Acquisition International January 2013 by AI Global Media

January 2013 /

IN THIS ISSUE/

DEAL GURU:

DOING BUSINESS IN 2012:

From Deal to Day One. A.I. examines company formations around the world.

ALTIUS ANNUAL REPORT — Ten Challenges Facing the Private Equity Sector. / 14 www. ACQUISITION-INTL .com

Q4 REPORT:

Acquisition International’s final quarterly review of 2012.

MANAGING HIGH-RISK LITIGATION — Acquisition International speaks with experts in the field to examine some of the methods developed by insurance and legal communities alike which are used to achieve a successful outcome. / 44 THE EVOLVING ROLE OF THE ACTUARY — Acquisition International speaks to leading experts in the field to discuss the vital role actuaries play. / 48

CONTENTS:

January 2013

Editors Comment 2013 begins with a great deal of optimism and ambition for the new year, however caution stemming from the continued economic challenges around the world are tempering this positivity.

CONTENTS — January 2013

BMO Harris Private Banking’s latest Market Outlook Commentary Report reveals that the world’s market and economic situation is in better shape now than it was 12 months ago. The report notes that several factors have led to this positive outlook, including the economic accomplishments of policymakers in Europe, the United States, China and Canada, on-going recovery in China and a stronger U.S. economy. The combination of these developments is expected to improve U.S. equity markets and a rise in energy and commodity prices, in turn, positively impacting Canadian equity markets. The latest Quarterly Economic Survey released by the British Chambers of Commerce (BCC) shows that the UK economy improved in the fourth quarter of 2012, with stronger balances seen in both the manufacturing and service sectors. The new survey, made up of nearly 8,000 business responses, shows that UK firms are confident and ambitious, but also indicates that growth remains weak and there are still economic challenges ahead. The Greenwich Optimism Index moved into positive territory in the second half of 2012, indicating that, on net, small and mid-sized U.S. companies believe economic conditions are improving. The Index started 2012 in positive territory but quickly turned negative amid the European sovereign debt crisis and mixed signals about the direction of the U.S. economy. The uptick to a positive reading in the second half of last year was surprising uncertainty around the U.S. fiscal cliff and a variety of upcoming banking regulatory actions. “Many firms have managed to survive and even flourish in a volatile and slow-to-recover business environment. This partially explains the optimism that we are now seeing in many businesses,” says Greenwich Associates consultant David Heiner. This month’s issue includes the continuation of our extensive review of Q4 2012, a detailed examination of company formations around the world, and discussions with experts in high-risk litigation. The Acquisition International team hopes all our readers have a happy and prosperous new year. Enjoy the issue, Phil Grainger, Editor phil.grainger@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/

ON THE COVER - ALTIUS ANNUAL REPORT – TEN CHALLENGES FACING THE PRIVATE EQUITY SECTOR: /14 Altius highlights asset pricing and over ambitious fund managers as key challenges facing the infrastructure market. Altius provides detail on each of the ten challenges. NEWS: /04

The Latest News Stories From Around The World.

ACQUISITION INTERNATIONAL

Hedge Funds News

8/ Appointments 16/ 2013 Predictions Let’s Switch Again 18/ Doing Business

SECTOR TALK: /10 Food and Agriculture Private Equity-Backed Buyout Deals Powered by Prequin.

DEAL GURU: /12 From Deal to Day One.

20/ Doing Business in the Nordic Region 23/ Investing and Doing Business in Mexico 25/ Ukraine & the Green Tariff Law 26/ Introducing the Loss Adjustor 27/ Employment Law and HR issues in M&A 28/ The Risks of the Banking Industry 30/ Doing Business in 2012

Q4 REPORT: /58 Acquisition International’s Final Quarterly Review of 2012

DEAL DIARY: /72 @acquisition-int

The Latest M&A From Around The World.

44/ Managing High-Risk Litigation 46/ Fund Formation 48/ The Evolving Role of the Actuary 51/ Managing Environmental Risks in M&A Transactions 54/ Aerospace: Airplane Carbon Trading 56/ The Importance of Effective Due Diligence 71/ Meet the Experts

January 2013 /

NEWS:

from around the world

Quarterly Economic Survey: Businesses confident, but growth remains weak The latest Quarterly Economic Survey released by the British Chambers of Commerce (BCC) shows that the UK economy improved in the fourth quarter of 2012, with stronger balances seen in both the manufacturing and service sectors. The new survey, made up of nearly 8,000 business responses, shows that UK firms are confident and ambitious, but also indicates that growth remains weak and there are still economic challenges ahead.

it has faced. Although the improvements we have seen are slight, it is progress nonetheless, and highlights the determination and ability of the businesses we have here in the UK. Despite rising business confidence that the outlook will improve, it is clear that economic growth remains weak and that nurturing it must be a top priority.

Commenting on the results, John Longworth, BCC’s Director General, urged the government to take bold and imaginative measures to boost growth that will help businesses of all sizes to deliver a lasting recovery throughout 2013 and beyond.

“The UK economy will continue to face major obstacles as we head into 2013, and every effort must be made to kick-start growth. Politicians can make a difference to our economic success, as they have the power to deliver bold and imaginative measures that will drive growth. The question is whether they have the guts to do it.

“Our survey results show that the economy is making progress, despite the numerous challenges

“It is a new year and the time for a new chapter in our economy. The government must build on

measures announced in the Autumn Statement and deliver a strategy that combines deficit reduction with a realistic long-term growth plan, including immediate measures to support business confidence. “Recent steps to improve access to finance, such as the commitment to create a business bank, must be implemented at scale and with clear timetables. More forceful measures are also needed to unlock massive private funding to renew Britain’s infrastructure that will create confidence in the short-term, jobs in the medium-term and growth in the long-term. But this will only work once we free up the planning system at national and local levels, and defeat the culture of NIMBYism that prevents many business projects getting off the ground.”

Confidence Starting to Build among U.S. Small and Mid-Sized Businesses Optimism about the economy built slowly but steadily in the second half of 2012 among U.S. small and mid-sized businesses, some of which are likely to seek more credit in 2013 as they become increasingly confident in business fundamentals. A new Greenwich Market Pulse revealed that owners and executives of 40% of small businesses and 37% of midsized companies reported that the current environment has actually had a positive impact on their business. This study from Greenwich Associates covered 262 small businesses, defined as those generating revenues between $1 million and $10 million and 262 middle market companies, with sales of between $10 million and $500 million.

One important contributor to that impact is the seemingly positive behavior of banks towards many small businesses. Forty-six percent of small businesses that borrowed in the three-month period ending in late October/early November reported that credit was “easier” or “much easier” to obtain as opposed to 24% approximately a year ago. Only 17% of small and mid-sized businesses said that they had accessed credit on the back of federally sponsored programs, an indication that many businesses had gotten loans on the strength of their performance in a challenging environment. Greenwich Optimism Index Turns Positive The Greenwich Optimism Index moved into positive

territory in the second half of 2012, indicating that, on net, small and mid-sized U.S. companies believe economic conditions are improving. The Index started 2012 in positive territory but quickly turned negative amid the European sovereign debt crisis and mixed signals about the direction of the U.S. economy. The uptick to a positive reading in the second half of last year was surprising uncertainty around the U.S. fiscal cliff and a variety of upcoming banking regulatory actions. “Many firms have managed to survive and even flourish in a volatile and slow-to-recover business environment. This partially explains the optimism that we are now seeing in many businesses,” says Greenwich Associates consultant David Heiner.

Hansteen Agrees Over €40 Million Investment Deals and a Pre-Let Hansteen, the investor in UK and continental European real estate, has carried out a series of significant investment and leasing transactions in Germany, proving its expertise at asset recycling and asset management.

tenants with 41% (34,917 sq m/375,850 sq ft) vacant. The estimated rental value (ERV) of the portfolio is €3.6 million a year.

In the biggest transaction, just completed, Hansteen has acquired the German assets of the EIP Fund for €24.5 million, satisfied from existing cash resources. The price reflects an initial yield of 10.6% and the reversionary yield is more than 14%.

This transaction follows the recent announcement (27 December 2012) of the acquisition of a £60 million portfolio of multi-let UK industrial estates from The Industrial Trust. The portfolio comprises 32 estates, totalling 1.6 million sq ft, and has an annual rent roll of £6.1 million, representing a net initial yield of 10.1%, and vacancy rate of 16%.

The portfolio comprises seven multi-let industrial estates, totalling 84,224 sq m (906,600 sq ft), located in Hannover, Dusseldorf, Hennef, Frankfurt, Rodgau, Stuttgart and Munich. The properties have a combined rent roll of €2.6 million a year from 32

Hansteen has also agreed five investment sales in Germany for a total of €15.9 million. The sales comprise properties in Neckarsulm for €2.75 million, in Freising for €2.45 million, in Aschaffenburg for €2.3 million, in Weiterstadt to the occupier for

/ January 2013

€8.05 million and three small residential blocks in Padderborn for €370,000. On the leasing side, in a transaction which will give Hansteen a return of over 10%, it has pre-let a new building at Industriepark in Gottmadingen, southern Germany, to an existing tenant, Constellium Singen GmbH, an automotive structures business, for expansion space. The building will comprise 2,200 sq m (23,680 sq ft) of yard space and 1,500 sq m (16,150 sq ft) of unheated warehouse space with 192 car parking spaces. ConstelliumSingen has agreed a twelve year lease from practical completion, expected in late July, at an initial rent of €97,500 a year and has also agreed to extend its existing leases, which total around €1.5 million of rent a year, from five to twelve years.

ACQUISITION INTERNATIONAL

NEWS:

from around the world

BMO Harris Private Banking Market Outlook As the New Year commences, BMO Harris Private Banking’s latest Market Outlook Commentary Report reveals that the world’s market and economic situation is in better shape now than it was 12 months ago. The report notes that several factors have led to this positive outlook, including the economic accomplishments of policymakers in Europe, the United States, China and Canada, on-going recovery in China and a stronger U.S. economy. The combination of these developments is expected to improve U.S. equity markets and a rise in energy and commodity prices, in turn, positively impacting Canadian equity markets. Highlights from the report include: Europe Rebounding Europe’s sovereign-debt challenges came to the fore in early 2012, but the year closed with a clear path

forward. Austerity programs, though necessary, were not enough and led to violent protests; through hard work, however, policymakers made tremendous progress by year’s end: • Europeans now have a communal agreement on banking supervision throughout the region. • Communication among all constituents vastly improved and has gone a long way to restoring confidence. • There was considerable movement towards stability. “ European leaders have made more improvements in 2012 than anyone could have imagined a year ago, yet Europe has not fully recovered,” said Richard Mason, Head of Investment Management at BMO Harris Private Banking. “More work is required before markets in Germany, France and several Eurozone countries regain confidence and the region begins to grow again. Still, it is very encouraging that there is a sustainable framework in place.”

Progress in the United States The U.S. Federal Reserve effectively set the tone for policy clarity in 2012, with politicians making substantial inroads in the important area of tax reform through the fiscal cliff negotiations: • Monetary policy will be tied to the unemployment rate. • A 6.5 per cent unemployment target means rates will remain low for at least another year. • The dreaded Fiscal Cliff was averted through last-minute legislation, resulting in tax hikes for higher income earners, some relief for middleclass wage earners and no immediate spending cuts. In turn, the markets rallied. “ Rather than create a ‘grand bargain’ that linked spending cuts to tax reform, legislators made a wise move by postponing the deadline for the cuts that would kick in automatically,” said Mr. Mason. “It will be interesting to see what transpires over the next few weeks and months, as it could have a ripple effect throughout the world.”

CMS and DealWatch release “Emerging Europe: M&A Report 2012” M&A activity in the region last year was hampered by the drawn-out debt crisis in the Eurozone, the region’s main trading partner, political turmoil in some states and tough austerity plans introduced by local governments. According to the publication, the number of M&A transactions in Emerging European countries in 2012 neared 2,265, an almost 40% decrease in year-onyear terms. The total value of M&A deals went down as well amounting to €121 bn, with fewer mega-ticket deals than in the year before. Rosneft’s acquisition of TNK-BP, Russia’s largest-ever takeover deal, accounted for more than a third of the overall value.

Manufacturing remains the most active sector and mining (including oil & gas) was the leading sector in terms of deal value, with over €58bn accounting for nearly half of the overall market. Helen Rodwell, Head of the CMS CEE Corporate Practice states: ‘The outlook for CEE for 2013 continues to be dominated by the uncertain evolution of the debt crisis in Europe but a number of Emerging Europe countries in certain sectors are expected to slowly pick up as we move into the new year. Indeed, the CEE region remains attractive to investors.’

