy, setting up quick and there can be only one owner (not such case in partnership, limited partnership). The SME sector is very large in Serbia and as such targeted
ACQUISITION INTERNATIONAL
by all commercial banks with wide array of banking products. The following period shall be very challenging for the economy in the whole Europe and will not pass Serbia. However, the announced investments by Siemens, Bosch, NCR, Cooper Standard, IKEA, Cooper Tires and recent investments by FIAT, Benetton, Yura Corporation, Panasonic give hope that Serbia will get out of the financial crises as a winner.
GREECE
-----------------------------------------------------------------------Alkistis Christofilou, LL.M. (L.S.E.) is a senior partner and lead lawyer in Rokas International Law Firm primarily focusing on financial services, insurance and corporate law. -----------------------------------------------------------------------Her practice includes licensing, regulation with emphasis on cross border financial services, data protection and e-commerce law. She advises companies on their establishment, acquisitions and reorganisation schemes, as well as on the design, licensing and operation of their products; she leads multi-jurisdictional projects covering the regions where Rokas is active through its network of legal and business consulting firms that spreads across the countries of the Central and Southeastern Europe. Rokas understands that the international perspective can be the critical advantage regarding the services offered to clients who plan to expand their business.
HOW DOES THE INCORPORATION PROCESS DIFFER WHEN DEALING WITH DIFFERENT SIZED COMPANIES? WHICH COMPANY STRUCTURES ARE IN THE GREATEST DEMAND? Since the creation of the General Commercial Registry the establishment of all types of companies is completed quite fast; up to three days may be needed. Partnerships are registered by chambers, whereas limited liability companies and societes anonymes are registered by notaries, working as one-stop-shops. For medium sized businesses, the structure in greatest demand is the limited liability company structure as the minimum capital requirement is €4.500 and the partners are not liable for company debts. Larger businesses tend to take the form of a company limited by shares. A fast-track registration and licensing procedure is available for larger businesses, even in regulated sectors of the economy. By nature as well as a result of the economic downturn, Hellenic businesses are becoming more and more extrovert; therefore formations like the societas europaea are slowly gaining in popularity, and so are cross border mergers of commercial enterprises or of regulated entities. Public administration is more apprehensive of alternative restructuring forms than expected, which facilitates the implementation of innovative corporate reforms.
Through its 12 offices in Southeastern and Central Europe and its in-depth knowledge of local cultures and legal systems, Rokas aims at serving as a critical catalyst in forwarding clients’ business efforts. The firm has often lead or participated in consortia working with the EU or the World Bank on projects enacting law and regulation in the sectors of insurance, energy, environment and telecoms, in several countries of Central and SE Europe, and in former USSR States. WHAT ARE THE LEGAL REQUIREMENTS WHEN IT COMES TO SETTING UP A COMPANY IN YOUR JURISDICTION? The legal requirements for the establishment of a company in Greece depend primarily on the kind of company to be established. Company forms range from the varieties of personal partnerships, the limited liability company and the company limited by shares (societe anonyme). Articles of association are published according to the provisions of the law and lead to the acquisition by the company of its legal personality. To commence business the company needs to be tax registered as well. An entity may have to obtain regulatory licenses or authorisations depending on the business it will operate. Thus, a bank or an insurance company is subject to the licensing and regulatory authority of the Bank of Greece, an energy company will be subject to the supervision of the Energy Regulatory Authority, etc. Cross border establishments are facilitated through harmonised EU legislation.
Company: Legal Advisory Group Web: www.legaladvisorygroup.com Address: Admirala Geprata 17/5, 11000 Belgrade Telephone: +381 (11) 268 3511
Company: Rokas (Athens) Name: Alkistis Christofilou Email: a.christofilou@rokas.com Web: www.rokas.com Address: 25 & 25A, Boukourestiou St., 106 71 Athens, Greece Telephone: (+30) 210 3616816
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SECTOR SPOTLIGHT:
Employment Law and HR Issues
EMPLOYMENT LAW — and HR Issues -----------------------------------------------------------------------Tim Capelin is a Partner in the Employment Relations team at Piper Alderman. He specializes in all areas of employment law from issues in M&A transactions, to drafting and advising upon all types of employment documents, to collective negotiations and disputes, through to litigation involving discrimination, work health and safety and postemployment restraints. -----------------------------------------------------------------------WHAT ARE SOME OF THE TYPICAL EMPLOYMENT LAW/HR ISSUES WHICH CAN ARISE IN CORPORATE TRANSACTIONS? Dealing with key employees, dealing with unions, the optimum structure for the transaction from an ER perspective, determining the lawfulness of golden parachutes, determining the appropriate content of employment offers to limit redundancy costs as well as other issues, addressing collective agreements and minimising the adverse effects of their transfer, ensuring people on leave are not forgotten and dealing with non-employee members of the business’ labour force. WHAT ARE SOME OF THE MAJOR CHALLENGES THAT CAN ARISE IN ACQUIRING & MERGING WORKFORCES? Dealing with discrepancies in: cultures; employment conditions; and levels of union involvement with the workforces. Addressing a perception amongst former employees of the acquired entity that they have been colonised. Ensuring there is a very clear vision for all within the combined entity and that vision has a compelling role for all team members. DO YOU HAVE ANY PREDICTIONS FOR EMPLOYMENT LAW OVER THE NEXT 12 MONTHS There will be no major changes in Australian employment law over the next 12 months. There will be some minor amendments to our principal piece of legislation, the Fair Work Act, following recommendations arising from a recent review. However, any substantial changes will need to await a new government. A change of federal government is likely, but will not occur until the end of 2013, which means any significant legislative changes won’t come through until 2014. -----------------------------------------------------------------------Catherine Drinnan is a partner in the Benefits, Compensation and Employment team in Latham & Watkins’ London office. The firm’s clients include global corporations, financial institutions and private equity firms. -----------------------------------------------------------------------WHAT ARE SOME OF THE TYPICAL EMPLOYMENT LAW/HR ISSUES WHICH CAN ARISE IN CORPORATE TRANSACTIONS? An important question is whether the transaction is going to be structured as a share sale or an asset sale. If the latter, and the target has operations in jurisdictions which are subject to the Acquired Rights Directive, the fact that employees will automatically transfer with the business will need to be considered. Information and consultation requirements will also apply, as well as restrictions regarding changing terms and conditions or dismissing employees. On all transactions, the purchaser will want to carry out a thorough due diligence exercise so it understands which employees it will be taking on, what their terms and conditions and benefits are, whether there are any outstanding employee claims etc. CROSS-BORDER TRANSACTIONS CAN PROVE TO BE MORE COMPLEX WHEN IT COMES TO HR AND EMPLOYMENT ISSUES. CAN YOU DRAW UPON YOUR OWN EXPERIENCES OF ADVISING ON HR ISSUES IN CROSS-BORDER DEALS? WHAT CHALLENGES DID YOU FACE AND HOW WERE THESE OVERCOME?
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The key issue that comes up time and again is the more onerous consultation requirements that apply in continental European jurisdictions. For example in some cases, consultation needs to take place before a binding purchase agreement is signed. It is therefore critical that local law advice is taken at an early stage. HOW ARE YOU ABLE TO ASSIST PROSPECTIVE ACQUIRERS IN ADDRESSING PENSIONS & BENEFITS OBLIGATIONS AND CULTURAL CONSIDERATIONS? Our team regularly provides advice on the pensions and benefits aspects of M&A transactions. In a share sale, it will often be the case that employees can continue to participate in their current plans post-close, but on an asset sale, or a share sale where employees participate in seller-group plans that are not transferring, consideration will need to be given as to the legal and employee-relations considerations regarding putting new plans in place. In addition, if the target operates a UK defined benefit pension plan, this can often be a key deal item, with the acquirer needing to consider an appropriate purchase price deduction for any deficit, as well as the powers of the trustees and the Pensions Regulator. -----------------------------------------------------------------------Eric Bergamin is one of the founders of Bergamin & Gielink Pensions Law. -----------------------------------------------------------------------PLEASE EXPLAIN THE TYPICAL PENSIONS LAW ISSUES WHICH CAN ARISE IN CORPORATE TRANSACTIONS. Issues about unforeseen expensive pensions arrangements, harmonising and restructuring pension arrangements and pension administration, potential accounting issues under IAS 19 for the buyer if the scheme qualifies as Defined Benefit, potential merger of Pension Funds (additional costs), exit obligations by leaving the Pension Fund, rights of deferred members, the risk of (incalculable) indexation costs, and recovery obligations.
extend. Though, due to the still ongoing financial crisis, postponed reduction of rights will supposedly take place. The bill is scheduled for spring 2013. If this bill is accepted, employers can opt for a new pension contract; a conditional pension scheme in which the ambition is a price indexed pension and the effects of market conditions and longevity are directly converted into the individual pension benefits. The majority of the Dutch pension schemes are currently Defined Benefit schemes with a high level of security, so this might have a major impact. Parliament has already adopted the bill regarding the increase of the pensionable age for occupational pensions, which will be effected by lowering the tax maximum for annual pension accrual. Implementation is scheduled for 1 January 2014. Due to recent governmental developments it is expected that the pensionable age for statutory old-age pension is to become 66 in 2019 (by raising the age in 2013 with one month and from 2014 onwards gradually to 66 years in 2019) and 67 in 2024. It is possible that the age will be raised more rapidly.
Company: Piper Alderman Name: Tim Capelin Email: tcapelin@piperalderman.com.au Web: www.piperalderman.com.au Address: Level 23, Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW 2000 Telephone: 02 9253 9936
WHAT ARE THE MAJOR CHALLENGES IN ACQUIRING AND MERGING WORKFORCES? Harmonising and restructuring pension arrangements (e.g. (international) collective value transfer), the execution of the different pension scheme(s) involved, accrued rights and tax compliancy. WHAT THE CHALLENGES YOU FACE WITH CROSSBORDER TRANSACTIONS? - Tax implications: different tax treatment in the countries involved. - Affiliation to a mandatory industry-wide pension scheme of those employees working in the Netherlands / executing activities in the Netherlands. - In case of salary split for employees working in two or more countries: Do you also split the pension accrual? How do you split the pension accrual? National (tax) rules may not allow for the pension to be accrued in one country taking into account the global income. - International value transfer. - Differences between international schemes, potential harmonisation issues. These challenges were overcome by specific tailor made advice, as the advice depends on the countries involved. WHAT ARE YOUR PREDICTIONS FOR PENSIONS’ LAW OVER THE NEXT 12 MONTHS? It will be a dynamic time. Dutch parliamentary elections are scheduled on 12 September 2012. A high level proposal to amend the Dutch Pension Act has been issued to parliament. In this bill a higher discount rate (UFR) for Pension Funds to calculate the pension obligations is included. UFR may restore the funding ratio’s of Pension Funds to a certain
Company: Latham & Watkins LLP Name: Catherine Drinnan Email: Catherine.Drinnan@lw.com Web: www.lw.com Address: 99 Bishopsgate, London, EC2M 3XF Telephone: +44 (0) 207 710 1116
Company: Bergamin & Gielink Pensions Law Name: Eric Bergamin Email: info@pensioenrechtadvies.nl Web: www.pensioenrechtadvies.nl Address: Bahialaan 502 3065 WC ROTTERDAM, Netherlands Telephone: +31 (0)10 463 77 55
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Healthcare M&A Report
HEALTHCARE — M&A Report KNP LAW Nagy Koppany Varga and Partners was established in 2006. The founding members of the firm are not only accomplished attorneys but represent an interesting combination of legal background, including practicing law in the United States, teaching at leading international universities, serving on the bench, and working for the Hungarian government. Today KNP LAW is a mid-size, gradually growing, positively aggressive firm. Its name is associated with high quality legal services for an enviable mix of distinguished clients. KNP LAW serves international and domestic clients in the following practice areas: • Life Sciences and Pharmaceuticals • Litigation and Arbitration • Corporate and Commercial • Banking and Finance • Real Estate • Labour and Employment • Insolvency and Restructuring • Intellectual Property Rights • Constitutional Remedies • European Law WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? KNP LAW is an independent Hungarian law firm with a global network of international law firms. The firm is free from most bureaucratic constraints, can tap into global resources indispensably, and act faster than most of its local counterparts. This guarantees prompt, time-effective, and high quality client services in multiple jurisdictions. Over the years, the firm has built an extensive network of leading life sciences professionals domestically and abroad. KNP LAW promotes life sciences industry efforts by supporting government relations activities of trade associations. Members of the firm maintain exemplary professional relationships with representatives of the regulatory, administrative, and legislative branches. CAN YOU PLEASE DEFINE ANY DEALS THAT YOU HAVE ADVISED UPON IN THE HEALTHCARE SECTOR? AND EXPLAIN WHAT YOUR FIRM BROUGHT TO THE DEAL TABLE? KNP LAW recently advised one of the leading US-based global pharmaceutical companies in the Hungarian leg of a multibillion dollar legal acquisition project. The firm’s profound knowledge of the healthcare industry and substantial experience in M&A transactions were instrumental to the timely and efficient completion of the project. KNP LAW also represented market leader global healthcare companies in the establishment and operation of their local Hungarian subsidiaries. The firm negotiated multiple drug reimbursement matters with the Hungarian Health Insurance Fund (OEP) and filed several new drug registration applications with the Hungarian registration authority GYEMSZI. It also challenged the issuance of marketing authorizations by GYEMSZI to generic drug companies.
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Attorneys of the firm handled IP rights related matters before the Hungarian Intellectual Property Office (HIPO) and pursued patent prosecutions before courts of law. WHAT FACTORS HAVE CONTRIBUTED TO THE INCREASED M&A ACTIVITY LEVELS IN THE HEALTHCARE SERVICES SECTOR? WHY IS THIS TREND PREDICTED TO CONTINUE THROUGHOUT 2013? The economic crisis of 2008 forced healthcare companies to look for more efficient solutions to reduce cost and increase revenue. In addition, expiry of the patents of major blockbuster drugs prompted pharmaceutical companies to look for options supplementing lost revenues. M&A is a solution that can optimize resources to fend off the negative effects of these two factors.
IN TERMS OF HEALTHCARE DEALS WITHIN YOUR JURISDICTION, WHAT IS THE CURRENT LEVEL OF PRIVATE EQUITY INVOLVEMENT?
Another consequence of the economic crisis is that the role of private equity might increase in proportion with the decrease of the willingness of banks to finance M&A transactions.
WHY ARE BUSINESSES IN THE HEALTH SECTOR INCREASINGLY TURNING TO M&A IN HIGH GROWTH ECONOMIES TO FUEL GROWTH?
In the current economic environment, in order to maintain or increase profitability, firms need to pull their resources and aggressively cut cost. M&A may be an avenue to achieve these objectives.
DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS, REGARDING M&A IN THE HEALTHCARE SECTOR? AND ARE THERE ANY NEW REGULATIONS ABOUT TO BE ANNOUNCED THAT COULD CHANGE THE SHAPE OF THE HEALTHCARE LANDSCAPE? In the last 18 months, the Hungarian Parliament has passed several laws affecting M&A transactions and the healthcare industry. This trend might continue for the next 12 months. Therefore, KNP LAW is constantly monitoring and informing clients of pending bills, proposed laws, and regulations in these areas.
CAN YOU PLEASE DEFINE THE MAJOR CHALLENGES THE HEALTHCARE INDUSTRY POSES FOR COMPANIES THAT WISH TO ENTER OR GROW WITHIN THE SECTOR? The healthcare sector is one of the most heavily regulated industries. New companies wishing to enter or existing firms striving to grow in this field must overcome a myriad of regulatory hurdles. It is essential to retain the services of professionals, such as KNP LAW, to successfully navigate through the maze of regulations. HOW IMPORTANT IS THE IN-DEPTH DUE DILIGENCE GIVEN THE COMPLEXITY OF THE SECTOR? AND WHY IS THERE AN INCREASED NEED FOR ANTITRUST SCRUTINY? Without appropriate due diligence, a lucrative deal can easily collapse. In the healthcare sector in addition to scrutinizing corporate documents, clinical trial, licensing and various IP issues must be carefully reviewed and analyzed.
Company: KNP LAW Nagy Koppany Varga and Partners Name: Dr. Kornelia Nagy-Koppany, LL.M. Email: knplaw@knplaw.com Web: www.knplaw.com Address: MAHART HÁZ, 6th Floor, H-1051 Budapest , Vigadó utca 2 Telephone: +36 1 302 9050
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: M&A and Immigration
M&A — and Immigration No big merger would ever be completed without a comprehensive due diligence analysis. Yet while prudent deal makers will always conduct a thorough financial analysis of a prospective merger partner, an issue that has become very important in today’s global economy often gets little pre-merger consideration: immigration compliance.
The lack of adequate immigration due diligence can have serious repercussions for any major corporate restructuring, whether it occurs by way of a merger, acquisition, asset sale, stock sale, joint venture or spin-off. If immigration considerations are not assessed in advance, key employees who are crucial to the company’s success could suddenly discover that the change in corporate structure has invalidated their authorization to continue legally working in the United States. Even if they qualify for reauthorization, this still can be highly disruptive. Out-of-status aliens are not permitted to change their visa status in the United States, so they will have to leave the country and apply at a U.S. consulate abroad for a new visa. Such problems can be addressed in advance, but mainly if they are discovered before the merger takes effect. A thorough immigration review as part of the initial risk assessment can go a long way toward preserving the status of essential foreign employees and easing the integration of the two companies’ employees. Immigration complications can arise in a surprising number of ways following a merger. Consider, for example, the case of a U.S. subsidiary of a French company, headed by a French national who was working in the United States on an E-2 investor visa. If a U.S. company acquired the French subsidiary company, the company president’s E-2 visa, issued because the petitioning entity was French-owned and the president was French, would no longer be valid after the merger. Also consider the case of a vice-president of a U.S. subsidiary of a foreign company working in the United States on an L-1A visa, granted to an intra-company transferee. After an acquisition by a U.S. company, the company structure would be transformed and the vice-president’s U.S. employer may no longer be a subsidiary. As a result, the L-1A visa would no longer be valid and the vice-president could be an unauthorized worker in the eyes of U.S. immigration.
ACQUISITION INTERNATIONAL
The major disruptions that occur when key employees lose their work authorization is only one consequence of the lack of advance planning on immigration issues. Individuals who find themselves, even through no fault of their own, out of compliance with immigration laws could face repercussions for years to come. For the company, the failure to undertake immigration planning as part of a merger, leading to violations of immigration laws, could expose the organization to sanctions under federal immigration regulations, including the Immigration Reform and Control Act. The due diligence review of immigration compliance must include a comprehensive analysis of the prospective changes in ownership and structure of the company. Even seemingly minor differences, such as company tax ID number changes, revised job descriptions, or geographic relocations of employees, can immediately invalidate foreign workers’ employment authorization. To resolve immigration problems that emerge in a corporate restructuring, each affected employee must be considered on a case-by-case basis. The solution will depend on the nature of the restructuring as well as the visa category of the alien worker. Non-immigrant temporary work visas, for example, are always “employer-specific.” In other words, work authorization is allowed only with the sponsoring company, and generally most changes of employer require a new or amended petition. However, minor exceptions exist under a few categories. Corporate reorganizations may also adversely affect a foreign executive’s pending application for permanent residency by either delaying the process or rendering the application for a Green Card invalid. The permanent residency process can be protracted, even without such complications. Any change that would require an entirely new application could involve delays for many years. In today’s globalized economy, buyers are likely to find that their target acquisition employs a substantial number
of foreign nationals in jobs ranging from scientists and engineers to chief executives. The loss of any of these key personnel because of immigration problems that arise after a merger or corporate reorganization could have serious and far-reaching effects on vital aspects of the enterprise, including operations, management, and research and development. Sanctions, fines and loss of legal status can occur for violations of federal immigration regulations. During the due diligence process that precedes a merger, immigration issues often get short shrift, if they get much consideration at all. In light of the high impact of immigration violations once they occur, acquisition minded companies must accomplish compliance with immigration laws far in advance of closing a transaction. Uncovering and resolving visa and work permission problems of corporate executives and key workers before they arise can help assure a solid foundation for the newly formed company. Mark Ivener, managing partner of Ivener & Fullmer in Los Angeles, has been practicing immigration law for more than 30 years.
Company: Ivener & Fullmer Name: Mark Ivener Email: mark@usworkvisa.com Web: www.usworkvisa.com Address: 11601 Wilshire Blvd. Suite 2280 Los Angeles, CA 90025 Telephone: (310) 477-3000
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SECTOR SPOTLIGHT:
M&A Trends in Media & Information
M&A TRENDS — in Media & Information Ocean Strategy’s Directors report on M&A trends in the Media and Information Sector. As the leading sector specialist and an Acquisition International 2012 award winner for due diligence work, Ocean is uniquely qualified to comment on developments in this sector. segment 3, which Ocean believes, can be where significant value can be found through unlocking growth strategies by leveraging existing assets. Having said that, the importance of the ‘growth strategy’ element of a strategic due diligence has never been as important as now with trade buyers and private equity firms fully aware of the risks of digital disruption (both to old media and increasingly to established digital media). WHAT ARE THE KEY M&A TRENDS IN THE MEDIA AND INFORMATION MARKET? The main trend Ocean sees in the market is this heightened emphasis on the strategy, with the basics of diligence (market, asset) recognised as hygiene factors. Trade buyers are loath to weaken their portfolio with challenged assets, and private equity know that they will most likely drive value towards a strong exit via excellence in growth strategies. We also see a strong demand for diversification across multiple dimensions to minimise risk in low growth areas and maximise position in high growth areas – whether in geographies, new media channels, or value chain plays. WHO IS A TYPICAL CLIENT? There is no typical client – all our clients are unique, and as such we do not have a typical process or off-the-shelf product to fit. All clients, regardless of their size, are treated to bespoke services tailored to their needs. As the leading media specialist in strategy, we’re pleased to count many of the world’s top media companies and investors in media among our clients. We’re a discreet firm who don’t shout about our clients, but we are proud to advise market leaders in most sectors, who in many cases have become long-term client partners. WHAT IS THE TYPE OF M&A WORK YOU UNDERTAKE? Over the history of Ocean we have advised on deals cumulatively valued at £9BN, for which we have undertaken the strategic due diligence in the UK and across Europe. However, a growing part of our business is Vendor Due Diligence, which presents slightly different challenges and pressures. We are also active in acquisition strategy and the development of potential sector and asset targets in Europe and globally for our clients. Recent market entry or expansion studies have been undertaken in Turkey, Russia, Ukraine, Poland and the Czech Republic.
audience relationships and widen the markets they address by taking up new positions in the value chain they operate in – for example, potentially moving from information databases to workflow based software. This type of work will flow naturally from the evaluation of the strategy, to the selection of positions to take and target assets to acquire, and inevitably, ultimately to the due diligence process. HOW IMPORTANT IS M&A WORK TO YOUR BUSINESS? M&A related work has reduced from more than 60% of our revenue back in the height of the cycle in 2007, to perhaps 20-30% now. During this same period Ocean has grown substantially, more than doubling in size during the downturn – with lost M&A work more than replaced by strategic advisory work both for media companies and private equity asset owners. The balance is right at present as we know that our value in the M&A process comes from our deep insight and knowledge about the day-to-day management of media companies.
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Ocean has never subscribed to the myth that private equity owned businesses are sub-optimal and has witnessed many cases of excellence in strategy and execution as a direct effect of private equity ownership. On the other hand this same strategic and executional excellence is also evident among the market leading trade players in media. The real barriers to growth and success, especially in this time of digital disruption and cycle turmoil, lie in the ability of the owner to invest in the asset. It is fundamental with such a fast changing context for owners to be fleet of foot, find the right growth strategies that leverage their assets, and be empowered to act on them rapidly.
WHAT ARE THE KEY M&A TARGETS YOU SEE IN THE MEDIA AND INFORMATION MARKET? You can segment the potential M&A targets into 4 asset types in the media and information sector:
HOW DO CLIENTS APPROACH YOU? Clients, particularly private equity firms, tend to approach us when they have identified a target, however, M&A for Ocean, does not necessarily stand alone as a practice. Often acquisition strategies develop from strategy advice. Recently an Asian review of a media portfolio progressed into an acquisition strategy to leverage the asset and build up their presence in the region. Equally we are currently working extensively in Europe on assessing whether and how media companies can leverage their brands and
WHO IS THE BEST OWNER OF A MEDIA ASSET FOR SUCCESS?
1: Start-ups, or early businesses, usually digital, with high risk. 2: Established digital businesses with clear revenue models (or at least a clear path to revenue models) 3: Challenged (usually by digital) traditional media assets 4: Media assets which have successfully managed the digital transition The importance of a clear strategy and strong emphasis on this in the due diligence process is particularly important in
Company: Ocean Strategy Contacts: Directors - Charles Ross, Christoph Schedl, Claus Werner (pictured above) Email: charles.ross@oceanstrategy.com, christoph.schedl@oceanstrategy.com, claus.werner@oceanstrategy.com Web: www.oceanstrategy.com Address: 19 Buckingham Street, London, UK, WC2N 6EF Telephone: +44 (0) 20 7451 3720
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Pension Obligations and Issues
PENSION OBLIGATIONS — and Issues Alex Wilson is a partner at PwC, London. He talks to Acquisition International about pension obligations and issues faced in corporate transaction.
PLEASE GIVE A BRIEF SYNOPSIS OF YOUR PERSONAL, AND YOUR FIRMS EXPERIENCE ADVISING ON ANY PENSION RELATED ISSUES WHICH MAY ARISE IN CORPORATE TRANSACTIONS. The financial complexity of pensions and legislative structure mean that a range of skills are needed to identify and manage risks. Our dedicated pensions transaction teams provide actuarial, legal, financial, tax and investment advice, coupled with years of experience of supporting clients through transactions across the globe (our UK team alone works on in excess of a hundred deals each year). Working closely with lead deal advisors means we understand how pensions fit into the bigger picture. Ultimately, the quality and experience of the individuals in our team means we can provide the best for our clients.
We help clients: • work out the impact of pensions on their valuation and offer for the business • determine how trustees, employees and regulators may react • liaise with the Pension Regulator • negotiate with the vendors, purchasers, unions and trustees • design future arrangements, and • have discussions with banks around financing. PLEASE DESCRIBE A TYPICAL CLIENT FOR PWC. None are typical, clients range from family businesses looking to exit, to PE firms and sovereign wealth funds and large multi-nationals adding to or divesting from their portfolio. The understanding of pension issues and appetite for pension risk varies significantly amongst our clients. WHEN BUYING, SELLING OR RESTRUCTURING A BUSINESS WHAT ARE THE KEY RISKS RELATING TO PENSION SCHEMES? Unexpected demands or increases in cash contributions arising from:
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- existing information being out of a date or a new valuation becoming due, - uncertain or hidden liabilities; and - events triggered by the transaction (eg exit payments, debt structure changes resulting in cash calls, renegotiation of insurance contracts). WHY ARE PENSION DEFICITS WIDELY SEEN AS ONE OF THE MOST IMPORTANT AND COMPLEX ISSUES FOR CORPORATE TRANSACTIONS? Pension liabilities can be very large, uncertain, complex and subject to the vagaries of the financial markets. Add to that the significant regulation that varies by territory, the impact of many groups of stakeholders (trustee, regulators, employees, pensioners, unions) and, importantly, the limited control that company management has over pension costs mean that pensions can be a minefield. We have increasingly seen the analysis of UK deficits in transactions being applied to overseas retirement benefit liabilities which can present similar risks.
Whilst the last 12 months has seen little change in UK pensions legislation, we have seen more guidance issued by the Pensions Regulator to trustees and we have seen increased activity from the Regulator in using its powers. Recently the Take Over Panel issued a consultation paper that could mean increased information is provided to pension trustees. While transparency is welcomed, much of the information and data that a potential buyer would need to make such statements is not usually publicly available. DO YOU HAVE ANY PREDICTIONS FOR THE NEXT 12 MONTHS IN TERMS OF THIS AREA OF EXPERTISE? I’d expect pensions to continue to cause both buyers and sellers concerns as they go through transactions particularly with continued economic uncertainty, low interest rates and fragile markets. Pensions will increasingly be an area considered early in a transaction. With auto-enrolment in the UK on the horizon there will be a new risk that all parties need to understand and address.
HOW DO YOU AND YOUR TEAM DE-RISK PENSION SCHEMES? AND HOW DO THE SERVICES YOU OFFER DIFFER WHEN DEALING WITH DIFFERENT SIZED COMPANIES? We build solutions specific to the situation and corporate goals with a ‘best of breed’ approach across investments, insurance, liability management and longevity hedging. This includes preserving cash by unlocking value in corporate assets and increasing efficiency by utilising natural hedges in the business, all executed tax efficiently. For smaller schemes, we offer a packaged exit solution, efficiently removing the scheme from the balance sheet at a cost that can be factored into the deal economics. HOW HAVE PENSION LIABILITIES AND REGULATIONS WITHIN YOUR JURISDICTION CHANGED OVER THE LAST 12 MONTHS?
Company: PwC | Partner Name: Alex Wilson Email: alex.wilson@uk.pwc.com Web: www.pwc.co.uk Address: PricewaterhouseCoopers LLP Hays Galleria , 1 Hays Lane , London SE1 2RD Telephone: + 44 (0) 20 7213 1128
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SECTOR SPOTLIGHT:
Doing Business in a Transcontinental Country
DOING BUSINESS — in a Transcontinental Country
EGYPT
-----------------------------------------------------------------------Nadim Elias is Chairman at Sahara Printing Company. Sahara produces books, magazines, catalogues, calendars, notebooks, corporate products & all kinds of printed material – and the expertise of its staff extends to each step in the production process. -----------------------------------------------------------------------PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS. SAHARA Printing Company is a shareholding Egyptian company founded in 1995 and located in Cairo’s tax free zone. With a lifetime of experience under his belt, Nadim Elias have expanded the initial family business, dating back to 1913, into a centralized, streamlined printing facility, complete with pre-press, printing, binding, finishing and shipping capabilities. Sahara provides a one stop shop for all your printing requirements including packaging of folding box board as well as digital printing services. Sahara exports over 50% of its production to Europe, Africa and the Middle East, while serving a vibrant local market. WHAT SETS EGYPT APART FROM OTHER TRANSCONTINENTAL COUNTRIES SUCH AS TURKEY?
The area surrounding the Suez Canal represents a tremendous opportunity for the European Union trade development and logistics from the East to West and South to North. Egypt is the gateway to the African market. Egypt is part of the COMESA and benefits from trade agreements and removal of tax barriers with Jordan, Tunis, Saudi Arabia and other Arab countries; and labour, electricity and land costs remain very attractive for industrial investment. WHAT FACTORS HAVE CONTRIBUTED TO THE STRONG GROWTH FIGURE IN EGYPT OF 5% SINCE THE FINANCIAL CRISIS IN 2009? The government has encouraged exports through a number of programs which gave a big boost to non-petroleum exports. Further, the internal debt was in the safe region. Real estate debt and mortgages are short term and within very safe limits. WHY IS GROWTH EXPECTED TO BE MUCH SLOWER THIS YEAR, AT AROUND 2%? We have seen a decrease of direct foreign investment due to the internal political unrest. In addition to this, the Eurozone crisis is affecting exports going out of Egypt.
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THE CURRENT BUDGET DEFICIT IS 11%. ARE THERE CONCERNS THAT THIS COULD SPIRAL OUT OF CONTROL AND RESULT IN A GREEK STYLE CRISIS? The current deficit is a result of the reduction of income mainly from tourism, construction and real estate sectors. It is not due to the government over spending. Once these sectors are on track again and with the reduction of energy subsidiaries, the deficit can be controlled.
RUSSIA
-----------------------------------------------------------------------Michael Aleksandrov is the Partner of DS Law firm, a company founded in 2005. Their practices now cover a wide range of areas focusing on Corporate law/ M&A Support, Public-private partnership and Real Estate. -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? We have a deep knowledge of Russian law combined with a strong expertise in cross-border processing based on practical cases. We believe that the main thing about us is our eagerness to evoke trust between us and our clients. That makes it necessary for us to keep in touch with all the trends in outer world inside and outside of Russian borders
The extensive factors causing Russia’s grow are mainly exhausted and now it’s time for intensive growth and development. You can hardly expect fuel prices to go higher, so that means further growth will require Russian businesses to improve their production and Russian government to pay more attention to investment climate both for internal and external investors.
WHAT MAKES TRANSCONTINENTAL BUSINESS IN RUSSIA SO SPECIAL? Russia is a very big country present in 9 time zones. Russian postal system, as well as road net is working quite hard to get over our incredible space. Even though modern communication means should make all these differences unimportant we still have to take care of keeping information safe as we pass it over to different parts of the country. Moreover, whereas the European part of Russian federation is strongly affected by western way of doing business, out Eastern regions are much more subject to Asian influence and they interact more actively with Japanese, Chinese, Thai and Malaysian markets. That is why sometimes you’ll find it necessary to «interpret» even when all your vis-à-vis’ are Russian speaking.
Company: Sahara Printing Company s.a.e. Name: Nadim Elias Email: info@saharaprinting.com Web: www.saharaprinting.com Address: Nasr City – Free Zone Cairo, Egypt. Telephone: +202 22744056
HOW DOES RUSSIA BENEFIT ECONOMICALLY FROM ITS UNIQUE GEOGRAPHICAL POSITION? Numerous countries Russia has common boundaries with provide our country with a great variety of opportunities to work cross-borders. Russia is currently working at settling an economical union with Belarus, Kazakhstan. Should Ukraine join us, it will be a market of overall revenue of over 200 billion USD. THE RUSSIAN ECONOMY HAS RECOVERED SLOWLY FROM THE LATEST CRISIS IN COMPARISON TO PREVIOUS CRISES AND IN COMPARISON TO OTHER DEVELOPING COUNTRIES. CAN YOU PLEASE COMMENT ON THE REASONS FOR THIS?