Ian Parker, CMS Corporate Partner adds: ‘We believe that 2013 will again bring a steady flow of deals. Despite turbulent times, CMS remains dedicated to the CEE region with the leading corporate M&A legal practice and the most extensive and experienced office network offering deal experts on the ground’. Boris Maleshkov, DealWatch Editor-In-Chief adds: ‘M&A activity throughout Central and Eastern Europe in 2013 will largely hinge on the availability of bank liquidity for deal financing, the implementation of austerity measures and the path of the Eurozone sovereign debt crisis’.

Short-term ‘fast cash’ more of a priority for sellers than longer term strategic priorities Nearly 50% of divestments in the UK over the past two years were driven by a need for a quick cash injection rather than to achieve a longer term strategic objective, according to a new report from Ernst & Young. The 2012 Global Corporate Divestment Survey reveals that respondents’ rationale for a divestment is often focused on short-term financial motives rather than the longer term strategic benefit of the business. Seven out of ten respondents say the main factor that determines whether a business stays within a company portfolio or not are short term financial measures. For example, whether an asset dilutes or enhances earnings per share (EPS), and how

ACQUISITION INTERNATIONAL

it performs against financial benchmarks such as return on capital employed (ROCE). Strategic drivers such as enhancing shareholder value or focusing on core business, come further down the priority list. The survey, conducted by the Economist Intelligence Unit (EIU), is based on feedback from 600 senior corporate executives globally and 49 respondents in the UK, as well as a series of interviews with clients, investment banks and law firms. Michel Driessen, Operational Transactions Services Partner at Ernst & Young who lead the research, commented: “The rationale for making divestments is shifting. Many UK companies are still using divestments as a short-term tool to raise cash or pay down debt. That’s not surprising given the difficulties

many businesses have faced in terms of cash and credit over the past five years. “However, some companies are now taking a more strategic and structured approach, viewing a divestment as strategically important as an acquisition. “Those that divest strategically tend to exceed their value goals. The fact that 76% of companies that divest leave money on the table will increasingly spotlight the benefits of a more strategic approach. In this prolonged period of low – or even zero – growth, divestments will likely play a more important role in how companies navigate uncertainty, meet their strategic corporate objectives and create value for their stakeholders.”

January 2013 /

FUND NEWS:

from around the world

Strong inflows to bond funds boost net sales of worldwide investment funds in Q3 2012 The European Fund and Asset Management Association (EFAMA) has released the latest international statistical release containing worldwide investment fund industry results for the third quarter of 2012. The main highlights for Q3 2012 include: * Investment fund assets worldwide increased by 2.5 percent to €21.95 trillion in the third quarter of 2012. In U.S. dollar terms, worldwide investment fund assets increased 5.3 percent during the quarter to US$ 28.38 trillion. This difference reflects the depreciation of the US dollar vis-à-vis the euro during the quarter. * Total worldwide net inflows into investment funds amounted to €167 billion during the third quarter, up from €99 billion in the previous quarter. This increase was achieved thanks to stronger net inflows into balanced and bond funds.

* Long-term funds (all funds excluding money market funds) registered increased net inflows during the quarter of €175 billion, up from €141 billion in the second quarter. Bond funds continued to enjoy strong net inflows (€146 billion), up from €121 billion in the second quarter. Equity funds recorded the fifth consecutive quarter of net outflows (€43 billion, up from €14 billion in the previous quarter). Balanced/mixed funds registered a large increase in net sales to €38 billion, compared to €2 billion in the previous quarter. * Money market funds registered net outflows of €9 billion, down compared to the second quarter (€42

billion). The United States registered net inflows of €29 billion during the quarter, marking a turnaround compared to the second quarter when net outflows amounted to €53 billion. On the other hand, Europe registered net outflows of €31 billion, up from €1 billion in the previous quarter. * At the end of the third quarter, assets of equity funds represented 37 percent and bond funds represented 24 percent of all investment fund assets worldwide. The asset share of money market funds was 16 percent and the asset share of balanced/mixed funds was 11 percent. * The market share of the ten largest countries/regions in the world market were the United States (49.3%), Europe (28.1%), Australia (5.7%), Brazil (5.5%), Japan (3.6%), Canada (3.5%), China (1.3%), Rep. of Korea (0.9%), South Africa (0.6%) and India (0.4%).

UCITS register inflows of €36 billion in November 2012 The European Fund and Asset Management Association (EFAMA) has published its latest Investment Fund Industry Fact Sheet, which provides investment sales and asset data for November 2012. 26 associations representing more than 99.6 percent of total UCITS and non-UCITS assets at end November 2012 provided us with net sales and/or net assets data.

• Long-term UCITS (UCITS excluding money market funds) net sales rose in November to €36 billion, from €34 billion in October. o Net sales of equity funds amounted to €13 billion, up from €3 billion the previous month. o Net inflows into bond funds amounted to €19 billion, compared to €25 billion in October.

The main developments in November 2012 in the reporting countries can be summarised as follows:

o Balanced funds registered a reduction in net sales month on month of €3 billion versus €5 billion.

• UCITS continued to register strong net inflows of €36 billion in November (compared to €41 billion recorded in October).

• Net sales of money market funds broke even in November after recording net inflows of €6 billion in October.

• Net sales of non-UCITS totalled €8 billion, down from €13 billion in October. • Special funds (funds reserved to institutional investors) reduced sharply in November to €3 billion, compared to €10 billion in the previous month. • Total net assets of UCITS increased 1.1% in November to €6,316 billion, whilst non-UCITS net assets increased 0.9% to stand at €2,502 billion. Bernard Delbecque, Director of Economics and Research at EFAMA, said: “Net inflows into bond funds remained the largest contributor to total net sales of UCITS in November. The substantial volume of net sales of equity funds was largely due to the transfer of some insurance company assets into UCITS.”

ING IM Renta Fund Global High Yield hits €1 billion in AuM ING Investment Management’s ING (L) Renta Fund Global High Yield has surpassed the €1 billion mark in assets under management (AUM). Bolstered by significant inflows from Asia and Europe in 2012, the Fund has continued to attract investors with its multi-site management team and disciplined investment approach that combines a strong focus on risk management with thorough bottom up credit analysis aimed at avoiding credit deterioration and identifying improving credits. The strategy outperformed the benchmark over both 1 year and 3 years, returning 16,25% over 2012 and an average 12,84% per year over the last three years. The performance was driven by an underweight

/ January 2013

to the lowest yielding most interest rate sensitive names, a focus on single-B rated bonds, and from an overweight to Asian High Yield. In addition, the peripheral stress within Europe created several attractive investment opportunities. Launched in 2001, the fund is managed on a total return basis, combining credit analysis on individual issuers with top down views on regions, credit quality, and industry sectors to construct a diversified investment portfolio that balances the aim to avoid defaults with investments that offer attractive upside potential. Hans Stoter, Head of Global High Yield at ING Investment Management, says: “Investor appetite

for yield has remained the main driver behind investments in this asset class. While overall yields have declined, the compensation for credit risk is still attractive given the strong corporate credit fundamentals. In the current low interest rate environment we expect continued investor appetite for high yield bonds.” On the Fund’s 2013 investment themes, Hans Stoter continues: “The actions of policymakers have reduced the macro tail risk, while corporate default rates are expected to remain very low. We have positioned our portfolio to benefit from this by maintaining a slightly higher beta positioning through careful selection of lower rated credits across our global investment universe.”

ACQUISITION INTERNATIONAL

FUND NEWS:

from around the world

Court Orders New York-Based Hedge Fund Manager and Firm to Pay Nearly $5 Million in Disgorgement and Penalties The Securities and Exchange Commission announced today that, on January 3, 2013, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York entered final judgments against hedge fund manager Chetan Kapur and his firm, ThinkStrategy Capital Management (ThinkStrategy), ordering them to jointly and severally pay disgorgement of $3,988,196.59 and civil penalties in the amount of $1,000,000. The final judgments stem from a partially-settled civil injunctive action filed by the Commission on November 10, 2011. The SEC’s complaint alleged that over nearly seven years, Kapur and ThinkStrategy engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials. In particular, Kapur and ThinkStrategy materially overstated the performance of their ThinkStrategy

Capital Fund, giving investors the false impression that the fund’s returns were consistently positive and minimally volatile. The complaint also alleged that Kapur and ThinkStrategy repeatedly inflated the firm’s assets, exaggerated the firm’s longevity and performance history, and misrepresented the size and credentials of ThinkStrategy’s management team. With respect to a second hedge fund they managed, the TS Multi-Strategy Fund, the complaint alleged that Kapur and ThinkStrategy misstated the scope and quality of due diligence checks on certain managers and funds selected for inclusion in the fund-of-funds’ portfolio. As a result, the TS MultiStrategy Fund made investments in certain hedge funds that were later revealed to be Ponzi schemes or other serious frauds, including Bayou Superfund, Valhalla/Victory Funds, and Finvest Primer Fund.

The Commission charged Kapur and ThinkStrategy with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the allegations in the Commission’s complaint, Kapur and ThinkStrategy consented to the entry of November 18, 2011 judgments permanently enjoining them from violating the above provisions. Kapur also consented to a November 30, 2011 SEC order permanently barring him from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognised statistical rating organisation.

Hedge Funds Finish the Year with Gains and Outperform the S&P 500 in Q4 Hennessee Group LLC, an adviser to hedge fund investors, has announced that the Hennessee Hedge Fund Index advanced +1.45% in December (+6.99% YTD), while the S&P 500 increased +0.71% (+13.40% YTD), the Dow Jones Industrial Average gained +0.60% (+7.26% YTD), and the NASDAQ Composite Index advanced +0.31% (+15.92% YTD). Bonds were down, as the Barclays Aggregate Bond Index declined -0.14% (+4.23% YTD). “Hedge funds continued to perform well in December, adding to their gains for the year,” commented Charles Gradante, Managing Principal of Hennessee Group. “Hedge fund managers

benefited from both increased exposure levels and alpha generation from security selection as high correlations continued to decline among stocks with attractive and unattractive valuations. The fourth quarter was the best quarter of the year for hedge funds as they outperformed the S&P by more than +2.5% on an absolute basis (+1.70% versus -1.01%).” “2012 was another year where global markets were driven by macro news. Global stimulus outweighed renewed concerns about the European sovereign debt crisis, a global economic slowdown, and political uncertainty in the U.S. Fears of a recession declined dramatically and risk assets rallied,”

commented Charles Gradante. “Hedge funds posted a respectable year, but underperformed broad equity markets due to conservative positioning early on. During the first quarter, below-average exposures led to reduced up-market capture. In May, European worries resurfaced in a dramatic sell off, resulting in a reduction of risk and leading to underperformance in the relief rally that followed. However, the last six months have been encouraging. Despite volatile macro events, such as political uncertainty and fiscal cliff in the U.S., managers were able to capture a good portion of upside and generated alpha, which bodes well for our outlook for hedge fund performance in 2013.”

Linedata announces two new hedge fund clients in Asia Linedata, the global solutions provider dedicated to the investment management and credit industries, has announced that two hedge funds in Asia have selected Linedata Global Hedge to support their businesses. One of these, Magenta Advisors PTE Ltd (Magenta), an independent boutique asset management and investment advisory firm based in Singapore, selected the portfolio management and middle office module of Linedata Global Hedge to support its start-up hedge fund business. Magenta will rely on Linedata to host and manage the software. Recent analysis of the hedge fund industry in Asia shows strong performance and a record number of 1,128 hedge funds in the third quarter of 2012. With growing competition and volatile market conditions, it is important for hedge funds to have robust, trusted systems in place to support more complex requirements, deliver transparency and control, and ultimately attract investors. It was these factors that

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lead Magenta to search for a system. Magenta conducted a thorough selection process based on vendors’ reputation in the industry, as well as the range and scalability of the product offering. They were particularly impressed with Linedata Global Hedge’s comprehensive handling of multiple asset types, its user friendly interface, strong technical support and its reputation in both the long only and alternative space. After shortlisting their preferred systems and trialling Linedata Global Hedge for a couple of weeks, Magenta chose Linedata. May Lim, COO and Executive Director at Magenta, commented, “Linedata offers us both the functionality and scalable technology that we require to support our business. As a start-up, it is crucial for us to have control of our costs without sacrificing the integrity of the firm. We chose Linedata’s hosted solution as it gives us peace of

mind regarding the system and data availability, it takes away the need for us to perform costly data backups and allows us to make the most effective use of our time by focusing on our core business. Looking forward, the ease of adding new funds and structures to the system means that we can launch a new product offering to our investors quickly and without incurring hefty implementation costs.” “We are delighted to welcome Magenta Advisors to our client base,” said Sally Crane, Managing Director of Linedata Asia. “Having worked with over 200 start-ups around the world, we understood Magenta’s requirements for scalability, broad functional coverage, excellent support and choice of deployment. The addition of two clients, a start-up hedge fund and a well-established, China-focused long/short equity fund with AUM of $2bn, is affirmation that our offering is strong and well placed to meet business requirements now and in the future.”