Company: DS Law Name: Mikhail Alexandrov Email: info@ds-law.ru Web: www.ds-law.ru Address: Kadashevsky alley, building 8, 3d floor Moscow, Russia, 115035 Telephone: +7(495)649 84 74
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Resolving Disputes in the Aviation Industry
RESOLVING DISPUTES — in the Aviation Industry
-----------------------------------------------------------------------Baumeister & Samuels, P.C. was founded in 1989 by Mitch Baumeister to offer victims and their families a different choice in legal counsel in the aftermath of an aviation crash or other catastrophic disaster. -----------------------------------------------------------------------The firm dedicates itself to uncovering and improving dangerous conditions within an industry, while simultaneously securing full and just damages available to families under the law. It has represented families of those killed in almost every major commercial airline disaster that has occurred in recent years, and has also represented many seriously injured passengers and crew members. The firm is internationally recognized for its representation of victims and their families in the aftermath of aviation tragedies, and litigates in both federal and state courts across the Unites States. Members of the firm have served in leadership positions on Plaintiffs’ Steering and Executive Committees for almost every air disaster over the last 30 years. The firm’s expertise has been recognized by Martindale Hubbell, the national law directory, and is honored to be included in the Martindale Hubbell Bar Register of Preeminent Lawyers. Lawyers from the firm have also been named “Super Lawyers” on numerous occasions. Litigation that inevitably follows the crash of an airplane requires a complex analysis of extensive factual and legal issues, detailed investigation into the cause of an accident, unraveling the intricacies of international treaties, statutes of repose, and product liability laws, as well as choice of law issues that can result in the application of various laws to damage claims. Specialized knowledge, experience, compassion and professionalism are traits possessed by the lawyers at Baumeister & Samuels, and all are necessary to effectively represent families of aviation tragedies. The professionals at Baumeister & Samuels stay informed of changes within the aviation industry, including new technology, methods of manufacture, or recurring problems which could contribute to the cause of an accident. They also closely follow systemic issues such as pilot fatigue or problems associated with a particular product as these issues may become the focus of an aviation accident. While the aviation industry tries to implement changes to
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meet safety concerns, crashes continue to occur throughout the world. The United States frequently becomes the situs for litigation involving large commercial disasters, and the resolution of claims and disputes is an area of particular specialty for the lawyers at Baumeister & Samuels. Because of their expertise and excellent reputation, the attorneys are often able to craft resolutions to benefit their clients short of a lengthy, protracted and expensive lawsuit, but they also possess the skills required to litigate the matter if necessary.
Future Challenges / Liber Amicorum: “The Draft Protocol on Matter Relating to Space Assets: New Developments and Perspectives for Success” (August, 2011); Book Author, “Separate Financing of Aircraft Engines – Legal Obstacles” (August, 2010); Article, Guest Writer in Current Law Review (Güncel Hukuk Dergisi): “Comments to the Turkish Draft Translation of the Montreal Convention, 1999” (April, 2009); Article, Guest Writer in Current Law Review (Güncel Hukuk Dergisi): “The Distinction Between Actual and Contractual Carrier in Air Law”(April, 2008).
Aviation accident litigation is a highly specialized field and those who have the necessary experience can best represent the victims of aviation tragedies. Baumeister & Samuels has fostered its expertise in the field over more than three decades, and is uniquely situated to represent aviation accident victims and their families. The firm’s professionalism, dedication and compassion for the victims of aviation tragedies is an important component in helping victims and their families navigate through these complex issues during some of the most difficult times of their lives. -----------------------------------------------------------------------Mr. Cem Karako obtained his bachelor’s degree in law at Istanbul University Law Faculty in 2004. He was graduated from the International Institute of Air and Space Law, University of Leiden with cum laude in 2008. Since 2004, he acts as legal counsel at Karako Law Office, which is founded by Nedim Karako in 1970. Mr. Cem Karako is also guest lecturer for air law at Yeditepe University Law Faculty, Istanbul since 2009. -----------------------------------------------------------------------Mr. Cem Karako deals with aircraft leases on behalf of airlines, aircraft mortgage agreements, aircraft and aircraft engine sale and leases, International Registry problems under Cape Town Convention and Aircraft Protocol, air carrier liability issues, passenger rights, air law litigation under Warsaw Convention, Montreal Convention & E.U. Regulation 261/2004. He provides legal assistance to governmental authorities regarding application of Cape Town Convention and aircraft registry issues, as well. Publications of Mr. Karako are as follows:; Article with Fabio Tronchetti (Associate Professor of Law at the School of Law, Harbin Institute of Technology, People’s Republic of China), Air & Space Law / Contemporary Issues And
Company: Baumeister & Samuels, P.C. Name: Mitch Baumeister Email: mbaumeister@baumeistelaw.com Web: www.baumeisterlaw.com Address: One Exchange Plaza, 15th Fl, New York, NY, 10006, United States Telephone: (212) 363-1200
Company: Karako Law Office Name: Mr. Cem Karako Email: cem@karako.av.tr Web: www.karako.av.tr Address: Vefa Bey Sok Ozlem Apt. No 10/5, 34349 Gayrettepe/Istanbul
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SECTOR SPOTLIGHT:
Resloving Disputes in Real Estate
RESLOVING DISPUTES — in Real Estate
-----------------------------------------------------------------------Gillian Craig is a partner in the commercial dispute resolution team of MacRoberts, LLP. “Our main areas of high activity have included professional negligence, corporate disputes, competition law, intellectual property and information technology, personal injury, property litigation and insolvency, corporate regulatory and criminal matters including prosecutions by HSE and fatal accident inquiries.” -----------------------------------------------------------------------WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE? Our litigation team, and in particular our property litigation offering, is supported by a number of complimentary specialists within the firm, including our top-rated construction practice, highly regarded real estate team and our dedicated planning team. WHO DO YOU TYPICALLY ACT FOR? WHO IS AN ARCHETYPAL CLIENT?
We act for large landowners and investors. The archetypal client is a client with a medium to large property portfolio. WHAT KEY SECTORS DO PROPERTY DISPUTES AFFECT AND WHY?
Property disputes feature particularly largely in the development sector, as there is the potential for fallout be it at the acquisition stage/ dealing with adverse title conditions (or acquiring the necessary rights for development) and thereafter the disposal. WHAT ARE KEY CHALLENGES WHEN RESOLVING PROPERTY DISPUTES AND HOW CAN THEY BE AVOIDED?
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It depends on the nature of the dispute. However, the following may assist:
range of commercial and residential real estate, insolvency and trusts of land.
• Parties should be realistic as regards what they can hope to achieve. For example, we see any number of grossly inflated dilapidations claims supported by bullish surveyors opinions however, it is often the case that (a) the guidance for the courts as regards lease interpretation is not appreciated and (b) in any event, the landlord will need to factor in what a tenant is actually able to pay. Equally, if a seller seeks to enforce missives against a purchaser, the reason for the purchasers default in the first place is probably a lack of funds. As such, parties should be pragmatic.
More than 50% of properties sold in Prime Central London in the last year were sold to overseas / non-domiciled investors or their offshore vehicles.
• For the above reasons, parties can become entrenched in their positions once litigation is underway, and the costs paid to legal team become a barrier to settlement. As such, I would suggest that ADR be considered as a cost-effective and quick method of resolution, provided parties are prepared to be realistic, as stated above. • Against that, however, if you do proceed to court, both parties should consider protective measures such as interim diligence to secure any debt, and caution to secure any awards of expenses. -----------------------------------------------------------------------Philip Rainey QC is the head of the property team at Tanfield Chambers, an established Barristers’ Chambers which comprises 38 members specialising in real estate work in England and Wales. ------------------------------------------------------------------------
They are recommended in the leading directories Chambers & Partners and The Legal 500. Tanfield offers expertise in dispute resolution across the whole
Many are leasehold. Tanfield have in-depth expertise in the law which applies to these properties, including statutory rights to acquire freehold interests from landlords, service charge disputes and management. Prime London property is an attractive investment in an uncertain world but English real estate law can be fiendishly complex and disputes are commonplace at Tanfield they can guide investors through the legal maze. As one the largest dedicated teams of property barristers in the UK they are able to provide affordable expertise which fits the needs of the client and the case. Members act for a spectrum of clients from large London estates, through offshore entities to individual tenants. Tanfield’s members appear at all levels of court and tribunal, up to and including the UK Supreme Court. Despite the resilience in the prime property sector, the UK remains in recession. Inevitably, cost is a major
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Resloving Disputes in Real Estate
One of the peculiar characteristics of the real estate industry is that people encounter each other frequently. One day’s opponent may be another day’s joint venture partner and therefore the emphasis is very much on avoiding disputes before they happen. Caroline DeLaney
driver of our work. This brings to the fore the need for early common-sense advice and for effective ADR, where appropriate. They recognise that their clients need advice which is not just right on the law, but commercially astute. Members of Tanfield’s property team are able to accept instructions direct from our clients, without referral from a solicitor. -----------------------------------------------------------------------Caroline DeLaney is the head of the Real Estate Disputes Team at Kingsley Napley LLP. ------------------------------------------------------------------------
Her team specialises in all aspects of commercial and residential real estate disputes ranging from contentious commercial joint venture agreements, rights of light cases, disputed assignments, prescriptive rights claims and complex dilapidations claims, to more basic landlord and tenant actions and possession claims. Kingsley Napley LLP gives its clients the best of all worlds. It has a quality name both for real estate and for litigation. It is located in the City of London however can offer fee rates that compete with regional law firms.
developments and involved rights of light disputes, the release of easements and block clearance. In more austere economic times that work has changed focus to the termination of contracts, tenant default and insolvency issues. One of the peculiar characteristics of the real estate industry is that people encounter each other frequently. One day’s opponent may be another day’s joint venture partner and therefore the emphasis is very much on avoiding disputes before they happen. To that end, Kingsley Napley LLP believe it essential that all forms of dispute resolution, such as mediation, expert determination and arbitration are considered, not just litigation.
In an expanding economy such that we had a few years ago, Caroline’s work focused on facilitating
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Company: Tanfield Chambers Name: Philip Rainey QC Email: philiprainey@tanfieldchambers.co.uk Web: www.tanfieldchambers.co.uk Address: Tanfield Chambers, 2-5 Warwick Court, London, WC1R 5DJ Telephone: +44 (0) 20 7421 5300
Company: Kingsley Napley LLP Name: Caroline DeLaney Email: cdelaney@kingsleynapley.co.uk Web: www.kingsleynapley.co.uk Address: Knights Quarter, 14 St John’s Lane London, EC1M 4AJ Telephone: 020 7814 1201
These attributes combined with Caroline DeLaney’s city background give Kingsley Napley LLP an advantage over local and global competitors. (Before joining Kingsley Napley LLP, Caroline was head of Real Estate Disputes at an international city law firm in the City of London where she practised for 20 years). They act for a broad range of clients including commercial investors, sovereign wealth funds, ultra high net worth individuals, entrepreneurs and developers. A lot the firm’s clients value their privacy and as a result much of their work is “under the radar”. The number of property disputes remains pretty consistent in both recession and boom however, the nature of the dispute changes depending on the state of the economy.
Company: MacRoberts, LLP. Name: Gillian Craig Email: gillian.craig@macroberts.com Web: www.macroberts.com Address: Capella, 60 York Street Glasgow, G2 8JX, Scotland, UK Telephone: +44 (0)141 303 1100
Company: VCI Legal Name: Phung Anh Tuan Email: tuanphung@vci-legal.com Web: www.vci-legal.com
Company: Sarka, Sabaliauskas, Jankauskas Name: Arunas Šarka Email: arunas.sarka@ssj.lt Web: www.ssj.lt
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ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Transfer Pricing
TRANSFER — Pricing -----------------------------------------------------------------------Garry Stone, PwC USA and Ajith Choradia, PwC India commented on the New Tax Pitfalls for Multinational Acquisitions and Restructuring in the Age of Fiscal Shortfall. -----------------------------------------------------------------The persistent negative economic environment has led both multinationals and governments to review strategies to sustain economic growth and fiscal stability. As part of the response to this situation multinational corporations are pursuing acquisitions due to relatively lower valuations of potential targets, and are also spinning-off existing operations for various reasons like to better focus on their core competencies or improving profits going forward. Shareholding and legal structures are also being reorganized within these companies to both integrate acquired businesses and to align with new global financial and operational strategies. Concurrently, governments around the world are looking at these restructuring and acquisition activities as a potential source of much needed tax revenues. Nearly all governments are facing large and increasing fiscal deficits which have led them to propose or enact aggressive tax regulations in the M&A area. For instance, China has enacted regulations to tax indirect transfer of shares of Chinese companies. Indian Government has not only enacted similar regulations to tax indirect transfer of shares of Indian companies in the hands of the seller, but also has cast withholding tax obligations in the hands of the buyer. Even more alarming in India is the new law in India was amended retrospectively with effect from 1961 with an intention to reverse the Apex
Court’s judgement in case of Vodafone, a recent court case which points out many of the issues multinationals may face regarding the potential tax implications resulting from corporate restructuring and acquisition activity. With enactment of laws related to the indirect transfer of shares, tax authorities in China and India are also increasingly focused on intercompany pricing audits related to inter-company transfer of shares as may occur in an internal corporate reorganization. In the past these transactions would have been valued at current basis levels and therefore result in no gains and none or little tax would have been due.
Name: Garry B. Stone (PwC USA) Email: garry.stone@ us.pwc.com Telephone: (312) 298-2464
Under the new approach, corporations may need to value the shares at something similar to a “fair market value”. Although the transfer of equity needs to be valued at “fair market value” instead of current basis level in China, the equity transfer transaction is allowed to seek Special Tax Treatment (essentially a tax deferral treatment) when certain requirements in Caishui [2009] No. 59 are met. Multinational corporations should be mindful of this and assess where they are qualified to apply Special Tax Treatment in China before business restructuring. It is important to note that the valuation approaches are evolving in these countries so care must be taken when evaluating the potential gain and associated tax liabilities resulting from internal share transfers. For instance, China is considering the use of the traditional Income, Market or Cost approaches to valuation, but the specific regulatory applications of these methods is still being developed.
Name: Ajith Choradia (Pwc India) Email: ajith.choradia@ in.pwc.com Telephone: +41 44 396 91 91 Company: PricewaterhouseCoopers LLP Web: www.us.pwc.com Address: 1 North Wacker Chicago, Illinois 60606 , USA
SIMPLY_MORE
HEUSSEN: SIMPLY_MORE We take the time to understand your concerns and goals. Your satisfaction and economic success is our top priority. With HEUSSEN you will always have strong partners at your side who do more and achieve more for you: SIMPLY_MORE www.heussen-law.de/en
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BERLIN, FRANKFURT, MUNICH, STUTTGART, AMSTERDAM *, BRUSSELS **, ROME *, NEW YORK **
July 2012 /
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(*Cooperation Offices / **Representative Offices)
SECTOR SPOTLIGHT:
Introducing the Interim Executive
INTRODUCING
— the Interim Executive
-----------------------------------------------------------------------Mark Esom is Managing Director at Fuel Recruitment, a leading Technical and Management Recruitment Specialist founded in 2003. They offer Executive Search, Interim and Permanent recruitment services, and also provide Recruitment Process Outsourcing and Managed Service Provision through their sister company Pivot RPO. -----------------------------------------------------------------------WHO IS A TYPICAL CLIENT? There’s no such thing as a typical client. Whether you’re a global blue-chip or an SME, the most valuable resource in any organisation is its people. HOW GREAT IS THE CURRENT DEMAND FOR INTERIM EXECUTIVES?
HOW LONG DO YOUR CANDIDATES TYPICALLY SPEND IN EACH POSITION? There is no ‘typical’ length of role when it comes to Interims. Our candidates are prepared to be as flexible as needed, which is a prerequisite in their field. Assignments can vary in length from 2 weeks to over 12 months. BEYOND COVERING THE DUTIES OF THE ROLE, WHAT ADDITIONAL VALUE CAN YOUR EXECUTIVES BRING TO A BUSINESS? Our executives have the expertise and transferable skills to support new strategies, investments and drive business transformation.
We work with a cadre of well-known Interim’s that are referenced and validated for their quality of experience and capability, many of whom have worked with us previously. We make it our business to constantly meet high calibre executives wishing to join our register and refresh the talent to ensure our capability matches the changing needs of business. You are guaranteed a highly confidential, personal and bespoke service. HOW DO YOU AND THE COMPANY DEFINE AND SET THE SEARCH CRITERIA? We jointly create the brief, detailing desired outcomes and success criteria and the likely required skills and experience to achieve these.
Demand is high and it’s not difficult to see why; Interims provide real flexibility for organisations managing their workforce in a changeable environment.
HOW IS YOUR APPROACH TO FINDING AND MATCHING EXECUTIVES SUPERIOR TO THOSE OF YOUR COMPETITORS?
WHAT PROCESSES/METHODOLOGIES DO YOU USE WHEN CONDUCTING AN EXECUTIVE SEARCH? HOW CAN AN INDIVIDUAL INCREASE THEIR CHANCES OF BEING APPROACHED?
Our executive candidate ‘reach’ and relationships with the Executive Interims is second to none. The speed of response required means you must previously know and understand your Interims prior to receiving any assignment. We often can recommend the shortlist as we receive the assignment brief.
We have experienced teams of consultants and researchers, working in specific industry and professional verticals. We are pro-active when conducting an assignment and keen to meet and exceed the demands of clients and candidates, ultimately resulting in an excellent customer experience for both. It is our job to source and network amongst the industry’s top performers, as frequently the best candidates are those that are not actively seeking work. HOW DO YOU AND THE COMPANY DEFINE AND SET THE SEARCH CRITERIA? We work on a consultative basis with all our clients, and conducting an executive search is no exception. It’s vital that we understand the company’s culture as well as the specific brief, as candidates need to add value to the organisation from day one. HOW IS YOUR APPROACH TO FINDING AND MATCHING EXECUTIVES SUPERIOR TO THOSE OF YOUR COMPETITORS? Our consultants have many years of experience in our specialist sectors, which gives us the edge on more ‘generalist’ executive search companies. Working with a select pool of professional Interims, and having the resources to search both in the UK and internationally, allows us to rapidly find high quality executives. WHY ARE INTERIM EXECUTIVES THE IDEAL SOLUTION FOR COMPANIES EXPERIENCING UNFORESEEN PERIODS OF TRANSITION? Employing Interims is a great solution during periods of transition, as they can be engaged at short notice to complement the existing workforce and provide much needed expertise, support and even revitalise an on-going project.
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Company: Fuel Recruitment Ltd Name: Mark Esom Email: mesom@fuelrecruitment.co.uk Web: www.fuelrecruitment.co.uk Address: 17 Waterloo Place, Leamington Spa, Warwickshire, CV32 5lA Telephone: 01926 487487 -----------------------------------------------------------------------Director of Penna Recruitment Solutions and leader of the Executive Interim practice for Penna is Simon Drake. Penna is an AIM listed HR Services Group. Formed over 10 years ago, Penna Executive Interim is one of the leading providers of Executive Interim Managers, both in the UK and internationally, we have built our reputation on the depth and quality of our service to both clients and interims. -----------------------------------------------------------------------WHO IS A TYPICAL CLIENT? Predominantly Board directors and senior business leaders in all functions, from FTSE 100 clients and large organisations in the public sector to the leadership teams of SMEs. However, there is also an increase in HR and procurement buying our services.
WHY ARE INTERIM EXECUTIVES THE IDEAL SOLUTION FOR COMPANIES EXPERIENCING UNFORESEEN PERIODS OF TRANSITION? The ability to foresee and plan ahead is more difficult in today’s changing economic landscape and therefore we provide a reassuring service to business leaders, that can rely upon our ability to quickly (typically between 2 – 10 days) help establish the brief and quickly provide an experienced Executive to quickly take on the mantle of managing change. BEYOND COVERING THE DUTIES OF THE ROLE, WHAT ADDITIONAL VALUE CAN YOUR EXECUTIVES BRING TO A BUSINESS? There are many but some examples are; Their ability to help the leadership team understand the DNA of the organisation; how their leadership style impacts the business, a sense of the value of its culture, whether critical success factors are understood and embedded in performance management and sharing knowledge of performance benchmarking from other sectors/businesses etc.
HOW GREAT IS THE CURRENT DEMAND FOR INTERIM EXECUTIVES? Demand is growing. Figures from the IMA (Interim Management Association) indicate that the sector has almost doubled since 2006 and enquiries are growing with more organisations recognising the significant benefit that can be quickly attained through the intervention from experienced executive talent. WHAT PROCESSES/METHODOLOGIES DO YOU USE WHEN CONDUCTING AN EXECUTIVE SEARCH? HOW CAN AN INDIVIDUAL INCREASE THEIR CHANCES OF BEING APPROACHED?
Company: Penna Plc Name: Simon Drake Email: simon.drake@penna.com Web: www.penna.com/interim Address: 5 Fleet Place, London. EC4M 7RD Telephone: +44 (0) 207 332 7839
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Executive Searching/Longterm Recruitment
EXECUTIVE SEARCHING — Longterm Recruitment
Tyzack was founded in 1958 and has been one of the leading executive search firms in the UK ever since. The practice covers a variety of different sectors, recruiting both executive and non-executive directors. It has particular experience in media and entertainment, leisure and gaming, professional services, not-for-profit and trade associations, general industrial and CIO/CTO recruitment.David Dumeresque is a Partner at the firm. WHAT GIVES YOU AN ADVANTAGE OVER LOCAL AND GLOBAL COMPETITORS IN YOUR AREAS OF EXPERTISE?
Highly specialised and experienced recruiters, we have never adopted offthe-shelf solutions for any assignment. Working closely with our clients as collaborative business partners rather than simply search consultants, we focus on actions that are tailored specifically to each client’s requirements - actions that deliver distinctive and sustainable improvements in their performance. We pride ourselves on understanding our clients’ businesses and markets. We provide a bespoke and highly professional Human Capital service which achieves tangible results and sustainable competitive advantages. WHAT SERVICES DO YOU OFFER FIRMS REGARDING RECRUITMENT? We
provide
executive
search,
advertised
ACQUISITION INTERNATIONAL
selection,
management assessments (in order to establish and identify the exact need) and board reviews. WHAT SECTORS DO YOU OPERATE IN? AND HOW DOES YOUR APPROACH TO EXECUTIVE SEARCHING DIFFER FROM SECTOR TO SECTOR? We operate in the media and entertainment, leisure and gaming, professional services, not-for-profit and trade associations, and general industrial sectors. Our basic approach, working alongside our clients not only as search consultants but also as business partners, will not markedly change between sectors. The only change will be in those areas where, for governance reasons, advertising senior positions to be filled is mandatory. Also, there is a major difference between searching for executive and nonexecutive appointments. IN CHALLENGING TIMES OF SLOW GROWTH AND GLOBAL ECONOMIC UNCERTAINTY, WHY IS IT IMPERATIVE THAT ORGANISATIONS FOCUS ON THE LEADERSHIP COMPETENCIES TO DRIVE THE COMPANY FORWARD AND TO ACHIEVE LONG-TERM PROFITABILITY? The individuals who were successful in the buoyant years may not necessarily be the same individuals who will be able to lead the company in the new and challenging environment. Clients need to look closely at their strategic plan and hire people who are able to undertake the role as it will be in the medium term, not simply those who can only fill the hole at the moment. They need to focus on those competencies that will be appropriate over the coming years, recognising that, while past performance may be an indicator of future performance, the roles may be very different.
The competencies required to perform exceptionally in a complex and ever-changing marketplace are often very different from those of the past when economies were strong. Most important, business leaders need to take risks and not become bogged down in recruiting with a fear of failure.
Company: Tyzack Name: David Dumeresque Email: info@tyzackpartners.com Web: www.tyzackpartners.com Address: 33 St. James Square London, SW1Y 4JS Telephone: + 44 (0)20 3178 4227
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SECTOR SPOTLIGHT:
US as a Domicile for Captive Insurance, California
US AS A DOMICILE David Liptz is the principal of Liptz & Associates, CPAs. Liptz & Associates, CPAs has been providing CPA services to the captive industry since 1999. They provide PROACTIVE audit, tax, consulting services to the captive insurance industry. They also specialize in resolving issues with income and regulatory controversies and their inquiries. David is a member of the AICPA, LinkedIn and an ICCIE credential. WHAT FACTORS HAVE CONTRIBUTED TO THE PHENOMENAL GROWTH IN THE NUMBER OF CAPTIVE INSURANCE COMPANIES? I feel some of the primary factors in the growth of captive insurance companies are that closely held corporations are looking to control their risk management operations. The middle market size company suffers from the lack of flexibility in many types of coverage and the use of a captive allows those sized companies to tailor coverage to meet their needs. The opportunity for a middle-market sized company to increase the efficiency and profitableness of their risk management and enjoy auxiliary asset protection, income tax and estate planning benefits. CAN YOU PLEASE EXPLAIN THE LAWS AND REGULATIONS THAT GOVERN CAPTIVE INSURANCE WITHIN YOUR STATE? California presently does not have any captive insurance legislation. You can form a traditional insurance company and utilize it as a captive, but with the capitalization requirements of approximately $5 million, it does not make California an attractive domicile for a captive insurance company. A California based company does not have to travel far to find a captive insurance friendly jurisdiction,
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— for Captive Insurance, California
of the approximately 25 states that have captive insurance legislation, Nevada, Arizona, Utah or Hawaii are several that do not require a lot of travel to reach.
WHAT IS THE US GOVERNMENT CURRENTLY DOING TO ENCOURAGE GROWTH AND MAINTAIN ITS STATUS AS A COMPETITIVE DESTINATION?
WHY HAVE CAPTIVES BECOME A VITAL PART OF LARGE COMPANIES’ RISK MANAGEMENT STRATEGY?
To speak in a “tongue in cheek” manner, the US is spreading fear through the legislation and enforcement. The message being sent by the IRS and US Treasury is that if it is “Foreign” then it must be abusive. With the right advisors and team, forming a foreign domiciled insurance company also has its benefits and should not create any adverse situations for its owners and those who are insured.
Captives have become a vital part of the middle market’s risk management strategy as it allows the entrepreneur to retain and control some of their insurance activities as profits in their own insurance company. For instance, a company can pay premiums to cover a high deductible risk program into their captive and reap the underwriting profits. Also, a company that issues warranties on its products can spread the revenue recognition on the warranty sale over several tax periods. Further, a company has moved its RX employee program to an in-house mail order program, whereby the company is able to more closely monitor the doctor’s recommendations which resulted in the company’s employees missing less days of work and becoming more productive since they are taking their prescribed medications. CAN YOU PLEASE EXPLAIN THE BENEFITS OF CHOOSING THE US OVER DIFFERENT CAPTIVE INSURANCE DOMICILES? The benefits of choosing a domestic domicile over a foreign domicile is that your company is logistically located much closer and attending a corporate meeting is easier to get to. The IRS, Congress and the current administration continue to send messages that they dislike anything foreign.
Anglo German Law Firm of the Year
M&A AWARDS 2012
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing business around the world
Eye on the Horizon For 110 years, White & Case has navigated the ever-evolving global marketplace, serving clients in emerging and developed markets.
38 offices. 26INTERNATIONAL countries. ACQUISITION
whitecase.com July 2012 / 53 06823
SECTOR SPOTLIGHT:
Doing Business Around the World
DOING BUSINESS IN — Cyprus -----------------------------------------------------------------------Haviaras & Philippou L.L.C is a firm formed in 2008 but its members have been practicing law in Cyprus since 1976. They consider the practice of law to be, first and foremost, about their clients. The professionalism they aim to have and the commitment to offer exceptional service to their clients give them the advantage they seek to obtain over their competitors. -----------------------------------------------------------------------They are recognized for the girth and depth of their legal knowledge , expertise and experience and they promise to apply them each and every time for their clients’ benefit. They have been developing and growing as a firm the last years by building trusting relationships with their clients and their people. Haviaras & Philippou LLC together with its affiliates give the opportunity to its clients to handle every business related matter through their people. Amongst other aspects, they have a strong litigation team which is able to get involved and represent clients on any matter of law a conflict exists. Then there is the corporate team which can assist any physical
person or legal entity with all issues arising in the day to day business running to general management of a company, tax planning and accounting. Corporate litigation is also a section of law the firm that is quite popular as well thanks to Andreas L. Haviaras one of the top litigants in Cyprus is the founding partner of the firm. They are a member of the Bar Association in Nicosia and the Bar Association of Cyprus since their incorporation and their clients consist of a wide range of local business and of clients abroad. The following is a list of their main areas of practice : Tax planning, Corporate services, Incorporation of companies in a number of jurisdictions, Trusts, Corporate litigation, Insurance Law, Admiralty & Shipping law, Passport /visas issuing, Banking /Finance, Arbitrations. Cyprus has been in the business of services for years and has grown to be one of the main jurisdictions used by foreign investors so as to enjoy the tax benefits and the well preserved to date service provided in Cyprus.
Despite the economic crisis in the world Cyprus remains a jurisdiction described often as tax heaven and thus all service providers together with the Government will try to hold on this situation with measures taken favorable to business men who look for the best solutions as far as their work is concerned.
Company: Haviaras & Philippou LLC Email: hphlaw@hphlaw.eu Web: www.hphlaw.eu Address: 20 Stasandrou street, off 101, 1060, Nicosia, Cyprus Telephone: +357 22 764 001
— Belgium -----------------------------------------------------------------------Edward Carlier is a senior partner and co-founder of Reliance Advocaten (“Reliance”), a Belgium based niche law firm specialized on the one hand in employment, pensions and immigration law and on the other hand in tax law. -----------------------------------------------------------------------PLEASE PROVIDE A BRIEF HISTORY OF YOUR FIRM AND OUTLINE YOUR MAIN PRACTICE AREAS. Established at the end of 2009 by co-founders EdwardCarlier and Koen De Bisschop, Reliance is a specialist law firm offering a full range of legal services (both advice and litigation) in all areas concerning human resources, tax, pensions and immigration law.
WHAT FACTORS HAVE CONTRIBUTED TO BELGIUM’S GDP INCREASED BY 1.9% IN 2011? AND WHY WAS BELGIUM RANKED 28TH IN THE MOST ATTRACTIVE LOCATIONS FOR DOING BUSINESS? Belgium has a modern, open, and private-enterprise-based economy which has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. All of these elements played an important role with respect to the 2011 GDP increase and also clarify why Belgium remains an attractive location for doing business.
Reliance is staffed by Belgian qualified lawyers, all of whom have an outstanding knowledge of the local legal and business environment and are fluent in Dutch, French and English.
The presence of highly skilled, multilingual employees combined with its central geographic location are often invoked as being the main reason for investments in Belgium. The quality of life is also very high in Belgium and plays equally an attracting factor.
Our lawyers provide practical solutions to legal problems aiming to create “win-win” situations for our clients, while taking full account of our clients’ commercial objectives.
CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT IN BELGIUM AND THE RISKS IT FACES IN 2012?
WHILE THE REST OF THE EURO ZONE IS STRUGGLING TO GET PAST THE ON-GOING ECONOMIC DOWNTURN, WHY IS BENELUX ONE OF THE FEW REGIONS THAT ARE STAYING AFLOAT?
The Belgian industry is concentrated mainly in the more heavily-populated region of Flanders in the north. With few natural resources, Belgium imports substantial quantities of raw materials and exports a large volume of manufactures, making its economy vulnerable to volatility in world markets. Roughly three-quarters of Belgium’s trade is with other EU countries.
Several explanations are generally put forward in this respect by economists. An important reason is in any event the openness of the Belgian economy. The economic activity, certainly in 2010, benefitted from a strong increase in net exports, driven by the impressive economic recovery in Germany, Belgium’s main trading partner.
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HOW HAS BELGIUM BEEN EFFECTED BY THE EURO ZONE CRISIS? The Belgian financial sector has been effected heavily by the financial crisis. Fortis has been absorbed by BNP Paribas, Belfius (before Dexia) is now a state-owned bank and KBC
has been obliged, in view of the received state aid, to sell-off a significant portion of its business. Further, the decline in economic activity was accompanied by a less than proportional contraction in the volume of labour, resulting in a fall in labour productivity. The reduction in the volume of labour was only partly reflected in the trend in employment. The customary practice of labour hoarding, which consists of refraining from making redundancies assuming a rapid recovery in activity and in the light of existing shortages of qualified staff, was in fact reinforced by the system of temporary unemployment and the special measures to combat the crisis. These two forms of labour hoarding brought about a considerable decrease in the number of hours worked per employee.