January 2013 /

APPOINTMENTS:

from around the world

Artio Global Investors Inc. Board Appoints Christopher Wright as an Independent Director Artio Global Investors Inc. has announced Christopher Wright to its Board of Directors. He was also appointed to its Audit, Compensation and Nominating and Corporate Governance committees. Artio Global Investors Inc. is the indirect holding company of Artio Global Management LLC (“Artio Global”), a registered investment adviser that actively invests in global fixed income and equity markets primarily for institutional and intermediary clients. Headquartered in New York City, Artio Global offers a select group of investment strategies including High Grade Fixed Income, High Yield, International Equity and Global Equity. Access to these strategies

is offered through a variety of investment vehicles, including separate accounts, commingled funds and mutual funds. Mr. Wright is Chairman of Emerging Markets Alternatives LLC, a private equity asset management firm, a director of Merifin Capital Group, a private European investment firm and serves as an advisor to Campbell Lutyens & Co. Ltd. and also to Hansa Capital LBG. Until mid-2003 he served as Head of Global Private Equity for Dresdner Kleinwort Capital and was a Group Board Member of Dresdner Kleinwort Benson overseeing alternative assets in developed and emerging markets. He acted as Chairman of various investment funds prior to and

following the latter’s integration with Allianz AG. Mr. Wright is a director of Roper Industries Inc. (NYSE), Idox PLC (AIM-London) and Yatra Capital Ltd. (Euronext). He is a Foundation Fellow of Corpus Christi College, Oxford and serves on its endowment committee. “We are very pleased to welcome Christopher to our Board. He brings a wealth of public company and asset management industry experience,” said Tony Williams, Chief Executive Officer and director. “We look forward to working with him as we continue growing our highly rated fixed income strategies and reestablishing the competitiveness of our equity strategies.”

New Global Head of Sales for Paladyne Systems Paladyne Systems, a Broadridge Financial Solutions company and a leading provider of next-generation investment management solutions, has announced the appointment of Jim Feingold as Global Head of Sales. In addition, joining the sales and business development team as senior hires are Devani Maijala, Lisa Zippelius and Michael Conti. ”We are pleased to expand our sales and business development with a seasoned team to be led by an industry veteran of Jim’s caliber as we continue to grow our client base across the buy-side globally,” said Sameer Shalaby, President, Paladyne Systems. “Since Paladyne was acquired by Broadridge we have significantly expanded our product offering and account coverage, and are extending into adjacent markets beyond the hedge fund community.”

“I am excited to join Broadridge and lead Paladyne’s sales team at this juncture. Broadridge’s global reach and commitment, combined with Paladyne’s extensive trading, portfolio management and enterprise data management capabilities, creates an institutional offering unique in the marketplace,” said Jim Feingold, Vice President and Global Head of Sales, institutional offering Paladyne. “We are at an inflection point right now as the buy-side faces an increasingly complex global market landscape, shifting government regulations and the need to monitor their business challenges in real-time. Paladyne offers a world class platform, in a truly hosted solution, to help investment management firms and their service providers with these challenges.”

Mr. Feingold will have responsibility for generating revenue globally, leveraging existing and developing new buy-side relationships directly with hedge funds, asset managers, service providers and channel partners; as well as supporting Paladyne sales into adjacent markets. He was most recently Global Head of Institutional Sales at Direct Markets, Inc., a subsidiary of Rodman & Renshaw, and prior to that Global Head of Sales and Marketing at Portware LLC. Mr. Feingold has more than 20 years of experience, with the last 15 years concentrating on electronic trading platforms and algorithms offered to both the buy-side and the sell-side. He has held sales and marketing positions at Progress Software, Merrill Lynch, Laidlaw Capital Management and Bloomberg Financial Markets.

Jersey Finance appoints global head of business development Jersey Finance has announced the appointment of Richard Corrigan as Global Head of Business Development. In this new role, Richard will assume responsibility for the established international offices of Jersey Finance in Abu Dhabi, India and Hong Kong whilst retaining a personal focus on extending the profile of Jersey’s finance industry in the UK, Europe and Russia.

that we have been able to recruit such a high calibre individual as Richard to lead our overseas business development activities. He has a wealth of experience both in Jersey and in international markets and I know that his knowledge, drive and energy will be enormously helpful in harnessing the numerous business growth opportunities which lie in both our traditional and developing markets “

Richard joins Jersey Finance from the banking sector where he has held senior roles with Barclays Wealth and Royal Bank of Scotland International in a number of financial centres, most recently as Director for Barclays Wealth in Jersey.

An experienced banker, Richard has been privileged to work with a wide range of international clients across the corporate, institutional and private client sectors. This deep understanding of client needs and breadth of sector knowledge will support the continued development of Jersey as a successful and increasingly diverse financial centre.

Commenting on the appointment Geoff Cook, Chief Executive of Jersey Finance, said : “ I am delighted

/ January 2013

Richard Corrigan commented: “With ever increasing mobility of international capital it is vital that Jersey seeks out fresh opportunities and new markets whilst continuing to invest in the strong relationships that have served us so well within the United Kingdom, particularly the City of London. I look forward to working with member firms and colleagues to stimulate increased business for the jurisdiction and continue to reinforce the view amongst international practitioners of Jersey as a well-regulated and respected international finance centre”. Richard has been a Committee member of the Jersey Bankers Association and continues as a member of the Prince’s Trust Steering Group for Jersey.

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APPOINTMENTS:

from around the world

Heritage International Fund Managers announce new Head of Office Heritage International Fund Managers (Malta) Limited has appointed Nicholas Warren as Head of Office. Educated at St. Edward’s College and the University of Malta, Nicholas will be responsible for the client service delivery and day to day operations as well as assisting with business development initiatives and growing the business in Malta. Nicholas has worked in the financial services industry since 2004 initially with Deloitte & Touche in Luxembourg moving on to take a role within the regulatory unit of the Malta Financial Services Authority. Nicholas joined a Tier 1 law firm

responsible for providing counsel to international clients on using Malta as a Financial Services Centre, and assisted them in the setting up of both open and closed ended collective investment schemes. Before joining Heritage Nicholas was Fund Services Manager with an international Fund Administration Company whereby he was involved not only in guiding clients in the setting up of their collective investment schemes but also in overseeing the Net Asset Valuation calculations, regulatory and other compliance matters. Nicholas holds an Honours Degree in Banking and Finance from the University of Malta and is an Affiliate of the Association of Chartered Certified

Accountants (ACCA). He has also obtained Certificates in Islamic Finance from the Chartered Institute of Management Accountants (CIMA). Laurence McNairn, Managing Director of Heritage International Fund Managers (Malta) Limited commented: “Nick’s appointment as Head of Office in Malta comes at an important time for the development of the Malta business. Together with his regulatory & fund administration background and his contacts in the local market, Nick will play a pivotal role in positioning Heritage as a leading provider of fund administration services to Maltese Funds in the wake of global regulatory developments.”

KNG Securities appointment of Thomas Saler and Gabriele Balducci KNG Securities LLP (KNG), the independent fixed income specialist, has announced the appointments of Thomas Saler and Gabriele Balducci to its fixed income team, as part of the firm’s growth strategy. Thomas will focus on increasing the firm’s geographic footprint in the Swiss and German markets. Gabriele will develop KNG’s solutions platforms with a particular focus on interest rates and ALM strategies for the insurance sector. These hires follow the appointment last year of Andrea Podesta from Bank of America Merrill Lynch, as a Managing Partner and Head of Fixed Income and of Alessandro Vargiu and Filippo Gromo to the fixed income team.

Thomas joins KNG having spent 8 years at UBS, having been a senior salesperson with responsibility for institutional client coverage in Germany, Austria, Benelux and Switzerland. Before this he was Head of Fixed Income Wealth Management Products distribution at the firm and was instrumental in rolling out the FICC retail product platform in Europe. Gabriele joins KNG having previously held positions on the fixed income teams at Merrill Lynch and JP Morgan Chase, with a particular focus on the Southern European markets. These appointments emphasise the continued migration of experienced executives from bulge bracket firms to client-focused, specialist

platforms. Andrea Podesta, Managing Partner and Head of Fixed Income at KNG Securities, commented: “We’re delighted that Thomas and Gabriele are joining KNG. Their industry and international experience will be instrumental in supporting the growth of our product offering, notably for the insurance sector, and geographic presence across the European markets. We are taking advantage of the shift in the market as a growing number of clients favour working with specialist firms such as KNG who offer a more independent and client-focused service.”

Ten Group COO relocating to Singapore Andrew Long, co-founder of Ten Group, and the global lifestyle concierge company’s COO, will move from London to Singapore in early December to take up a new role as the CEO for Ten Asia Pacific. Andrew will focus on leading and managing the service delivery in the APAC region and all existing country Managers for Singapore, Hong Kong, Shanghai and Tokyo will report to him. He will also continue to support existing and new client relationships, working closely with Ten’s Global Business Development team. Ten recently opened a new office in the city-state to service members from the increasing number of private banks, wealth management firms and

premium credit card businesses that operate in the region. Ten has seen sustained growth in Asia over the past two years culminating in seven new contract wins. This has led to offices opening in Tokyo, Shanghai and Singapore in 2012 and an increased headcount in the region of more than 50 lifestyle experts. To support the forecast growth for 2013, there are further plans to expand into Korea and Australia. Andrew commented “We have seen a clear shift in the market from the call centre concierge provided by other firms in the market to Ten’s personalised, expert-led model. We are also seeing an increased investment in premium products and services from

the region’s leading banking groups. Ten has been servicing HNW individuals, on a global basis, for 15 years and I am excited to be moving to SE Asia to lead and develop our award winning service across the region. Ten is the only global concierge company to wholly own and run all of its offices worldwide, ensuring the member’s experience of the service is the same wherever they might be. Its lifestyle platform also delivers unique offers, benefits and experiences, fulfilled via the concierge teams across all regions. With more than 10 languages delivered 24/7, Ten’s unique lifestyle and content proposition is helping to redefine personalised customer service for affluent global travellers.”

EFG International appoints new head of the Caribbean EFG International has appointed Carlos Valle to be CEO, Caribbean. He replaced Ludovic Chechin-Laurans, who moved to Switzerland last year to assume responsibility for private banking in Geneva while also becoming Deputy CEO of EFG Bank. In this capacity, Ludovic Chechin-Laurans continues to oversee the Caribbean business, and Carlos Valle will report to him. A highly experienced financial services professional, Carlos Valle has held a variety of senior roles within Merrill Lynch, where he worked for over 20 years. Most recently he was

ACQUISITION INTERNATIONAL

Managing Director, Global Wealth Management, New York International Complex, and before that Managing Director, Institutional Advisory Division. He was latterly a Visiting Professor at the Darden School of Business Administration, University of Virginia. Ludovic Chechin-Laurans, Deputy CEO, EFG Bank: “I am delighted that we have been able to bring on board such an experienced individual as Carlos Valle. He brings extensive financial services

and senior management experience, and is well equipped to take the business to the next stage of its development. We will be working closely together to optimise performance across the Caribbean region.” Carlos Valle, CEO, Caribbean, EFG International: “This is an exciting challenge. The dynamic culture of EFG was a strong attraction for me, and the business is well positioned for continued profitable growth in the Caribbean. I look forward to working with my new colleagues to make this happen.”

January 2013 /

SECTOR TALK:

Food and Agriculture Private Equity-Backed Buyout Deals

â&#x20AC;&#x201D; Powered by l The food and agriculture sector, which includes companies operating in agriculture, beverages, food and tobacco, has witnessed 951 private equity-backed buyout deals globally in the period 2006 to present (as at 16 January 2013), with an aggregate value of $109.5bn.