Company: Reliance Advocaten Name: Edward Carlier Email: edward.carlier@reliancelaw.be Web: www.reliancelaw.be Address: Convenstraat 2, 2800 Mechelen, Belgium Telephone: +32 (0)15 63 66 53
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Doing Business Around the World
DOING BUSINESS IN LUXEMBOURG
DOING BUSINESS IN TURKEY
Company: Ober Avocats and Beerens Name: Stéphane Ober Email: sober@ober.lu Web: www.ober.lu Address: 37A, Avenue J.F. Kennedy L-1855 Luxembourg Telephone: 352 26 26 79-1
Company: Intetra Name: Mehmet Omerbeyoglu Email: mehmet@intetra.com.tr Web: www.intetra.com.tr Address: Istanbul, Turkey Telephone: 0216 456 86 4
— Turkey -----------------------------------------------------------------------Öznur Öztürk works for Independent Accountants, which is an Accounting, Tax and Legal Advisor Service Company. His is a Partner of the Outsourcing Department. The firm is a member of TURMOB which is CPA Associations in Turkey. -----------------------------------------------------------------------Following the closedown of the Outsourcing department of Ernst & Young in Ankara in 2004, IA was launched under my leadership as the Department Manager. Employing over fifteen professional personnel with foreign language skills, IA offers service primarily for foreign capital organizations and companies in frame of the financial advisors act and legal arrangements applicable in Turkey. IA offers payroll, bookkeeping, reporting, tax counseling and legal counseling services for foreign capital organizations from the establishment until liquidation and winding-up processes in line with the Commercial Law, Tax Law and Tax Agreements. We also provide Executive Board Membership, Management, Audit, or agency services through any power of attorney for any foreign capital companies upon their demand.
ACQUISITION INTERNATIONAL
We provide our customers the best of the best with our hardworking and experienced employees. Strategically, we are connected to Europe, Asia and the Middle East. This is an important location and has enabled Turkey to grow very fast. To improve its business environment in 2012, Turkey is applying safe economic policies for the foreign investors. We can also mention the fact that we have stabilized inflation, enabled foreign capitalized companies to establish and applied law taxes in line with other countries in Europe and Asia. Under favour of new banking law and regulations, Turkey has become one of the major recipients of Foreign Direct Investment. Occasionally, structural reforms have the purpose of increasing the role of the private sector in Turkish economy. Today Turkey predicts to bring the level of per capita income to 25 thousand dollars in 2023 and that means a great opportunity for foreign investors.
Company: AZİM ÇİĞİL LAW OFFICE Name: Öznur Öztürk Web: www.azimcigil.av.tr Address: Sülün Sokak. No:32 PK 34330 Levent , İSTANBUL-TURKEY Telephone: + 90 212 269 25 77
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SECTOR SPOTLIGHT:
Comprehensive Due Diligence
COMPREHENSIVE — Due Diligence
-----------------------------------------------------------------------Olivier Bietrix is an Audit Partner at Mazars, France, and is in charge of Financial Advisory Services for Mid-Market. -----------------------------------------------------------------------CAN YOU PLEASE DESCRIBE A TYPICAL CLIENT? HAS THE PROFILE OF YOUR CLIENT CHANGED AS A RESULT OF THE DOWNTURN? Our clients are both private equity funds and corporate clients.
We usually work on private companies with enterprise value between M€ 10 and 250, located in France as well in European countries, if not abroad.
Last but not least it provides the potential buyer with independent advice. There is a growing demand on vendor due diligence as well, which strongly contribute to securing and accelerating the acquisition process. CAN YOU PLEASE EXPLAIN THE IMPORTANCE OF FINANCIAL DUE DILIGENCE AND DEMONSTRATE HOW IT CAN MAKE A POSITIVE CONTRIBUTION TO A TRANSACTION? Main contribution of financial due diligence is the following: 1) Disclosure of material misstatements in the financial statements 2) Identification of non recurrent or non normative revenues or costs
4) Critical analysis of current trading and business plan assumptions As such they contribute to better understand the business model of the target, very often to lower the price and reduce the risk of post-acquisition litigation.
WHY IS EFFECTIVE DUE DILIGENCE IMPERATIVE IN M&A TRANSACTIONS? WHAT ARE THE KEY BENEFITS TO POTENTIAL BUYERS?
WHY IS FINANCIAL DUE DILIGENCE OFTEN NOT GIVEN ADEQUATE ATTENTION IN M&A?
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Is the outlook for the company promising? Is the price justified? Is this the right time to buy? Is the company positioned in a growing market? Will its business model allow it to capture further growth? A Commercial Due Diligence (CDD) will address the above questions by undertaking a comprehensive review of the company’s business plan in the context of projected market conditions, competitive environment and customer base. It will address specific commercial questions such as:
3) Identification of debt like elements
In spite of the economic downturn, the middle market is still active. Moreover, in France, the need for equity is increasing, due to a decrease in bank credit.
Due diligence is imperative as it helps to establish a link between figures and operations, to understand the relationship between the business model and profitability and to appreciate the normativity of ratios (usually EBITDA or EBIT and Net Debt) as well as key assumptions taken into account for the valuation.
-----------------------------------------------------------------------Lushani Kodituwakku is Head of Strategy and Commercial Advisory at Grant Thornton. Here, she explains the key to M&A success where Commercial Due Diligence is concerned. -----------------------------------------------------------------------Due diligence provides the acquirer with fact-based answers to questions such as:
It may appear to some as nothing more than a formality. In a context of increasing risks, we consider a higher attention should be given to the reliability of financial data provided by all sides.
Does the business model position the company well to capture market growth? Is the company positioned in a growing market which supports managements projections? Is there a potential for further market / customer penetration? Can the target prove the stability, longevity and growth potential of their customer base? Is there a risk that the type and volume of business the existing customers have with the company may change? Is there a threat of substitutes / new entrants to the target’s market? Moreover, we regularly work alongside our financial, operational, IT and Tax due diligence teams. As a result, our conclusions and recommendations are based on empirical evidence and on integrated views of all aspects of the transaction, providing an integrated approach to Due
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT:
Comprehensive Due Diligence
Diligence. Having a target with sound financials is no longer enough. Commercial Due Diligence has become a critical element of the due diligence process especially in such challenging market conditions. One of the most common problems that arise in a Commercial Due Diligence is that client expectations and the CDD scope are not sufficiently aligned. To minimise this risk and to deliver a successful CDD it is necessary to have a clear scope of work and effective project planning. We develop a clear scope of work through detailed discussions with the client to understand the background of the proposed deal and working with the client to formulate the key questions that need to be answered to support their investment decision. The timetable for a CDD is always tight, and there will be pressure on the team to deliver the most comprehensive analysis in a shorter timeframe. However, a clear scope of work that both the advisor and the client have signed up to and a well thought out project plan are critical in delivering a robust analysis and meeting client expectations.
At Grant Thornton we recognise that every CDD project is different. We combine our technical skills and our experience of conducting CDDs with a bespoke approach that is adapted to the individual transaction. We deliver insightful commercial advice that helps our clients meet their strategic objectives. -----------------------------------------------------------------------James McNally is Technical Director at Wardell Armstrong International and specialises in Environmental, Social and Health and Safety Due Diligence. -----------------------------------------------------------------------With a history stretching back over 175 years our business has grown to include all aspects of Energy & Climate Change, Environment & Sustainability, Infrastructure and Utilities, Land and Property, Mining, Quarrying, Mineral Estates and Waste Resource Management. Wardell Armstrong has acted for a wide variety of private and public sector clients in a number of different sectors including: mining/minerals, industrial, waste and energy, residential and retail/commercial. Clients range from small to large businesses, local authorities, government agencies,
ACQUISITION INTERNATIONAL
financial institutions and NGO’s both internationally and throughout the UK.
Whether drivers relate to stock exchange IPOs, mergers & acquisition, raising debt, equity finance, or marketing company assets for takeover, Wardell Armstrong apply effective due diligence to help execute transactions smoothly. In particular, we can apply quantification techniques of known and potential liabilities consistent with Financial Accounting Standards Board (FASB) guidance and other methodologies published by international regulators. To manage risks and protect investment requires an advisory team with solid technical and engineering understanding. Having an international presence and experience with junior explorers, mid-tier and senior miners, international investment with banks and corporations, Wardell Armstrong understand potential liabilities, international best practice and apply innovative advisory and management solutions. We work with financial clients in respect of project debt and equity financings, public offerings, M&A and distressed asset disposal. Understanding the value of assets and adequately costing liabilities is essential in making informed decisions at critical stages in project development. For mining we can employ these techniques during exploration, development, operation and closure. Environmental due diligence is often not given adequate attention in M&A possibly because environmental due diligence is not well understood and is treated more as a “box-ticking exercise� rather than an essential ingredient. The culture of environmental management varies across international regions and liabilities can be significant where these are not appropriately managed, potentially resulting in fines, impacting reputation and ultimately share price. In an Environmental due diligence plan Wardell Armstrong utilise a pre-audit questionnaire to understand the asset prior to reconnaissance. Effective research, collation and interpretation of data is essential. This requires adequate time and budget provisions and tailored reporting and client communication.
Company: Mazar Name: Olivier BIETRIX - Partner FAS/TS Email: olivier.bietrix@mazars.fr Web: www.mazars.fr Address: Le Premium - 131 Boulevard Stalingrad 69624 Villeurbanne Cedex Telephone: + 00 33 4 26 84 52 52
Company: Grant Thornton UK LLP Name: Lushani Kodituwakku Email: lushani.kodituwakku@uk.gt.com Web: www.grant-thornton.co.uk Address: 30 Finsbury Square | London | EC2P 2YU Telephone: +44 (0)20 78652428
Company: Wardell Armstrong Name: James McNally Email: jmcnally@wardell-armstrong.com Web: www.wardell-armstrong.com Address: Wardell Armstrong International, Sutherland House, 5-6 Argyll Street, London, W1F 7TE Telephone: +44 (0) 20 7287 2872
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SECTOR SPOTLIGHT:
Managing Future Uncertainty in M&A Transactions
MANAGING FUTURE UNCERTAINTY — in M&A Transactions Alexander Vogel is partner and the head of the corporate finance team of Meyerlustenberger Lachenal. He specializes in national and international M&A, private equity, corporate finance, in particular acquisition finance. He is advising Swiss and foreign clients on structures for investment schemes and complex real estate financing transactions. Andrea Sieber is partner of the corporate finance team of Meyerlustenberger Lachenal. She specializes in national and international mergers and acquisitions, private equity and capital market transactions as well as national and international company reorganizations. She also advises Swiss and foreign clients on collective investment schemes and on issues related to contract, commercial and corporate law. CAN YOU PLEASE DESCRIBE A TYPICAL CLIENT? Meyerlustenberger Lachenal’s clients include Swiss and foreign groups, institutions and private individuals. In the M&A area the firm advises on a regular basis (i) midsized - public and private - Swiss and foreign industrial groups and (ii) private equity funds. Please outline the most common forms of contingent consideration and the reasons for their use/effectiveness. The most common form of contingent consideration are earn-out arrangements. Typically, a (significant) portion of the (cash or share) consideration is only payable to the seller(s), if the target company exceeds certain preestablished financial hurdles (e.g. revenue, EBIT or EBITDA targets) after the closing date. Earn-outs are the most common method of bridging a valuation gap between buyer and seller. With an earn-out structure, the buyer will usually also reserve the right to set off some or all types of warranty or indemnity claims against the outstanding earn-out payments. Other structures used include subordinated vendor loans (or seller notes) which provide for repayment which is conditional upon the achievement of certain financial milestones and partial acquisitions (i.e. the seller keeping a minority interest in the target or rolls his minority interest in the target over in an equity interest of the acquisition vehicle) combined with call/put arrangements which provide for an exercise price that is based upon the financial performance of the target company during predefined periods in the future. Escrow solutions are most often seen where buyer and seller agree on the purchase price to be paid for the target company, but they fail to agree on the financial impact of one or more specific risks which have been identified in the course of buyer’s due diligence process.
purchase price. However, the seller will usually request for certain protection to avoid or mitigate a payment risk (e.g. bank guarantee).
somewhat improved for the Swiss economy, the European economic environment recently showed signs of further decline, according to SECO.
How do methods such as sales pipeline analysis, contingent earnouts and clawback clauses help to determine fair value and shift some of the risk towards the seller?
As the continuing economic uncertainty within the European Union continues to be a dominating force in European M&A activity, Swiss companies which were to profit from a strong Swiss Franc when acquiring may tend to wait for a clearer economic environment before conducting outbound transactions. With ongoing restricted credit availability, companies that are able to finance acquisitions with a significant equity contribution are expected to prevail as potential buyers in the current market environment.
As the earn-out mechanism ties a part of the consideration on the future performance of the target company’s business, both the benefits and the risks of the target company’s performance post-closing are shared by seller and buyer. For the seller, earn-out payments provide a chance to (substantially) increase the purchase price. For the buyer it might also be a way to increase the incentive and motivation for the seller (in case the selling parties are individuals and remain part of the management team of the target company or in case the seller can indirectly influence the performance of the business e.g. by transferring technical knowhow, customer relationships or business leads) to maximize performance of the target during the earn-out period. DO YOU THINK THAT DEAL VOLUME COULD RETURN TO PRE-CRISIS LEVELS IF ENOUGH PEOPLE USED THESE STRATEGIES? In case of valuation gaps between the seller and the buyer and/or specific risks identified during the due diligence review, earn-out or escrow mechanisms remain a good strategy to find an acceptable solution for both parties and, therefore, can help to make these deals happen. However, geopolitical and macro-economic reasons causing uncertainty and volatile markets remain – in our view – the pre-dominant factors, which determine whether the M&A market recovers and returns to pre-crises levels.
Guided by our maxim “Finding solutions is our mission. Advising clients is our passion“, Meyerlustenberger Lachenal serves its national and international clients with innovative approaches to complex issues. Our approach and ambition is to obtain in-depth knowledge of our clients’ business and legal concerns in order to find and apply solutions tailored to the specific situation and the particular needs of our clients. WHAT ARE YOU PREDICTIONS FOR NEXT 12 MONTHS? ARE THERE ANY NEW IDEAS ON THE HORIZON THAT COULD DRAMATICALLY ALTER OUR APPROACH TO RISK MANAGEMENT IN M&A?
With the escrow solution, the buyer deposits a certain portion of the purchase price into escrow, which will then be released to the seller(s) if the said issues are remedied without financial damage to the target. Even more beneficial for the buyer is a deferred payment – upon the settlement of said issues – and, therefore, allowing the buyer to postpone financing of said portion of the
The Swiss economy’s strong performance is mainly supported by a stable domestic market and a fairly resistant Swiss export sector. Even though the short term outlook has
/ August 2012
Overall, Swiss M&A activity for the last four months of 2012 is expected to remain stable, however, trending down. In view of the continuing uncertainty regarding the economic outlook, well advised buyers will remain cautious, will use increased levels of due diligence to determine the quality of the information provided by the seller(s) and to update and challenge their valuation models and will push to share some of the risks relating to the target with the seller(s). This approach is also helpful to make realistic assessments of the challenges ahead and to develop specific plans for the fast and smooth integration of the business to be acquired, thereby significantly reducing the risk inherent in any acquisition.
HOW ARE YOUR SERVICES SUPERIOR TO THOSE OF YOUR COMPETITORS?
The Swiss State Secretariat for Economic Affairs (SECO) increased its GDP growth forecast for the ongoing calendar year from 0.8% to 1.4%, citing better than expected performance of the Swiss economy, despite the strong Swiss Franc and the recessionary economic conditions in many EU countries.
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As Swiss companies are traditionally less leveraged than European competitors, this might be an advantage in doing deals. However, as the economic outlook remains uncertain, cash reserves may also be used as a cushion for tougher times. As an alternative to traditional sources of acquisition financing, vendor loans and earn-outs continue to gain momentum.
Name: Dr. Alexander Vogel, LL.M. Email: alexander.vogel@ mll-legal.com Telephone: +41 44 396 91 91 Name: Andrea Sieber, lic.iur. HSG, LL.M. Email: andrea.sieber@ mll-legal.com Telephone: +41 44 396 91 91 Company: Meyerlustenberger Lachenal Web: www.mll-legal.com Address: Forchstrasse 452, P.O. Box 1432, 8032 Zurich
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TORONTO COMMERCIAL ARBITRATION SOCIETY Why Arbitrate in Toronto? Toronto is one of the best places in the world to arbitrate commercial disputes. Toronto is a more convenient, less expensive and more reliable place to conduct arbitrations than the world’s traditional arbitration centres. It’s also an exciting and entertaining city. Have a look at our website, the qualifications and experience of our members as counsel and arbitrators and the excellent facilities for holding arbitrations. Come and enjoy our amazing city!
Visit us at torontocommercialarbitrationsociety.com to learn more.
The Construction Contracts Consultants Atlas Commercial Consultants Ltd. is a UK based firm of Quantity Surveyors and Construction Contracts Consultants. We have been engaged in numerous complex construction disputes in the UK, Europe, Middle and Far East over the last decade. We have acted on behalf of Multi-national Employers and Contractors alike, in disputes from tens of thousands to tens of millions of dollars on several of the world’s iconic projects. Our experience and pragmatic approach assists our Clients in managing their risk and expectations in matters of dispute with an energetic approach to achieving prompt and cost effective resolution in matters of dispute. Contact us today for a free initial consultation.
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SECTOR SPOTLIGHT:
Spotlight on the Arab League
SPOTLIGHT — on the Arab League Gabriel Oussi, of Oussi Law Firm, Syria, explains to Acquisition International the concept behind the Arab League and what it means to the Arab people.
On 29 May 1941 Anthony Eden, Minister of Foreign Affairs of Britain, gave a speech in which he said, “ The Arab world has made great strides since the settlement concluded after the last World War and the Arabs are looking forward to gaining our support in their endeavours for this goal. We should not neglect the response to this request from our friends. It seems natural and rightful to strengthen the cultural and economic relationships among the Arab countries as well as the political relationships.” On 24 February 1943 he declared in the British House of Commons that the British government “considers with sympathy every movement among the Arabs aiming to achieve their economic, cultural and political unity”. In 1942, the Egyptian Prime Minister, Mustafa al-Nahhas, invited both the Syrian Prime Minister, Jamil Mardam and the Head of the Lebanese National Bloc, Bechara alKhoury, to Cairo to discuss with them the idea of founding an Arab league to strengthen the relationships of the Arab countries joining this league. This was the first time the idea of the Arab League was raised so clearly. The Egyptian Prime Minister also reassured the readiness of the Egyptian government to explore the opinions of the Arab governments on the question of unity and convening a conference to discuss this idea which was commended by the governor of Jordan, Emir Abdullah. In consequence, a series of bilateral consultations began between Egypt, on one part, and the representatives of Iraq, Syria, Lebanon, Kingdom of Saudi Arabia, Jordan and Yemen, on the other. These consultations resulted in crystallization of two main trends concerning the unity : the first trend called for what may be described as the sub - regional unity the constituent of which is Greater Syria or the Fertile Crescent, and the second trend called for a more common and more comprehensive type of unity embracing all the independent Arab states, even though this trend, in turn, had two separate opinions of which one calls for a federal or confederal unity among the concerned Arab states and the other calls for an in-between formula achieving cooperation and coordination in various fields and maintaining, at the same time, independence and sovereignty of the states. When a Preparatory Committee containing representatives of Syria, Lebanon, Jordan, Iraq, Egypt and Yemen, as an observer, in the period 25 September – 7 October 1944, this
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committee advocated the unity of the Arab independent states in a way not affecting their independence and sovereignty and agreed to call the relationship embodying this unity “ The League of Arab States” in the light of which the Alexandria Protocol was concluded and became the first document of the Arab League. The Alexandria Protocol provides for the following: •Founding the League of Arab States of the independent Arab states which accept joining it. This league will have a council in which the states joining the league are represented on an equal footing. •The mission of the Council of the League is to observe implementation of what the states conclude among them of agreements, hold regular meetings to strengthen the relationships among them, coordinate their political plans to achieve cooperation among them and maintain their independence and sovereignty against any aggression in the possible political means and consider, in general, the affairs of the Arab countries. •The resolutions of the Council are binding on those who accept them excluding the cases where a dispute takes place between two states of the members of the League wherefore both parties resort to the Council to settle the dispute between them. In such cases the resolutions of the Council are binding and in force.
formed by the Alexandria Protocol and the representatives of the Arab states signing the Alexandria Protocol in addition to which are the representatives of Saudi Arabia and Yemen and a representative of the Palestinian parties, who attended as an observer. After completing the draft charter which was the result of sixteen meetings held by the above mentioned parties in the headquarters of the Egyptian Ministry of Foreign Affairs in the period 17 February – 3 March 1945, the charter was approved in al-Zaafaran Palace in Cairo on 19 March 1945 after adding some revisions on it. The League of Arab States is an organization comprising states in the Middle East and Africa the members of which are Arab states. The charter of the League of Arab States provides for coordination among the member states of the economic affairs including the trade relationships, telecommunications, cultural relationships, nationalities, travel documents and passports, social relationship and health. The headquarters of the League of Arab States is Cairo, Arab Republic of Egypt. The headquarters was exceptionally moved to Tunisia and then returned once again to Cairo.In consideration of the stance of the Syrian Arab Republic against the armed opposition in Syria and despite all new reforms which were achieved by the Syrian government, the Arab League resolved to freeze the membership of Syria in it.
•No resort to force shall be followed to settle the disputes between two states of the states of the League nor shall be followed a foreign police harmful to the policy of the League of Arab States or of any one of its states. •Every state of the member states of the Arab League may conclude special agreements with another state of the states of the League or with other states, which do not contradict with texts and spirit of these provisions. •Finally, recognition of the sovereignty and independence of the states joining the league actually in their existing borders. The Alexandria Protocol represents the principal document on the basis of which the Charter of the League of Arab States was set forth. participating in the preparation of this protocol are the political sub-committee recommended to be
Company: Gabriel Oussi Name: Oussi Law Firm Email: go-law@oussico.net Web: www.international-referral.com/ userprofiles/GabrielOussi Address: P.O Box: 2506, Salhiye – ShouhadaNo.18 Damascus – Syria Telephone: 00963 11 33500090\1
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
REWRITING THE RULES — on Insolvency
Hendrik van Druten and Vincent Vroom are attorneys at law Loyens & Loeff, members of the Corporate Law practice group. They have a broad practice varying from restructuring and corporate recovery work to distressed M&A and associated litigation work. Hendrik and Vincent specialise in insolvency law and handling a range of issues related to the restructuring of transactions, whether they arise within courtroons or outside.
WHAT (IF ANY) WERE THE MAJOR FLAWS WITH THE PREVIOUS (AND IN SOME CASES STILL EXISTING) INSOLVENCY LAWS IN YOUR JURISDICTION?
the law to changed circumstances, modernising insolvency law (and thus the Dutch Bankruptcy Code) would create more certainty in respect of the applicable rules and regulations.
DOES YOUR FIRM PROVIDE ADVICE IN A FULL RANGE OF INSOLVENCY ISSUES OR DO YOU HAVE A NICHE AREA?
Not so much of a major flaw, but more of an impracticality, is the requirement that has been developed in Dutch case law to the effect that a creditor filing for the bankruptcy of a debtor should prove that such debtor has more than one creditor.
More certainty leads to more stability in the economic environment, not only in relation to Dutch companies but also with respect to foreign companies. Certainty with respect to the Dutch insolvency rules could make it more attractive to do business with companies situated in the Netherlands, which would have a positive influence on Dutch economy.
Loyens & Loeff provides advice in all insolvency related issues, as well as toplevel legal and tax advice for international businesses, financial institutions and government bodies. Thanks to our closely collaborating legal and tax practices, we have built up a unique and very solid position in the market. Different specialists tackle issues from different sides, offering the best advice in the most efficient way. With about 1,500 employees worldwide, consisting of about 400 tax experts and about the same number of legal experts, we are capable of effectively structuring and supervising both domestic and international matters. WHO IS A TYPICAL CLIENT? The team mostly acts in complex domestic and international restructurings and security rights issues, focusing on (international) workouts and insolvencies. Main clients include national and international banks, large retailers and energy suppliers. We have been involved in most recent major restructurings and insolvencies, either on the debtor or the creditor side. WHAT STEPS HAS YOUR JURISDICTION TAKEN TO MODERNISE INSOLVENCY LAWS? HAVE THESE STEPS FUELLED YOUR REGION’S ECONOMY? A recent development that should be mentioned in this respect is the preliminary bill on the Dutch Bankruptcy Code. Although this preliminary bill has not been implemented as the Minister of Justice held that there was no need for a comprehensive renewal of the Dutch Bankruptcy Code, the minister did invite members of INSOLAD to propose suggestions aimed at the improvement of Dutch insolvency laws. Such invitation resulted in the “Proposals for the amendment of the Dutch Bankruptcy Code” drawn up by the Commission INSOLAD, aimed at the modernization of Dutch insolvency laws.
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It is in principle not possible to merely state that this is the case, but the filing creditor should specifically state which other creditor is left unpaid. As the filing creditor usually does not have access to the debtors books and records, in practice this requirement could sometimes lead to difficulties when applying for a bankruptcy adjudication. CAN YOU PLEASE DEFINE RECENT FRAMEWORKS THAT HAVE BEEN IMPLEMENTED IN YOUR RESTRUCTURING & INSOLVENCY PRACTICE?
One of the difficulties for secured lenders in the current market is that it is not always possible to find a purchaser willing to make a bid on the secured assets.
HAVE ANY CHANGES BEEN MADE TO RESTRUCTURING LAW IN YOUR JURISDICTION? IF SO, HOW CAN THESE CHANGES HELP BUSINESSES THROUGH PERIODS OF FINANCIAL DIFFICULTY? Recent case law that should be mentioned in this respect is the Supreme Court case dated 3 February 2012 (Dix q.q./ING), in which the Supreme Court has acknowledged current banking practice of creating rights of pledge for the benefit of itself on receivables of its debtors against third parties, by making use of a power of attorney included to that effect in the general banking conditions. By using this construction, banks have found a way in which so called absolute future receivables (i.e. not arising out of a legal relationship existing at the time the right of pledge was created) can be effectively pledged without notification of the third party debtor. This Supreme Court case has been a victory for Dutch banking practice and has extended possibilities to create security for the payment obligations of the banks’ debtors.
Where the financing provided to borrowers has been used to acquire a large real estate portfolio, it may be preferable in a restructuring to sell the properties on an individual basis (or in small numbers) instead of on a portfolio basis, since there are not always buyers in the market that are able or willing to acquire a large portfolio. These potential purchasers will likely have to raise debt financing in order to make a credible bid (unless the secured lenders are willing to “roll over” their loans) and clearly the debt market has not been very open in recent years. This has led to more creative approaches to restructuring, whereby control is taken away from the shareholder/sponsor without a full market sale of the assets taking place. Such a structure can be achieved by transferring the shares in the holding company to a Dutch foundation (which is a separate legal entity with full legal personality). CAN YOU PLEASE EXPLAIN HOW MODERNISING INSOLVENCY LAWS CAN CREATE FINANCIAL STABILITY AND AN EFFICIENT FINANCIAL SYSTEM? The Dutch Bankruptcy Code dates from 1896. Since that time, the economy and the business of companies has developed and adjusted to our current needs. Although case law keeps track of such developments and provides for the possibility to adapt
Name: Hendrik van Druten, advocaat Email: hendrik.van.druten@ loyensloeff.com Telephone: +31 20 578 5925 Name: Vincent Vroom Email: vincent.vroom@ loyensloeff.com Telephone: +31 20 578 59 84
Company: Loyens & Loeff N.V. Web: www.loyensloeff.com Address: P.O. Box 71170, 1008 BD Amsterdam, the Netherlands
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency
CASE STUDY THE BRITISH VIRGIN ISLANDS INSOLVENCY REGIME The British Virgin Islands (“BVI”) has a modern insolvency regime, based on an Insolvency Act and Rules that were brought into force in 2003 and 2005, and which is tailored to the BVI’s particular requirements as a leading offshore financial centre. Good legislation needs enforcement and access to justice to be effective, and the BVI Insolvency Act is supported by a modern commercial Court, whose judge is extremely experienced in insolvency and corporate matters. The combination of appropriate legislation and an efficient and experienced Court system has enabled the BVI to deal effectively with fall-out from the financial crisis in 2008, such as the collapse of a number of high-profile hedge funds with Madoff exposure. The BVI regime has also encouraged the development of a sophisticated professional environment, and the market now supports a large number of high quality insolvency practitioners, legal advisors, related professional service providers and industry bodies including a local INSOL member organisation. The BVI insolvency regime provides for the strict and effective regulation and licensing of insolvency practitioners to ensure that this high quality is preserved. Recent legislative developments have, amongst other matters, focused on strengthening this regulatory environment, for
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example by requiring that the solvent liquidation of regulated entities in the BVI be conducted by a licensed insolvency practitioner. The insolvency regime is subject to ongoing review by the legislature, in consultation with the financial services industry. A key question is whether the sections of the Insolvency Act that incorporate the UNCITRAL model law on insolvency, will be brought into effect. Other than resolution of that question, we do not consider that major changes to BVI insolvency law are necessary or likely in the near future. The current situation is stable, predictable and modern, and therefore highly beneficial to those who invest in and lend to BVI companies. August 2012 © MAPLES AND CALDER About the Authors Arabella di Iorio is the Managing Partner of Maples and Calder BVI, and the head of the BVI litigation and trusts practice groups. She specialises in complex international commercial litigation, including insolvency, distressed funds, shareholder issues, asset tracing, trust disputes, insurance and reinsurance, professional negligence and contractual claims. She has considerable arbitration and mediation experience and is a solicitor-advocate. Arabella also advises on non-contentious trusts matters. Arabella is recommended by Chambers Global, Legal 500 and the PLC Which Lawyer? Yearbook. She is also listed as a leading lawyer in The Citywealth Offshore Leaders List. Ben Mays is a senior associate in Maples and Calder’s BVI office. He is a solicitor advocate with a diverse commercial
litigation practice and a particular specialism in contentious and non-contentious cross-border insolvency. He advises on insolvent and solvent liquidations, acting for liquidators, shareholders, creditors, debtors and directors, and has expertise in company and debt restructurings. Ben is also experienced in complex international commercial litigation including shareholder disputes, asset tracing and contractual claims. Ben regularly appears in Court as an advocate. He is recommended by Chambers Global.
Name: Arabella di Iorio Email: arabella.diiorio@ maplesandcalder.com Telephone: +1 284 852 3016
Name: Ben Mays Email: ben.mays@ maplesandcalder.com Telephone: +1 284 852 3018
Firm: Maples and Calder Web: www.maplesandcalder.com Address: Sea Meadow House, PO Box 173 Road Town, Tortola, VG1110, British Virgin Islands
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency -----------------------------------------------------------------------Marcus Pallot is a key partner at Carey Olsen (Jersey) in the Insolvency and Restructuring practice team. He works closely with David Jones, a Senior Associate at the Guernsey office. -----------------------------------------------------------------------Carey Olsen is a full service law firm providing advice and assistance in respect on matters relating to the laws of Jersey & Guernsey, and with a Cayman Islands and the British Virgin Islands law capability. The Restructuring and Insolvency practice team group combines experience from different legal spheres, including corporate law, dispute resolution and banking and finance. The team assists in insolvency and potential insolvency (including cross-border insolvency proceedings), enforcement of securities, restructuring and recovery. Our lawyers bring broad experience in this area for the benefit of distressed debtors or other obligors, acting for the debtor, creditor/security holder, contractual counterparty or other stakeholder. Carey Olsen’s experience in debt and equity finance brings with it an awareness of the advantages and disadvantages that attend a given case and the different courses of action available. WHO IS A TYPICAL CLIENT FOR CAREY OLSEN? Our business is based on relationships, the service and overall client experience we deliver. Our clients are broken down into these main categories;
• LAW FIRMS As an offshore law firm our business is reliant on a network of referring law firms. Historically this is made up of City of London and UK law firms but we are increasingly seeing work referred from international law firms that require Guernsey, Jersey, BVI and Cayman legal advice. It is therefore important that we are seen as a credible partner who can work alongside referring firms. We compete with other offshore law firms to be the primary adviser of choice in the jurisdictions in which we operate.
• FINANCIAL INSTITUTIONS These comprise of international banks (including local branches), trust companies, private equity funds and managers, hedge funds, asset managers, investment advisors, insurers, pension funds and other financial institutions. Our clients are based in the Channel Islands, UK and internationally. We have direct relationships with this client base and have gained positions on approved panels for the major banks. We have regular contact with this group of clients in varying forms across the practice groups.
• CORPORATES Carey Olsen advises more LSE & AIM listed companies than any other offshore law firm. We advise large corporates on capital raisings, offshore structuring, investments, mergers and acquisitions, schemes of arrangement and financing transactions and the advice we provide is delivered by our various practice groups. Carey Olsen also advises corporates who are starting up and growing their business, as well as businesses and entrepreneurs wanting to relocate to the islands.
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• ACCOUNTANCY FIRMS AND INSOLVENCY PRACTITIONERS The firm receives substantial instructions directly from the world’s leading accountancy practices and numerous independent specialist firms of insolvency practitioners. WHAT STEPS HAS YOUR JURISDICTION TAKEN TO MODERNIZE INSOLVENCY LAWS? HAVE THESE STEPS FUELLED YOUR REGION’S ECONOMY? Jersey is a customary law jurisdiction and as a result the law of the Island is flexible and ever changing. Older and often unwritten customary law procedures for bankruptcy have been materially reflected in modern Jersey Laws such that the tools available for practitioners to use to promote or protect businesses are varied, effective, comprehensible and able to be obtained in clear from for any potential applicant. In the current economic climate we are very pleased that the attention of our government and Institute of Law, whilst focused on dealing with headline events, has also fallen onto considering reform of the insolvency processes and remedies. While there are no statutes providing for receivership, administration or provisional liquidation, the tools that exist can be employed by the legal profession in imaginative ways with a flexibility that is not available in other jurisdictions which at first blush might appear more sophisticated. In the case of In re Poundworld (Jersey) Limited [2009] JRC 042 the well-trodden route of a just and equitable winding up petition was employed to create a form of provisional liquidation which allowed a business to undertake a retail disposition of its assets rather that to force a wholesale fire sale to the significant benefit of its creditors.
other common law jurisdictions on certain issues but “shoe horning” guidance from jurisdictions with differing statutory regimes into Guernsey is not always appropriate. Equally, the relative scarcity of cases that have come before the Royal Court since the enactment of the Companies Law (in relation to insolvency proceedings) creates further uncertainty. The result is office holders feeling obliged in some cases to apply to the Court for directions to ratify proposed actions. WHAT APPROACH DOES YOUR JURISDICTION TAKE TO ENFORCE PENALTIES UPON PRACTITIONERS INVOLVED IN MISCONDUCT? There is very little decided case law and very few past examples of insolvency practitioners being pursued in relation to misconduct. That may be because of the historic absence of any significant number of insolvencies. Administrators in Guernsey do not incur personal liability save to the extent that they are fraudulent, reckless or grossly negligent or act in bad faith. In liquidation, any former officer of the company may be sued for misfeasance or breach of fiduciary duty and the court retains a wide discretion on remedies. The practical reality is that Guernsey is a small jurisdiction. The Royal Court has adopted a practice of insisting that in all insolvencies, one appointment taker is locally based. Accordingly, the local faces become well known to the Court. All liquidators (appointed compulsorily) and administrators in Guernsey are formally sworn in by the Court and are required to attend Court and take an oath. If some practitioner were subsequently found guilty of some serious misconduct it seems unlikely that the Court would be persuaded to appoint them in the future.
CAN YOU PLEASE DEFINE RECENT AND PROPOSED INSOLVENCY FRAMEWORKS WITHIN YOUR JURISDICTION? HOW THEY WILL IMPACT STAKE HOLDERS? Guernsey has and still is considering reform of its insolvency laws by way of a bespoke piece of legislation akin to that in England & Wales and the BVI. That legislation is not, however, imminent. The current system seems to be working despite the uncertainties. Guernsey is not part of the EU and is not a part to the EC Insolvency Regulation nor has it adopted the UNCITRAL model law. Overseas recognition is, therefore, dealt with pursuant to the common law and/or reciprocal provisions such as section 426 of the Insolvency Act 1986. Guernsey is however, a globally recognised market for investment funds and other structures. Whilst there is no proposal to do so, the adoption of a universally recognized model law/system of recognition may benefit the Island by increasing confidence in local procedure. WHAT WERE THE MAJOR FLAWS WITH THE PREVIOUS (AND IN SOME CASES, STILL EXISTING) INSOLVENCY LAWS IN YOUR JURISDICTION? Prior to the enactment of the Companies Law in 2008, there was no administration regime available in Guernsey. In a sophisticated offshore finance center the inability to commence a formal rescue mechanism is impractical. Office holders will frequently require the flexibility administration affords to investigate and manage assets and simply to understand structures in order to realize best value for creditors. Whilst the Companies Law provides a workable framework for insolvencies, its brevity remains a concern. The basic mechanics for procedures are in place but much of the detail as to how commonly occurring issues ought to be dealt with are not. The Royal Court remains willing to seek guidance from
Name: Marcus Pallot Partner Email: Marcus.pallot@ careyolsen.com
Name: David Jones Senior Associate Email: david.jones@ careyolsen.com
Company: Carey Olsen Web: www.careyolsen.com Address: PO Box 98, Carey House, Les Banques, St. Peter Port, Guernsey GY14BZ Telephone: +44 (0) 1481 727272
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SECTOR SPOTLIGHT:
Rewriting the rules on Insolvency -----------------------------------------------------------------------Didier Bruère-Dawson is a partner at law firm DGFLA, based in Paris. The firm provides advice in a full range of insolvency issues: conciliation procedures, ad hoc mandates, recovery, takeovers of assets or going concern, continuation plans with investors or not or liquidation proceedings. -----------------------------------------------------------------------DGFLA represents either the company subject to the insolvency proceedings or the company or the investors which will offer to take over by various means the insolvent company. It also represents debtors or creditors for the setting up or implementation of security packages in an insolvent or preinsolvent environment. Didier explains how DGFLA’s services help the firm stand out from its competitors. “Whereas competitors are mostly specialized in insolvency issues, we provide, in addition to the said issues, simultaneous financial, tax (national and international), corporate, insurance, banking, real estate and labor law engineering in order to offer effective bespoke and full-service solutions suited to the strategies of our client. “For example, when one of our clients being a large construction insurer faced major issues amounting to €25m because of the insolvency procedure of its client being a developer, we provided a full service to the client and to the Court trustee (Administrateur Judiciaire) in order to ensure the viability of the safeguard plan with regards to construction law, tax law (the development program was with a specific regime), insurance law. Thanks to our well-established correspondent network, we efficiently deal with major cross-borders insolvency procedures (likely to amount to €100m), submitted or not to 2000 European ruling; either because of the need to recover assets abroad, or because of the implementation of cross-border securities packages set up in order to play around French insolvency rules (which are favorable to the debtor), or because of cross-border groups having several centers of decision in various jurisdictions.” -----------------------------------------------------------------------Alok Dhir, Managing Partner of law firm Dhir & Dhir Associates, Delhi talks about the Insolvency regime in India and the regulations surrounding it. ------------------------------------------------------------------------
The current business environment both domestic and global is beset with risk of all kinds presenting continuous challenges to commercial enterprises, resulting in many of them facing financial distress and insolvency. “Most jurisdictions around the world have been revising and rewriting laws to meet with these challenges to establish codes which create effective enforcement and insolvency systems that foster strong credit cultures and promote economic growth, by maintaining a fine balance between restructuring / rescue and insolvency, while being transparent, predictable and provide for speedy and orderly collection and distribution of the properties of the debtors amongst its creditors. The Indian Insolvency regime is made up of bagful of legislations and regulatory notifications including the Companies Act 1956, Sick Industrial Companies Act, Securitisation & Reconstruction of Financial
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Assets & Enforcement of Security Interest Act, DRT Act, Corporate Debt Restructuring guidelines notified by RBI etc. As a result different Courts and forums like the High Courts, BIFR, DRTs, CDR forum etc have somewhat overlapping jurisdictions leading to systemic delays and complexities, which are liable to be misused by unscrupulous defaulting borrowers raising the need for urgent reforms in the Insolvency regime. “To meet the challenge, the India legislature has promulgated the Companies Second Amendment Act in 2002 for consolidating the plethora of Insolvency laws, establish the NCLT, create a cadre of insolvency professionals, incorporate rules for cross border insolvencies etc. However the amendments could not be notified and another attempt is being made to revamp the entire insolvency regime through the Companies Bill 2011, which is presently under consideration of the Parliament. However, while the legislative concern is evident, much still needs to be done to match up with the best practices being followed in the other parts of the world and create an effective Insolvency regime in India.” -----------------------------------------------------------------------Ragnheidur Margret Olafsdottir is a partner at LEX Law Offices in Iceland, as well as a member of Icelandic Bar Association and the Icelandic Lawyers Association. -----------------------------------------------------------------------“In October 2008, the Icelandic financial sector collapsed due to the global financial crisis, and the three major banks that operated in Iceland were taken over by the Icelandic Financial Supervisory Authority.
New Act was adopted by Parliament on the same day as the first one of the banks was taken over. It became Act no. 125/2008 on the Authority for Treasury Disbursements due to Unusual Financial Market Circumstances, which have been referred to in Iceland as the Emergency Act. With the Emergency Act, the Minister of Finance was granted authority to disburse money to establish new financial institutions, or to take over the existing financial institutions or their bankrupt estates. The Emergency Act also granted the FSA broad authorisations to intervene in the operation of Icelandic banks in crisis under those unusual circumstances. Three new banks were established on the basis of the Emergency Act, and they took over certain assets and obligations of the old banks. These new banks have since then been facing various challenges due to the situation the collapse created in Iceland. “The rate of the Icelandic krona fell sharply due to the collapse, and companies and individuals encountered serious problems in meeting their financial obligations as borrowing in foreign currencies had increased enormously prior to the collapse. On top of all this a tremendous increase in indices followed which made it very difficult for companies and individuals, even those who had not taken loans in foreign currencies, to pay the instalments of their loans, which had multiplied. As a result, general payment capacity in the country deteriorated terribly,
for both businesses and individuals, and it was clear that this would have to be addressed in some way.However, many found relief with judgments by the Supreme Court of Iceland in June 2010, which concluded that a large part of the loans that had been granted since the year 2001 had involved unlawful exchange rate indexation. The new banks, which had taken over these loans after the collapse of the old banks, therefore had to perform a re-calculation of the loans which fell under the Supreme Court precedent, and the parties thus obtained some correction of their affairs and their situation consequently improved to some extent. Nevertheless many issues remain unresolved in this respect, such as which interest rate should apply to these loans, how to perform their re-calculation, etc. The courts have had, and will continue to have, to decide on these issues.”
Name: Didier Bruère-Dawson Email: dbrueredawson@ dgfla.com
Name: Charles Moulette Email: cmoulette@dgfla.com
Company: de Gaulle Fleurance & Associés Web: www.dgfla.com Address: 9 rue Boissy d’Anglas, 75008 Paris (France) Telephone: +33 (0)1 56 64 00 00
Company: Dhir & Dhir Associates Name: Alok Dhir Email: alok.dhir@dhirassociates.com Web: www.dhirassociates.com Address: D-55, Defence Colony, New Delhi-110024. Telephone: +91-011-42410000
Company: LEX Law Name: Ragnheidur Margret Olafsdottir Email: ragnheidur@lex.is Web: www.lex.is Address: Borgartún 26, 105 Reykjavik Iceland Telephone: +354 590 26 00
August 2012 /
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SECTOR SPOTLIGHT:
Double Taxation Agreements
DOUBLE TAXATION — Agreements
-----------------------------------------------------------------------Boris Lazic is a Tax and Legal Advisor at Eurofast Taxand in Cyprus. He advises and represents corporate and private clientele, both national and international, on cases relating to tax, including tax structuring and restructuring, real estate, intellectual property, cross border transactions as well as tax litigation. -----------------------------------------------------------------------Cyprus has signed over 45 treaties which are currently in force. Some treaties such as the treaties with the Soviet Union and Yugoslavia apply to more than one country. As a general rule the aim of all treaties is to eliminate double taxation, so that legal entities and individuals are not liable to the payment of tax on the same kind of income twice. Other than that, double tax treaties ensure that income generated in one country from sources in that country is taxable at that particular country. The purpose is to avoid possible tax avoidance. The current tendencies are that double tax treaties are used as vehicles for eliminating tax avoidance by way of exchange of information between signatory states.
-----------------------------------------------------------------------Seema Sharma works for Ernst and Young in the Mena region. She explains the rules and regulations surrounding this region with regards to double taxation. -----------------------------------------------------------------------In many MENA countries, the tax landscape is characterized by low tax rates, limited legislation and expertise and increasing fiscal pressures to increase tax collections. Consequently, tax laws are often applied with broad, subjective interpretation of tax concepts and principles. From a business investment perspective, tax outcomes need to be managed to ensure certainty of tax costs. Not just the tax payable based on tax declarations filed, but also costly taxes and penalties from assessments and disagreements. So, in an increasingly complex and dynamic business environment, how do businesses ensure that tax outcomes arising from cross border structures, transfer pricing, leasing and asset movements are planned and achieved with certainty.
Cyprus often renegotiates its Double Tax Treaties so as to meet all OECD requirements and maintain its reputation as a high quality, transparent and easy to do business Eurofast Taxand jurisdiction. I shall use the Protocol to the Double Tax Treaty between Russian and Cyprus as an example. This Protocol was signed on 7th October, 2010, in Cyprus, by the Russian President, Mr. Dmitriy Medvedev, and the Cypriot President, Mr Demetris Christofias. The Protocol, in addition to other amendments, provides that the signatory countries shall exchange such information which is foreseeable relevant for carrying out the provisions of the Double Tax Treaty.
Based on Ernst & Young’s experience of these issues in the MENA jurisdictions, the answer lies with good tax planning, use of DTAs, appropriate documentation to substantiate transfer price on intercompany transactions and sufficient tax compliance.
Exchange of information will occur even if one of the signatory countries has no interest in such information. Additionally, in accordance with the terms of the Protocol to the Double Tax Treaty between Cyprus and Russia, the signatory countries will assist each other in collection of taxes. The cooperation between states by virtue of a double taxation agreement aims to eradicate tax evasion.
Company: Eurofast Taxand Name: Boris Lazic Email: boris.lazic@eurofast.eu Web: www.eurofast.eu Address: Cypress Center, Chytron 5, 1302 Lefkosia, Cyprus Telephone: +357 22 699 222
Most MENA countries have extensive DTAs that provide considerable tax benefits relating to PE, income attribution rules, withholding tax rates and exemptions for specific transactions. Based on the above table, it is clear that in MENA, DTAs provide an invaluable framework for structuring and managing cross border investments, transactions and operating arrangements. Ernst & Young has the largest professionally qualified and experienced tax team of local tax experts and international tax, transaction tax and transfer pricing specialists located in most MENA countries including Egypt, Iraq, Kuwait, Libya, Oman, Pakistan, Qatar, Saudi Arabia and UAE.
Company: Ernst & Young Name: Seema Sharma Email: Seema.sharma@ae.ey.com Web: www.ae.ey.com Address: Rama Tower, P.O. Box 20, Kattameya, Cairo, Egypt. Telephone: +202 27260232
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SECTOR SPOTLIGHT:
Double Taxation Agreements -----------------------------------------------------------------------Juan Ignacio Fraschini is a Lawyer and Partner of Innovation Tax & Trust, as well as a member of The International Fiscal Association (IFA), The Uruguayan Institute of Tax Studies (IUET), The Corporate Tax Alliance, and The Latin America Observatory of International Taxation. -----------------------------------------------------------------------Innovation® International is a leading independent partnership that offers a range of global business and international tax planning services. With a core staff of talented and experienced professionals and a team of multilingual and highly skilled specialists, we design specific solutions tailored to guarantee the most appropriate fit to our clients’ needs. Our structure is designed to enable maximal protection and confidentiality to our clients’ operations. A close working relationship with other leading firms worldwide enables Innovation® International to offer a range of fully-integrated services globally. The key benefits of tax treaties and DTAs really depends on the country. For capital export countries, benefits are an increase of the taxable power over certain items of income and a limitation of the source country rights taxation. For capital import countries, it may imply technology transfers and increase of investments. For certain low-tax jurisdictions or non-cooperative jurisdictions in tax matters, it may imply a removal from certain lists (OECD black-lists/grey lists, CFC regimes, etc.) Negotiations are in charge of the Ministry of Foreign Affairs, but substantially they are carried on by representatives of the Ministry of Finance. Once the DTA is approved and signed by both parties, it requires approval of our Parliament by means of a LAW in order to be enforceable. The best way to reduce the amount of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other, is through an intelligent tax planning strategy, using the DTA´s in place between the parties or eventually a third DTA, taking advantage of asymmetries in the interpretation and application of the treaties (for instance qualification conflicts) and trying to apply most-favorable rules (for instance capital gains instead of dividends through dividend stripping) always considering LBO, beneficial ownership clauses and eventually anti-avoidance provisions. -----------------------------------------------------------------------Carl May is Managing Partner of May and Company, based in South Africa. The firm is a member of SAICA, STEP, IGAL and ITPA. Our firm stands out from others as we offer specialised world class services at local rates. -----------------------------------------------------------------------Double Tax Treaties (DTA) main objective is to promote international trade and economic development without the fear of double taxation on the same income. DTA’s prevent double taxation by allocating taxing rights between the two countries. Furthermore, DTA’s provide a tool for exchange of information between contracting states and taxes are determined with a fair degree of certainty under a DTA. South Africa (SA) follows OECD model. Section 108 of the Income Tax Act no.58 of 1962 mandates the National Executive to conclude DTA’s with any government in the world. After the agreement is negotiated and signed, it must be ratified by Parliament. Once ratified, DTA provisions are effective and take precedence over domestic tax law. SA has concluded many DTA’s with various countries and recently most DTA’s have been renegotiated and are pending ratification. The key benefits of DTA’s are that withholding taxes imposed by domestic law may be reduced or even eliminated. DTA’s offer good tax planning opportunities for
ACQUISITION INTERNATIONAL
taxpayers operating across borders of SA. For example, there is no withholding tax on royalties paid to residents of Cyprus in terms of the SA- Cyprus DTA. Withholding tax on dividends is reduced to 5% under Malta-SA DTA. All interest earned by non residents is exempt from tax provided the beneficial owner does not carry on a business in SA through a Permanent Establishment (PE) and in case of a natural person is not in SA for more than 183 days for the year. As a result, there is a substantial foreign inflow of funds to SA to acquire local bonds. Business profits may be repatriated to a low income jurisdiction if there is no PE in SA. As such, it is important for entrepreneurs to treaty shop and operate in the right entity in order to get the maximum DTA benefits. SA has got transfer pricing rules which need to be adhered to. -----------------------------------------------------------------------Gabriel Oussi is the founder and Manading Director of Oussia Law Firm, Syria. He speaks about double taxation in the region. -----------------------------------------------------------------------Double taxation is the levying of two taxes of the same type one the same income at one period of time and deducting these taxes from one taxpayer. There is no doubt that the double taxation generally generates some bad consequences socially, financially and economically. Therefore, legislators take care as much as they can to set the tax legislation and formulate its rules precisely and clearly to avoid as much as it is possible occurrence of the double taxation.
TWO TYPES OF DOUBLE TAXATION: 1. Domestic double taxation: It takes place when its elements become available within the regional borders of the state, no matter whether it is a simple state or a compound state. 2. International double taxation: It takes place when its elements are available within the scale of more than one state. This happens when a taxpayer gains profits outside his native country and they are considered a part of his income and he has to pay a tax on these profits in his native country. Double taxation may be avoided by one of two methods : When the law expressly provides for exemption of the taxpayer from tax if it is proved that he has already paid it to the treasury of another state, or, the legislator follows one of the aforementioned three methods to avoid the domestic double taxation, even if this will result in depriving the state from significant revenues, but it is considered, at the same time, as a factor to attract capitals and invest them in the development projects and offsets the loss of revenues. This method is resorted to by the states because of their need to capitals. When agreements are concluded between the states showing very clearly the jurisdiction of each state for levying taxes and the ways which ensure preventing levying the double taxation on the citizens of both contracting states. These agreements set forth the material of the international tax legislation.
Spain, the Czech Republic, Switzerland, Malta, Jersey, Malaysia and Mexico. Of these 25 CDTAs 20 have been signed in the last 2 years. This phenomenon viewed with surprise by many international tax practitioners, has rocketed Hong Kong into a position where it must now come under serious consideration, when a multinational organisation makes a decision as to where to locate its holding, financing or licencing entity in Asia. Even prior to this rapid establishment of a strong CDTA network Hong Kong already ticked many of the boxes in a “wish list” of desirable attributes for a location of such an entity. Its favourable tax system (under which dividends, non-Hong Kong sourced income including interest and royalties and capital gains are not taxable), its highly developed banking and communication systems and readily available of world class professional services have combined to make Hong Kong a very attractive location for a variety of business activities which would support a holding company.
Company: INNOVATION TAX & TRUST Name: JUAN IGNACIO FRASCHINI Email: ji.fraschini@innovation.com.uy Web: www.innovation.com.uy Address: Luis Alberto de Herrera 1248, World Trade Center II, Office 2306, Montevideo, Uruguay Telephone: +598 2622 66 23
Company: May and Company Name: Carl May Email: carl@mayandcompany.co.za Web: www.mayandcompany.co.za Address: 4th Floor , 5 St Georges Mall PO Box 3459, Cape Town 8000 South Africa Telephone: +27 21 425 1500
Syria has already signed several agreements with several states concerning preventing double taxation and tax evasion. -----------------------------------------------------------------------Nick Dignan is a partner at PricewaterhouseCoopers, Hong Kong. He explains why Hong Kong is the “Premier” Asian holding company location. -----------------------------------------------------------------------Hong Kong recently signed its 25th comprehensive agreement for the avoidance of double taxation (CDTA). It now has a CDTA with Belgium, Thailand, the Mainland of China, Luxembourg, Vietnam, Brunei, the Netherlands, Indonesia, Hungary, Kuwait, Austria, the United Kingdom, Ireland, Liechtenstein, France, Japan, New Zealand, Portugal,
Company: Gabriel Oussi Name: Oussi Law Firm Email: go-law@oussico.net Web: www.international-referral.com/ userprofiles/GabrielOussi Address: P.O Box: 2506, Salhiye – ShouhadaNo.18 Damascus – Syria Telephone: 00963 11 33500090\1
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SECTOR SPOTLIGHT:
Double Taxation Agreements The thing which was lacking was a DTA network which facilitated the reduction in interest and dividend withholding taxes and potential non resident capital gains tax. The recent flurry of agreed DTAs and the prospect of more goes someway to address this and moves Hong Kong toward par with traditional locations such as the Netherlands, Luxembourg and Singapore. Hong Kong may now be considered the preferred holding location for investment into China, Vietnam, Thailand, Indonesia and Japan. Leveraging of its treaties with the “Benelux” countries it likewise provides an ideal platform for investing into the European Union and beyond. -----------------------------------------------------------------------Marc Schwartz and Paul Tadros of Schwartz International speaks about the framework of US Income Tax Treaties. -----------------------------------------------------------------------The U.S. has its own model income tax treaty which is similar to the OECD Model with two major deviations, the inclusion of: the right of the U.S. to tax its citizens regardless of where they are resident, and a comprehensive limitation on benefits article to curb treaty shopping. Unlike some countries where treaties take precedence over domestic law, in the U.S. neither domestic tax law nor a treaty has such status. A later in time policy has been developed in which a new domestic law can override a treaty if it becomes law after the treaty becomes effective, and vice-versa. The U.S. tax authorities are extremely active in discouraging treaty shopping. Its primary tool is the Limitation on Benefits article. Negotiating and enforcing strict LOB articles is part of the global trend focusing on sufficient substance in a jurisdiction to allow for treaty benefits. Some U.S. treaty partners do not enforce such requirements; however, others such as Canada are becoming more active in this area. Almost all U.S. treaties contain a LOB article, and the authorities are diligently trying to include such an article in those that do not. Once a taxpayer meets the LOB article provisions, U.S. treaties can provide additional benefits: They provide a certain degree of certainty vis-à-vis whether taxation arises in either treaty partner country via a permanent establishment. For example, the other country’s tax law may rule that a permanent establishment exists but the treaty states otherwise. As an aside, for investment into the U.S., if there is any doubt as to whether a permanent establishment exists or not, it is often advisable to file a “protective” tax return reporting zero income/expenses. This preserves the right to claim tax deductions in case of an audit by the tax authorities. Since the U.S. taxes worldwide income and does not have a participation exemption, it relieves double taxation via a foreign tax credit mechanism based on foreign source income. In certain circumstances income could be considered U.S. source under domestic law even though it is subject to foreign taxes and thus those taxes would not be eligible for the foreign tax credit. However, generally there is a provision in U.S. treaties which resources the income as “foreign” allowing the U.S. taxpayer to obtain a foreign tax credit. -----------------------------------------------------------------------Mr. Anthony Uwadiae is Tax Manager at UHY Maaji & Co, based in Nigeria. -----------------------------------------------------------------------It is very important for entrepreneurs to choose the right business entity for a new company because the tax obligations and investment incentives, including tax rebates and holidays depend on the nature of the entity. Double taxation ensures that profits meant for future expansion are retained as much as legally possible and that the right taxes are paid to the right country.
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A typical Nigerian DTA has six chapters: The scope of the agreement; The definitions; The taxation of income; The method of elimination of double taxation; The special provisions; and The final provisions. Italy and Nigeria signed an agreement limited to air transportation and shipping. The overall objectives of the agreement are: The avoidance of double taxation The prevention of fiscal evasion and Exchange of information
Company: PricewaterhouseCoopers Limited Name: Nick Dignan Web: www.pwchk.com Address: 21/F Edinburgh Tower, 15 Queen’s Road Central, Hong Kong Telephone: +852 2289 3702
The key benefits of Tax Treaties/DTAs are: Avoidance of double taxation Certainty of tax treatment Grant of tax treaty benefit Lower compliance cost Prevention of fiscal evasion and avoidance Cooperation in tax matters Exchange of information Non-discrimination and Mutual agreement procedure. In Nigeria an agreement is negotiated by technocrats and it is facilitated by models provided by international conventionsprincipally the Organization for Economic Cooperation and Development(OECD),Tax Convention on Income and Capital and the United Nations(UN)Model Double Taxation Convention between Developed and Developing Countries. After the initialing on the conclusion of negotiation of the draft, it is presented to the Federal Executive Council for approval. The Minister of Finance, as the competent authority under the agreement signs on behalf of Nigeria. Where the Minister cannot personally sign, the authority is delegated to the Nigerian Ambassador/High Commissioner in the other country to sign. Thereafter the agreement goes to the National Assembly for ratification. After the ratification, Nigeria has to notify the other country through diplomatic channels that it has completed the internal procedures required to bring the agreement into completion. Instruments of ratification are exchanged between the treaty partners for the agreement to come into force.
Name: Marc Schwartz Email: mschwartz@ schwartzintl.com Telephone: 404-236-9829 Name: Paul Tadros Email: ptadros@ schwartzintl.com Telephone: 514 697 0901 Company: Schwartz International Web: www.schwartzintl.com Address: 5909chtree Dunwoody Rd., Suite 800 Atlanta, GA 30328
Company: Soussa Law Office Name: Yasser Salah Fouad Soussa Email: yasser@soussalawoffice.com Web: www.soussalawoffice.com Address: Egypt Telephone: 2688560.1.2.3
Company: UHY Maaji And Co. Name: Mr. Anthony Uwadiae Email: t.uwadiae@uhy-ng-maaji.com Web: www.uhy-ng-maaji.com Address: 1, Ilaka Street, Off Coker Road, Town Planning Way, Ilupeju Telephone: +2348033157232
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Double Taxation Agreements -----------------------------------------------------------------------Leszek Bialon is Director and Head of CIT Group at KPMG in Poland. ------------------------------------------------------------------------
Increasing demands of the State budget forced Polish Government to undertake energetic measures aimed at eliminating loopholes in the tax system and preventing from treaty shopping. Recently, a number of the tax treaties were re-negotiated, resulting in tighter controls over the tax structures, which for years made the cross-border transactions optimal from the tax point of view. More re-negotiations are in the pipeline.
ACQUISITION INTERNATIONAL
So far, the changes in the Polish tax treaty network include the treaties with: Malta, Switzerland, Isle of Man, Saudi Arabia , Jersey and Guernsey, Cyprus, Luxembourg, Norway, Iceland and Canada. Some of the changes enter into force on 1.01.2013, the other still need to be ratified, which could take more than a year before they become binding. Renegotiations have been reopened with the Netherlands, Belgium, the USA and the South Korea.
article - possibility to refuse treaty benefits in respect of income received or derived in connection with artificial arrangements. The amendments introduced to the tax treaties could imply substantial adverse tax consequences for the existing structures, involving Polish and foreign-resident companies. Thorough verification of these structures and their tax consequences would be, thus, recommended.
In particular, a wording of the agreements with Cyprus and Luxembourg will have a significant influence on the tax efficiency of transactions entered into by the Polish entities and individuals. The most important change introduced to the agreement with Cyprus is removal of a tax sparing clause. Soon, the tax on dividends, interest and royalties paid in Poland will be reduced only by taxes effectively paid in Cyprus (so far, tax sparing clause allowed for deduction of nominal tax on passive income, even if not actually paid in Cyprus). Apart from the above, directors’ fees will be taxable only in the country of residence of the director (based on the current regulations, directors’ fees may be taxed only in the country where the company has its registered seat). As for the Luxembourg, crucial changes pertain double taxation avoidance method for Polish residents with regard to dividends paid by Luxembourg companies, introduction of a ‘real estate company’ clause applied to capital gains from transfers of shares in real estate-holding companies (taxation in the state where real property is situated) and limitation of benefits (LOB)
Company: KPMG in Poland Name: Leszek Bialon Email: lbialon@kpmg.pl Web: www.kpmg.pl Address: KPMG Tax M. Michna sp. k. 51 Chlodna st., Warsaw 00-867, Poland Telephone: +48 22 528 11 86
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
Q2
— Mid-Year Review
-----------------------------------------------------------------------Ruby Maria Asturias Castillo partner of Aczalaw, Law Firm with offices, experience and practice advising foreign investment across the Central American Region. -----------------------------------------------------------------------HAVE THERE BEEN ANY NOTABLE DEALS THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? Over the last quarter we have been participating in notable deals, most of all because of their level of complexity over the last quarter. For confidentiality purposes, we cannot disclose this kind of information. Aczalaw, more and more each day, is one of the Central American Law Firms that is always being considered to represent this kind of deals, mostly because of our experience in the region, capacity to handle these kinds of transactions in intense time schedules, and our competitive tariffs. HOW HAS Q2 2012 COMPARED TO Q2 2011? In general terms, I would say that 2011 was a pretty slow year, concerning transactions. They were big relevant transactions that were recognized but not as many as previous years. 2012 has initiated with a new fresh wind, for many reasons, but mostly because it started with a solid and positive change of Government. Most definitely 2012, has been more active, compared to 2011, and the trend that is expected is for transactions to increase, for the next four years. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? According to the trimestral report 2011 from PIB, in the last quarter of 2011 there was a slowdown in manufacturing,
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wholesale, retail and private services. The most dynamic sectors reported for 2011 were: agriculture, mining, quarrying, transportation, communications and storage. It has been indicated, due to a lower demand from U.S. Market requirements, that manufacture industry reported a slower growth in the activities of food production, beverages and tobacco; processing activities in textiles, clothing, leather and footwear. At the same time, this area generated a slowdown in other manufactured products such as chemicals, metals, machinery and equipment. The trade was influenced by the slowdown in the flow of traded goods in the economy. In private services, the slowdown is due to a decrease in the activities of maintenance and repair of vehicles, real state, business, rental and intermediate demand. By 2012, Banguat maintains a growth forecast of 2.9% to 3.3%. -----------------------------------------------------------------------George Odo is the MD of the AfricInvest Capital Partners East Africa (ACP EA) office that was opened in mid 2009, and is a 100% affiliate of the AfricInvest Tuninvest group that began PE operations in 1994. -----------------------------------------------------------------------WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? There has been increased M&A in this period compared to the same period last year, with increased focus on SMEs but also on larger infrastructure and Real Estate deals. This has been driven by more political stability in the region compared to a decade ago. I can think of specific transactions in various sectors including Financial (several PE transactions recorded in Banking and Insurance), Hospitality (e.g. Kempinski set to open in Nairobi and ECP having just invested in the largest
Company: Aczalaw Abogados Centroamericanos Asociados Name: Ruby Maria Asturias Castillo Email: rasturias@aczalaw.com Web: www.aczalaw.com Address: 3Av. 13-78 Zona 10. Edificio Intercontinental Plaza, Torre Citigroup, Penthouse Norte, Nivel 17, Of.1702 Telephone: (502) 24156700
Company: AfricInvest Capital Partners Name: George Odo Email: george.odo@africinvest.com Web: www.africinvest.com Address: Box 273 00202, Nairobi, Kenyay Telephone: +254 386 1968
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
coffee house franchise in the region) Agribusiness (Coffee, Tea, Horticulture, Cereals and Dairy being the dominant industries) and Energy (A number of DFIs like DEG, IFC, FMO, etc have all invested in the energy and natural resource projects) and Transport (the cross border Rift Valley Railways transaction led by Citadel Capital with syndicated debt from IFC and others). We as AfricInvest have invested in the Pharmaceutical, FMCG and Insurance sectors in the past year. HOW HAS Q2 2012 COMPARED TO Q2 2011? The GDP of Kenya in Q2 2011 was 4.3 % and Q2 2012 was 4.1% although 2012 is expected to close at 5.1% compared to 4.9% last year. The investment market is generally a little bullish due to the European crisis. The effect of the Eurozone has been Investors in Europe are seeking alternative investments to diversify their portfolio but are moving slowly as they are being more risk averse. The trend is similar with the other countries in the East African region. PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER? The biggest worry for businesses at the moment is political risk and security. Kenya is about to go into an election and investors are watching the environment to see if the country learned any lessons from the last elections that ended violently. The instability in Somalia is and the dispute between South Sudan and its Northern neighbor is also beginning to cause some concerns. The positive development is that the neighboring countries are watching and jointly intervening through bodies like the East Africa Community (EAC), Intergovernmental Authority on Development (IGAD) and the African Union (AU) WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? In 2012, the Kenyan Government is investing heavily in infrastructure especially in Infrastructure and specifically in the Transport and Energy sectors. This together with the election year has resulted in high borrowing by the state affecting the cost of debt. The Kenyan Central Bank has also been intervening in the forex market with various instruments and policies to control liquidity and inflation. There has also been a concerted effort from the different EAC countries to standardize their policies relating to taxation, labor, etc WHAT ARE THE CURRENT PRIORITIES WITHIN YOUR REGION? Most companies are adopting the following growth strategies:Regional expansion across the EAC countries; Value addition, processing and backward/forward integration Introduce new products leveraging on ICT to reduce overheads AND Strategic Partnerships. -----------------------------------------------------------------------Quentin Bargate is Senior Partner of Bargate Murray, a boutique city of London Law firm specialising in most aspects of commercial and business law, including company law, litigation and Superyacht work. ------------------------------------------------------------------------
ACQUISITION INTERNATIONAL
WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? We undertake a lot of work with start up businesses and our base on the edge of Shoreditch means we expect to see core growth in acting for new and established technology businesses and entrepreneurs. Additionally our considerable strength as one of the world’s leading Superyacht law firms means we expect to continue to undertake major project and advisory work in this sector across the globe. WHAT ARE THE CURRENT LEVELS OF IMPORT AND EXPORT VOLUMES? ARE THESE UP OR DOWN COMPARED TO THIS TIME LAST YEAR AND WHY? As a law firm, most of our work comes from outside the UK and our advisory work to international businesses and high net worth individuals has not show any sign of a decrease. I would say up a tad, if anything. WHAT ARE THE KEY STRENGTHS OF YOUR TEAM? HAVE YOU WON ANY AWARDS/ACCOLADES RECENTLY? Our key strengths are our high client service levels. The firms’ leaders are experienced former partner in very large firms, now able to offer the highest quality advice in a more nimble and client focused environment, all at lower cost. We have won several awards recently, including Acquisition International’s prestigious award as Shipping Contracts Firm of the Year for the UK, 2012, and Corporate INTL Boutique Law Firm of the Year for the UK, 2012.
on insolvency and corporate restructurings. The credit crunch has negatively impacted private market activities since the end of 2009 up to mid 2010. The third quarter of 2010 showed encouraging signs with investors seeking opportunities, leading to a significant increase of activity in the course of the first half of 2011. However, even though this period showed the strongest performance since the collapse of Lehman Brothers, completing deals in the second half of 2011 was challenging. During this period, investors adopted a careful approach with a preference for highly selective transactions. There is strong potential for rebound in M&A activities. Private equity houses are still operating with significant amounts of funds available and will become progressively more active as acquisition opportunities emerge and the debt market starts to recover. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER? Despite of the international financial crisis, Luxembourg has still a competitive business environment and we are a financially healthy country. In fact, the country is stable and we benefit of a high-income economy. Furthermore, our proximity to France, Belgium and Germany gives to Luxembourg a highly strategic position in Europe. We also benefit of a skilled multilingual workforce and flexible and welcoming authorities which facilitate the development of business in Luxembourg. Thus, Luxembourg is one of the “places to be”.
WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION? We don’t see ourselves simply as lawyers, but as problem solvers. For example, we have set up a peer to peer start up business knowledge hub, “Seed Academy”, which has its own Facebook page and organizes events in London at places like Google Campus. We are also involved personally in more than one new start up business. It is important to nurture new businesses – some have a habit of becoming big businesses one day, and we would like to be there with them to help them with that journey. -----------------------------------------------------------------------Pierre-Alexandre DEGEHET is partner with BONN STEICHEN & PARTNERS. Pierre-Alexandre and his team are in charge of Corporate and M&A and capital market, which are core practices of the firm. -----------------------------------------------------------------------WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW DOES Q2 2012 COMPARE? The negative impact of the economic downturn in 2009 and 2010 has led to a reduction of M&A transactions. However, in the Luxembourg market, with its specific emphasis on financial activities, it is fair to say that the impact of the economic downturn has been limited. Parties involved in M&A transactions have adopted a “wait and see” approach for some months, but on the other hand there has been a large emphasis
Company: Bargate INNOVATION Murray,TAX solicitors & TRUST Name: Quentin JUAN IGNACIO Bargate FRASCHINI Email: Quentin@bargatemurray.com ji.fraschini@innovation.com.uy Web: www.bargatemurray.com www.innovation.com.uy Address: 5th LuisFloor, Alberto 20-22 de Herrera Curtin Road, 1248, London World3NF EC2A Trade Center II, Office 2306, Montevideo, Uruguay Telephone: Telephone: +44(0)2073751393 +598 2622 66 23
Company: BONN STEICHEN & PARTNERS Name: Pierre-Alexandre DEGEHET Email: padegehet@bsp.lu Web: www.bsp.lu Address: 2, rue Peternelchen | Immeuble C2 L-2370 Howald | Luxembourg Telephone: +352 26025-1
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-----------------------------------------------------------------------Mr Christodoulos G. Vassiliades is founder and managing director of Christodoulos G. Vassiliades & Co LLC, based in Cyprus. -----------------------------------------------------------------------WHAT AREAS DO YOU (AND YOUR TEAM) SPECIALISE IN? Christodoulos G. Vassiliades & Co. LLC, established in 1984 and based in Nicosia, Cyprus, is a broad based legal practice entrusted by major corporations with their legal matters. The firm has developed expertise in both domestic and international law to private and corporate clients in the corporate, intellectual property, trust, mergers and acquisitions, and commercial legal fields. The firm offers the diverse professional skills of qualified lawyers, legal consultants, administrators and legal assistants with more than 150 employees who are ready to provide viable and comprehensive solutions for clients. The firm sets uniformly high standards of quality services from its base in Nicosia, the capital of Cyprus, with coordinated teams in its branch office in Limassol and representative offices in Greece, Russia, Hungary, Belize, and the Seychelles. The firm also has an extensive international network of correspondent law firms worldwide and is a member of the Cyprus Bar Association, International Bar Association, International Tax Planning Association, Interlaw, Lexwork International, Laworld, Mackrell International, Legus, the International Trademark Association and the Institute of Trademark Attorneys. Through these networks the firm is able to call on the expertise of financial and legal professionals worldwide to tailor its services to specific client needs. WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION, AND HOW DOES THIS ASSIST IN GETTING DEALS THROUGH TO COMPLETION? The firm has been involved in many international transactions and has been appointed as a legal representative in Cyprus having worked with a number of international firms including Magic Circle firms. Generally, the firm’s clients range from private individuals to corporate clients in diverse fields including shipping, construction and development, oil and energy, information technology, investment firms, entertainment and prominent banks in Cyprus and Russia. Further, the firm acts for the Attorney General office in various civil actions such as the recovery of amounts due to the Republic based on leases of land owned by the Cyprus Government and VAT liabilities. The firm has further developed its expertise to provide a full range of legal administrative and international tax planning services, particularly to foreign clients and trusts. Professional and management services are provided through the firm’s affiliated companies. -----------------------------------------------------------------------Michael Caine is a partner at Davies Collison Cave based in Australia. ------------------------------------------------------------------------
THE INTELLECTUAL PROPERTY LAWS AMENDMENT (RAISING THE BAR) ACT 2012 The Intellectual Property Laws Amendment (Raising the Bar) Act 2012 received Royal Assent on 15 April 2012, and as such most provisions will take effect from 15 April 2013. This is the most significant amendment to Australia’s intellectual property laws since the commencement of the Patents Act 1990 One of the few provisions which took immediate effect is the experimental use exemption which allows researchers in Australia to carry out experiments relating to the subject matter of patented inventions without infringing the patent.
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The Act raises the requirements for patentability, and the requirements for patent specifications, for all applications filed from 15 April 2013, and for patent applications filed prior to that date for which an examination request has not been filed prior to 15 April 2013. Not only do these provisions raise the level of inventive step required to support patentability, but they also raise the level of disclosure required in a patent specification to support a claim to an invention. A number of actions are available to patent applicants to ensure that the current, more lenient, patentability and specification requirements apply to their applications, particularly requesting examination of pending applications prior to commencement. In some cases it might be necessary to enter national phase early or file Convention application in Australia early, or file divisional applications early, to enable an examination request to be filed before commencement. It is important to note that modified examination will not be available after commencement, and that it will not be possible to add matter to a patent specification. The new provisions will be subject to regulations which are yet to be published. It is anticipated that the regulations will be available for review later this year. -----------------------------------------------------------------------Jean-François ALANDRY is Managing Partner and Cofounder of EUROHOLD. Founded more than 20 years ago, EUROHOLD is a Corporate Finance Consulting Company and is currently one of the most active M&A boutiques in Spain. -----------------------------------------------------------------------WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011? Since the beginning of the year, we experience an unprecedented deal-flow but have completed only 4 deals till the date mainly due to their complexity (in terms of geography, time, and funding requirements). July should be an important month with 3 deals. So as to maximize our internal return of closed deals and to offer our clients access to international investors, we started a geographic expansion process in 2011 which we are completing this year with a Paris office. We also strongly strengthened our team of industry specialists and back-office structure so as to diversify our activity fields and create an own consulting network of M&A specialists across Europe. WHAT ARE THE PREDICTED HOTSPOTS FOR 2012?
PREDICTED HOTSPOTS: IT Consultancy and B2B services in general (perfect moment for Build-up and internationalization process), Agro-Food (performing companies with renowned brands, geography diversity and solid balances), Engineering (both Industrial and Public Works) Environment services (waste and water treatment) WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? A new labor law has been voted and work flexibility has clearly improved. It will be cheaper now to adequate staff level to the present economic situation. WHAT ARE THE CURRENT PRIORITIES WITHIN YOUR REGION?
Current priorities are financing, recovery term improving and internationalization. Regarding transactions, new trends are lower multiples for EV, money-in and less leveraged deals into growing activity fields with international projection. WHAT EFFECTS/CHALLENGES (IF ANY) HAS YOUR FIRM EXPERIENCED DUE TO THE EUROZONE CRISIS? Basically adaptation capacity due to different transactions’ type (above mentioned) added to high volatility and everyday more global counterparties. -----------------------------------------------------------------------Dr Bader Al Busaies is Attorney at Law & Managing Partner of Al Suwaiket and Al-Busaies Attorneys at Law. -----------------------------------------------------------------------Al Suwaiket and Al-Busaies Attorneys at Law is a law firm incorporated in Al-Khobar (Eastern Province) Saudi Arabia, aiming to provide clients with highly professional legal services from qualified and experienced lawyers collaborating to implement client business strategies. The firm offers its clients the best value for money though providing sound egal services, maintaining and serving the clients interests. Al Suwaiket and
Company: CHRISTODOULOS INNOVATION TAX G. & TRUST VASSILIADES Name: & CO. LLC JUAN IGNACIO FRASCHINI Email: ji.fraschini@innovation.com.uy Name: Mr Christodoulos G. Vassiliades Web: www.innovation.com.uy Email: cgv@vasslaw.net Address: Web: www.vasslaw.net Luis Alberto de Herrera 1248, World Trade Address: 15 Agiou Center Pavlou II, Office Street, 2306, 1105 Montevideo, Agios Uruguay Telephone: Andreas, Nicosia, Cyprus +598 2622 66 23 Telephone: +357 22 55 66 77
Company: Davies INNOVATION CollisonTAX Cave& TRUST Name: Michael JUAN IGNACIO Caine FRASCHINI Email: mcaine@davies.com.au ji.fraschini@innovation.com.uy Web: www.davies.com.au www.innovation.com.uy Address: 1Luis Nicholson AlbertoStreet de Herrera 1248, World Trade Melbourne Vic Center 3000II, Australia Office 2306, Montevideo, Uruguay Telephone: +598 2622 66 23
Company: EUROHOLD, S.L. Name: Jean-François ALANDRY Email: jfa@eurohold.com Web: www.eurohold.com Address: Av.Diagonal, 361, 2-2, 08037 Barcelona Telephone: 0034 94 457 89 80
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q2 Mid-Year Review
Al-Busaies cooperates with specialised expert firms in Europe and North America if needed. Its areas of practice include but are not limited to providing legal advice and consultations in the fields of trade, freight, maritime, banking, financing, drafting and reviewing contracts, labour law, employment, intellectual property, insurance, oil, energy, taxation, dispute settlement, liquidation, foreign investment, companies set up, litigation and arbitration and to represent clients before all kinds and levels of courts and judicial bodies. The firm consists of highly qualified and experienced lawyers in the corporate law and foreign investment areas, and has distinguished itself as a reputable law firm in business sector. The foreign investment in Saudi Arabia has a priority as it become day by day more attractive for foreign companies as the governmental sectors become more aware about Economical value of Foreign Investment. The governmental regulations subject to continuous amendments to fulfil the needs of investment environment. The firm attracts clients inside and outside Saudi Arabia by satisfying their needs and objectives, using modern methods and professional legal services carried by qualified lawyers. The firm’s clients include: Sumitomo Chemical Asia PTE Limited (Singapore), Procter & Gamble (Switzerland), Arab Petroleum Investment Corp “APICORP” (Saudi Arabia), Expro Group (South Africa), Power well Services (South Africa), ThyssenKrupp Xervon SA (Germany), Arner Bank (Switzerland), Deutsche Bank (Switzerland); Bank of Tokyo-Mitsubishi UFJ (Japan), Standard Chartered Bank, Mizuho Corporate Bank, Ltd. (Great Britain), Sumitomo Mitsui Banking Corporation (Japan), Calyon Corporate & investment Bank (France), The Carlyle Group (USA). -----------------------------------------------------------------------Founded in 1841, F.J. & G de Saram, is today in its 171st year of practice in Sri Lanka and is the exclusive member in Sri Lanka for Lex Mundi (the world’s leading association of independent law firms). Shehara Varia comments. -----------------------------------------------------------------------The Firm specializes in corporate and commercial law and remains a top-tier firm in banking and finance, dispute resolution, intellectual property, mergers and acquisitions, and real estate. The Firm is recognized for its ability to take on and address complex matters with an innovative approach and serves reputed multinational and local companies, banks and multilateral agencies. In the recent past, the Firm was involved in many notable deals which included, advising the government of Sri Lanka in respect of a One Billion United States Dollar ($ 1,000,000,000/-) international sovereign bond, advising China Development Bank in respect of a Two Hundred Fourteen Million Two Hundred Thousand United States Dollar ($ 214,200,000/-) lending to the government of Sri Lanka for the purposes of an infrastructure project, advising Overseas Telecom AB, in respect of the sale of a majority stake of a fixed line telecom operator, advising Emirates Airlines in respect of the sale of shares in Sri Lankan Airlines, advising Parks and Retail Asia Limited in respect of the purchase of shares in local retail stores, advising Tata owned TRF Limited of Singapore in respect of the purchase of shares in a trailor manufacturing company and other similar transactions. In addition to the above, the Firm is involved in carrying out several due diligence studies on large FMCG Companies, property owning companies, banking and finance companies, power projects, IT service companies etc. -----------------------------------------------------------------------Rodney William Leonard MLIA (Dip) FLIA, FIoD, Charted FCSI is Managing Director at Investment Interest Management. -----------------------------------------------------------------------Our Discretionary Management service is perhaps the biggest differentiator which sets us apart from our competitors. Banks for example will recommend a strategy but seldom review it, let alone recommend changes. Many high street banks do not
ACQUISITION INTERNATIONAL
have an “investment management licence”, and as such a client is left to “hope for the best”. We however, are different. Our investment analysts constantly review our positions and the market as a whole, to make sure our clients money is working in their best interests. Our goals for the rest of the year are to continue to provide a market leading first class customer service to our clients. We also aim to continue to grow our assets under management, and to explore new areas of potential business. Our Discretionary Managers recognised the signs of the Euro Zone Crisis early on, and so took the necessary steps to safe guard our client’s investments from the turbulent market conditions which ensued. In general there has been a very real change in the public and corporate appetite to risk regarding investments, which has led to an increased movement towards investments in Gilts, Corporate Bonds and even Cash. One of our biggest challenges has been in changing the public and corporate perceptions of investments in the market as opposed to holding funds in cash deposits. As we know, over the medium to long term investments within the market have shown to consistently outperform cash. -----------------------------------------------------------------------John Greenwood is the Managing Director of KRyS Global (BVI), a firm of specialist insolvency practitioners who act as receivers, administrators, liquidators and controllers of hedge funds, insurance companies, financial institutions and other offshore entities. -----------------------------------------------------------------------WHAT EXPERIENCE AND EXPERTISE DO YOU BRING TO THE TABLE DURING A TRANSACTION? Unlike a number of other firms, KRyS Global only provides corporate recovery, restructuring, forensic accounting and related services, which enables us to provide an independent and focused service to our clients.
Company: Fahad INNOVATION Al Suwaiket TAXand & TRUST Bader AlName: JUAN Busaies Attorneys IGNACIO at LawFRASCHINI Email: ji.fraschini@innovation.com.uy Name: Dr Bader Al Busaies Web: www.innovation.com.uy Email: sb@sb-lawyersweb.com Address: Web: www.sb-lawyersweb.com Luis Alberto de Herrera 1248, World Trade Center II, Office 2306, Montevideo, Address: Uruguay Telephone: Telephone: (+966-3) +598 887 7512 2622 66 23
Company: F.J. INNOVATION & G. de Saram TAX & TRUST Name: Shehara JUAN IGNACIO Varia FRASCHINI Email: shehara.varia@fjgdesaram.com ji.fraschini@innovation.com.uy Web: www.fjgdesaram.com www.innovation.com.uy Address: 216, Luis de Alberto Saram dePlace, Herrera Colombo 1248, 2 World Trade(0094) Telephone: Center11-4605100 II, Office 2306, Ext.128 Montevideo, Uruguay Telephone: +598 2622 66 23
HAVE THERE BEEN ANY NOTABLE DEALS THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S? KRyS Global is involved in some of the largest, most complex and unique international and cross-border assignments worldwide. Our larger engagements include acting as the Liquidators of the SPhinX Group, Fairfield Sentry, and Sextant Funds. All of these engagements involve elements of fraud, cross-border litigation and highly complex issues requiring specialized strategies to recover assets for the benefit of creditors. Fairfield Sentry is a BVI registered company and was the largest feeder fund into the Bernard L Madoff Investment Scheme. In this case, the claims brought by the Liquidator in the pursuit of assets are both novel and ground breaking and are being very closely followed by both the insolvency world and the investment funds fraternity. Should the Liquidator’s actions prove successful they will have a very wide ranging impact for the respective professions going forward.
Company: Investment Interest Management Limited Name: Rodney William Leonard Email: enquiries@iim.co.im Web: www.iim.co.im Address: The Barn, Moaney Woods Farm Church Road, Lonan, Isle of Man, IM4 7JX Telephone: +44 (0)1624 863125
HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? The landscape of international cross-border insolvency is ever changing, requiring the professionals involved to be flexible and able to respond quickly to the hurdles presented in these type of complex assignments, whether it’s collecting books and records, tracing assets, transparency or recognition issues. Our firm develops strategies tailored to maximizing the recoveries to the estate while weighing and balancing the risks. Our firm’s goal for the rest of the year and beyond is to continue to provide value to our clients by exploring all avenues in the pursuit of assets. We intend to add new service lines to our business, which we are certain will be beneficial to both our current and future clients.
Company: KRyS Global (BVI) Name: John Greenwood Email: John.Greenwood@KRyS-Global.com Web: www.KRyS-Global.com Address: Commerce House, 2nd Floor 181 Main Street, PO Box 930, VG1110 Tortola British Virgin Islands Telephone: +1 284 494 1768
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-----------------------------------------------------------------------Lubis Ganie Surowidjojo (LGS) was founded in 1985 by Timbul Thomas Lubis, Mohamed Idwan (‘Kiki’) Ganie and Arief Tarunakarya Surowidjojo. Since then, LGS has grown into the largest corporate transactions and corporate litigation firm in Indonesia. -----------------------------------------------------------------------HAVE THERE BEEN ANY NOTABLE DEALS THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S? LGS is acting for the Government of Indonesia (Ministry of Finance, the national electricity company (PLN), the Indonesia Infrastructure Guarantee Fund (IIGF), and Regional Governments hosting infrastructure projects) in formulating and executing the legislative and contractual framework underlying Indonesia’s current infrastructure development. HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? Completion of deals can take comparatively longer in Indonesia due to the regulatory approvals being required in a number of instances. Funding options are quite diverse at present, with the availability of equity financing, and a particular growth in private equity investments, as well as increased availability of debt financing after Indonesia’s recent sovereign debt upgrades. HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? Being able to understand a client’s needs and the legal complexities faced by them in Indonesia’s highly dynamic legal and business landscape, translate this into a solution, and then guide them to a successful outcome is one of the key aspects of our service. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? Retail and select manufacturing, due to the expanding Indonesian middle class. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER? Indonesia has been an island of calm and consistent growth in an otherwise turbulent business world, as exemplified by the on-going crisis in Europe. -----------------------------------------------------------------------Sherif Ezzat is Chairman of LifeCare Surgical Co, based in Egypt. -----------------------------------------------------------------------A complete ideal structure ready for booming, LifeCare Surgical Instruments, established in 2001, together with LifeCare Surgical Co established in 2005, both are located in Egypt for the purpose of to manufacture surgical instruments under license from a German co www.lifecaresi.com. Together with a local 20 years old medical device trading company www. itg-lifecare.com and a newly established trading company in Germany www.ai2m.de are all together constitute one future project. LifeCare Surgical is a unique free zone industrial area on 500 sqm space for rent for 25 years had acquired the entire license for manufacturing and international trading for surgical and dental
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instruments as well as any other medical devices. This structure is exempted from both revenue taxes and VAT for renewable 25 years end 2029. LifeCare infrastructure is currently working in 750 sqm with future expansion possibility for extra 750 sqm in three floors. Since foundation, LifeCare had succeeded to be one of the market leaders in the domestic market and to build a shining brand in the medical market internationally. It has been participated in most of biggest medical health exhibition worldwide since 2004 Although LifeCare has been able to remain profitable in the medical industry, in the grand scheme of the market, LifeCare has not been able to obtain an adequate share that would reflect maximum utilization of the current facilities (physical and technical) due to financial shortage. It is crystal clear that there is much work to be done for substantial return. Being pioneer in our field of business in the middle east, Modern and expandable facility, Stabilized brand name as well as in depth of medical market experiences are all factors making this project a great chance for visitors.
The energy and infrastructure sectors are thriving which of course results in further economic activity. HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? We take a “total solutions” approach coming rom a number of individuals who have had extensive experience in different areas that are needed to complete a deal. For example, because of our strong tax department that has assisted a number of foreign investors, we are able to design corporate structures that are the most tax efficient. Another example is our ability to predict all the potential pitfalls in all areas of project execution.
-----------------------------------------------------------------------Roderico V. Puno is a Senior Partner of Puno & Puno Law Offices. The firm specialises in Energy, Mining, Taxation, Project Finance, Mergers and Acquisitions, and general Corporate law. -----------------------------------------------------------------------WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011? We have seen an increase of deals in many areas of our practice. Because there is a strong push for infrastructure in the Philippines, in particular renewable energy, this year has been busier. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012?
Company: Lubis INNOVATION Ganie Surowidjojo TAX & TRUST Name: Dr. JUAN Mohamed IGNACIO Idwan FRASCHINI (‘Kiki’) Ganie Email: ganie@lgslaw.co.id ji.fraschini@innovation.com.uy Web: www.lgsonline.com www.innovation.com.uy Address: Menara Luis Alberto Imperium de Herrera 30th Floor 1248, World Jl. H. R. Trade Rasuna Center SaidII, Kav. Office 1 Kuningan 2306, Montevideo, Uruguay12980, Jakarta Telephone: Indonesia +598 2622 66 23 Telephone: +62 21 831-5005, 831-5025
Energy, Taxation, and Financing are the best areas of practice. As mentioned earlier, 2011 is better than 2012. WHAT FACTORS CONTRIBUTED Q1 2012 SHOWED STRONG IMPROVEMENTS IN BUSINESS CONFIDENCE AMONGST SOME OF THE WORLD’S LARGEST COMPANIES? Because of the anti-corruption platform of the present administration, there is a perception that there is a more level playing field. CAN YOU PLEASE DEFINE THE QUALITY OF THE BUSINESS ENVIRONMENT WITHIN YOUR JURISDICTION OVER THE LAST QUARTER?
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Company: INNOVATION LifeCare Surgical TAX Co& TRUST Name: Sherif JUAN Ezzat IGNACIO FRASCHINI Email: ji.fraschini@innovation.com.uy Address: Area No. 3, Block B, Free Zone, Nasr Web:Cairo, City, www.innovation.com.uy Egypt. Address: Luis Telephone: +202 Alberto 672 0314 de Herrera - 15 1248, World Trade Center II, Office 2306, Montevideo, Uruguay Telephone: +598 2622 66 23
There has been a strong interest in the Philippine markets by foreign entities as shown by the resurgent stock exchange. The local players have likewise been very active in raising financing and using those funds for expansion which in general has lead to a very positive outlook. WHAT MAJOR FISCAL POLICIES AND ECONOMIC REFORMS HAVE BEEN INTRODUCED AND WHAT ARE THEIR INTENDED OUTCOMES OVER THE COURSE OF 2012? The anti-corruption efforts of the current administration have resulted in better revenue collections that could lead to more spending to spur economic growth. WHAT ARE THE CURRENT PRIORITIES WITHIN YOUR REGION?
Company: Puno & Puno Law Offices Name: Roderico V. Puno Email: rvpuno@punolaw.com Web: www.punolaw.com Address: 12/F 1201 East Tower, Philippine Stock Exchange Center, Exchange Road, Ortigas Center, Pasig City, 1605 MM Philippines Telephone: (632) 631-1261 to 64
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q2 Mid-Year Review
-----------------------------------------------------------------------Anders Strand is 1 of 5 Partners at Steinvender, a fully dedicated mid-market M&A boutique serving the Nordic region since 1997 with more than 100 transactions to date and we have successfully completed more than 30 transactions the last three years which of many are cross border. -----------------------------------------------------------------------HAVE THERE BEEN ANY NOTABLE DEALS THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER?
anti-trust laws. In certain jurisdictions, we may recommend the parties to obtain an advance tax ruling beforehand to buy peace of mind. Jurisdiction is also an important factor given that in certain economies, it may take longer to obtain the necessary approvals.
We have completed four deals during the last quarter. All of these are typical for Steinvender in that they are private transactions with a deal size between €20-€50 million, where Steinvender has represented the selling shareholders. We earn our role typically through referrals and past credentials.
As the world markets continue to face credit crisis, our clients look to our attorneys who help them navigate credit restrictions and challenging situations. We have noticed a surge in transactions this quarter. Companies are showing higher level of interest compared to previous years and the time taken to conclude these transactions is quite low. Q2 2012 has been much positive compared to Q2 2011
HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? For sell-side mandates a typical transaction takes from 6-9 months to complete from the date Steinvender is engaged as financial advisor, unless the competition authorities intervene. Since the financial crisis in 2008 the duration has increased somewhat, and in some instances we have worked on deals for more than 12 months before they complete. Financial sponsors (at these transactions sizes) typically finance the deal by way of bank debt and equity and in some instances partly by sellers credit. HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? Careful preparation both in terms of recognizing the key selling points and making sure all of the potential buyers are identified. Steinvender’s presence in the Nordic market for more than 15 years and more than 100 completed transactions has generated a vast network amongst key decisions makers in our targeted markets. Our goal for the remainder of the year is first and foremost to successfully complete the transactions we are currently working as well as trying to secure new mandates to the extent that we can start off 2013 with the same level of pipeline as for 2012. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? In contrast to the rest of Europe, companies with exposure to the consumer sector perform well. Additionally, oil service companies, which there are quite a few of in Norway, are thriving on the back of continued high oil prices. Companies (outside the oil-industry) depending on export to Europe are struggling. -----------------------------------------------------------------------Sunil Thacker is Managing Director at Sunil Thacker & Associates, a full practice law firm covering almost all areas of corporate and commercial, construction and real estate, litigation and dispute resolution, international banking & finacen, franchising, and mergers and acquisitions. -----------------------------------------------------------------------HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? The time taken to conclude a deal may vary on case to case basis. A deal may involve complex transaction, multi-party claims, or may be subject to certain government or authority approval. Domestic transactions can generally be concluded within a short time. International transactions such as mergers and acquisitions may at times involve prior approval from EU under
ACQUISITION INTERNATIONAL
WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011?
WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? Besides real-estate, we have seen a rise in biotech and pharmaceutical sector, retail sector and consumer goods, media and technology and banking. WHAT FACTORS CONTRIBUTED Q1 2012 SHOWED STRONG IMPROVEMENTS IN BUSINESS CONFIDENCE AMONGST SOME OF THE WORLD’S LARGEST COMPANIES? We believe a lot many companies have explored new developing markets and these include marketing on world wide web. Many international corporations have moved into new emerging markets such as Dubai, Singapore and India. Besides being a tax-haven, Dubai offers a world class infrastructure, zero exchange controls, variety of legal vehicles, unrestricted repatriation of profits, low transportation costs and so on. The big players have acquired the smaller player benefitting both and consequently reducing the competition. Acquisitions will continue throughout 2012 and 2013.
Company: STEINVENDER INNOVATION TAX AS & TRUST Name: ANDERS JUAN IGNACIO STRAND FRASCHINI Email: A.Strand@steinvender.com ji.fraschini@innovation.com.uy Web: www.steinvender.com www.innovation.com.uy Address: Hieronymus Luis Alberto de Heyerdahls Herrera 1248, gate 1, WorldNorway Oslo, Trade Center II, Office 2306, Montevideo, Uruguay Telephone: Telephone: +47 901 38 +598 8322622 66 23
SUNIL THACKER & ASSOCIATES Company: Sunil Thacker & Associates Name: Sunil Thacker Email: sunil@sunilthacker.com Web: www.sunilthacker.com Address: Burj old town, P O Box 184125, Dubai, United Arab Emirates
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-----------------------------------------------------------------------Bjarte Røyrvik is a Partner at Svensson Nøkleby Advokatfirma ANS, a mid-sized lawfirm, located approx 40 km west of Oslo. -----------------------------------------------------------------------WHAT ARE THE KEY STRENGTHS OF YOUR TEAM? HAVE YOU WON ANY AWARDS/ACCOLADES RECENTLY? The key strengths are the experience and knowledge that has been achieved by successful executing of complicated cases in the past years and the basic willingness to work hard to fulfill our clients expectations and demands. HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? Depends in a large scale. As an average 2-4 months. WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011? There is a lot of potential buyers ready for acquisitions, but they do sit still awaiting the good targets to be identified. The activity in Q2 2012 is much the same as Q2 2011. WHAT EFFECTS/CHALLENGES (IF ANY) HAS YOUR FIRM EXPERIENCED DUE TO THE EUROZONE CRISIS? The crisis has not had any major impact to our firm so far, but as it still is escalating and developing, we will examine the situation very carefully the coming months. -----------------------------------------------------------------------Nicholas Howard is Transactions Practice Leader at URS. -----------------------------------------------------------------------The UK Transactions Practice at URS specialises in providing risk and liability management support during business transactions. URS’ expertise in engineering, safety and environmental services enable us to provide a unique and compelling proposition to clients. We provide expert technical and commercial advice to deal teams around the identification, assessment and management of environmental, health & safety, operational, infrastructure and engineering risks and liabilities. We identify and assess technical and commercial risks and determine their impact on the deal financial model and sale agreement. Our expertise spans the sell and purchase sides of the transaction process. On the sell side, we present risks in a clear, factual and comprehensible manner. We support sellside clients by undertaking background risk scenario and cost models that enable them to negotiate with bidders from an informed position. For the purchaser, we are expert at identifying underlying trends, issues and risks inherent in the vendor’s business. We review vendor expenditure records and forecasts to assess the sufficiency of recent spend on critical systems, plant and infrastructure, as well as identifying whether vendor-proposed future actions and spend are sufficient to achieve issue closure and risk mitigation. Our due diligence team includes experts with chemical, oil & gas and manufacturing industry experience who are able to review vendor-proposed technical process improvements and assess whether potential solutions are appropriate and effective or whether alternative measures are required. We provide our clients with the reassurance that technical issues, as well as potential risks and liabilities, have been identified and assessed prior to deal closure. The UK Transaction Practice is part of URS’ European and Global Transactions Due Diligence Practice, supported by
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URS’ network of approximately 56,000 employees in nearly 50 countries. We are very proud to have been named UK Mergers & Acquisitions Due Diligence Provider of the Year 2012 by Acquisition International Magazine. -----------------------------------------------------------------------Victoria D. Liouta is the Managing Director of Vilmar International SA. -----------------------------------------------------------------------HOW LONG ARE DEALS TYPICALLY TAKING TO COMPLETE AND HOW ARE THEY BEING FUNDED? Deals are typically taking less than 30 days to complete but certainly covers are finalized before vessel’s delivery to owners and annually before the previous cover expires. Ship-owners are responsible to fund the insurance of all their vessels annually and we follow up all claims and insurance issues by receiving a broking fee.
Areas of expertise include: Company and business formations and all relevant licensing Vetting and drafting of contracts Intellectual property law Investment and disinvestments Exchange control Taxation Labour law Regulatory compliance Telecommunications law Mining law Arbitration and mediation for commercial and corporate Matters Insurance Insolvency Human rights Property law Family law The firm acts for international clients, including large multinational firms and international law firms, and acts as local
HOW DOES YOUR FIRM ADD REAL VALUE TO THE DEAL? AND WHAT ARE THE FIRM’S GOALS FOR THE REST OF THE YEAR? We handle clients professionally and although quoting and placing the insurance is our most traditional responsibility we are equally able to advise clients on specialist products, wordings and markets as well as risk management issues. We try to be able to broker deals with all the major insurance markets all over the world and increasingly work to bring together clients and underwriters with like-minded philosophies. WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011?