Number and Aggregate Value of Food & Agriculture Private Equity-Backed Buyout Deals Globally: H1 2006 - H1 2013 YTD (as at 16 January 2013) 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 H2 2012

69 54 84 75 71 70 49 52 57 77 72 67 90 55

29.8 14.3 12.6 2.8 5.2 3.9 2.9 5.6 3.4 16.4 4.8 2.4 2.8 2.3

100 90 80 70 60 50 40 30 20 10 0

35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 H1 2006

H1 2007

North America Europe Asia ROW

44 54 9 16

46 29 18 8

57 49 19 9

60 44 17 18

68 44 16 17

10 / January 2013

39% 45% 8% 8%

45% 29% 18% 8%

42% 37% 14% 7%

43% 32% 12% 13%

47% 30% 11% 12%

Proportion of Total Number of Deals

2006 2007 2008 2009 2010 2011 2012 YTD 43% 44% 5% 8%

H1 2009

H2 2009

H1 2010

H2 2010

H1 2011

H2 2011

H1 2012

H2 2012

H1 2013 TD

Aggregate Deal Value ($bn)

Breakdown of Food & Agriculture Private EquityBacked Buyout Deals by Region: 2006 - 2012 100%

Breakdown of Food & Agriculture Private Equity-Backed Buyout Deals by Region: 2006 - 2012

36% 44% 7% 13%

H2 2008

Despite low levels of aggregate deal value, the number of deals completed in the sector reached a peak in H1 2012, with 90 food and agriculture buyout deals valued at $2.8bn; this mirrored a trend seen in global private equitybacked buyout deals in the same time period, when there was an increase in the prominence of small-cap deals.

90%

North America Europe Asia ROW

H1 2008

Deal flow in the sector did decrease during the onset of the financial crisis, and the aggregate value of deals taking place each half-year period in the food and agriculture sector reached relatively low levels between H2 2007 and H2 2012, except for a spike in the total value of food and agriculture deals in H2 2010, largely influenced by two public-to-private transactions: the $5.3bn acquisition of Del Monte and the $4.05bn privatization of NBTY. The combined value of these two deals represented 57% of the aggregate value of deals made in the second half of 2010.

2006 2007 2008 2009 2010 2011 2012 YTD

Region

H2 2007

The aggregate value of private equity-backed buyout deals in the food and agriculture sector globally peaked in H1 2006, with a total value of $29.8bn from 69 deals. This is largely due to a small number of large investments the sector during this period, including three large-cap private equity-backed deals (>$1bn. The largest food and agriculture deal between 2006 and present was recorded in H1 2006, the Cerberus-led consortium acquisition of Albertsons LLC, a US-based food retailer, for $17.4bn.

Region

55 63 11 12

H2 2006

No. of Deals

Number of Food & Agriculture Private Equity-Backed Buyout Deals by Region: 2006 - 2012

69 70 8 12

Aggregate Deal Value ($bn)

No. of Deals

Period

Number and Aggregate Value of Food & Agriculture Private Equity-Backed Buyout Deals Globally: H1 2006 - H1 2013 YTD (as at 16 January 2013)

80%

13%

8% 8%

70% 60%

8% 5%

44%

18%

45%

44%

7% 14%

13%

12%

11%

30%

29%

37%

32%

45%

42%

43%

47%

2010

2011

2012

50% 40% 30% 20%

36%

43%

39%

2007

2008

10% 0% 2006

North America

2009 Europe

Asia

Rest of World

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SECTOR TALK:

Food and Agriculture Private Equity-Backed Buyout Deals

Aggregate Value ($bn) of Food & Agriculture Private Equity-Backed Buyout Deals by Region: 2006 - 2012 Region North America Europe Asia ROW

2006 2007 2008 2009 2010 2011 2012 YTD 25.7 16.4 0.8 1.3

5.9 9.0 0.1 0.4

3.0 3.6 0.9 1.7

1.8 2.9 3.4 0.4

12.7 5.7 1.4 0.1

1.5 2.3 0.6 2.9

2.1 2.3 0.4 0.2

In 2012, North America was once again the most prominent region for food and agricultural deals, with the region accounting for 47% of investments in the sector in the year; North America has consistently represented over 40% of deals in the sector since 2009. 2012 was a particularly prominent year for food and agriculture deals in North America, with 68 deals valued at $2.1bn, the highest number of deals in the region since 2007. Although from 2006 to 2008 Europe witnessed the greatest share of food and agriculture private equity-backed deals, since 2008 the region has seen reduction in deal flow, dropping from 45% of all deals in the sector in 2008 to 30% in 2012.

Number and Aggregate Value of Food & Agriculture Private Equity-Backed Deals by Type: 2012 Type

No. of Deals

Aggregate Deal Value ($bn)

Buyout Add-on Growth Capital Public to Private

74 38 30 3

2.6 1.2 1.0 0.2

In contrast, the number of food and agriculture deals in Asia has witnessed an increase from nine deals in 2006 to 16 in 2012. While other regions struggled after the onset of the financial crisis in 2009, Asia witnessed the highest aggregate deal value of any of region in the year, with 18 deals valued at $3.4bn; over half of this aggregate deal value was represented by the $1.8bn acquisition of South-Korea-based Oriental Brewery by Kohlberg Kravis Roberts. Among private equity-backed food and agriculture buyout deals, the most common type of investment is leveraged buyouts, with 51% of the number and aggregate value of deals in the sector falling under this classification in 2012. Add-on deals accounted for roughly a quarter of both the number (26%) and aggregate value (24%) of food and agriculture private equity-backed buyout deals in 2012, while growth capital deals represented 21% of the volume and 20% of the aggregate value of deals in the food and agriculture sector in the same year.

The largest private equity-backed buyout deal in the food and agriculture sector in 2012 was the $755mn merger of Ferrara Candy Company with Farleyâ&#x20AC;&#x2122;s & Sathers, a portfolio company of Catterton Partners, which was announced in May and completed in mid-June.

Type

No. of Deals

Aggregate Deal Value

100%

90%

51% 26% 21% 2%

20%

70% 60%

26%

24%

51%

50% 40% 30%

Buyout Add-on Growth Capital Public to Private

21%

80%

Proportion of Total

Breakdown of Food & Agriculture Private Equity-Backed Deals by Type: 2012

20%

51% 24% 20% 5%

10% 0% Number of Deals Buyout

Add-on

Aggregate Deal Value Growth Capital

Public To Private

10 Largest Food & Agriculture Private Equity-Backed Buyouts Globally: 2012 Firm

Investment Type

Deal Date

Deal Size (mn)

Investors

Ferrara Candy Company Centerplate, Inc. St Hubert Atlantic Grupa

Merger

May-12

755 USD

Buyout Buyout Growth Capital

Sep-12 Jun-12 Dec-12

551 USD 430 EUR 307 EUR

Adelie Foods

Add-on

Apr-12

350 USD

Diamond Foods ETC Group

PIPE Growth Capital

May-12 Nov-12

225 USD 210 USD

Columbus Manufacturing Inc Symington's Eurodrip SA

Buyout

Oct-12

200 USD

Buyout Buyout

Jun-12 Oct-12

125 GBP 105 EUR

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Bought From/ Exiting Company

Primary Industry

Location

Catterton Partners, Farley's & Sathers -

Food

Olympus Partners Montagu Private Equity European Bank for Reconstruction and Development, IFC Asset Management Company India Hospitality Corp., Navis Capital Partners Oaktree Capital Management Carlyle Group, Pembani Remgro Infrastructure Managers, Standard Chartered Private Equity Arbor Private Investment Company, Babson Capital Management Intermediate Capital Group Paine & Partners

Kohlberg & Company Dairy Crest -

Food Food Food

US France Croatia

Duke Street

Food

Food Agriculture

US US

Endeavour Capital

Food

Bridgepoint Advisers Global Finance

Food Agriculture/ Irrigation

UK Greece

January 2013 /

DEAL GURU:

From Deal to Day One

FROM DEAL TO DAY ONE

â&#x20AC;&#x201D; By Alistair Catto & Scott Ellis, transformation consultancy Moorhouse Discussion around success and failure in Mergers & Acquisitions tends to emphasise the technicalities of the deal itself, with little focus upon the practicalities of delivering upon the promises made within the deal. The big numbers involved in deal making often distract; not enough focus is placed upon the requirements needed to execute the integration post deal, deliver synergies or benefits, and protect the Business As Usual operations of both the acquirer and the target.

Within this programme, Day One will require strong and distinct governance during the transitional period. This is designed to manage the organisation to Day One. Empower a team to execute the preDay One activities apportioning responsibility for critical activity to specific individuals. Each member should undertake planning using extensive readiness checklists for each function to identify the key changes required. Without this structure and approach, paralysis or confusion is all too easily created.

The period between agreeing the deal and taking ownership of the target organisation, usually referred to as Day One, is critical. A huge amount of concurrent activity needs to be undertaken within a compressed timescale to kick-start integration. This phase, lasting just a few months, is essential to ensure that both the business and the integration are carefully managed over this transitional period. There are Six Golden Rules that should be applied to any transaction to greatly increase the chances of success.

3. Engage organisation

1. Focus on the essentials Clearly, an overarching vision for the combined business, fed by the terms and ambition of the deal itself, will be needed. Translating this into specific actions, programmes and initiatives takes time. Of immediate concern is the identification of critical activities that need to be achieved to support deal completion. These need be agreed, planned and resourced effectively. Focus must be placed on the things that really matter. All other work can be left until after Day One. So what are the critical activities? The answer will depend upon the context, but start by looking at each business function and working with key stakeholders (Directors, Functional Heads, etc.) to list the actions that absolutely must be undertaken for the business to function effectively. Customers may not mind if in the near term their invoices carry an old logo. But they will care if they canâ&#x20AC;&#x2122;t buy the products and services they depend on. A good sense check is to ask whether there is a legal, compliance or impactto-BAU issue regarding a proposed change. If not, it can wait. 2. Treat the programme

integration

defined

The integration needs to be treated as a planned programme of related activity, and this should be planned as early and as thoroughly as possible preferably before the closing of the deal.

/ January 2013

stakeholders

within

the

Share as much information as is possible. People will be apprehensive in the absence of communication, which will impact performance. Be upfront about the vision for the combined organisations. If you help everyone understand why you are doing this, they are more likely to commit to the cause. Equally you can more readily identify those who might block your progress. Aim to create transparency for the workforce and customers about the situation. Be sensitive to different working cultures and values. Communication can help employees make personal transitions as the new organisation emerges. Avoid triumphalism; you will have to be working with this team in the near future. Finally, ensure that the best resources are quickly identified on both sides of the transaction, and put plans in place to increase their confidence and commitment to the new business, ensuring they are retained. 4. Engage specialists, early on

If you do recruit internally make the role full time and ensure previous responsibilities are delegated. If possible, appoint this person into the deal team so they fully understand the rationale, the benefits and the key risks before integration starts. They can then help shape the transaction itself. 6. Protect Business As Usual (BAU) operations BAU must not be interrupted in either organisation in this period. Critical day-to-day services within the business should be identified and ongoing checks made to ensure that standards are maintained. While the temptation is often to task the best managers and leaders in the business with driving critical change this creates a risk that BAU may be interrupted. Experts in change should be focused on critical activity, rather than those who are expert in delivering day-to-day operations. In reality, the work is only just beginning; total integration may take years. Rather than being daunted by the task, creating an agile portfolio of change initiatives to support integration will ensure resource can be managed, and the organisation is not overwhelmed by too much change all at once. After Day One, the focus must look towards managing and delivering the long-term benefits and synergies agreed in the deal. More attention needs to be given to the practicalities of this and getting to Day One. This brief window sets the tone for the complex and longer-scale integration work that follows.

Embarking on an integration is an exciting, but complex and time consuming, prospect. Defined processes must be followed and critical timescales observed. Without an internal M&A function, and given the levels of expenditure involved, it is prudent to invest in the best advice available. Experienced independent experts can focus on identification and formalising of benefits, delivery of these and the realisation of the synergies required for long-term success. Others can concentrate on day-to-day business. 5. Appoint an Integration Director This role is a powerful one, there to neutralise hostility and internal/cross-organisation politics by defining the period of engagement early, together with an exit strategy. They also make tough decisions, and will need full sponsorship at the most senior level to do so. Performing the role is impossible on a part-time basis.