Company: Svensson INNOVATION Nøkleby TAXAdvokatfirma & TRUST ANS Name: Bjarte JUAN Røyrvik IGNACIO FRASCHINI Email: broyrvik@eurojuris.no ji.fraschini@innovation.com.uy Web: www.svenssonnokleby.no www.innovation.com.uy Address: P.o. LuisBox Alberto 294 de Bragernes, Herrera 1248, N-3001 World Trade Center DRAMMEN, NORWAY II, Office 2306, Montevideo, Uruguay Telephone: Telephone: +47 3225+598 55002622 66 23
Shipping is always an interesting field and despite the worldwide economical difficulties, it has managed to survive and accommodate various ports and countries. Q2 Review focuses on the people and companies that always contribute to spread the knowledge and experience among the countries and make use of those locally as necessary. It helps broadening the specialized information and particular legal facts. WHICH SECTORS PERFORMED BEST OVERALL IN YOUR JURISDICTION OVER THE COURSE OF 2011 AND HOW DOES THIS COMPARE SO FAR TO 2012? WHAT ARE THE PREDICTED HOTSPOTS FOR 2012? Shipping Legal cases can be heard in any jurisdiction worldwide and also in Greece, following Court or Arbitration or Mediation or other proceedings and this continues through the years. However it is noted that huge movement to Far East is being made and many companies make use of the favorable to many aspects jurisdiction. -----------------------------------------------------------------------James Grundlingh works for law firm Webber Newdigate. Established in May 1978 the firm has since developed into the largest and one of the most respected law firms in Lesotho. -----------------------------------------------------------------------The firm provides legal services to local clients, including the Government of Lesotho, large financial institutions, insurance companies; mines; para-statal organisations and various stakeholders in the Lesotho Highlands Water Project, such as international construction companies, professional advisory firms and consortiums. Involved in major constitutional challenges, election cases, financial institution investigations, arbitrations, large commercial transactions, liquidations etc.
Company: INNOVATION URS TAX & TRUST Name: Nicholas JUAN IGNACIO HowardFRASCHINI Email: nick.howard@urs.com ji.fraschini@innovation.com.uy Web: www.ursglobal.com www.innovation.com.uy Address: Brunel Luis Alberto House, de54 Herrera Princess 1248, Street, World Trade M1 Manchester, Center 6HSII, Office 2306, Montevideo, Uruguay Telephone: Telephone: +44 (0) 161 +598 2372622 605066 23
VILMAR INTERNATIONAL SA Company: Vilmar International SA Name: Victoria D. Liouta Email: vliouta@vilmar.gr Address: 107-109 Filonos Str. Piraeus, 18536 Greece Telephone: 30 210 4511 615
ACQUISITION INTERNATIONAL
SECTOR SPOTLIGHT: Q2 Mid-Year Review
counsel on a wide range of international projects, and assists foreign businesses who are seeking to enter the Lesotho market or are established in the country and require on-going legal services. Recent projects include: Advised a multinational ICT firm on cross border finance and tax arrangements. Advised a London listed diamond mining company on finance arrangements and securities. Advised a London listed mining company on share charges and hypothecation of shares in Lesotho. Advised an online search company on point-of-presence, data protection, jurisdiction and telecommunication licensing requirements. Advised a multination online retailer on classifications and ratings for online content. Assisted a leading South African retailer in establishing a retail footprint in Lesotho. A member of Lex Africa since 1993, and awarded the PMR Africa Diamond Arrow from 2009 to 2011 best overall attorneys firm in Lesotho award. -----------------------------------------------------------------------Hermione Markides and Alecos Markides are the two senior partners of Markides Markides & Co and the only Directors of the new Company. -----------------------------------------------------------------------Markides Markides & Co is one of the oldest firms of Cyprus, originated with the establishment in 1933 of the office of Frixos Markides, regarded as a doyen of the legal profession of Cyprus. Nowadays the Firm consists of 8 partners. As from 1st January 2012 the business of the Firm was taken over by Markides Markides and Co L.L.C, a limited liability lawyers’ company. Through the efforts of Mrs Hermione Markides, the Firm developed a sizeable and dedicated IP department. Mrs Markides and two of the other Partners as well as all paralegals devote their time to this Department, handling all matters relating to Trade Marks (registrations, renewals, searches etc), Patents (validations, translations etc), watching briefs on behalf of owners of famous brands in respect of counterfeiting goods. In cases of infringements, the relevant Court actions come under the supervision of Mr Alecos Markides, a former Attorney General of Cyprus, widely respected and acknowledged to be one of the ablest litigators of Cyprus. The other main Department of the Firm comes under the supervision of Alecos Markides. Mr Markides’ advice is often asked in respect of complicated legal matters. The Firm prides itself for being the first to file and persuade both the first instance Court and the Supreme Court to issue worldwide freezing orders as well as orders requiring defendants to give information and discover documents, in order to help victims of fraud to locate and recover their assets. We believe that our ability to serve our clients with zeal and dedication is based on the fact that our respective lawyers, working either individually or as teams of 2 or 3 (depending on the nature of the case at hand) have the ability to separate the relevant from the irrelevant, cut through the complexity of legal and factual situations concerning a case and giving correct advice to clients. -----------------------------------------------------------------------Thywillonly Services Limited -----------------------------------------------------------------------Accounting and Bookkeeping provides the basis for all management, business growth and tax planning strategies. It is an essential requirement for monitoring the financial health of any business or entity. Keeping proper accounting records is not just good business practice but also a legal requirement. Accounting records are also the source for creating both
ACQUISITION INTERNATIONAL
internal and external financial reports and statements. Thywillonly Services Ltd (TSL) is made up of experienced team of professional bookkeepers, accounting officers, accountant, part-time accountants and tax experts and we specializes in providing accounting and bookkeeping services for small and medium sized businesses. We provide an outsourced accounting department for small and medium sized businesses to handle their accounting, bookkeeping, tax and management needs. At TSL, we believe that successful businesses are built and maintained by focusing on activities that generate revenue. Our mission is to enable our clients to focus on those activities by providing them with a full-service outsourced accounting department to handle everything from daily bookkeeping tasks to weekly, monthly and annual financial reporting. TSL has developed and standardized processes and procedures to capture business activity and design reports that provide our clients with this data as needed. TSL is made up of middle management Accountants who have requisite experience to handle your bookkeeping and Accounting of your business effectively and efficiently.
entrepreneur very often is exposed to tax risk. Therefore, professional assistance becomes necessary particularly with respect to different intra-community commercial operations and Taxways can ably provide this.
Company: Thywillonly Services Limited Email: info@thywillonly.com Web: www.thywillonly.com Address: P. O. Box KN 1157, Kaneshie, Accra, Ghana Telephone: +233 244575408
WHY YOU NEED TSL: Outsourcing your accounting department is a positive idea for your business if any of the following applies to your current situation: • You want professional grade accounting but either cannot afford or simply do not have the need for a full time accounting person or department. • You find that you are cutting corners, or you are uncomfortable with your accounting because it is too time consuming, or you do not really understand how to do some of it.
Company: Taxways sp. z o.o. Name: Marek Bytof Email: bytof@taxwaysgroup.com Web: www.taxways.pl Address: Plac Przymierza 6, Warsaw Telephone: +48 22 617 71 73
• You are spending too much time managing your books and not enough time growing or running your business. • You have a basic understanding of financial reports, so that you can stay informed about your business on an “at-a-glance” basis. • You want the flexibility to examine your accounts whenever and wherever you’d like, combined with the peace of mind that your books are being maintained by dedicated and experienced professionals. Contact us whenever you need an expert to help you with your accounting, bookkeeping, management and tax matters. -----------------------------------------------------------------------Taxways is registered with the Polish Ministry of Finance as a tax advisory company in Warsaw. Their company specializes in tax planning and tax risk management. -----------------------------------------------------------------------They represent their clients before tax authorities during tax investigations and finally before the courts. If it comes to the tax investigations, due to their assistance, Polish administrative courts often overthrow decisions issued by the tax authorities against taxpayers. From the perspective of their clients, the most complex and time consuming transactions consist of intra-community delivery of goods such as electronics or steel. These are the transactions generating the highest level of tax risk as well. Taxways main task is to protect the clients against that kind of risk. First of all, the clients should meet high level due diligence requirements to identify both suppliers and products. This is because missing trader may cause tax troubles to the honest entrepreneur. Because of general economic problems, they watch intensely the activities of tax authorities. As a result of the ever-increasing complexity of tax laws, the innocent
Company: Webber INNOVATION Newdigate TAX & TRUST Name: James JUAN IGNACIO Grundlingh FRASCHINI Email: jjg@webberslaw.com ji.fraschini@innovation.com.uy Web: www.webbernew.com www.innovation.com.uy Address: Metropolitan Luis Alberto de Life Herrera Building, 1248, 2nd Floor, World Trade Kingsway, Maseru, CenterLesotho II, Office 2306, Montevideo, Uruguay Telephone: Telephone: 00266 2231 +598 3916 2622 66 23
Company: Markides Markides and Co L.L.C Name: Hermione Markides, Alecos Markides Email: info@markides.com.cy Web: www.markides.com.cy Address: 1-1a Heroon Street, P.O.Box 24325 Nicosia 1703, Cyprus Telephone: +357 22819450, +357 22779900
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Q2 ENVIRONMENT FOR M&A IN THE MENA REGION Karim A. Souaid is founder and managing partner of Keystone Equity Partners, a specialist buyout firm that focus on mid-sized companies in the GCC markets. -----------------------------------------------------------------------The environment during Q2 remains poor and suppressed by the global financial crisis. Investors’ confidence is shaken and pricing mismatch between sellers and buyers prevail. Regional stock markets are barely ticking with any signs of IPOs. However, real challenges reside in other aspects of doing deals. They are encapsulated in the acronym: ‘ICOL’ which stands for : Information is poor in terms of quality and of historical records (i.e., financial statements covering several years preceding the acquisition date). Buyers must watch out for creative accounting or tampering with books for tax avoidance. Forensic accounting is often required to re-constitute corporate accounts and bring them into the IAS age.
Company: Seth Dua & Associates Name: Sunil Seth Email: sunil.seth@sethdua.com
Comparable transactions are rare commodities. M&A activity is absent from public markets, and financial terms of private transactions remain muted. Public companies bear no similarities to privately held ones since large banks, telcos, real estate and petrochems dominate regional stock markets. Ownership barriers abound. Local laws set limits on foreign ownership (49% of total capital stock). That leaves buyers in possession of substantial stakes but of inconsequential influence over a target’s future direction and management. Where majority ownership is exceptionally allowed (e.g., free zones) founding shareholders still resist ceding control to new investors, except at exorbitant premiums. Leverage finance based on future cashflow streams of a target is not common. Leverage from banks is available only when supplemented by personal guarantees or tangible collateral (i.e., real estate). That renders any leveraged acquisition more akin to an equity investment accentuated in the case of personal guarantees by no limitation on liabilities in case of default. The above should not be viewed as a repellant to doing M&As in the MENA
region but rather as a useful map for corporate landmines that practitioners must, at times, avoid, circumvent or overcome. The author is founder and managing partner of Keystone Equity Partners which the general manager of GrowtGate Capital Corporation, a specialist buyout firm that focus on midsized companies in the GCC markets.
Company: GrowthGate Capital Corporation BSC Name: Karim A. Souaid Web: www.growthgate.com
Company: Ernst & Young Name: Oscar Calderon Email: Oscar.Calderon@co.ey.com
www.erste-am.ro
Would you dare to fly their plane? You’d better leave what’s really important to the professionals. Find out now your way to effective investments. ERSTE Asset Management, your investment professionals! Previous performance of the Fund is not a guarantee of future results! Please read the prospectus before investing in this fund! The Prospectus may be obtained from the agencies/units pertaining to the Romanian Commercial Bank and from the premises of Erste Asset Management S.A. Open-Ended Fund ERSTE Monetar, Decision no 569/04.07.2012, NSC Public Registry no.CSC06FDIR/400079; Open-Ended Fund BCR Obligatiuni Decision no 1872/09.10.2007, NSC Public Registry no CSC06FDIR/400039. Open-Ended Fund BCR Dinamic Decision no 3117/2004, NSC Public Registry no CSC06FDIR/400002, Open-Ended Fund BCR Expert Decision no 3215/2005, NSC Public Registry no CSC06FDIR/400024, Open-Ended Fund BCR Europa Avansat Decision no 1870/09.10.2007, NSC Public Registry no CSC06FDIR/400042. The Depository of the Fund is ROMANIAN COMMERCIAL BANK, headquartered in Bucharest, 5 Queen Elisabeth Bld., registered with the Trade Registry with number J40/90/23.01.1991, Sole Registration Code R361757, registered with NSC Registry under number2012 PJR10/DEPR/400010 on 04.05.2006, authorized by NSC with the Endorsement number 27/04.05.2006. Phone number: 021 312 61 85; www.bcr.ro. The ACQUISITION INTERNATIONAL / August Administrator of the Fund is SAI ERSTE Asset Management SA headquartered in Bucharest 1,14 Uruguay Street, authorized by NSC with the Decision no 98/21.01.2009, registered with NSC Public Registry with number PJR05SAIR/400028, Number General Registry ANSPDCP: 0017716, Tel:0372.269.999; Fax: 0372.870.995; www.erste-am.ro ; email: office@erste-am.ro .
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ROBUS IS AN ISRAELI LEGAL MARKETING AND CONSULTING SERVICES COMPANY, PROVIDING STRATEGIC ADVICE AND BUSINESS DEVELOPMENT SOLUTIONS. ZOHAR FISHER COMMENTS. -----------------------------------------------------------------------WHAT ARE THE KEY STRENGTHS OF YOUR TEAM? HAVE YOU WON ANY AWARDS/ACCOLADES RECENTLY? Robus has vast knowledge and in-depth know-how about the Israeli legal sector, coming from years of working close to Israel’s prominent law firms, partners and rainmakers. Robus practices in various business fields, and has a unique emphasize on Legal Marketing for law firms. We were recently chosen as Israel’s best Legal Marketing Consultants by the financial magazine of Intercontinental Finance (2012). HAVE THERE BEEN ANY NOTABLE DEALS; (SIZE, COMPLEXITY, DURATION, ETC.) THAT YOU’VE BEEN INVOLVED IN OVER THE LAST QUARTER? HOW WERE YOU ABLE TO SECURE THE ROLE/S? A few recent eminent activities in our portfolio, among others, merger of two distinguished medium-size Israeli law firms, including new branding and marketing approach to the law firm, new website and legal guides representation, and financial advice with regard to the actual merger.
WHAT PATTERNS AND LEVELS OF TRANSACTION ACTIVITY HAVE YOU WITNESSED IN YOUR JURISDICTION THIS QUARTER? HOW HAS Q2 2012 COMPARED TO Q2 2011? After a long period of thought, debates and uncertainty, it’s now a done deal- the Israeli Minister of Finance signs an order allowing foreign law firms to operate and collaborate in Israel. Foreign lawyers and law firms are permitted to provide legal services regarding foreign law, yet will not be allowed to represent before Israeli courts. The approval removed barriers that prevented foreign lawyers from working in Israel and permits collaboration between local and foreign law firms. Received with great interest among the Israeli legal milieu and local media, the new legislation is of great significance for both foreign law firms and independent foreign lawyers who consider branching out to new international markets and gaining access to an extremely vibrant business arena.
WHAT EFFECTS/CHALLENGES (IF ANY) HAS YOUR FIRM EXPERIENCED DUE TO THE EUROZONE CRISIS? In today’s competitive legal market, law firms are required to use wide range of skills beyond the traditional tools.
In this harsh competition, legal marketing is a unique and dynamic practice field which assists law firms with attracting new clients and maintaining the current ones.
Our team at Robus will be more than happy to consult, assist and provide relevant tools to foreign law firms, as well as individual lawyers, regarding entering the Israeli market and/ or operating under the new amendment WHAT ARE THE CURRENT PRIORITIES WITHIN YOUR REGION? Robus offers services that are fundamentally needed for every law firm that seeks to maintain an excellent brand in Israel’s tough legal competition. In a country which holds the largest ratio of lawyer per citizen, a competitive advantage for a successful law firm is crucial.
Company: Robus Name: Adv. Zohar Fisher Email: zohar@robus.co.il Web: http://robus.co.il/about-robus/ Telephone: +972-3-6763533
Robus is a leading strategic consulting company which provides business development services, with a unique specialization niche in Legal Marketing for law firms. Our office offers an all-encompassing package of legal marketing services, including: Comprehensive strategic consulting All-inclusive preparation for legal ranking guides Cooperation and collaboration with other law firms and related factors Advertising, public relations and branding Amplifying internet and cyberspace presence Assisting with conducting Legal seminars and professional conferences Refining law firms' profile and restructuring of the firm's practice areas Initiation and management of mergers and collaborations between law firms Legal marketing and consulting services Adv. Zohar Fisher Tel: +972-3-6763533 Email: zohar@robus.co.il Chosen as Israel's best Legal Marketing Consultants by 'Intercontinental Finance' magazine
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THE PERILS AND POTENTIAL OF INTERCOMPANY PRICING — on Mergers and Acquisitions in a Multinational Environment The effect of intercompany pricing on the valuations of business enterprises and its importance to the risk and opportunity matrix of a deal often pass under the radar screens of deal teams.
However the proper assessment of transfer pricing in the context of a purchase or sale of a multinational enterprise can significantly affect the pricing and success of the deal. The potential issues and opportunities discussed in this paper focus on the need for: i) proper treatment of the intercompany pricing in the valuation of businesses which are part of a multinational group, ii) the need for proper due diligence of the intercompany pricing issues as they relate to existing or future tax liabilities of the target enterprise, and iii) the potential for intercompany pricing tax benefits and associated implementation issues to sustain these benefits (or to avoid adverse results) associated with postdeal integration of these acquired businesses into existing companies. Early in the due diligence process it is important to identify and understand the target’s significant intercompany transactions. Examples of intercompany transactions include product sales, distribution arrangements, licensing of intellectual property (“IP”)/royalty payments, management fees, and intercompany financing, amongst others.By identifying these transactions at the outset, you can assess their potential effects on valuation and historic exposures and determine the extent to which a deeper review in the due diligence process is necessary. We begin with a look at the potential implications of intercompany pricing on business enterprise (BE) valuations.
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VALUATION OF A BUSINESS WITHIN A MULTINATIONAL GROUP: THE NEED FOR “ARM’S LENGTH” INTERCOMPANY PRICING ASSUMPTIONS
When valuing a business it is standard procedure to obtain and evaluate past financial results (P&L and cash flow data) and balance sheet information. This data is typically analysed and forecasts of future cash flows are developed from this information base. These cash flow estimates are then discounted at an appropriate risk adjusted discount rate to determine a discounted cash flow (DCF) “fair market value” (assuming for our discussion no deal synergies exist). Alternatively, market multiples of the target companies current earning (P/E) and or sales revenues (P/S) are also often used to determine a fair value. These methods in the case of a target company which is a member of a multinational group are often relying on the correctness of the historic intercompany pricing among the members of the multinational group. The tax regulations of most countries generally impose an “arm’s length” pricing principle on the intercompany transactions of a multinational enterprise but the
regulations intended to result in arm’s length pricing tend to differ somewhat across countries and the application of the regulations vary widely in practice. Also the regulations which attempt to provide guidance on how to apply the arm’s length standard in practice often allow for a reasonable range of prices which in and of itself can influence valuation substantially even if the enterprise is fully complying with the appropriate tax rules. Even if small changes are imposed on transactions involving high volume tangible goods transactions, for example, were to be imposed on the intercompany pricing (say for a manufacturing entity which exports products to its foreign affiliates prior to acquisition), the resulting shift in the reported profits and sales revenues could move substantially the DCF, P/E or P/S valuation results. In addition, significant deviations from the arm’s length standard for intercompany pricing could also result in unanticipated past or future tax liabilities (or possibly benefits) which if known may be material enough to disrupt an unadjusted fair market valuation by altering the stand alone cash flow or balance sheet financial projections as presented by the target.
DUE DILIGENCE IN A MULTINATIONAL ENVIRONMENT: POTENTIAL RISKS ASSOCIATED WITH EXISTING INTERCOMPANY PRICING POLICIES During the due diligence process in evaluating a potential acquisition, tax risks inherent in the target company’s profile are carefully examined. When considering a multinational
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
target, it is increasingly important to understand the company’s transfer pricing policies, strategies, and associated risks. Fundamental to this due diligence process for transfer pricing is the development of the functional profile of the company’s key operating entities and a quantification of the magnitude of intercompany transactions between the key operating entities.
The functional profile will normally characterize the operating entity as a manufacturer, distributor, service provider, intellectual property (“IP”) owner, entrepreneur, or some combination thereof. The magnitude of intercompany transactions, including product sales, royalties, service payments, or financing payments, indicate the relative importance of the intercompany transactions to the particular operating entity. For example, if the company has a Germany manufacturing operation that sells to the local Germany market, and it’s intercompany purchases of inventory amount to less than 5% of total cost of goods sold, transfer pricing is likely not a significant issue for this entity, even if it is one of the largest operating entities in the group. Conversely, if the company has a buy-sell distributor in Japan, where 100% of its product purchases are intercompany, then transfer pricing is a highly significant issue for that entity. In terms of assessing the risk associated with transfer pricing, it is important to identify certain types of operating models or transactions that are indicative of singificant tax planning that often carry a higher-risk profile. Examples include IP transfers or migrations, cost sharing (or co-development) arrangements, centralized IP companies or regional headquarters or hub models. These arrangements generally attract significant attention under audit and can have material risk associated with them over a multi-
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year period. It is helpful to understand the company’s tax provision position with respect to these and other material transfer pricing policies as this is often a good indicator of where the company anticipates (or has experienced) tax audit activity. The existence of Advance Pricing Agreements (“APAs”) which offer pre-approval on covered intercompany transactions may serve to minimize the risk associated with more material or high-profile transactions. Most major jurisdictions require companies to document the arm’s length nature of their material intercompany transactions through annual transfer pricing tax studies. Typically the existence of these studies serves to mitigate tax penalties associated with adjustments to transfer prices, and in the absence of such studies significant penalties can be assessed by local tax authorities.
needs and cash tax objectives in the intermediate term are married with longer-term objectives of effective tax rate minimization which serves to maximize the value of the individual portfolio company on a stand-alone basis.
CONCLUSIONS In this short article we attempt to outline some of the key risks and benefits to evaluating the intercompany pricing implications on target and acquired entities. By including these often overlooked intercompany pricing issues and opportunities involving valuation, due diligence and post-deal integration deal teams can relatively easily improve performance and reduce the risks associated with an already complex set of deal analyses.
INTERCOMPANY PRICING POLICIES AND POST-DEAL INTEGRATION While risks associated with a target company’s transfer pricing policies may be identified during the due diligence process, the savvy investor will look for opportunities that are available through the acquisition and post-deal integration process. The priorities and opportunities may differ depending on whether the acquirer is a strategic investor or a private equity fund. For the strategic investor, the integration of the operations of the target with existing operations could generate inconsistencies between existing transfer pricing policies and those of the target. At a minimum, the buyer should consider harmonization of transfer pricing policies across similar jurisdictions and transaction types. From a more opportunistic standpoint, the acquisition may offer a one-time chance to make significant changes to prevailing transfer pricing policies (for both legacy and acquired operations) in light of operational changes happening as part of the integration. For example, if the acquired company had a significant procurement business that will now support the larger, integrated company, then there may be an opportunity to consider the best tax structure to support this procurement activity in light of the overall value chain of the business. For private equity investors, the tax profiles and priorities may differ from strategic investors. In a private equity setting, the existence of significant finance expense associated with the acquisition may give rise to unique and intermediateterm cash needs that can in some cases be achieved through transfer pricing planning. Additionally, these planning strategies can in many cases be supplemented with longer-term objectives of effective tax rate minimization through value chain transformation and other operational tax planning initiatives. The key in the private equity setting is to ensure that cash
Company: PricewaterhouseCoopers INNOVATION TAX & TRUST LLP Name: Garry JUAN B. IGNACIO Stone FRASCHINI Email: garry.stone@us.pwc.com ji.fraschini@innovation.com.uy Web: www.us.pwc.com www.innovation.com.uy Address: 1Luis North Alberto Wacker de Herrera 1248, World Trade Chicago, Illinois Center 60606 II, Office 2306, Montevideo, Uruguay United States Telephone: of America +598 2622 66 23 Telephone: (312) 298-2464
Company: PricewaterhouseCoopers INNOVATION TAX & TRUST LLP Name: Paige JUANHill IGNACIO FRASCHINI Email: paige.hill@us.pwc.com ji.fraschini@innovation.com.uy Web: www.us.pwc.com www.innovation.com.uy Address: 300 Luis Madison Alberto de Avenue Herrera 1248, WorldFloor, 24th TradeNew Center York, II,New Office York 2306, 10017 Montevideo, Uruguay United States Telephone: of America +598 2622 66 23 Telephone: (646) 471-5192
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-----------------------------------------------------------------------Hugo Williamson is Managing Director of The Risk Resolution Group, London. -----------------------------------------------------------------------As global financial pressures have seen opportunities in traditional investment markets slow down, the emerging markets are increasingly becoming the focus of M&A teams and fund managers in search of higher returns. This has translated into positive deal flows. In Africa, 30 combined African deals in Q1 2012 were valued at USD 3.5bn. M&A activity in the African extractives sector is expected to be particularly buoyant, following the GBP 118m acquisition of Dominion earlier this year, and the recent GBP 1.2bn takeover battle for Cove. With more confirmed finds by smaller, explorative players in Mozambique, Tanzania, Kenya and even Somalia and Madagascar, further acquisition efforts by majors seem likely. Similarly, in Eastern Europe, the exploitation of shale gas alone could kick-start Polish M&A. In Asia, although global economic conditions have hampered investor appetites, last year saw USD 1.6bn in new capital for SE Asia-focused PE funds, and while recent dealmaking has slowed, there are expectations
for a recovery in H2 2012, with analysts citing the region’s unsaturated markets. Despite the obvious upsides, emerging market opportunities are often complicated by local factors. In Uganda, muchmooted oil and gas legislation was finally passed in Q1 2012, but notably without a revenue management law. In India, recent announcements to retrospectively tax overseas M&A involving substantial Indian assets have concerned investors. Choosing the correct partner is also essential, and can mean the difference between major success or substantial failure. The Risk Resolution Group (R2G) works with investors looking at opportunities in emerging markets to manage this uncertainty. We have an unrivalled network of on-ground assets in Asia, Africa and much of the Middle East and Eastern Europe, and can provide detailed market assessments, competitor analysis, due diligence, and investigative support; before, during and after the deal. R2G offers our clients the insight, intelligence and advisory support necessary to succeed in the emerging markets.
CRAWFORD BAYLEY & CO. Company: Fuoco Group LP Name: Lou Fuoco, CPA Email: Lfuoco@fuoco.com Web: Www.fuoco.com Address: 200 Parkway Dr S Suite 302, Hauppaug,e NY 11788 Telephone: 1-631-870-3901
Company: Crawford Bayley & Co. – Advocates & Solicitors Name: Sanjay Asher Email: sanjay.asher@crawfordbayley.com Address: State Bank of India Building, N.G.N Vaidya Marg, Fort, 400023 Mumbai (Maharashtra), India Telephone: +91-22-22613850/+91-22-22663713
Company: Risk INNOVATION ResolutionTAX Group & TRUST (R2G) Name: Hugo JUANWilliamson IGNACIO FRASCHINI Email: hwilliamson@riskresolutiongroup.com ji.fraschini@innovation.com.uy Web: www.riskresolutiongroup.com www.innovation.com.uy Address: 67 Luis Grosvenor Alberto de Street Herrera | London 1248, | World3JN W1K Trade Center II, Office 2306, Montevideo, Uruguay Telephone: Telephone: +44 (0) 7811486047 +598 2622 66 23
SECTOR SPOTLIGHT: Q2 Mid-Year Review
THE IMPORTANCE OF BEING DILIGENT — Due Diligence for M&A Involving Israeli Companies
The importance of the due diligence processes in international M&A transactions cannot be overrated. Especially so, when an Israeli entity is being purchased. The uniqueness of the Israeli law results inter alia from the fact that the Israeli legislation can be viewed as a form of a hybrid doctrine, combining influences from the British law, with the constant inspiration it receives from the current US and EU law, and with rulings by the Israeli courts, which have added a certain unique “flavor”, among others in terms of protecting employees and creating labor law instructions applicable to M&A transactions.
LABOR LAW The customary due diligence process often includes investigation of the target company and its assets, which include the physical assets, the intangible assets, and the workforce. The workforce itself is comprised of the corporate leadership and the remaining, subordinated, staff and employees. While the investigation of the company’s debts, corporate resolutions, financials, and other assets, is in many ways similar to a due diligence process conducted in other countries, subject naturally to the implications of local laws and accounting rules, Israeli labor law is a unique field which has to be even more carefully scrutinized while purchasing an Israeli company. In a recent transaction in which we were representing the Israeli target company, which was purchased by a European conglomerate, the purchaser’s due diligence of the company was not sufficiently thorough, resulting in substantial difficulties to conclude the transaction, inter alia in terms of remuneration to senior employees. In Israel, the rights accumulated by an employee, regardless of the employee’s position in the company and often also of the question whether or not the employee is also a shareholder of the company, continue to accumulate despite of the change in ownership. This is different than in many other legal systems, and thus if for example, an employee that has been working for the company for three years before the M&A, is let off one year following the acquisition of the company by the purchaser, such an employee shall be awarded with full compensation due for four years of employment, i.e. four times his recent salary. However, the Israeli law allows the employer and the employee to agree on entering a special arrangement, according to which the employer transfers payments equal
ACQUISITION INTERNATIONAL
to 8.33 percent of the employee’s monthly salary to a specific fund, and then when the employee is let off, he is awarded with severance payments of whatever sums have accumulated in such fund, regardless of his last salary. On the other hand, such an arrangement also allows the employee to receive the funds in case he resigns, a situation that otherwise would not have entitled him to any compensation. Furthermore, the Israeli law requires that the employer will transfer mandatory payments to the employee’s pension fund (currently up to 5% of the employee’s salary), and it is customary that the company would maintain, for midlevel and senior employees, an education fund to which the company donates 7.5% of the employee’s salary, in addition to all the other sums mentioned above.
NON-COMPETITION Another matter which is common in M&A agreements but is relatively hard to enforce in Israel is the non-compete requirement. It is imperative that a foreign purchaser will understand that in order to enforce a non-compete period longer than six months, certain elements must be considered (including substantial specifically designated payments), and that even those six months are not to be taken for granted, as they are not often enforced. Moreover, limitations also apply to the assignment of intellectual property by the employee to the company, similar to those which apply in certain states of the United States.
regulations will apply to all inter-company transactions performed between the purchaser (or any other member of the group) and the Israeli newly acquired subsidiary. The regulations determine, inter alia, that all such transactions (be it R&D, management services, distribution, etc.) have to be conducted in arm’s length prices, supported by a transfer pricing study, and documented in an inter-company agreement which incorporates the results of the study. In Israel, the Israeli Tax Authorities have established a specific Transfer Pricing audit unit, which performs on going audits to Israeli entities owned by foreign companies. Audits may result in upward adjustments to tax assessments (including a roll-back period), interest charges, and fines. It should be noted, in this respect, that according to Israeli law any company to which the Transfer Pricing regulations apply, has to file a form 1385, which describes its intercompany transactions, together with its tax return.
TO CONCLUDE: When we take all this into consideration, the purchaser has to be aware of the cost of employment in Israel, which for senior and mid-level employees, for example, may be up to 22% higher than the cost originally anticipated. The purchaser has to also be aware of the duties its nominated board members will have to the Israeli newly purchased company, and of its relative inability to divert funds to other companies in the group due to the local Transfer Pricing regulations, unless justified within a transfer pricing study.
DUTIES OF THE OFFICERS The duties of the Israeli officers, including those of the members of the board of directors, are first and foremost to the company. This means that, unlike in other legal systems, a board member cannot receive instructions on how to vote on a certain matter from the shareholder who has nominated him, and cannot have any voting agreements with other board members. Additionally, a shareholders agreement is hierarchically positioned below the Israeli Companies law and the company’s articles of association, and thus cannot override them. It is thus important to include all the important rights and obligations of the shareholders, in the articles of association, since the shareholders agreement in itself has less power to bind the company.
TRANSFER PRICING Once an Israeli company has been purchased (50 percent or more) by a foreign entity, the Israeli Transfer Pricing
Company: Bar-Zvi & Ben-Dov, Law Offices Name: Eyal Bar-Zvi, Adv. Email: eyal@bbl.co.il Web: www.BBL.co.il Address: Zaksenberg Building 15 Abba Hillel Rd., Ramat Gan 52522, Israel Telephone: +972-3-7522280
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SECTOR SPOTLIGHT: Q2 Mid-Year Review
FOCUS ON OPERATIONAL IMPROVEMENT — is a key trend in M&A
-----------------------------------------------------------------------Infima is an independent company that offers strategic and financial advisory services and project management services to buyers and sellers of companies. -----------------------------------------------------------------------Macroeconomic uncertainties challenge business models relying on financial levers and access to a well functioning equity or debt market. At the same time, difficult times open up attractive investment opportunities both for platform investments, but in particular for add-ons which are exposed for less competitive pressure. The Nordics, and in particular Norway, are currently regarded as a safe heaven for investors looking for acquisition opportunities, due to its favourable macroeconomic outlook. However, the increasing focus on operational improvements is perhaps the most important trend in M&A. Operational experience and insight into the business and relevant sector improve the understanding of the key value drivers and consequently make a huge difference in creating value from the acquisition, differentiating the successful buyer from the less successful one. An integrated due diligence process focusing on value creation and implementation will improve the ability to drive operational improvements as an owner. Traditional financial advisors lack the indebt knowledge, network and key insight to advice the buyer in the acquisition process. Operational improvements are very different from the overexposed focus on share dilution/appreciation, refinancing and multiple expansion at exit.
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Successful operational improvement is hard analytical work at the planning stage combined with thorough industrial insight. Looking for key value drivers and potential value destroyers in the due diligence process, and to integrate the findings in the 100 days program to be well prepared for the most essential part of the ownership period – the critical first day and first three months. A buyer’s long-term orientation in this critical phase enables sustainable value creation strategies including where relevant an M&A strategy with selected add-on acquisitions to consolidate or supplement the target with required products, markets, technology or key skills.