Company: Moorhouse Web: www.moorhouseconsulting.com Telephone: +44 (0) 20 3004 4482 Name: Alistair Catto (Principal) Email: alistaircatto@moorhouseconsulting.com Name: Scott Ellis (Principal) Email: scottellis@moorhouseconsulting.com

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ON THE COVER:

Altius Annual Report - Ten Challenges facing the private equity sector

ALTIUS ANNUAL REPORT

— Ten Challenges facing the private equity sector According to the annual report: Ten challenges facing the private equity sector by Altius Associates (“Altius”), the US buyout market faces a challenging environment of rising purchase price multiples for high quality companies while in Europe, GPs have innovatively found sources of capital amongst sovereign wealth funds and public fund managers willing to bridge the pre-IPO gap. The Report also reveals that private equity flow in China, Peru and Colombia is set to boom while private credit strategies have begun to attract the attention of LPs as funds focussed on distressed and primary issuance of debt emerge. Altius highlights asset pricing and over ambitious fund managers as key challenges facing the infrastructure market. However Altius believes the secondary market, which is on track to challenge the record fundraising year of 2009, should mature and become more efficient in the future. Altius provides more detail below on each of the ten challenges: 1. European Buyouts The challenge for European buyout managers is and will be to find a profitable way to exit the boom year deals. Altius believes that of the three established exit routes (public markets, trade sales and secondary sales), the IPO market remains largely closed with financing almost certainly not available for financial sponsors to be realistic buyers in a secondary transaction. Indeed a full trade sale of one of these large businesses is theoretically possible but problematic given the current economic environment in Europe and with vendors wanting to receive cash rather than paper. Charles Magnay, Partner at Altius, commented: “In many cases the clock has reached the five year mark and is very definitely ticking. GPs have been forced to become increasingly innovative in seeking liquidity and, thankfully for the asset class, have been successful in this regard in a number of cases.

/ January 2013

They have looked for ready sources of capital and found them amongst sovereign wealth funds and public market fund managers willing to bridge the pre-IPO gap – often corporates from Asia.” Altius also believes that there are remaining assets which, for a variety of reasons, have either not found the right buyer or are not yet ready to be moved on, perhaps needing more time for further deleveraging. However the majority of high quality and strategic businesses are saleable even in an environment where the public markets are effectively closed. Charles Magnay said: “We applaud GPs for their ingenuity in tapping these alternative buyers and believe that, just as the secondary market has improved the exit options for the lower mid-market, so this development will open up a broader range of strategic options at the larger end of the buyout market for years to come.” 2. US buyouts Altius believes the US buyout market faces a challenging environment of rising purchase price multiples for high quality companies, which over the last year have hovered at around 9.0x earnings before interest, taxes, depreciation and amortization (EBITDA) and sometimes more. This is as a result of an increasing number of private equity firms competing for high quality deals, the efficiency of a more intermediated market, and the improvement in accessing debt for leveraged buyouts. Altius cites improvement in bank financing and capital markets that have allowed debt multiples to increase from an average of 3.0x in 2009 to 5.0x EBITDA thus far. Brad Young, Executive Director at Altius, said: “Fund managers must be sure their investment thesis is solid as there is less room for mistakes when higher prices are paid. A good fund manager must be able to make meaningful improvements to portfolio companies and use leverage effectively to balance risk and return. The challenge for

limited partners will be identifying those private equity firms that are best poised to outperform in a more expensive and more competitive environment.” 3. Secondary market Altius believes the challenge for the secondary market will be to find attractive opportunities in an increasingly transparent and crowded market. In the first three quarters of 2012, an aggregate of $15.7 billion was raised, which is on track to challenge the record fundraising amount achieved in 2009. However Altius believes that an inflow of large amounts of capital into a segment can often create issues. Chason Beggerow, Partner at Altius, said: “The high level of fundraising has been supported by an equally high level of secondary transaction value. Currently there is a good supply of deals, as European financial institutions have started and are still looking at shedding private assets from their balance sheets due to regulatory concerns and public pension plans are utilising the secondary market to actively manage their private equity portfolios and exposure. While the supply has been good, sellers are more strategic and as a result, pricing has remained firm.” Altius thinks that as the secondary market continues to mature and becomes more efficient, secondary funds/buyers will need to look for ways to differentiate themselves. Indeed these secondary buyers will need to find areas of inefficiency where there is less competition in an effort to generate strong returns consistent with past returns in the secondary market. 4. Real assets Altius cites a number of challenges facing investors today within the infrastructure market. Asset pricing is one issue, especially for core brownfield assets as the asset class is seen as a “safe haven” with the promised yield viewed as an attractive replacement for low-yielding fixed income securities. As a result, capital is rushing into the space, pushing up asset prices and reducing future returns.

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ON THE COVER:

Deal of the Year – Gulf Capital acquires Sakr Energy Solutions stake Reyno Norval, Senior Associate at Altius, commented: “Real assets are often exposed to regulatory risk and with lower returns, there is less headroom for manoeuvring should there be any adverse regulatory action.” Another challenge highlighted by Altius is the divergence of returns expectations that core infrastructure will provide to a portfolio. Altius believes that some managers are unrealistically projecting mid-teen IRRs and yields of 5% or so, while more conservative managers are targeting an 8-10% IRRs with a similar yield. Reyno Norval concludes: “For investors exploring direct investment into infrastructure assets or projects, a key challenge is acquiring the necessary resources and expertise to properly assess the investment opportunities. Many investors underestimate the time, cost, and experience required to build the capabilities necessary for successful direct investing.” 5. Private Credit Altius believes private credit strategies have attracted the attention of LPs and more broadly, the investor community. Elvire Perrin, Partner at Altius, said: “Investors are looking at ways to enhance their returns on traditional credit and fixed income portfolios, which have displayed very meagre performance over the last couple of years due to the very low interest rate environment in most of Europe and the US. The market dislocation created by the increasing regulatory pressure on banks has created a space for non-traditional debt providers as well as opportunities for distressed credit sales. Indeed, the conditions attached to bank rescue packages by the European Competition Entity and the new regulations being implemented are forcing banks to exit or decrease their level of activity in private equity and leveraged lending.” Altius thinks that with the very uncertain and challenging macro environment, the premium for investing in private credit strategies above public credit strategies is one of the highest in history. Elvire Perrin continues: “On a segment level, we are seeing the best opportunities in the small and lower-mid market where the issue of refinancing will be the most acute. The market has been quick to spot the opportunity and a plethora of funds focusing on distressed or primary issuance of debt for the private equity industry has emerged.” Altius thinks that many of these funds focussed on distressed or primary issuance of debt have been set up for the first time by ex-investment bankers or hedge fund managers diversifying into private equity type investing or even mezzanine focused funds where risk/return profiles are more attractive than in the traditional mezzanine space. Elvire Perrin concludes: “Many will not be able to raise the capital they are looking for and therefore will not be viable firms. When looking into the very specific segment of the market, investors should keep in mind the major risks related to first time funds and adequate experience.” 6. Emerging markets Nearly all emerging markets have a need for healthcare, infrastructure, education and basic technology that facilitate business. Altius believes that the more attractive regions, such as Southeast Asia, politically stable countries in Latin America such as Peru or Colombia, and the emerging African countries like Kenya or Nigeria have increasingly younger populations with increasing levels of disposable income that will drive consumerism. Elvire Perrin, Partner at Altius, commented: “Foreign direct investments in emerging markets tend to flow quickly in and out of the regions and it is important for private equity investors to avoid the herd mentality flows of capital. The one challenge that affects all of these regions, despite the differences in demographics, proximity to developed markets, and an abundance of natural resources, is fundraising.”

ACQUISITION INTERNATIONAL

Altius believes that the private equity sector benefits from a healthy ecosystem where fundraising is roughly in balance with or less than the opportunity set. Since fundraising ebbs and flows there will always be regions that are underserved and others that are over capitalised. In the past few years, Altius thinks that three areas have become over capitalised by private equity: Brazil, Turkey, and Southeast Asia (mainly Indonesia). In these regions, Altius has seen large funds being raised by global investment firms as well as several regional asset managers and now they are having difficulty deploying this capital. The funds that raised over USD1.0 billion in Latin America have either been solely dedicated to Brazil or virtually dedicated to Brazil since few other Latin American countries offer large market investment opportunities. Altius has seen how investors are now turning to countries such as Peru and Colombia, which have been private equity capital starved until the past 12 months, and it appears several funds will be raised at record sizes in those markets in 2012. Turkey and Indonesia have raised record amounts of capital in the past two years but most of these funds are very young. On the contrary, countries such as Mexico and virtually all large countries in Africa excluding South Africa have had extreme difficulty raising capital. 7. Asia Private Equity Altius believes that as financial markets in China are slowly liberalising, China has emerged as the largest private equity market in Asia during the last couple of years. Foreign investors have long had only access to the Chinese market by off-shore constructions, as private equity investment by local investors only became possible in 2005 when new legislation to facilitate this was implemented. The RMB market includes industries and industry sectors not accessible to foreign investors and offshore funds; conversely for local investors, it is difficult to make commitments to offshore funds. Private equity has, therefore, become increasingly popular with local fund raisers as well as with local investors, mostly large and cash-rich sovereign funds. 8. Compliance and Regulation Compliance with various levels of governmental regulation is an eternal challenge for the industry; but Altius believes that the coming year will be an annus horribilis in this regard with too much regulation happening too fast to be fully digested and absorbed by the industry. Amidst the sea of regulatory proposals facing the industry are: i) Solvency II, a fundamental review of the capital adequacy regime for the European insurance industry; ii) Basel III, a long term package of changes to the original Basel Accord on the strength, soundness and stability of the international banking system; iii) MiFID II, the expected update of the Markets in Financial Instruments Directive (“MiFID”); iv) consultation on the EU Pensions Fund Directive (“IORPII”) which could have far reaching consequences for both the funding of pension schemes and the way in which they are managed. Most significant perhaps is the fact that in July 2013 the Alternative Investment Fund Managers Directive (“AIFMD”), the main new piece of regulation affecting the private equity industry, will become effective even though the European Commission only published its draft implemention measures just before Christmas, leaving most firms little time to prepare for implementation . In the UK the timing awkwardly overlaps the transformation of the UK Financial Services Authority into two new authorities on 1st April 2013. Altius thinks that the Directive offers little flexibility for member states but some are proposing to introduce additional measures to those required by the EU. Germany, for example, removed the rule that exempted smaller managers, a move that could harm its venture capital market. For non EU organisations, the directive will still have implications due to the restrictions on being able to market products in the EU. Outside of Europe, the US is still coming to grips with the significant regulatory changes enacted in 2010: the Dodd-Frank Wall Street Reform Act, and the

Foreign Account Tax Compliance Act (“FATCA”) designed to combat tax evasion by US persons holding investments in offshore accounts. The impact on PE firms of these continues to be deep and has added to the regulatory burden on the industry at a difficult time. 9. Client Services/Reporting Altius believes there is an increasing need for transparency across GPs and private equity advisors. Standardised capital call and distribution templates, which were released by Institutional Limited Partners Association (ILPA) two years ago, are taking root in the industry and several leading GPs have begun to adopt them. The level of uptake has been promising so far and has been led by several institutional LPs. There has been a complementary movement on a standardisation in fund reporting, with an increasing number of GPs either adopting industry body templates, or moving closer towards more investor-friendly forms of reporting with regards to their fund structures and holdings. Jenny Fenton, Chief Operating Officer at Altius, said: “Standardisation and transparency in the industry have been increasing in momentum since the global financial crisis and we expect the trend to continue as LPs are now more conscious of the risk and compliance considerations in their portfolios. The increasing demand for transparency affects not only the direct GPs, but also advisory firms and intermediaries. There is more interest from clients on issues ranging from increased compliance at the investment due diligence stage, to management fees and carried interest charges, to performance attributes, though to risks inherent within their underlying portfolio company holdings as well as ESG.” 10. Investor Relations Altius believes that a major shift in GP-LP relations in the private equity world is taking place. Stung by the abrupt valuation shifts and mark-to-market losses through the financial crisis, LPs now demand more information, with greater transparency and on a more regular basis as the price for continuing to support their GPs. Eric Warner, Executive Director and Head of Investor Relations at Altius, commented: “Most major GPs are now meeting with significant LPS on a quarterly basis, with full portfolio reviews, including all major changes, cash flow statements and details of drawdowns, distributions and any valuation changes. As a result of this pressure, most PE firms have had to increase their establishment in IR teams significantly; many have doubled their staffing in the last five years, and this trend is set to continue given the rapid change in compliance and regulatory standards across the globe.” Organisations such as the International Limited Partners Association (ILPA), which monitors and comments on these matters on behalf of global LPs, have gained members, staff, traction and credence throughout this period. Altius believes that most GPs of any standing have had to comply with the standards for reporting and Advisory Board activity as a result. For the full report, please visit the Altius website.

Company: Altius Associates Name: Eric Warner Email: eric.warner@altius-associates.com Web: www.altius-associates.com Address: 20 Grosvenor Place, London SW1X 7HN Telephone: +44 207 838 7640

January 2013 /

SECTOR SPOTLIGHT:

Let’s Switch Again - 2013 Predictions

LET’S SWITCH AGAIN

— 2013 Predictions

•

Number one prediction from Duncan Lawrie Private Bank: banking customers all set to move providers in 2013 Eight further finance focused tips for investors in the New Year

High Street banks need to be prepared for a significant loss of market share this year as thousands of dissatisfied customers start switching their accounts, according to 2013 predictions from Duncan Lawrie Private Bank. Soaring customer dissatisfaction with high street banks, coupled with a demand to a return of a more personal service* means that the days of 26-year average customer retention are over. In 2011, the Independent Commission on Banking set out stipulations on account redirection, saying that banks have a time limit of seven days to switch customer accounts – the ICB wants this to be fully operational by September 2013. Matthew Parden, Managing Director of Duncan Lawrie Private Bank comments: “The repercussions for the banking industry will be severe. With rock bottom faith in High Street banks and with many customers disgruntled at the service they are getting, we predict that people will start to look around. And the independent private banking industry is set to be a beneficiary.”

Statement that MPs’ pensions are exempt from the reductions in both the annual and lifetime allowances. •

India vs China: India’s growth potential will continue to be strong in the New Year but Duncan Lawrie believes China is the one to watch in 2013. Its pick-up in GDP growth rate and estimated corporate stability says it is hugely under-valued.

•

Stock markets: Duncan Lawrie Private Bank envisages continued volatility across equity markets, due to the cocktail of low GDP growth rates, political uncertainty, and high sovereign debt levels. However, the backdrop of low interest rates and continued policy stimulus (QE et. al) is constructive for equities versus bonds. There is the capacity for markets to grind higher in 2013.

•

Mobile Banking: banks will invest heavily in m-banking in 2013 as big players such as Google leverage new technology to steal more of the market share.

•

Stop gap in lending: despite Government schemes trying to boost lending, there will be continued caution into 2013 as legislation such as Basel III means banks have stricter capital demands even less capacity to lend. As a result, payday and other alternative forms of lending will soar following continued increased borrowing in the last few years**.

Further 2013 predictions from Duncan Lawrie Private Bank include: •

MPs’ gold plated pensions will lose their lustre in 2013: Duncan Lawrie Private Bank predicts that MPs will face calls to bring their pensions in line with private and other public sector pensions, after the news in the Autumn

/ January 2013

•

Landscape for annuities: the cost of implementing the European Gender Directive will fall on consumers in 2013 resulting in lower overall annuity rates for both men and women.

•

Disappointing pensions: The drop in lifetime allowance will mean companies need to look to find alternative methods of remunerating high earning employees, particularly those with defined benefit schemes, which could see a resurgence of EFRBS (Employer Funded Retirement Benefit Scheme)-like products and the increased use of workplace funded ISAs as part of employee benefit packages. There will also be a corresponding surge in VCT and EIS usage by HNWIs looking to boost tax reliefs lost by previous drops in the annual allowance.

•

Child benefit: As it starts to reduce in 2013, the onus will be on consumers to opt out of child benefit payments if their income exceeds the threshold. A large number of people are likely to be unaware of the changes, which will mean they will hit with the need to repay any benefit they received that they were not entitled to when they complete their 2013/14 tax return.

Matthew Parden summarised: “2013 is set to be another year of changes for consumers, which need to be planned for and considered. For people to preserve their wealth and maximise their financial circumstances, they need to be conscious of the changes taking place and look into the best options available to them. Whether it means switching banks or seeking financial or investment advice, people need to be proactive around their finances in 2013. ” *Report commissioned with YouGov between 14th and 16th August 2012 with a sample size of 1,008 UK HNWIs with over £250,000 investable assets showed that over three quarters (76%) wanted a more personalised banking service. ** Consumer Focus estimated in 2011 that 1.2 million people took out 4.1 million loans in 2009. An interim report in November 2012, by the OFT, thinks that as much as £1.8bn a year may now be being lent by payday lenders.

Company: Duncan Lawrie Private Bank Name: Matthew Parden Web: www.duncanlawrie.com Telephone: UK clients - +44 (0)207 245 1234 International clients - +44 (0)1624 662200

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Doing Business

DOING BUSINESS

l Acquisition International’s comprehensive guide to doing business around the world.

-----------------------------------------------------------------------Michele Semenzato is a managing partner of Wise SGR. ------------------------------------------------------------------------

Wise SGR was founded in 2000 as a Private Equity firm focused on the mid-market in Italy. Through the investment of three funds in more than 30 companies in a 12-years span, Wise SGR has become one of the most relevant players in the Italian Private Equity mid-market arena. Discussing emerging trends, Mr Semenzato said: “During this difficult recession period, the companies which have suffered the least and in many cases have continued to grow are exportoriented companies, especially the ones which have a significant exposure in extra-European countries.” According to Mr Semenzato the sectors with the greatest opportunities at the moment in Italy are mainly those in which Italy has historically an

‘‘

In the peak of the confidence crisis on the country, Italian banks have found their funding very expensive. This problem, coupled with the need to decrease their total loans level to reinforce their parameters according to the new Basilea requirements, have left a lot of Italian companies with a significant reduction of their access to the banking sector, commented Mr Semenzato.

‘‘

in Italy

important world production share such as machinery, design, fashion, food, engineering, chemicals and others. “We also believe that there are opportunities to invest on more domestic companies as there are areas where internal consumption is going to start to pick-up again,” he added.

“We are currently in a campaign for the new elections” he said. “It will be up to the next government to try to foster new growth through a reduction of the fiscal pressure which, given

in Romania

There are many opportunities in specific sectors where no significant players exist on the market or niche areas which have not been exploited yet.”

Roman | Partners specialises in Business Law, acting in principal for Romanian and international corporate clients. The law firm has repeatedly acted for various large domestic and international corporations, banks and financial institutions, as well as governments, in the fields of company and commercial law, corporate and project finance, banking and finance, real estate transactions, mergers and acquisitions, maritime & transport law, etc.

“Generally speaking, given that Romania is economically tightly interconnected with the other EU countries and the whole world, the euro crisis impacted the country as much as all the other countries,” commented Mr Roman. “The implications of the euro crisis for the region were serious, especially considering Greece’s position, and meant economic contractions, varying from country to country. However, things were to some extent under a relative control. Given that it has not adopted the euro currency, Romania has had the possibility to act independently from currency control point of view and despite local currency depreciation, implications were not that serious as in other EU countries.”

-----------------------------------------------------------------------Dragos Roman is a Managing Partner at Roman | Partners – Attorneys at Law. -----------------------------------------------------------------------Roman | Partners is a high standard and highly competitive law firm gathering over a decade of top quality experience within the legal field, being involved over time in some of the largest and most complex transactions in Romania.

“The business environment in Romania has slightly improved comparing to previous years of the economy downturn,” commented Mr Roman on the current business environment in Romania. “Due to the considerable difference between Romania and developed countries in terms of economic growth, there is fertile ground for development to take place.

/ January 2013

He outlined that sectors such as the energy sector, renewable energy, technology and telecommunication industry, agriculture sector, including ecological agriculture, natural resources, retail, tourism and e-commerce are the current emerging trends in Romania.

Discussing the EU funds and the eventual boost they are expected to give to the economy, Mr Roman said: “The EU funds may give a tremendous boost to Romanian economy if absorption is improved, considering that the absorption

the important government debt, can be achieved through an important reduction of the government spending.” In conclusion Mr Semenzato predicted that the “shock” of 2011 and 2012 “has now been absorbed”. He noted that Italian economy is expected to stabilise in the first part of 2013 and to start to grow again in the second part of the year.

Company: Wise SGR S.p.A. Name: Michele Semenzato Email: Msemenzato@wisesgr.it Web: www.wisesgr.it Address: Foro Buonaparte, 76 20121 Milano Telephone: +39-028545691 rate was very low in the past years, yet Romania managed to survive the crisis”. He expressed a positive attitude towards the recent changes on the political scene in Romania and concluded: “The new government will have full legislative support to work harder on improving the absorption rate of the EU funds that will bring finance for important new projects in key sectors of the economy and giving the investors a sense of stability and predictability of country’s economic climate.”

Company: Roman | Partners – Attorneys at Law Name: Dragos Roman Email: dragos.roman@romanpartners.ro Web: www.romanpartners.ro Address: 34 Ion C. Bratianu Blvd., 2nd Floor, Suite 7, 3rd district, Bucharest 030175, Romania Telephone: +40 744 649 353

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in the Nordic Region

DOING BUSINESS

in the Nordic Region

l According to a report published by Forbes, 4 of the top 10 countries for business this year were in the Nordic region. The region has been somewhat insulated from the crisis in Europe and is in better shape than most European economies however the international slump has led to a moderate stagnation. A pickup is expected in 2013 as the debt crisis improves and exports recover. The Nordic region is an attractive location for investment and benefits from many positive factors such as a strong fiscal position, low to no public debts, low unemployment rates and stable currencies. The region is expected to rebound at a stronger pace than most of Europe. Acquisition International speaks to the experts for their take on doing business in the Nordic region. -----------------------------------------------------------------------Gudmundur J Oddsson is a Partner and Head of the London office at LOGOS Legal Services. -----------------------------------------------------------------------Mr Oddsson believes that Iceland “is on the road to recovery out of a deep recession”. He noted that Iceland was one of the first to be hit with the total collapse of its banking system in October 2008 but seems to be one of the first to return to sustainable recovery and growth.

“There are however a number of issues that still need to be dealt with, first and foremost, the lifting of the currency restrictions that are in place, completing the restructuring of the fallen banks and to change the politics which currently are not facilitating much needed foreign direct investment,” he commented. Mr Oddsson stated that the Icelandic local market has seen a good number of sizable restructurings and sales of businesses that come out of such restructuring in the last year. Companies have now started listing in the OMX Nordic Stock Exchange again and such listings have generally been very successful with share prices rising. “Further, a number of know-how based companies have been sold to foreign investors during the last year,” he added. -----------------------------------------------------------------------Carsten Brink is the managing partner of the law firm Lund Elmer Sandager LLP -----------------------------------------------------------------------Lund Elmer Sandager is a full service law firm originating in 1877 and is a result of a number of mergers. The firm offers hands on cost efficient approach to solving legal issues.

“The advantage that we have over our local competitors is that we have a focus on problem solving rather than problem creating and always keeping in mind the commercial best interest of the client,” said Mr Brink. “We identify the problems and suggest ways of solving them.” Mr Brink describes the current business environment in Denmark as “hesitant for the moment”. “There is a credit crunch and therefore there is a hesitancy in making investments although the economy is rather sound and in a much better state than in most other European countries,” he added. “The emerging trend at the moment is the hesitancy in investments.” According to Mr Brink, the greatest opportunities for investors lie in real estate. He noted that there are “a number of very attractive portfolios” for sale and that the

20 / January 2013

“Software companies in various industries have been acquired by international industry leaders and we have been instructed in all the major transactions. Most recently, our firm acted for the acquirer of deCODE Genetics, a global leader in human genetics, headquartered in Reykjavik, Iceland. The all-cash transaction valued deCODE Genetics at $415 million. “A good number of very interesting start-ups have sprung up over the last few years with talented young people looking to new careers after the collapse of the all-consuming and brain draining banking sector.” Iceland has an abundant of clean renewable hydro- and geothermal energy and, according to Mr Oddsson, there are plenty of opportunities to further harness such energy. Investment in most energy dependent industries, such as aluminum, magnesium, data centers etc, is a long term opportunity for investment. “Innovation and design is very much in the genes of the Nordic countries and even more so when employment is not as easy to come by as it has been,” he observed. “Further, Iceland has seen a major increase in the last few years of the number of tourists. The tourism industry is

number of potential Danish buyers is “very limited due to the credit policies of the banks”. “A strong capital investor can therefore make very good deals in the real estate sector. The same is true for acquisitions of medium and small enterprises,” he observed. While the economy in Denmark has been affected by the downturn in Europe, Mr Brink stated that it was not to the extent seen in many other countries.

still relatively underdeveloped and therefore it is likely that opportunities are to be found in that area as well.” “Generally the Nordic region seems to be weathering the global economic storm better than most regions and I am sure that although 2013 may have various surprises in store that the region is still better placed than many to persevere,” he concluded.

Company: LOGOS Legal Services Name: Gudmundur J Oddsson Email: gudmundur@logos.is Web: www.logos.is Address: IcelandEfstaleiti 5, IS-103 Reykjavík UK: 42 New Broad Street, EC2M 1JD, London Telephone: +354 5400 300 / +44 2079203000

Mr Brink explained that the Danish government is trying to increase the work force and to reduce personal tax rates through labour reform and other measures. “The government’s policy might just work, but the government which is a central left government need to focus more on improving the business environment by reducing business taxes,” he concluded.