Infima can support the buyer in the intensive due diligence phase and may also take on a project manager role to add necessary capacity and competence to the team at the most critical phase in the process. What sets INFIMA apart is our approach to creating value: deep and focused commercial due diligence, careful risk assessment, and hands-on engagement designed to prepare for driving operating improvements in the implementation phase, supported by industry experts who know the industry and the key players.
INFIMA draws on its operating and industrial know-how to help client teams build realistic business plans and programs for executing them with uncompromised focus on value creation and implementation. By combining operational and financial skills, its unique mix of relevant industry and M&A experience, Infima is a catalyst for identifying the potential for value creation, preparing for implementation and thereby increasing the probability of a successful transaction.
Company: Infima INNOVATION AS TAX & TRUST Name: Rolf JUAN Straume IGNACIO FRASCHINI Email: rolf.straume@infima.no ji.fraschini@innovation.com.uy Web: www.infima.no www.innovation.com.uy Address: Lysaker Luis Alberto Torgde 8, Herrera 4. etg, Postboks 1248, 449, World Trade NO-1327 Lysaker, Center Norway II, Office 2306, Montevideo, Uruguay Telephone: Telephone: +47 97 65+598 98 542622 66 23
ACQUISITION INTERNATIONAL
ACQUISITION INTERNATIONAL
August 2012 /
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DEAL DIARY: Deal index
DEAL DIARY — Deal index 87
FIRCROFT
93
KEWILL
87
ABYLSEN
93
KORES
87
ADENIUM BIOTECH
93
LAB21
88
ANCHOR GLASS
94
LIFE FORCE SPA
88
BARCLAY VOUCHERS
94
LUMEJET
88
BLUEPRINT MANAGEMENT SYSTEMS LTD
94
NORDIC CAPITAL FUND VII
89
BONITA
95
NORDIC METALBLOK
89
BRIDGECONSULTING
95
ORKA GROUP
89
CERADIS
95
PEP
90
CNC
96
PHARMAPLAN
90
DPT LABORATORIES
96
PREZIOSO
90
FASTTRACK
96
SCRIPTLANCE
91
GASMEDI
97
THE SHIELD GUARDING COMPANY LTD
91
GIMV
97
SPORTRADAR
91
HIGH RIVER GOLD MINES LTD.
97
ST HUBERT
92
INFOCASH
98
UNDERWATER ENGINEERING SERVICES
92
JORDAN DUBAI CAPITAL
98
VALCARE
92
KAYASS
98
WST PRÄZISIONSTECHNIK
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/ August 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world
l Equistone Partners Europe bought a significant stake in Fircroft in a deal worth £140m. Johnathan Johnson, the founder and chief executive of Fircroft, said “The business planned to continue its international expansion and open further offices to help boost growth.” “Fircroft is a global player that provides bespoke services to some of the world’s leading technical industries,” said Johnson. “We are pleased that Equistone shares our vision for the future and we are delighted to secure the investment and look forward to working with them in the coming years. “We have expanded the business to support our clients, both in the UK and increasingly in overseas markets over the past five to ten years. We expect this trend to continue and we also plan to open new offices in the coming year to support our organic growth strategy and move into complementary services.” The transaction was handled by Steve O’Hare, Paul Harper and Andrew Backen from Equistone’s Manchester office. Following completion of the transaction, Steve O’Hare will join the Fircroft board as a non-executive director. O’Hare said the existing management team have done an “excellent job” in developing the business to date and positioning it for the next stage of growth. He added that a future strategy may also include future acquisitions in existing or additional sectors.
l European private equity firm Vespa Capital has bought a controlling stake in engineering and technology consultancy Abylsen for €75m. European private equity firm Vespa Capital has bought a controlling stake in engineering and technology consultancy Abylsen for €75m. The company, which advises on operational management and R&D outsourcing, was founded in 2005 and has 659 staff, with subsidiaries in cities across France and a presence in Germany and Belgium. The business has grown revenues from €16m in 2007 to €52.8m in 2011, while EBITDA for the same period has increased by 19 per cent to €10.1m. Vespa will own a 52 per cent interest in the company, while the management team will retain a 30 per cent stake. The majority of the remaining equity will be retained by the company’s founder. Banque Populaire Rive de Paris provided a €28.5m debt package to support the deal.
“The market prospects, combined with Fircroft’s service levels and continued geographic expansion, means there remains huge growth potential for the business,” said O’Hare.
Richard Bell
Ewen Maclean, Project Manager at Calash, led the Commercial Due Diligence Team throughout the transaction for Equistone Partners Europe. They commented, “We enjoyed working closely with Equistone on this transaction and are in discussions to provide additional strategic advisory services.”
Ewen MacLean
Calash provided commercial due diligence to Equistone throughout the transaction. Project Manager, Ewen Maclean commented, “Calash is a renowned Commercial Due Diligence Energy sector specialist, and has conducted similar exercises in the oil and gas manpower sector, which enabled us to quickly establish the facts and support Equistone from an early stage in the process.”
Alban Neveux
Advention brought in a team which worked closely together along with the Vespa Capital investment team. In addition to extensive primary data collection, intensive discussions where held with clients and also Abylsen’s operating model was carefully described and assessed.
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Advention Business Partners commented: The team was led by Alban Neveux, the Group Managing Director of Advention, along with Eric Lesavre, Vice President. We represented the buyer, Vespa Capital, with whom we had worked with before, and we lead the strategic due diligence for him.
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Deloitte provided vendor financial and tax due diligence for Fircroft. The work was carried out by a Manchester based team consisting of Richard Bell, Matt McLoughlin, Fiona Gray and David O’Leary.
ADENIUM BIOTECH
ABYLSEN
In this deal three particular challenges had to be faced and properly assessed: First, the market environment of Abylsen, second the fairly complex business model of Abylsen, and third the operating model of Abylsen.
l Sunstone Capital is investing DKK 11 million in Adenium Biotech, a Danish biopharmaceutical company spun out from Novozymes in 2011. This is the second investment from Sunstone Life Science Ventures Fund III. Adenium Biotech is a spin-off from Novozymes and was established in 2011 with financing from Novo Seeds, the early stage investment arm of Novo A/S. The company works on developing the compound Arenicin, which is secreted from lugworms. Arenicin is the lugworms’ defense against invasive bacteria. The compound has shown effectiveness against multi resistant gram-negative bacteria – the bacteria, that cause the biggest problems in hospitals today. Adenium Biotech has raised a total of DKK 22 million from Novo Seeds and Sunstone Life Science Ventures Fund III, and with the new capital injection, there is financing to complete a comprehensive screening program. With an investment from Sunstone of DKK 11 million we can now complete the next phase of our development program and choose the Arenicinvariant, that is most promising for further testing in humans, Dr. Peter Nordkild, CEO of Adenium says.
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FIRCROFT
Jusmedico, which is a specialist law firm providing legal services to the biotech, pharmaceutical and medical device industries and life science investors, have acted as legal advisors to Adenium and Novo on the transaction. Jusmedico is primarily rendering advise to biotech start-ups enabling funding and refunding of their research & development activities. Internationally Jusmedico operates a representative office in New York, USA. www.jusmedico.com Jan Bjerrum Bach - jbb@Jusmedico.com
EQUISTONE INVESTMENT IN FIRCROFT
VESPA CAPITAL BUYS INTO ABYLSEN
SUNSTONE CAPITAL INVESTS IN ADENIUM BIOTECH
Debt Provider
Debt Providers
Legal advisors to Adenium and Novo
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Strategic Due Diligence Provider Jan Bjerrum Bach Financial Due Diligence Provider
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August 2012 /
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DEAL DIARY:
M&A from around the world
l Ardagh Group, a global leader in glass and metal packaging solutions, today announced that it has agreed to aquire US-based Anchor Glass Container Corporation from private investment funds managed by Wayzata Investment Partners LLC in a transaction involving total cash consideration of US $880 million (721 million euros). The transaction is subject to US regulatory approval and other customary closing conditions and is expected to close at the end of August 2012.
l Edenred today announced that it had entered Japan - it’s 39th country - with the acqisition of Barclay Vouchers, the only company in the local meal voucher market.
KPMG Commented:
With the acquisition of Barclay Vouchers in Japan, Edenred has entered its 39th country, following the opening in Finland in 2011. The transaction has enabled the Group to establish a foothold in a country that enjoys significant growth potential, with 63 million employees and a penetration rate that is still very low, estimated at less than 1%.
Intralinks Commented: “IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.” Eugene Davis, Chairman of Anchor’s Board of Director’s, stated: “The acquisition of Anchor by Ardagh represents a great day for our company. Operating as part of Ardagh will allow Anchor to accelarate it’s growth plans and offer a global capability to it’s customers. Wayzata Investment Partners led Anchor through it’s restructuring, turnaround and a period of record earnings growth, but the majority of the credit goes to the outstanding team at Anchor.”
“With this transaction, Edenred has reaffirmed its commitment to strengthening its presence in the Asia-Pacific region, which is a strategic growth territory, especially in terms of geographic development” said Laurent Pellet, Chief Operating Officer, Edenred Asia-Pacific. “In view of this challenge, Laurent Gachet, previously Chief Financial Officer, Edenred Brazil, has been chosen to head our operations in Japan. His mission is to develop our solutions in a local market that still has a very low penetration rate.” With more than 600 clients, Barclay Vouchers, the only player in the Japanese market for meal vouchers, generated 2011 issue volume of approximately €100 million. The acquisition gives Edenred direct access to a nationwide network of over 30,000 affiliates. Jones Day acted as legal adviser to Edenred as acquirer in this transaction. John C. Roebuck led the team. He is a partner based in the Tokyo Office of Jones Day. Dan Matsuda and Yuki Yoshida of the Tokyo Office of Jones Day also worked on the team. John C. Roebuck
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Liam Lynch
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KPMG acted as tax advisors to Ardagh on the acquisition of Anchor Glass, led by Liam Lynch, Partner KPMG Ireland, and Jason Tata, Partner KPMG USA.
At the same time, the Group has strengthened its positions in Latin America through the acquisition of Comprocard, a Brazilian food voucher issuer. With the two transactions, Edenred is pursuing its geographic expansion with the goal of opening six to eight new countries by 2016 and is reaffirming its targeted acquisitions strategy.
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He commented: Jones Day represented Edenred as acquirer. This was a new representation for the Tokyo Office of Jones Day.
http://www.jonesday.com/ ACQUISITION OF ANCHOR GLASS BY ARDAGH GROUP
ACQUISITION OF BARCLAY VOUCHERS
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BLUEPRINT MANAGEMENT SYSTEMS LTD l Ascot, July 3, 2012 - itelligence AG, a leading global SAP partner for the SME market, announced on 3rd July the 100% acquisition of the British company Blueprint Management Systems Ltd., London, one of SAP UK’s leading BusinessObjects partners, by its Ascot-based British subsidiary itelligence UK. This acquisition represents a significant expansion in the range of services offered by itelligence in the UK in the growth segments of business analytics and SAP Business Objects.
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Claus Andersen of Royds commented:
Claus Andersen
I worked with my colleague Julian Rampton in relation to Chris Wigglesworth and Michael Hayman’s disposal of their shares in Blueprint Management Systems Limited.
My task was to negotiate and complete the relevant documents of the transaction. The main challenges were 1) a provision providing for a reasonable adjustment of the purchase price and 2) the implementation of a structure which rewards the management of Blueprint for their performance after completion. We had to make sure that all the documents were completed in good time before completion so that we had time to finalize the above points before completion.
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William Berrington Partner
Goldenhill was advising Blueprint Management Systems and they have been a client since 2007 The important thing was to find the right partner for Blueprint William Berrington where there is business fit, culture fit and the right transaction for the shareholders
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BARCLAY VOUCHERS
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ANCHOR GLASS
There is an excellent fit between Itelligence and Blueprint across technology, services, culture and client base. Joining forces will create opportunities for clients and staff in both companies ITELLIGENCE UK ACQUIRES BLUEPRINT MANAGEMENT SYSTEMS LTD Legal Adviser to the Vendor
Financial Adviser to the Purchaser/Management Team
Business Development Asia Financial Due Diligence Provider
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Baker & McKenzie Tokyo
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Tokyo M&A
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DEAL DIARY:
M&A from around the world
BRIDGECONSULTING
l TOM TAILOR Holding AG has entered into a definite agreement with BONITA International GmbH & Co. KG, a wholly owned subsidiary of the non-profit foundation Versorgungs- und Förderungsstiftung, Vaduz/Liechtenstein, to acquire a 100% stake in BONITA. With the acquisition of BONITA, TOM TAILOR is expanding into the attractive fashion segment for women and men in the customer group over 40 years. In addition to its lines TOM TAILOR Casual and TOM TAILOR Denim, the Group is exploiting a new, long-term area of growth. BONITA currently operates more than 960 of its stores under the brands BONITA and BONITA men and has around 4,500 employees. The company, which was founded in 1969 and is headquartered in Hamminkeln, generated sales of approximately EUR 379 million, adjusted EBITDA of EUR 59 million and an operating cash flow of EUR 50 million in the calendar year 2011. With an adjusted EBITDA margin of 15.7% and a cash conversion rate of 84.3%, BONITA is one of the industry”s most profitable and cash-generative companies. Representing Tom Tailor AG were Roland Berger. Leading the team at Roland Berger were Dr. Oliver Merkel (Partner), Philip Beil (Principal).
l Innofactor Plc has today signed a contract to acquire the entire share capital of Bridgeconsulting A/S from its management. 3 % of the shares of Bridgeconsulting A/S will be acquired directly and the rest 97 % will be acquired through acquiring the entire share capital of Bridgeconsulting Holding ApS. Bridgeconsulting is the leading Danish IT services company focusing on producing Business Intelligence solutions based on Microsoft technology. The acquisition supports Innofactor’s growth strategy announced last year. Innofactor’s strategic goal is to expand operations to the neighboring countries through mergers and acquisitions and to become the largest provider of Microsoft-based solutions in Scandinavia. Lead by Vagn Thorup and Jakob Hans Johansen, Danish law firm Kromann Reumert’s Mergers & Acquisitions Technology and Media Group assisted Innofactor in the acquisition of owner-led Bridgeconsulting A/S. Bridgeconsulting is the leading Danish IT services company focusing on producing Business Intelligence solutions based on Microsoft technology. Innofactor is the largest Microsoft-focused IT service provider in Finland and Microsoft Country Partner of the year 2011. The acquisition supports Innofactor’s growth strategy announced last year.
Adviser to seller Bonita International GmbH & Co. KG were Daiwa Corporate Advisory. Leading the team here were Dr. Wolfgang Kazmierowski, Managing Director and Moritz von Bodman, Managing Director.
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They commented: We faced many challenges, Sale of the company in a challenging financing environment, preference for longterm oriented strategic buyer, design of transaction structure / purchase price consideration which supports buyer’s capital market position and at the same time maximizes seller’s proceeds Wolfgang Kazmierowski
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This was a landmark deal in German retail industry, creating an industry leader both in fashion wholesale and retail with complementary USPs. It was an attractive transaction structure for a seller with potential to participate in future upside potential.
TOM TAILOR HOLDING AG ACQUIRES BONITA
Lund Elmer Sandager represented the sellers consisting of the five partners personally and their respective holding companies.
David Frølich
Lund Elmer Sandager has advised BridgeConsulting and its owners since the establishment of the company.
The team at Lund Elmer Sandager was lead by Partner Christian B. Elmer and Senior Associate David Frølich. Info on the above can be found on: Christian B. Elmer: http://www.lesadv. dk/Attorneys/Attorneys/Partnere-visning. aspx?Action=1&NewsId=64&PID=490 David Frølich: http://www.lesadv.dk/Attorneys/Attorneys/ Partnere-visning.aspx?Action=1&NewsId=99&PID=490
INNOFACTOR TO ACQUIRE BRIDGECONSULTING A/S
Debt Providers
CERADIS l Ceradis, a Wageningen, the Netherlands-based company developing crop protection products, has raised €4.5m in funding. Backers include existing investor Value8 and new shareholder Rabo Ventures. The company intends to use the funding to accelerate its growth. A spin off from Wageningen University, Ceradis develops patented fungicides applicable to a broad range of fruit and vegetable crops (including potato, tomato, grape, banana and pineapple), which reduce chemical residues. The company is led by - Wim van der Krieken, PhD, CEO and Chief Scientist; - Desiree Engelen, Msc, COO and Regulatory Affairs/IP; and - Johan Grootscholten, Ir, Sales & Marketing manager NA & EMEA. Norton Rose LLP advised Rabo Ventures, the captive private equity firm of Rabobank, on their joint investment with Value8 in Ceradis. The team was led by Amsterdam based partner Marcel van de Vorst, assisted by associate Marcel Van De Vorst Coen Barneveld Binkhuysen. The notarial team of Norton Rose Amsterdam was involved as well comprising Geert-Jan van Rijthoven (partner/notary) and associate Pabe Suurd. Norton Rose assisted Rabo Ventures on the term sheet, the subsequent legal due diligence as well as the the drafting and negotiation of the transaction documentation. Marcel van de Vorst commented:
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BONITA
We enjoyed working with the Rabo team on this transaction and it was exciting to be involved with Ceradis which is an innovative and fast-growing company. CERADIS FUNDING Investors
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heymann
Financial Due Diligence Provider & Tax Adviser
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DEAL DIARY:
M&A from around the world CNC
DPT LABORATORIES
FASTTRACK
l Publicis Groupe [EURONEXT Paris: FR0000130577] announced today the acquisition of strategic communications consultancy CNC - Communications & Network Consulting AG (CNC).
l RoundTable Healthcare Partners (“RoundTable”), an operating-oriented private equity firm focused exclusively on the healthcare industry, announced today that its portfolio company, Renaissance Acquisition Holdings, LLC (“Renaissance”), has acquired DPT Laboratories Inc. (“DPT”). DPT is a leading pharmaceutical contract development and manufacturing organization with facilities in San Antonio, TX and Lakewood, NJ. As part of the transaction, the current shareholders of DPT will maintain a meaningful equity stake in the combined business.
l HARBERT Australia Private Equity fund, an arm of Harbert Management Corp in the US, has spent around $US12 million ($11.75m) on a majority stake in FastTrack, a recruitment and payroll software provider operating in Australia and New Zealand.
Headquartered in Munich, Germany, CNC is an international strategic communications consultancy group. CNC, which employs 100 professionals, is present in 14 cities across Europe, Asia, North and South America. Since its founding in 2002, the consultancy has regularly achieved double-digit annual growth. With an exceptional client portfolio, CNC advises large corporations, mid-cap companies, institutions and individuals on all aspects of strategic communications within their specific markets. CNC’s services range from strategic communications and reputation management to financial communications, crisis counseling including litigation advisory, branding and public affairs.
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CNC is one of the premier strategic and financial public relations firms in Europe, with a client base that is outstanding. I have followed CNC’s success story with interest and I am impressed by the company’s entrepreneurial spirit. The skill set will fit perfectly into our group and our strategy to make Germany one of our key hubs.
commented Maurice Levy, Publicis Groupe Chairman & CEO. Olivier Fleurot, CEO MSLGROUP, said: “Bringing CNC into MSLGROUP makes us one of the top three networks in Germany, and at the same time gives us very valuable additional strategic capabilities in other key markets. We see considerable potential in matching and leveraging our collective competencies and relationships.”
McGrathNicol Transaction Services in Australia acted as adviser to Harbert Australia Private Equity by performing financial and tax due diligence in relation to the majority acquisition of FastTrack. The due diligence team was led by Ashley Walton and David Barnaby who both have extensive experience advising private equity clients and performing due diligence on software companies.
Ashley Walton
IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
M+K Lawyers commented: “We advised Sway Business Pty Ltd and other shareholders from the FastTrack management team on the sale of their majority interest in FastTrack to Harbert Australian Private Equity (HAPE). Our role involved coordinating the full exercise of a pre-existing employee share option scheme in FastTrack and the subsequent buyout of the then approximately 40 employee minority shareholders and termination of that plan ahead of the planned sale to HAPE”.
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Gerard Kennedy, Principal lead the team assisted by Grant Guenther, Senior Associate commented: We represented Sway
Gerard Kennedy
Business Pty Ltd and other FastTrack management shareholders and had acted for FastTrack on its general commercial work for some years prior to the transaction.
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CNC will become part of MSLGROUP, the flagship strategic communications network of Publicis Groupe.
Joseph Moss, Managing Director, and Kevin Blitz, Vice President, GE Capital, Healthcare Financial Services led the financing for RoundTable Healthcare Partners and Renaissance Acquisition Holdings. GE Capital, Healthcare Financial Services has been the leading lender for RoundTable Healthcare Joseph Moss Partners for more than 11 years and has financed Renaissance Acquisition Holdings since its inception. At GE Capital, Healthcare Financial Services our deep industry expertise and reliability continue to drive our leadership position as the premier healthcare lender in the United States.
The biggest challenge was the coordination of the buy-out of the 40 (approx) employee minority shareholders and the roll out of the 300 odd documents involved in that aspect.
PUBLICIS GROUPE ACQUISITION OF CNC
RENAISSANCE ACQUISITION HOLDINGS, LLC ACQUIRES DPT LABORATORIES
HARBERT BUYS MAJORITY STAKE IN FASTTRACK
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Christoph Walther, CEO of CNC added, “We are very excited to team up with Publicis Groupe’s strategic communications network MSLGROUP as it provides us with a truly global footprint. While our current clients will enjoy continued high-class service by the existing CNC offices, we will be able to tap into the significant benefits offered by being part of MSLGROUP.”
Virtual Data Room Provider Financial Due Diligence Provider
Kain Comments: “Kain Corporate and Commercial Lawyers advised Harbert on the preparation and the negotiation of all documentation relating to their investment in Fasttrack. Gerry Cawson led the team for Kain C+C with assistance from Sarah Chia and Chani Kimberlin”. Bankwest Comments: “Bankwest involvement was led by Duncan Russell State Director together with Stephen D’Alcorn Senior Relationship Manager. FastTrack have been a long term client of Bankwest and we continue to assist them with cashflow management, work capital and core debt requirements”.
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ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world GIMV
HIGH RIVER GOLD MINES LTD.
After more than five-and-a-half years, Gimv has sold its majority interest in ICT service provider OGD. Van Lanschot Participaties has bought the company together with OGD’s management/founders. Gimv invested in the ICT service provider in 2006 and assisted OGD in its transformation into a more professional and diversified company. Together with management, a strategic plan was drawn up, resulting in a targeted expansion of the range of services to capitalise on changing market demand and a more diversified client base.
l Nord Gold N.V. (“Nordgold” or the “Company”, LSE: NORD) is pleased to announce that it intends to make an offer to acquire the outstanding shares of High River Gold Mines Ltd. (“High River”, TSX: HRG) not already owned by Nordgold and its affiliates. Nordgold currently owns 630,627,472 High River shares, constituting approximately 75 percent of High River.
l Mercapital has sold healthcare group Gasmedi to French corporate Air Liquide for an enterprise value of more than €330m. Founded in 1996, Gasmedi specialises in respiratory therapies that are administered at home. In addition, the company supplies medical gases to hospitals and clinics. It has more than 500 employees and cares for 125,000 patients. Mercapital acquired a 70 per cent stake in Gasmedi for €76m in 2006. Since then, it has doubled the number of patients in its care, and doubled turnover to €82m. The exit has made a 2.4x return for the firm and a capital gain of over €100m. Since 1990 Mercapital has invested more than €300m in seven healthcare deals. In the six healthcare portfolio companies that it has exited, the firm has generated an average return of 2.5x on its original investment and capital gains of some €400m. The news comes shortly after Mercapital announced it had merged with rival Spanish firm N+1. Accuracy team led by Miguel Viejo performed the financial due diligence for Air Liquide. The Freshfields Bruckhaus Deringer team was lead by Corporate partner Armando Albarrán and Tax Partner Silvia Paternain.
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Ivo Vincente, Head of Buyouts & Growth for Gimv in the Netherlands, about this exit: “From the outset, OGD has stood out from its competitors due to its young, enterprising corporate culture. The company has a unique ability to combine flexibility and a fast response with quality. In the face of the company’s strong growth and on-going professionalisation, management has succeeded in holding onto these core competencies. We have every confidence that OGD will continue to develop strongly based on this excellent foundation.” Daan de la Parra and Roel Nikkessen, the management of OGD, look back with satisfaction on the period with Gimv as investor: “Over the last five-and-a-half years, Gimv has proved a valuable partner. We look back with pleasure on a period during which Gimv has supported the company in its growth into a mature organisation.” The sale of OGD has had a positive impact of EUR 4.9 million (EUR 0.21 per share) on Gimv’s most recently published equity value as at 31 March 2012. Over the entire period, this represents an investment with a return substantially higher than Gimv’s long-term average.
We acted for the sellers in the sale of the Spanish company Gasmedi to French based company Air Liquide. Due to the particular nature of the activities of Gasmedi, its business is heavily reliant on the Spanish public sector, something that lead to uncertainty on the long term value of the company for the buyer and required thorough regulation within the sale and purchase agreement. In addition, the current economic environment lead to additional roadblocks in the negotiation process which required cutting edge legal advice to arrive to a successful signing.
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MERCAPITAL SELLS GASMEDI Legal Adviser to the Management Team / Legal Adviser to the Vendor & Tax Adviser
Financial Adviser to the Management Team & Financial Adviser to the Vendor
Menno Riemslag
Myriam Derksen
The financing of the transaction was led by Menno Riemslag and Myriam Derksen as part of the Acquisition Finance and Structured Lending team of ING Event Finance Business Banking. A longstanding relationship with the company and the ability to deliver within tight timelines made ING stand out in the process. It was a demanding process financing a well performing company that is currently facing challenging market conditions. However, the positive experience with the company, the knowledge of the ICT-sector and the continuous and constructive dialogue with all stakeholders (i.e. management, investor and advisors) made this deal a success.
GIMV DISPOSAL OF ITS MAJORITY INTEREST IN OGD
Under the terms of the proposed offer, eligible High River shareholders will have the right to elect to receive either: (i) 0.285 (the “Exchange Ratio”) Nordgold global depositary receipts (“GDRs”) for each High River share held by them (the “GDR Offer”); or (ii) C$1.40 in cash for each High River share held by them (the “Cash Alternative”, together with the GDR Offer the “Offer”). The GDR Offer represents a 17.2 percent premium based on Nordgold’s and High River’s respective closing share prices on July 17, 2012, the last trading day before this announcement, a 20.2 percent premium based on Nordgold’s and High River’s respective one month average share prices for the period ended July 17, 2012, and a 30.6 percent premium based on Nordgold’s and High River’s respective three month average share prices for the period ended July 17, 2012. At Nordgold’s closing share price on July 17, 2012, the GDR Offer values High River at approximately US$1.2 billion, or approximately 58 percent of the value of the fully consolidated Nordgold.
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Mikhailov and Partners has acted as PR adviser to Nordgold. Andrey Bykasov, Director of the Financial Communications Practice, and Alexander Chaychits, Senior Account Manager, led the work. Our team’s key tasks within this project included working on the messaging and adopting the messages for the Russian media. Mikhailov and Partners have been working with Nordgold since early 2012 assisting the client in its first steps as a public company. As the leading Russian financial communications company, Mikhailov and Partners has extensive experience in assisting top listed Russian metals and mining companies, including gold producing companies.
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GASMEDI
NORD GOLD N.V. TO ACQUIRE OUTSTANDING SHARES OF HIGH RIVER GOLD MINES LTD.
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ACQUISITION INTERNATIONAL
August 2012 /
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DEAL DIARY:
M&A from around the world
INFOCASH
JORDAN DUBAI CAPITAL
KAYASS
l DirectCash Payments Inc. (“DirectCash” or the “Corporation”) today announced that DirectCash has entered into an agreement with Triton Systems of Delaware, LLC (“Triton”) to acquire the automated teller machine business of InfoCash Holdings Limited (“InfoCash”), a wholly owned subsidiary based in the United Kingdom. The purchase price was £11.8 million ($19.1 million CAN) including working capital such as inventory, prepaid expenses and accounts receivable. The acquisition is subject to customary purchase adjustments and holdbacks and was initially funded from DirectCash’s acquisition credit facility.
l Jordan Dubai Capital (‘JD Capital’), the Amman based investment company today announced that the Hong Kong based HPF Private Investment Fund Company Ltd (‘HPF’) has bought 100% of it’s share capital at JD 0.90 per share for an aggregate consideration of JD 92 million.
l Olam International Limited (“Olam”), a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, announced today that it has acquired 100% equity interest in Kayass Enterprises S.A. (“Kayass”) for a price consideration of approximately US$66.5 million (subject to working capital adjustments at completion).
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Clarkson Wright & Jakes acted for Directcash Management UK Limited on this transaction. Ben Madden led the CWJ team with assistance from Andrew Wright and Yao Trinh (corporate), Nicky Androsov (commercial) and Rosa Brennan (employment). We are delighted to have been able to assist Directcash Payments Inc. with its expansion into the UK market by way of this transaction.
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Mr. Rami Al-Hadidi, Founding Partner, led the legal team at Hadidi & Co.
Our engagement initially was through the Purchasers, yet as Custodian Agents Hadidi & Co represented both Sellers and Purchasers. Hadidi & Co has advised JDC for a few years and enjoys professional relations with several Sellers to the transaction. The Companies Controller will always have a discretionary authority over the formality of the transfer deeds.
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We are very excited about the acquisition of InfoCash as it gives us significant ATM market presence in the United Kingdom and the opportunity to continue to build our presence internationally. InfoCash is an exceptional ATM operator in the United Kingdom with quality ATM merchant contracts in place and a strong management team that will continue to drive growth in the future. said Jeffrey Smith, DirectCash’s President and Chief Executive Officer.
Typically, the acquisition transaction involved participating in round of negotiations and follow up meetings with International and local Lawyers representing the Sellers as well as the appointed Custodian.
The Team endeavoured to have all pertinent documentation thoroughly drafted and detailed. The Team verified all such documentation with the Companies Controller at the Ministry of Industry and Trade. Thus, anticipating any future requirements.
DIRECTCASH PAYMENTS INC. ACQUISITION OF INFOCASH HOLDINGS UNITED KINGDOM BUSINESS
JORDAN DUBAI CAPITAL ACQUIRED BY HPF PRIVATE INVESTMENT FUND HONG KONG
Legal Adviser to the Purchaser
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Phyllis KY Kwong
Kayass’ principal business interest is in the manufacturing and marketing of branded dairy products and beverages in Nigeria. The company owns several brands, including the key brand “Blue Boat”, which has been traditionally a strong brand in the packaged milk powder category in Nigeria, and it has recently launched beverage brands “Nature’s Fresh” and “Yo-Jus”. Kayass, with its principal focus on dairy products and beverages in Nigeria, fits well into Olam’s Packaged Foods strategy. The company has been an important customer of Olam for the past six years. In addition to offering a strong geographic and product category fit, Kayass provides Olam with opportunities to realise back-end supply chain synergies in the sourcing of key raw materials, logistics, distribution and marketing.
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Olam’s Senior Vice President and Head of Packaged Foods, M Ramanarayanan said:
This acquisition is an attractive proposition for our Packaged Foods business to enter and scale up in another large and attractive packaged foods category in Nigeria. Just as we have been successful in building market leading position in other categories against established market players, we hope to replicate our success with Kayass. We believe that Olam, combined with the assets and capabilities of Kayass, will be competitive in offering differentiated products based on our best practices in manufacturing, global sourcing, product development and innovation, branding and marketing.
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Management’s Commentary:
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Barghouthi & Co. represented the Purchasers with regard to Jordanian law matters relevant to the acquisition; legal Due Diligence on Jordan Dubai Capital, the Share Purchase Agreement and other Transaction Documents, filings and registration with the Companies Controller Department in Jordan.
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A total of approximately 4,700 ATM sites and related contracts were acquired by DirectCash in the United Kingdom. The acquisition of these ATM contracts brings the total number of DirectCash’s active ATM locations to approximately 12,300. With the transaction DirectCash has become a leading global ATM provider with ATM operations in Canada, the United Kingdom, and Mexico. The acquisition of InfoCash creates a leading presence for DirectCash in the United Kingdom and presents an opportunity for further expansion into the European market. InfoCash has a strong and capable management team that will continue to manage and grow the business.
Mr. Basel Barghouthi was the Partner in charge of this acquisition and assisted by Ramez Barghouthi (Partner in charge of Banking and Commercial practice), Jamal Hadidi and Ashwaq Khraisat, (Associates in the Corporate and Commercial practice).
The acquisition of Kayass, will be funded through internal accruals and borrowings and is expected to be earnings accretive from FY2014. Olam expects to deliver 20% in EBITDA margin by FY2016 and generate an Equity IRR of 35% on this investment. OLAM INTERNATIONAL ACQUIRES KAYASS ENTERPRISES’ DAIRY PRODUCTS AND BEVERAGES BUSINESS IN NIGERIA Legal Adviser to the Purchaser
Olawoyin & Olawoyin
Financial Adviser to the Purchaser & Financial Due Diligence Provider Legal Transaction Jurisdiction
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Financial Advisers to the Vendor
Barghouthi & Co. L.L.C / Jordan Salem Law Firm Obeidhat Freihat
Legal Escrow Agent/Custodian
Hadidi & Co Amman ‐ Jordan
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ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world
KORES
LAB21
l Southern Africa-focused Frontier Rare Earths’s stock rose by 29.17% in early morning trade on the TSX on Wednesday following confirmation that a Korean company would close a $23.8-million deal to acquire a 10% interest in the project.
l Clydesdale Bank has provided a new £5 million package for Lab21, the global specialist in personalised medicine and clinical diagnostics.