“The impact here is a more conservative approach by banks in lending money, but also a hesitancy with the ordinary consumer in actually spending money.” The impact of the Euro crisis is currently the main risk factor for Denmark, said Mr Brink. “Should the Euro fail, although Denmark is not a member of the Euro, it would have very negative consequences for Denmark. The unemployment rate which is low after a European measure approximately 5% but high after Danish measures and if this is not improved the pessimism will continue which will be a hindrance for the investments and the general improvement of the economy.”

Company: Law firm Lund Elmer Sandager LLP Name: Lawyer Carsten Brink Email: cb@lundelmersandager.dk Web: www.lundelmersandager.dk Address: Kalvebod Brygge 39-41, DK-1560 Copenhagen V, Denmark Telephone: +45 33 300 200

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in the Nordic Region Helsinki / Finland

“As with all economies at the moment it would be wrong to claim that these are not challenging times and as Finland is an export-driven economy the financial problems elsewhere are having an effect,” said Mr Cotton. However in the past 12 to 18 months Finland has been an attractive investment destination given its political and financial stability (it is still AAA-rated), low level of corruption and its focus on innovation and product development. Discussing emerging trends, Mr Cotton noted: “whilst there is still some M&A activity there has been a shift towards more operational investment such as Google’s data centre project, Mercedes manufacturing the C class in Western Finland and a number of projects which involve long-term large scale investment by multinationals on which HPP is advising. There has definitely been a decrease in the number of auctions and very low levels of private equity and venture capital activity”. Whilst HPP’s insolvency lawyers have been getting busier over the past two or three years, the corporate team remains active with a number of interesting and creative midcap deals in a range of sectors.

-----------------------------------------------------------------------Andrew Cotton is a Corporate Partner at Hammarström Puhakka Partners. ------------------------------------------------------------------------

Hammarström Puhakka Partners (HPP) is a leading Finnish corporate law firm specialising in advising clients in key sectors including technology, energy and infrastructure, transport and logistics, mining and natural resources and pharmaceuticals and life sciences.

22 / January 2013

According to Mr Cotton, the Finnish wind sector along with mobile and technology including biotechnology are among the greatest opportunities for investors at the moment. “The Finnish wind sector is currently booming as a result of a competitive regulatory environment, an attractive feed-in-tariff and a lack of local finance to build out the large number of projects currently under development,” he added. Mobile and technology have always been areas of strength for Finland and the Angry Birds’ creator, Rovio, is a good example of what Finnish developers

can achieve when given the right backing. “There are a number of very innovative start-up and breakout companies in Finland who have internationally scalable technologies and concepts which just need to find the right investor to take the next step.” says Cotton. “Perhaps reflecting the need for inward investment, the Finnish government is being very active through its trade associations Invest in Finland and Finpro in spreading the message that Finland is a good investment opportunity at the moment,” he noted. Mr Cotton concluded with his predictions for the Nordic Region’s economy in 2013: “It is very difficult to make solid predictions in the current market but we expect further project-based investment into Finland in specific sectors. M&A will continue to remain relatively flat during the first half of 2013 but with more distressed transactions and consolidation. It is likely that there will be some private equity deals given the age of some of their portfolio investments.”

Company: Hammarström Puhakka Partners Name: Andrew Cotton Email: Andrew.cotton@hpplaw.fi Web: www.hpplaw.fi Address: Bulevardi 1A, 00100 Helsinki Telephone: +358 9 474 2230

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Investing and Doing Business in Mexico - Latin America’s next hot spot

INVESTING AND DOING BUSINESS IN MEXICO

— Latin America’s next hot spot

l The economies of developing countries continue to outshine those of developed markets and impressive performance of stock markets continues to lure investors. With the New Year fast approaching, many individuals have their eyes firmly on Mexico, attracted by the country’s predicted outlook for 2013. Despite on-going economic turbulence across the globe, Mexico is in a much stronger position economically than it has been for several decades and Mexico’s economic growth outlook is substantially better than that for other developing countries, which are looking at GDP growth of 1.4% this year and about the same level in 2013 before rebounding and growing 2.3% in 2014. The country’s bourse is the second-best performing major market in the world so far this year, lagging only to Germany. Economists now suggest that Mexico could surge past Brazil to become the fastest-growing economy in Latin America. Mexico has obvious attractions for investors not least of which its Pacific and Caribbean ports, land links to North and South America, extensive variety of natural resources and a skilled workforce ranked among the hardest-working in the world by the World Trade Organization. Acquisition International discussed Mexico’s outlook for 2013 with Alejandro Torres, partner at Chevez, Ruiz, Zamarripa y Cia, SC. 6. Tax reforms, aimed at increasing the tax payers base, eliminating tax payment privileges, such as tax consolidation system, reframing direct and indirect taxes, as well as a serious strategy to prevent tax avoidance and fraud. 7. Legislation amendments, which promote greater and equal competition between radio, television and telephone companies. With these intended amendments, Mexico is looking forward to creating new investment opportunities and becoming more competitive on the international scenario. The Presidential team seems to have the required strengths, political experience, and lobbying skills necessary to reach the agreements required to achieve its goals in Congress. These agreements are the key element for this administration´s success.

2013 will bring significant changes in the Mexican scenario, which will be likely to attract foreign investment. Enrique Peña Nieto´s new government has clearly shown signs of the path it shall follow, and has taken immediate steps in order to start delivering on its campaign promises. Within a few days after the new administration took charge, the “Pacto por Mexico”, has been subscribed by the country´s three main political forces. The Pact´s aim is to leave political rivalries behind, once the elections have been concluded, and to compromise its subscribers so that they will all work together towards Mexico´s transformation in order to regain the leadership it has relinquished in favor of Brazil, during the past few years.

ACQUISITION INTERNATIONAL

The “Pacto por Mexico”, establishes the obligations assumed by the strongest Political forces in the Mexican Congress, so that they will promote the amendments to the economic, political and justice main structural regulations. 1. Educational amendments, (Which hopefully, will have been approved by the time in which this article is published) 2. Tourism, emphasizing the cultural wealth and diversity of our country. 3. Improvement of highways, harbours and train infrastructure. 4. Promotion and support of clean technologies and renewable energy projects. 5. Transformation of the Mexican oil industry (PEMEX) into a competitive and highly productive industry.

Taking into account the considerations hereof, Mexico is likely to become the new Hot Spot for foreign investment in Latin America during the next years.

Company: Chevez, Ruiz, Zamarripa Name: Alejandro Torres Email: atorres@chevez.com.mx Web: www.chevez.com.mx Address: Corporativo Pirámide Vasco de Quiroga 2121, 4° Piso Colonia Peña Blanca Santa Fe, C.P. 01210, México D.F. Telephone: +52 (55) 5257-7072

January 2013 /

SECTOR SPOTLIGHT:

Ukraine & the Green Tariff Law

UKRAINE & THE GREEN TARIFF LAW

l Ukraine is a promising emerging market for photovoltaic energy investments. On the 1st of December amendments to the law concerning incentives for production of electric power from alternative sources of energy were published. On the 1st of April 2013 most of the provision of the law will enter into force, i.a. reducing feed in tariff for solar power plants and delaying the gradual reduction of feed-in tariffs. Currently the tariff for electricity produced from ground-mounted solar power plants is one of the highest in the world. The lower tariff for solar ground-mounted installations will not be as attractive as before, but it might be offset by the decline of solar components prices that the market experienced in the last few months. Acquisition International spoke to Dr Julian Ries, a lawyer at Beiten Burkhardt, to get his views on the new law.

-----------------------------------------------------------------------Beiten Burkhardt is a Germany-based independent law firm with a strong focus on Eastern Europe and China. After opening offices in Russia in the beginning of the 1990s, the firm opened its Kyiv office in the beginning of 2004. In Ukraine the firm works predominantly for foreign investors throughout the country, advising them on all aspects of relevant commercial and international law. ------------------------------------------------------------------------

Dr Ries explained that key changes in the recent amendments to the provisions on the Green Tariff concern payments for electricity and local content requirements. A feed-in-tariff rate for electricity produced from biogas was introduced. In addition, the definition of biomass was changed and narrowed. “The feed-in-tariffs for solar- and wind-produced electricity were reduced, whereas the feed-intariffs for micro and mini hydro power plants (less than 1 MW of installed capacity) were increased. According to the old law, the feed-in-tariffs for electricity should be reduced automatically, by 10, 20 and 30%, in the years 2014, 2019 and 2024 respectively. All these reductions were postponed by one year,” he commented.

ACQUISITION INTERNATIONAL

Dr Ries noted that the granting of the Green Tariff is subject to compliance with certain local content requirements (LCR). LCR is determined as a certain percentage of the plant’s overall cost which has to be of Ukrainian origin. “On the one hand the local content requirements were softened in that the 15 and 30% period of local content were extended slightly and the 50% requirement delayed. On the other hand the law determines now the maximum share of a part of a power plant, for example the construction works, avoiding that developers use particular pricing schemes to comply with the LCR,” he observed.

into account that even an economy like Germany’s cannot afford significantly lower tariff rates, it was wise to introduce some changes. “The changes regarding the LCR likewise can bring some relief, however, the requirements remain significant and it is not clear whether they can be met within the allowed time frames. The local content requirements were changed several times over the last years because it was practically impossible to meet them,” he concluded.

Some changes in the law do indeed improve the investment conditions in the renewable energy industry in Ukraine, stated Dr Ries. “For example, the delay in feed-in-tariff reductions is positive from an investment standpoint, at least for wind, biomass and hydro power plants. For solar plants, the delay does not compensate the reduction of the solar tariff rates in general. However, the feed-in-tariff rates for solar power plants were extremely high – and remain so. Taking

Company: Beiten Burkhardt Name: Dr. Julian Ries Email: julian.ries@bblaw.com Web: www.beitenburkhardt.com Address: vul. Turhenevska, 38, 01054 Kyiv, Ukraine Telephone: +380-44-494 04 00

January 2013 /

SECTOR SPOTLIGHT:

Introducing the Loss Adjuster

INTRODUCING THE LOSS ADJUSTER l Since we entered the new millennium, the number of high profile insurance claims has increased dramatically; from the threat of terrorism to global warming, the world is now a much more hostile place. This increase has brought about huge change in the insurance industry, particularly in the value we now attach to loss adjusters across all sectors of the insurance industry. Loss adjusting has undergone such transformation that no longer is it carried out by untrained people; it is now a highly skilled role that requires expert understanding of insurance law, policies, claim management and other global systems. It’s a highly sensitive role as in the process of assessing a fair and reasonable claim, the adjustor has to be careful not act for either side, i.e. the insurance company or the claimant. Acquisition International speaks to Rodolfo A. Lat, President and General Manager of Chartered Adjusters, Inc.

With more than 40 years of experience in the insurance industry, Mr Lat shared that “being a lawyer has successfully complimented my work as a loss/claims adjuster”. “We launched the first online claims handling services in the Philippines to improve efficiency in the way we handle the assigned claims and to serve our clients better,” said Mr Lat. Discussing the key skills required of a loss adjuster, Mr Lat listed: independence of judgment, service orientedness, thoroughness of investigation, negotiation skills, resourcefulness, wide knowledge of various classes of work and the legal application to it, and inherent sense of fairness and human understanding. “The growth of the insurance industry translates also to the growth of the loss adjustment sector. Rendering quality service and living up to the values-standards looked upon by insurers and

26 / January 2013

reinsurers also contribute to the success of the industry,” he explained. Mr Lat also expressed his opinion regarding the changes in the industry in recent years, noting “the changing role of the loss adjuster as he adapts to the rapid developments taking place in the insurance industry; and the changing perception of insurers and reinsurers toward loss adjusters”. Furthermore Mr Lat listed the key challenges in the process of assessing a fair and reasonable claim: getting and retaining the right people, pressure from insurance/reinsurance companies and costs. According to Mr Lat the implementation of a global system is likely and, in his words, “it will raise standards in the way we do business and create a more sustainable future”. In conclusion, Mr Lat shared his predictions for 2013: “Since climate change is a reality, I see more

and more insurance claims arising from natural catastrophes and disasters where the insurance industry will be calling on the expertise and experience of loss adjusters to successfully settle claims for them.”