“We see a significant opportunity for Kewill as longterm growth and increasing complexity in the trade and transportation of goods drives the need for comprehensive software solutions,” said Deep Shah, a partner for Francisco Partners. “Kewill has a robust product portfolio and an impressive client list of 7,000 customers around the world, including some of the world’s leading multinational companies such as Bayer, Black & Decker, Damco, DHL, Hitachi, Ingersoll Rand, Mothercare, UPS and TNT. We look forward to helping the company achieve its ambitious growth plans and will seek other opportunities to help Kewill expand its offering.” Founded in 1972, Kewill has offices in eight countries. The company’s software is designed to drive revenue growth and measureable cost savings for its customers through accelerated customs and forwarding, transportation, logistics, e-commerce, and business-to-business integration solutions. HSBC acted as sole financial adviser and broker to Francisco Partners in its successful contested public offer for Kewill, the UK based logistics software company. This was a unique public market transaction with a counter bidder emerging even after the shareholders had voted in favour of the Scheme.
In terms of a financing deal to accelerate the development of Frontier’s flagship Zandkopsdrift project in South Africa, Korean government-owned Korea Resources (Kores) had taken up its responsibility to contribute its share of the project’s development budget from July 3. Under the agreement, Kores would pay $23.8-million to acquire an initial 10% stake in the Northern Cape project, including offtake rights for 10% of the rare earths production, by September 30. Frontier CEO James Kenny told Mining Weekly Online that as a junior in the tough rare earths market, the company was “extremely” pleased at having a partner contributing to developing the project in the form of both technical expertise and finance as well as having an interest in taking much of the end product. This followed Frontier completing a Canadian National Instrument 43-101-compliant preliminary economic assessment (PEA) on Zandkopsdrift on March 30, which pointed to the project being both technically feasible, economically robust and having a low-risk profile. The agreement also provided that Kores may acquire a further 10% interest in Zandkopsdrift and up to 10% of Frontier’s shares following completion of a definitive feasibility study on Zandkopsdrift, which together, if acquired, would give Kores offtake rights for an additional 21% of rare-earth production.
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Abbas Merali who led the transaction at We were all HSBC commented,
in somewhat uncharted waters. Quickly reacting to the situation and successfully negotiating to obtain negative irrevocables from 25% of the shareholders were key Abbas Merali in ensuring success for Francisco Partners. There were also some rather innovative discussions with the Takeover Panel which proved critical in the outcome of the process. A very satisfying result for our client.
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FRANCISCO PARTNERS ACQUISITION OF KEWILL
Edward Nathan Sonnenbergs Comments:
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l Francisco Partners, a leading technologyfocused private equity firm, today announced that it has completed the acquisition of Kewill, a global trade and logistics software provider. This deal represents Francisco Partners’ sixth take-private transaction in Europe since the beginning of 2009.
ENS Advised Frontier Rare Earths and Sedex Minerals in respect of the strategic investment by the Korea Resources Corporation (representing a consortium of investors including Samsung, Hyundai and LG), regarding the development of rare earth prospecting, mining and processing facilities in South Africa, valued at CA$24 million
KORES CONFIRMS STAKE IN SOUTH AFRICAN PROJECT
Patrick Long, Head of Banking & Finance, acted for Lab 21 Limited and other group companies and led the Pitmans team which consisted of Patrick Long, Mark Metcalfe, Philip Weaver and Andrew Souter.
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Pitmans LLP have a long standing connection with Lab 21 and have previously provided support for corporate acquisitions by the Group. This is the first time we have advised in connection with the Group’s banking & finance requirements. Patrick Long
The purpose of the facilities made available by Clydesdale Bank Plc was to refinance some existing investor debt and provide growth finance to this international Group as a whole. This was very much a “leveraged” style transaction. We were involved at an early stage advising on structuring the deal. We had to deal with a variety of investor and other lender interests to the Group in order to facilitate an orderly completion of the new Bank debt financing. Detailed and involved negotiations between relevant parties was required both by Lab 21 and ourselves with the parties to the intercreditor agreement and also with other investor parties dealing with the terms of their consents to the transaction. Additionally thanks to the common sense position the Bank took we were able to substantially align the negotiated terms of the Bank’s term loan and security documents with those of the Bank’s invoice finance arm. Managing the numerous party interests proved time consuming and interesting. We were ably supported by our commercial clients, Graham Mullis and Susan Lowther and I believe our team work helped to significantly smooth the path and achieve workable solutions for all parties to this transaction. It was also a pleasure to work alongside Sandra Hope and the Clydesdale Bank team including Julia Bracewell of Morton Fraser who acted for the Bank.
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KEWILL
We are absolutely delighted that Graham and Susan secured new finance for Lab 21 a very progressive and innovative company and we wish them continued success with their plans for on going growth and development. Given the difficult conditions of markets generally and business as a whole it is great to be part of a truly good news story.
LAB21 FUNDING Legal Advier to Lab21
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August 2012 /
93
DEAL DIARY:
M&A from around the world LIFE FORCE SPA
LUMEJET
NORDIC CAPITAL FUND VII
l Global Alternative Asset Manager The Carlyle Group today announced it has signed a definitive agreement to purchase a majority stake in Light Force SpA, owner of Italian womenswear brand Twin Set Simona Barbieri, from founders Tiziano Sgarbi and Simona Barbieri and Italian-based growth capital fund DGPA Capital. Integral to the transaction, Carlyle has formed a partnership with Mr Tiziano Sgarbi and Mrs Simona Barbieri to develop and grow the Twin-Set brand. Mr. Sgarbi and Mrs. Barbieri will continue to manage day-to-day operations at the company and will retain a significant minority interest in Light Force SpA. DGPA Capital will divest its total holdings. Terms of the transaction, which is expected to close in August 2012, were not disclosed.
l A Midland firm has raised more than £4.5 million from angel investors in anticipation of its new ultra high quality printer technology.
l Nordic Capital Fund VII (“Nordic Capital”) has today signed an agreement to acquire 55 per cent of Resurs Bank, Solid Försäkringar, Reda Inkasso and Teleresurs (together the “Companies”). This acquisition makes Nordic Capital the majority owner of the leading providers of consumer financing and profiled insurance solutions for the Swedish retail sector. The sellers are the families Westin, Schröder and Paulson. The Bengtsson family will stay on as co-owner together with Nordic Capital and will retain its current 45 per cent ownership.
It said it will create more than 100 jobs by the end of 2014 and intends to ship 1000 machines over the next five years. Christopher McCann, chairman of LumeJet, said: “Completing this fund raising in the current climate is a major milestone for the company and a tremendous vote of confidence in our management team led by Paul Anson.”
Leading the team at Banca Euromobiliare was Simone Citterio, Head of Corporate Finance Advisory.
We assisted Carlyle. I know Marco De Benedetti since many years, even before MDB joined the company.
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It has been very challenging to work with one of the top teams in the Italian Private equity sector.
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Leading the Transaction at Willis was Mr. Nicola Ronconi Divisional Director of the Willis M&A practice, London.
We were representing The Carlyle Group. I know the Carlyle team in Milan since long time ago and assisted them in occasion of previous transactions. Willis has worked with Carlyle in the UK and internationally in several occasions.
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Our role was to provide insurance due diligence advisory. We identified few areas of improvement and, with the exception of Directors’ & Officers’ liability, no major issues or material uninsured areas. We are now assisting Carlyle to purchase D&O insurance.
THE ACQUIRES THECARLYLE CARLYLE GROUP GROUP ACQUIRES MAJORITY LIFEFORCE FORCE SPA MAJORITYSTAKE STAKE IN LIFE SPA Tax Adviser
Kstudio
The technology was developed over 12 years by Dr Trevor Elworthy, a former Kodak research scientist, who had a vision for developing a printer that ‘sprayed’ light onto photographic paper to produce high quality print. Midven introduced Mr Anson to LumeJet as the investor director before being appointed chief executive.
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Mr Anson said:
Attracting investment to high value manufacturing propositions can be difficult, but our new and existing Angel investors see potential of the LumeJet technology. Now we can get on and deliver a digital printing system that will change the market completely for some sectors.
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Winning the competition of other potential bidders and avoiding any Clessidra’s attempts to come back on the deal. We went always straight forward and kept a strong relationship with the sellers and their consultants.
The company was launched in 2010 with private angel investment and co-investment from West Midlands venture capital company Midven, to develop technology acquired from a Warwick University spin-out.
LumeJet secured angel investment from Wren Capital, Qi3 Accelerator, Martlet, LBA EIS Roundtable Syndicate Fund, private investors from LBA and Cambridge Angels and a number of independent investors.
The complexity of M&A transactions demands skilled and dedicated advisors who can identify risks and opportunities and add value throughout the lifecycle of a deal. Aon’s specialized expertise, broad resources, global network and intellectual capital are utilized to deliver integrated strategies and solutions for managing business risks. Aon M&A Solutions’ (AMAS) role in the transaction has been to provide insurance due-diligence services and risk management/ insurance related transaction support.
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Karl Roquet Practice Leader - Sweden lead the team at Aon M&A Solutions
We were representing Nordic Capital with whom we have a long-standing working relationship with. There were some challenges relating to certain of the target’s complex business risks and AMAS assisted in evaluating and mitigating such risks.
Arkwright represented Nordic Capital. Arkwright’s team was lead by Mr. Alexis Kopylov and Mr. Claes Green, both Associate Directors.
As the leading providers of consumer financing and profiled insurance solutions, Resurs Bank and Solid Försäkringar facilitate trade for consumers and retailers alike and play a key role in the Swedish retail industry.
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The company hope to move into markets including labelling, packaging and patterning of electronics.
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Coventry-based LumeJet’s most recent funding round saw them receive £1.87 million to launch an LED-based printer later this summer.
In order to assess the addressable size of the market segment, its drivers, the expected development and differences between various end-markets, Arkwright leveraged on its knowledge of the financial services and retail discretionary markets as well as its network of industry experts and market participants.
LUMEJET RAISES £4.5M FROM ANGEL INVESTORS
RESURS BANK, SOLID FÖRSÄKRINGAR, REDA INKASSO AND TELERESURS
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DEAL DIARY:
M&A from around the world
NORDIC METALBLOK
ORKA GROUP
PEP
l NORMA Group AG (‘NORMA Group’), a global market and technology leader for engineered joining technology, has acquired Nordic Metalblok S.r.l. (‘Nordic Metalblok’) effective 12 July 2012. The parties agreed to maintain confidentiality on the transaction details.
l Investcorp, a Bahrain-based investment firm, said on Tuesday its private equity fund bought a 30 percent stake in Turkish menswear retailer, Orka Group, tapping into growth opportunities in the fast-growing country.
Australian private equity firm Pacific Equity Partners has acquired Nestle Australia’s Peters Ice Cream Business for an undisclosed amount.
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Werner Deggim, CEO of NORMA Group, says: We are further expanding our global footprint through the acquisition of Nordic Metalblok. The expertise of Nordic Metalblok particularly in the heating, ventilation and air conditioning technology and NORMA Group’s product portfolio complement each other perfectly. We will meet the requirements of our clients across Europe even better.
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Additional information on the company is available on www.normagroup.com. To download press pictures, please visit www.normagroup.com/press pictures. Contact NORMA Group AG Daphne Recker Media Relations E-mail: daphne.recker@normagroup.com Tel: +49 (0)6181 - 6102 743
Leading the team at Turkey Corporate Finance Advisory, UniCredit was Mehmet Yucesoy, Associate Director.
PEP will acquire sub-brands like Billabong, Monaco Bar, Connoisseur and Frosty Fruits as well as the right to market and sell in Australia select global brands like Drumstick, Maxibon, Skinny Cow, Heaven and Milo Scoop Shake. “We are pleased that PEP has expressed its desire to continue to grow this iconic brand in Australia, and delighted that PEP has agreed for substantially all employees to offered employment with PEP as part of the deal. The remaining employees will be retained by Nestle,” he added. Nestle currently employs around 4,000 people across Australia. News Limited Lucy Court, left, and Claudia Brkic enjoy Nestle Peters’ Drumsticks in Melbourne’s South Yarra “For PEP, this is a great chance to apply our strong consumer products knowledge and credentials to support the management team and their business strategy. We are keen to invest further in Peters’ iconic and loved brands, and we are excited to include the Peters business in our portfolio,” Pacific Equity Partners Managing Director Rickard Gardell said in a statement.
We were representing Orka Group. It was our first transaction with them. Some of the challenges we faced were as follows: Process: After detailed consultations internally and with the client, the decision was to employ the “selective” approach, inviting only a very small number of financial sponsors; a risky proposition, but an effective one in keeping buyers and the seller focused and disciplined in the highly crowded Turkish market (2) Valuation: After initial discrepancies on the understanding of valuation between the parties, UniCredit proposed an Earn-Out structure that reflected our client’s understanding of the future development of the company while providing acceptable grounds for further negotiations to the buyer (3) Structure: The Orka Group consists of two legally independent companies, with differing shareholding structures, with no holding structure above them. In order to mitigate the fact, that Investcorp was not willing to do a parallel investment into the two companies, a Holding company first needed to be founded and a transaction structure needed to be found in which the existing shareholders would not be subject to additional taxation (4) Real Estate Spin-off: The group companies own non-operational real-estate which is agreed to be spun-off before closing
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With its Damat, Tween and D’S brands, Orka Group enjoys the highest brand awareness among Tolga Yaveroglu the men’s fashion retailers in Turkey. Backed by our extensive experience in the Turkish retail sector, our analysis was not only focused on determining the available room for geographical and volume growth for the Group’s brands but also identifying a number of strategic and operational improvement initiatives that would create significant performance upside when executed post transaction.
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Based in Riese Pio X near Treviso in Northern Italy, Nordic Metalblok has been active in the market for over 40 years. The company is manufacturing clamps for various applications particularly for the heating, ventilation and air conditioning industry and the agricultural and construction sectors. In addition, the company produces metal bands and the related tools. Nordic Metalblok distributes its products to retailers and wholesalers as well as to manufacturing companies globally. The company generated overall sales of about EUR 6 million in fiscal year 2011. It will be consolidated as part of NORMA Group with immediate effect. NORMA Group has already been present in Italy since 2006 and is operating a distribution centre in Gavardo.
Tolga Yaveroglu, Partner who leads Deloitte’s management consulting practice in Turkey advised Investcorp on strategic and commercial due diligence of the Orka Group. He explained,
Sean Gregory
PwC provided financial, taxation and IT due diligence services to long term client Pacific Equity Partners in support of the acquisition of the Peters Ice Cream business. The team was led by Sean Gregory, Transaction Services Partner and Chris Morris, Tax Partner, who were supported by a wider PwC team incorporating various technical specialists
Consideration of the financial performance by customer channel was a key aspect of PwC’s work. Additionally, the carve out nature of the transaction provided key challenges such as assessing the stand alone cost base including IT systems and working capital requirements.
Steve Smith
Steve Smith – Partner led the Ashurst team acting on behalf of the banks that provided the debt financing for the deal. Steve commented: “A particular focus for the banks was ensuring their security in the IP was properly protected. A key element of this was a tripartite agreement negotiated with Nestle.”
NORMA GROUP ACQUIRES NORDIC METALBLOK
INVESTCORP BUYS 30 PCT STAKE IN ORKA GROUP
PEP ACQUISITION OF NESTLE’S PETERS ICE CREAM
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WBC
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August 2012 /
95
DEAL DIARY:
M&A from around the world
JOHANNESBURG, SOUTH AFRICA (February 21, 2012) – JSE listed Litha Healthcare Group Limited (“Litha”) today announced that the group has entered into a strategic partnership agreement with Paladin Labs Inc.(“Paladin”), a listed Canadian-based pharmaceutical company focused on developing and in-licensing of innovative pharmaceutical products for Canadian and global markets. This will also include a number of indivisible transaction agreements, including a sale of shares and subscription agreement with Paladin. As part of the agreement, Litha will purchase 100 % of Pharmaplan (Pty) Ltd (“Pharmaplan”), Paladin’s South African based pharmaceutical operations, which will then merge with Litha’s Pharma Division. Litha to build scale with greater pharmaceutical portfolio With business interests spanning pharmaceuticals, vaccines and medical devices, the enlarged group will now deliver on its stated strategy to acquire pharmaceutical businesses in order to possess enhanced commercial scale and portfolio breadth within its pharmaceutical operations. The acquisition will give the Group the appropriate critical mass across all three divisions namely pharmaceuticals, vaccines and medical devices which will enhance Litha’s capacity to negotiate with suppliers on a bigger scale as a diversified company.
LITHA HEALTHCARE GROUP ACQUISITION OF PHARMAPLAN Merchant Bank, Sponsor and Funder
Transaction Originator and Debt Underwriter
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Independent Sponsor
Legal Adviser to Paladin as to Canadian Law
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l The world’s largest outsourcing and crowdsourcing marketplace, Freelancer.com, has announced the acquisition of Scriptlance -Canada’s largest freelance marketplace and the fifth largest in the world.
Prezioso is a leading provider of coating and insulation services which maintain vital industrial infrastructures in the energy and infrastructure sector. Prezioso’s services are critical to protecting the integrity of off-shore oil and gas and nuclear installations.
From its headquarters in Toronto, Scriptlance has over 360,000 enterprise and professional users, incorporated in 2001 as R3N3 International Inc., by René Trescases, Scriptlance boasts users from 244 countries, regions and territories globally. Over 600,000 projects have been posted to date with over $43 million paid out to freelancers by René and his team.
The Company is the market leader in its core markets where it primarily serves blue chip Western energy companies, such as EDF, Total, BP and Exxon. Prezioso’s markets in the O&G and nuclear industries are expected to deliver double digit growth over the next five years, driven by the increase in the number of off-shore O&G installations - and their maintenance requirements - and by the lifetime extension of nuclear reactors and more stringent maintenance requirements following Fukushima.
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Commenting on today’s announcement, Nicolas Paulmier, Partner at Cinven Partners LLP, said: Prezioso already has strong international operations. Together with management, we have identified significant growth opportunities in other markets including Brazil, the Middle East and Northern Europe. This investment reinforces our strategy of finding European-headquartered businesses whose growth prospects are primarily driven by exposure to rapidly growing emerging markets. Our investment in Prezioso demonstrates the combined strength of Cinven’s sector expertise and our local European network. Our Business Services team had been actively looking at investment opportunities in the energy services sector that can benefit from the growth in energy production without direct exposure to volatile commodity prices. Our team in Paris was instrumental to the successful execution of this investment.
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Erwoan Naour, CEO of Prezioso, added: The economic value of the assets Prezioso maintains is very high. Performing maintenance work in operational conditions without disrupting the production is a challenge we take up every day for our customers. Customers, therefore, will only rely on a provider like Prezioso with a strong knowledge and a long track record of a ‘zero defect’ service.
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The group will achieve a key milestone in its pharmaceutical strategy of rapidly growing its Litha Pharma Division through acquisitions and will now be the Group’s second largest division by revenue and largest by earnings.
l European private equity firm, Cinven today announces it has reached agreement to acquire Prezioso Technilor (“Prezioso” or the “Company”) from Indigo Capital for an undisclosed consideration.
We are very excited about working with Cinven. We believe they are the right partner to help grow the business globally organically and through acquisition given their experience of doing this successfully with other companies.
Matt Barrie, chief executive of Freelancer.com described Scriptlance as “truly one of the great trailblazers and most widely recognised brands in the online outsourcing industry,” he added: “we are tremendously excited to acquire Scriptlance”.
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Barrie continued:
Today we launch in Canada, and we couldn’t think of a better way to announce this than by buying one of Canada’s top technology websites. The company’s procurement of Scriptlance adds to its list of acquisitions which includes, LimeExchange (United States), Freelancer.co.uk (UK) and GetAFreelancer (Sweden) amongst others. The transaction was lead by Robert Postema, Partner in the Corporate Division of Piper Alderman’s Sydney office. The firm represented the buyer, ‘Freelancer.com’ Robert has a long standing relationship with Freelancer’s CEO (Matt Barrie) and CTO (Darren Williams) and acted for them when Freelancer was acquired by them some years ago.
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Acquisitions in this sector can be challenging, often raising issues outside the experience of either party. We were pleased to assist our client, Freelancer.com, and Scriptlance to overcome these challenges and reach a mutually satisfying agreement. Freelancer.com is an exciting business and a great client of our firm. We are excited to see them take this significant step forward
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Litha will acquire 100 % of Pharmaplan (Pty) Ltd (“Pharmaplan”), Paladin’s South African based pharmaceutical operations, which will then merge with Litha’s Pharma Division.
SCRIPTLANCE
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l A number of indivisible agreements have been signed which will result in Paladin Labs Inc. (“Paladin”) becoming Litha Healthcare Group’s (“Litha”) largest shareholder and international strategic partner.
PREZIOSO
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PHARMAPLAN
CINVEN INVESTS IN PREZIOSO
FREELANCER.COM ACQUIRES SCRIPTLANCE
Management Team Adviser
Legal Adviser to the Purchaser
Legal Adviser to the Purchaser
Financial Due Diligence Provider & Vendor Due Diligence Provider
Commercial Due Diligence Provider
Legal Adviser to the Vendor
Financial Adviser to the Vendor
Tax Adviser
Legal Adviser to the Vendor Reporting Accountants
IP Due Diligence Provider
Independent Expert M&A Adviser to the Vendor
96
/ August 2012
ACQUISITION INTERNATIONAL
DEAL DIARY:
M&A from around the world THE SHIELD GUARDING COMPANY LTD
SPORTRADAR
ST HUBERT
l In an official announcement on Sunday, Topsgrup said it has completed “the 100 per cent acquisition of The Shield Guarding Company Ltd, a reputed British security firm for a sum of £19.5 million”.
l EQT Expansion Capital II (“EQT Expansion Capital”) has agreed to invest approximately EUR44 million in Sportradar AG (“Sportradar” or the “Company”), the leading supplier of sports related live data, odds solutions and fraud detection services to bookmakers, media companies, sports federations and government agencies. As part of the transaction EQT Expansion Capital will become a minority investor and provide growth capital to finance Sportradar’s further organic and acquisitive development. Sportradar has an enterprise value, before EQT Expansion Capital’s investment, of EUR 127.5 million.
l Pan-Euopean private equity investor Montagu Private Equity is to acquire St Hubert alongside the comany’s existing management team from Dairy Crest Group plc, for a consideration of USD430m in cash. St Hubert is a leading producer of standard and low fat spreads in France and Italy.
Mr Stuart Kedward, who has been with The Shield Guarding Company Ltd for 15 years, will assume the role of Managing Director.
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The Shield Guarding Mr Nanda commented: Company Ltd has consistently demonstrated its market leader status both in terms of unrivalled quality and service and that is something that we are very proud of... we will ensure that we go from strength to strength and will create a truly global security service to better others. Acknowledged as the pioneer of the burgeoning security industry, Mr Nanda joined Topsgrup at the age of 22 in 1992 when the industry was plagued by uncertainties and problems. Topsgrup started off as an ailing company with just eight customers and is now India’s largest security group, valued at over £200 million. It comprises a conglomerate of 12 companies with 93,000 employees, over 8,000 clients in India, Israel and the UK, and has 120 offices.
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They commented: We were representing EQT Expansion Capital II on this deal, they are a company who we are proud to have had a long standing relationship with.
Email: tobias.klimpe@de.pwc.com or Visit: www.pwc.com
Thomas Talos has led Brandl & Talos Rechtsanwälte legal team. He is the founding partner and head of the corporate/M&A department of Brandl & Talos. He commented:
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We advised Sportradar AG as well as the existing shareholders. We have a long-standing working relationship with Sportradar AG and are rendering legal and strategic advice on a regular basis. Thomas Talos
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Mr Nanda will assume his position as Executive Chairman of The Shield Guarding Company Ltd with the existing management team remaining in place.
The team leading the deal at PwC were Steve Roberts (Partner Financial Due Diligence, Germany), Jochen Reis, Tobias Klimpe (Senior Manager Financial Due Diligence, Germany), Fabian Söffge (Senior Consultant Finacial Due Diligence, Germany), Juerg Niederbacher (Partner Tax M&A Switzerland), Matthias Marbach (Senior Manager Tax M&A Switzerland).
The transaction involved a complex corporate structure comprising a direct as well as an indirect share purchase via Sportradar AG by EQT and an increase in the capital of Sportradar AG. The involvement of Swiss, Norwegian, Austrian and Slovenian shareholders added additional complexity to the transaction. Email: talos@btp.at or Visit: www.btp.at
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Sylvain Berger-Duquene (pictured), Director of Montagu Private Equity, says: We are very proud to partner with the managers of St Hubert in the acquisition of the company. St Hubert fulfils all of Montagu’s investment criteria. It is a market leader, with a steady organic growth record, fuelled by an ambitious innovation strategy and led by an outstanding management team. We look forward to investing in the business and supporting Patrick Cahuzac and his team in their development plans for St Hubert, including via acquisitions, both in France and abroad.
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Topsgrup originally acquired a 51 per cent majority stake in the company in 2008, and then took up its option to purchase a 100 per cent stake in the company, making it a powerful security services conglomerate.
Founded over 100 years ago, St Hubert is one of the leaders in the spreads market. It achieved over €130m sales and produced circa 35,000t of standard, low fat and innovative spreads in the year ended March 2012. Headquartered near Paris, St Hubert has its original production site near Nancy (Lorraine) and derives a material part of its sales from its Italian affiliate. St Hubert employs over 200 people and markets such brands as St Hubert and Le Fleurier in France, and Valle’ in Italy. St Hubert has a clear focus on innovation, which resulted in the launch over the past ten years of highly successful products such as St Hubert Oméga 3, St Hubert Bio and 5 Céréales.
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Mr Nanda’s acquisition of The Shield Guarding Company Ltd comes closely after he entered the Sunday Times Rich List 2012, with an estimated personal fortune of £168 million.
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The acquisition has positioned the company’s Global Chairman, Diwan Rahul Nanda, as the only entrepreneur of an Indian multi-national company to purchase a 100 per cent stake in a British security company.
Patrick Cahuzac, CEO of St Hubert, says: We have found in Montagu a seasoned and ambitious European partner whose investment philosophy and pan-European presence will allow us to accelerate our development strategy. We look forward to working with Montagu over the coming years to further invest and grow St Hubert. Any decision by Dairy Crest Group plc to proceed with the transaction is subject to French Works Council consultation. In addition, completion of the transaction is subject to the approval of Dairy Crest’s shareholders, satisfactory clearance from the French competition authorities and financing consents.
THE SHIELD GUARDING COMPANY LTD
EQT EXPANSION CAPITAL INVESTS IN SPORTRADAR
MONTAGU PRIVATE EQUITY TO ACQUIRE ST HUBERT
Debt Provider
Financial Due Diligence Provider & Tax Adviser
Environmental Due Diligence Provider
Legal Adviser to the Purchaser / Risk & Insurance Due Diligence Provider & Commercial Due Diligence Provider
Legal Adviser to the Vendor
Legal Adviser to the Purchaser/Management Team
Legal Advisers to the Equity Provider
WILLKIE FARR & GALLAGHER LLP Legal Adviser to the Vendor
Risk & Insurance Due Diligence Provider
Risk & Insurance Due Diligence Provider Financial Due Diligence Provider & Vendor Due Diligence Provider Commercial Due Diligence Provider
Virtual Data Room Provider
The Shield Guarding Co. Ltd. (Target Co.)
ACQUISITION INTERNATIONAL
Virtual Data Room Provider
August 2012 /
97
DEAL DIARY:
M&A from around the world
UES specialise in the rental and supply of marine and subsea support equipment to the Diving, ROV and survey sectors of the global offshore industry. The company provides both Diver and ROV operated tooling as well as fully integrated packages, comprising deck cranes, winches, power packs, survey and deployment equipment. UES has a market leading reputation for the quality of its subsea engineering, design and manufacturing capabilities. The company, which was established in 2006, is based in Foveran, on the outskirts of Aberdeen Following the acquisition of UES, ATR will have a turnover in excess of £20 million and ATR’s workforce will increase by 15%.
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Keith Moorhouse, chief executive of ATR, said: We are excited about welcoming Jeff and his team to ATR Group. UES is widely respected and has built up a significant track record for servicing the leading, specialist marine and subsea contractors. ATR is performing strongly and we have identified the subsea market as a key strategic area for many of our customers. We intend to invest substantially in UES for growth without losing its core focus and speciality. It’s about responding to customer needs and continuing to deliver.
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UES’s subsea rental offering and engineering capabilities are highly complementary to ATR’s existing surface rental and service offering. We’ve listened to our customers and I believe that this surface to subsea approach will provide them with an enhanced value-based proposition that meets their needs.
Ewan Neilson
Ewan C Neilson led the Stronachs LLP team, who is Head of the Corporate/ Commercial Department.
l Moshe (Mori) Arkin and Dr. Uri Geiger’s Accelmed is investing $8 million in US transcatheter technology developer, ValCare Medical Inc., a spinoff of MiCardia Corporation. ValCare is developing a heart valve repair device which is implanted in a minimally invasive way by catheter. MiCardia CTO Sam Shaolian, who has been appointed CEO of ValCare, is a former Israeli, and the primary inventor of ValCare’s technology. He is a serial entrepreneur, whose ventures include Vertelink, which was sold to Medtronic Inc. (NYSE: MDT) for $80 million. ValCare is developing a transcatheter mitral valve repair system, which utilizes interventional cardiology methods to implant a mitral annuloplasty device. Israel’s Ventor Technologies, which Medtronic acquired for $325 million in 2009 and closed in 2012, developed minimally-invasive replacement aortic valves, called the Engager, eliminating the need for open-heart surgery. The development technologies like Ventor’s product for the aortic valve made it clear that minimally invasive methods for repairing the mitral valve was the next big thing, and that the market could be even larger than the market for aortic valve repair. AccelMed has joined this race with its investment in ValCare.
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l Global-leading oil and gas equipment services specialist ATR Group has completed its first strategic acquisition following its recent MBO supported by NBGI Private Equity. The acquisition of Underwater Engineering Services (“UES”) strengthens ATR’s existing subsea capabilities and demonstrates the Group’s commitment to investing in this dynamic, fast growing market.
WST PRÄZISIONSTECHNIK
VALCARE
We use a different way to locate technology than venture capital funds,” Geiger told “Globes”. “We found this field interesting and we examined 40 companies in it with a team of doctors who devoted months to this. After locating the technology, we had to persuade them to sell it. In short, we didn’t wait for the deal flow. IntraLinks (NYSE: IL) empowers global companies to share content and collaborate with businesses partners without losing control over information. Through the IntraLinks platform, companies, partners, and third parties can share and work together on even the most sensitive documents — while maintaining compliance with policies that mitigate corporate and regulatory risk. IntraLinks has more than 15 years of experience, and a track record of enabling high-stakes transactions and business collaborations valued at more than $19 trillion. IntraLinks is the proven provider of enterprise strength collaboration solutions, and is headquartered in New York City. In addition the company operates eleven offices on four continents.
l The company, which is based in the Hochschwarzwald region of Germany, manufactures high-end, ready-to-mount precision turned and milled parts based on state-of-the-art production technology. The customer base derives from the automotive, drive technology, hydraulics and mechanical engineering sectors. Around 230 employees work full-time for WST, generating around €40 million of annual revenue.
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Volksbank eG commented: We were the main bank partner of the “old” WST Präzisontechnik GmbH & Co.KG. During the acquisition process we became convinced of the strategy and ideas of the new shareholder Finatem. So we decided to continue our business relationship with WST Präzisionstechnik GmbH.
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UNDERWATER ENGINEERING SERVICES
There were no extraordinary challenges to face in completing this deal. All partners worked hard and efficient, so the time schedule could be reached. OMF advised Finatem in the transaction on the tax and corporate acquisition structuring, the acquisition documents, the re-participation of the sellers, finance and the management agreements. The team of Otto Mittag Fontane comprised Dr. Thomas M. Hofacker (legal and tax) and the associates Elisabeth Huber-Sorge, Steffen Kreß and AnnaMaria Krekeler. Morgan Lewis advised Finatem Fonds Management Verwaltungs GmbH on the labour and employment aspects of the acquisition of a majority stake in WST Präzisionstechnik GmbH & Co. KG. Finatem is one of Germany’s leading independent midmarket private equity investment company. WST Walter Ahrens manufactures precision turning parts for a wide range of applications. The Morgan Lewis team conducted the due diligence and advised on certain deal structure issues. It is the first transaction in which Morgan Lewis acted for Finatem. Business and finance partner Nils Rahlf made the contact and labour & employment partner Walter Ahrens led the Morgan Lewis team. www.morganlewis.com wahrens@morganlewis.com
ATR GROUP ACQUISITION OF UNDERWATER ENGINEERING SERVICES
ACCELMED INVESTS IN VALCARE MEDICAL INC
WST PRÄZISIONSTECHNIK AND FINATEM ON JOINT EXPANSION PATH
Debt Provider
Legal Adviser to the Purchaser/Management Team
Commercial & Tax Due Diligence Provider
Legal Adviser to the Vendor
Legal Adviser to the Equity Provider
Legal Adviser to the Purchaser
Legal Adviser to the Debt Provider
Environmental Due Diligence Provider
Financial Due Diligence Provider IP Due Diligence Provider
Financial Due Diligence Provider & Systems Due Diligence Provider
Risk & Insurance Due Diligence Provider
Legal Adviser to the Vendor Financial Adviser to the Vendor
98
/ August 2012
Virtual Data Room Provider
House Banks
ACQUISITION INTERNATIONAL