Company: Chartered Adjusters, Inc Name: Rodolfo A. Lat Email: ralat@chartered-adjustersinc.com Web: www.chartered-adjustersinc.com Address: 4/F Francisco Gold Condominium, 784 EDSA, West Kamias, Quezon City, Metro Manila 1109, Philippines Telephone: +63 2 921 7422

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Employment Law and HR issues in M&A

EMPLOYMENT LAW & HR ISSUES IN M&A l Employment Law and HR issues are a major consideration in mergers and acquisitions transactions. Deals of all sizes require both pre- and post-closing strategic planning. One of the most challenging and often overlooked or underappreciated components of a corporate transaction for a buyer can be the acquiring or merging of workforces. The newly formed venture must reconcile employee structure, personnel policies and benefit plans as well as considering existing employment practices. The level and significance of employment and HR issues which may arise will of course vary depending on the specifics of the deal and can often be somewhat complex particularly in cross-border transactions. It is important for prospective purchasers and vendors to address employment law considerations at the earliest opportunity in order to minimise further expense or delay further down the line. It is imperative that the management teams involved seek the expertise of those who are able to provide comprehensive and sound advice on labour, employment, and benefits issues in any merger, acquisition, investment, joint venture, and other strategic transaction. Acquisition International speaks to Hendrik Muschal, Managing Shareholder, and Sachka Stefanova-Behlert, Associate, at Ogletree Deakins International LLP. Discussing regulation, Mr Muschal noted an increasing trend for an extraterritorial reach of national employment law regulations. “Recently, the German Federal Labor Court has confirmed the possibility of a transfer of undertaking in the context of cross-border transactions,” he commented. Ogletree Deakins International LLP is able to assist prospective acquirers in addressing pensions & benefits obligations and cultural considerations by quantifying transaction costs resulting from transferring employer’s pension obligations and identifying potentials for efficient continuation or replacement of pension obligations. Looking ahead, Mr Muschal concluded: “Three fields will remain subject to a noticeable dynamic: temporary employment of agency-work, data protection questions, internationalisation of employment standards.”

Ogletree Deakins International LLP specialises in all areas of individual and collective employment law with a special focus on personnel restructuring projects on a national level and in a cross-border context.

Other issues include the restrictions for the employer to implement restructuring measures upon transactions resulting from statutory, contractual or collective provisions, and the efficient and smart handling of employee representation bodies’ rights.

Ogletree Deakins International LLP has an excellent track record of advising national and international companies of different sizes and from various sectors. The company offers a proven expertise and practical business solutions in the implementation of complex HR projects on an operational, company and group level. It assists growing businesses involved in transactions by helping clients to cost-optimise their HR practices.

Some of the major challenges which can arise in acquiring and merging workforces noted by Ms StefanovaBehlert include quantifying resulting transactions costs and identifying cost optimisation potentials from the HR perspective in the pre-transactional period; and the cost-optimising management of contractual situations and compensation migration of acquired and merged workforce in the post-transaction period.

Discussing some of the typical employment law/ HR issues which can arise in corporate transactions, Mr Muschal noted the existence of varying employment terms and conditions in entities subject to transactions, and the overlapping of collective bargaining agreement regimes.

ACQUISITION INTERNATIONAL

Ms Stefanova-Behlert underlined that cross-border transactions add further complexity, such as managing the interplay between national employment law regimes and related legal disciplines (corporate, tax, immigration and conflict of laws) governing crossborder transactions and the management of contractual situations of the acquired and merged workforce.

Company: Ogletree Deakins International LLP Web: www.ogletreedeakins.com Address: Fasanenstr. 77, 10623 Berlin Telephone: +49-30-862030162 Name: Hendrik Muschal Email: hendrik.muschal@ogletreedeakins.com Name: Sachka Stefanova-Behlert Email: sachka.stefanova-behlert@ ogletreedeakins.com

January 2013 /

SECTOR SPOTLIGHT:

The Risks of the Banking Industry

THE RISKS OF THE BANKING INDUSTRY OTHER EXPERTS IN THIS AREA

Company: Chrysses Demetriades & Co Name: Christos Mavrellis Email: Christos.Mavrellis@demetriades.com Web: www.demetriades.com Address: 13 Karaiskakis Street, Limassol 3032, Cyprus Telephone: +357 25 800 000

-----------------------------------------------------------------------Andrei Aganimov is a Partner at Attorneys at Law Borenius ------------------------------------------------------------------------

Attorneys at law Borenius, established in 1911, is one of the largest and most experienced business law firms in Finland whose services cover all areas of business law. Attorneys at Law Borenius` commitment to its clientsÂ´ success is firmly grounded in strong expertise, long-term commitment, genuine involvement, experience and innovation. In the Finnish banking environment there are mostly Finnish and Scandinavian banks operating. The renewal of the debt crisis in Europe in 2011 meant unstable economic environment to financial sector. Nevertheless, the Finnish banking industry performed relatively well last year. In 2012 Finnish financial sector has remained stable, even though withering economy poses growing risk to banks. Although the Finnish banking sector has been stable, the particularly low interest rates and the withering economic growth set some significant challenges to the banks. Lately, the growth in bank lending has slowed down significantly, and the net interest income has continued to decrease. Moreover, new regulation will cause banks additional costs since Basel III is influencing the Finnish regulation. The weakened economic outlook predicts increased credit losses.

28 / January 2013

The willingness of the banks to finance has decreased since the banks prefer strengthening their balance sheets to lending money outside. Nowadays there have to be more banks to execute a financing arrangement because of their reducing willingness to take risks. The banks operating in Finland have mainly done well in stress tests and they obtain money from the market with reasonable prices. Compared to other regions within the EU, there are no significant risks related to Finnish banks and their status in the market is fairly stable. All in all, in spite of the sovereign debt crisis, Finnish financial system has worked rather stable in a difficult operational environment and the greatest risks threatening the stability of Finnish financial system could be seen coming outside the Finnish borders. European debt crisis is influencing Finnish financial markets. Crisis has proved to be long-lasting and nervousness on the market may rise quickly again even though it seems that markets are calming down. In addition, the Finnish economy seems to be declining. Banking industry is currently faced by risks such as poor quality of the credit portfolios (balance sheet risks), continuous problems in refinancing and the difficulties to acquire equity from the market, decreasing profitably, increasing regulation and risks in investments arising from the nervousness on the stock market.

Trust between the banking industry and the general public could be restored by improving the solvency of the banks. Insecurity of the future regulation influences the trust of the investors. That is why the preparation of reforms in regulation should be made quickly and the enforcement of such reforms should be executed promptly and thoroughly. It is important that granting of credit and other essential banking services continue without any interruption despite the current challenging economic environment. Considering the current situation, Finnish economic growth within next year 2013 could be estimated to be rather modest.

Company: Attorneys at Law Borenius Ltd Name: Andrei Aganimov Email: andrei.aganimov@borenius.com Web: www.borenius.com Address: YrjĂśnkatu 13 A, 00120 Helsinki, Finland Telephone: +358 9 6153 3471

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

DOING BUSINESS IN 2012 — Forming Companies in... Burkina Faso

-----------------------------------------------------------------------Jacqueline Ouedraogo is the Office Manager for Dembs Associates, based in Africa. ------------------------------------------------------------------------

Dembs Associates is a consulting firm with formation services that are based on companies’ experiences and our trainers come from companies and Academic world. Our jurisdiction has witnessed a growth in formation levels mainly due to a need to strengthen companies’ capacity to compete fiercer. The availability of funds to support the formation also contributed to this growth

The incorporation process is not fundamentally different from one company to another in Burkina Faso. Of course fees and expenses change. Limited companies must appoint an auditor. Limited Liability Company (LLC) is the company structure which is in the greatest demand. The key challenges of incorporating offshore/foreign companies include knowledge of the country’s taxation; a study of the market sector; and the fact that the exercise of some activities is subject to prior authorization, for example in the field of construction and civil engineering

Access to credit is undergoing a positive change with the introduction of an Interbank Financial Corporation Guarantee Burkina (SOFIGIB). This company manages the guarantee fund to assist the development and the creation firms in Burkina Faso by facilitating access to credit.

To improve the formation process and the business environment in general in our jurisdiction more funds to support formations need to be developed, with improved access to credit, and expedition of the processing of commercial disputes in courts and focus on the implementation of judicial decisions needs to happen.

In real estate, there is a housing bank which facilitates the granting of housing loans.

It’s difficult to obtain statistics relating to formations over the coming 12 months, however DEMBS

Angola -----------------------------------------------------------------------António Vicente Marques is the founding partner of AVM Advogados. ------------------------------------------------------------------------

AVM was founded over ten years ago and is today one of the most solid and respected law firms with over 85 lawyers, based in Luanda and Cabinda in Angola, as well as Lisbon and Oporto in Portugal, Maputo in Mozambique, Rio de Janeiro in Brazil and soon in Dili in East Timor. The company covers a full range of legal services including particular strengths in Corporate and Commercial Law; Labour and Immigration law; Energy; Oil & Gas; Mining and Diamonds; Franchise & Distribution Law; Banking and Finance; Real Estate; Project Finance; Energy; Insurance; Transport; Regulatory issues and Commercial Dispute Resolution. AVM offers clients specialist advice on all aspects of corporate transactions, frequently with a cross border perspective. ‘Regarding the process of setting up a company, there are different business entities in Angola, however the most common way to start a business is to establish a corporate company’, says António Vicente Marques, the Angolan based Founder of AVM Advogados. There are two types of companies with limited liability in Angola, private limited liability companies and public companies controlled by shares. ‘Choosing between these two forms of companies, depends upon the preferred corporate structure, as private limited companies are commonly used for small sized structures involving less complex governance and management procedures,

30 / January 2013

while public companies are generally used for large sized structures’, says Vicente Marques. As explained, parties are required to undertaken several steps in order to incorporate a company in Angola, such as: •

•

• • • • •

obtaining the approval certificate of the company’s name – company names central office or via the companies’ sole counter system opening of a bank account in the name of the company to be incorporated and depositing its share capital executing the public deed of incorporation before a public notary in Angola registering the incorporation before the competent commercial registry in Angola

ASSOCIATES expect at least four for the year 2013, depending on the company’s request. There will be more business in the coming years in terms of the average number of entrepreneurship in Burkina (about fifty per month) and the development of sectors such as buildings and public works, mining, agribusiness with the advent of growth poles in the agricultural sector in particular.

Dembs Associates Company: Dembs Associates Name: Jacqueline Ouedraogo Email: dembsassociates@fasonet.bf Web: www.dembsassociates.bf Address: 06 BP 9731 Ouagadougou 06, Burkina Faso Telephone: +226 50 45 34 59 or 70 36 96 66

There are few taxes that companies should be aware of such as Taxation of Labour and Social Security Contributions, Industrial Tax, Tax on Capital Investments and Consumption Tax, adds Vicente Marques. Another important aspect that should be noted is that a reform of the country’s tax system is in course and new developments are expected for 2013. It is something that is ‘much awaited as it promises many novelties, which will reflect in business and investments’ says António. In particular, there are some expectations on the Tax Reform concerning Micro, Small and Medium Enterprises. ‘Also, Public-Private Partnerships (PPPs) have been launched in 2012. PPPs are regulated by a Law from 2011 and more regulation shall be approved during the 2013. During this preliminary phase, the Government will support PPPs in energy sector, such as the production of electricity (central natural gas and several mini-hydro) and road sector may also be included.’

carrying out the official publication in the official gazette of Angola obtaining the statistical registration registering with the tax and social security authorities

The enactment of a new Private Investment Law in 2012 emerged as an instrument of the Angolan economic, social, monetary and foreign exchange policies, focusing on attracting investments over USD 1,000,000.00 on sectors classified as priority for the country such as agricultural production, manufacturing, technology and industry modernisation, fishing industry and derivatives, health and education, infrastructures, telecommunications, energy and water, social housing and tourism.

Company: AVM Advogados Name: António Vicente Marques Email: avm@avm-advogados.com Web: www.avm-advogados.com Address: Rua Amílcar Cabral, n.º 211, 8.º, Edifício Irca, Luanda, República de Angola Telephone: +244 923 610 786 / +351 966 484 926

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in... OCIPED also coordinates the following agencies that will be of great assistance: Ministry of Commerce and Industry; Oman Chamber of Commerce and Industry; Ministry of Environment & Climate Affairs; Oman Development Bank; Public Establishment for Industrial Estate; Muscat Securities Market; and Ministry of Manpower.

Oman

-----------------------------------------------------------------------Hussain Salman Al Lawati is the Managing Director of Oman Cables Industry (SAOG). ------------------------------------------------------------------------

Mr Al Lawati stated that setting up a company in Oman is fairly easy and simple, adding that government authorities are very cooperative as long as the prospective investor fulfils the required formalities. The document required is industry/ company specific. “The OCIPED, The Omani Centre for Investment Promotion and Export Development offers support for new business ventures in the Sultanate,” commented Mr Al Lawati. “OCIPED will provide you information and practical help, assist you with the investigations, setting up operations and identifying export markets.”

Vietnam

-----------------------------------------------------------------------The Credit Information Centre (CIC) of the State Bank of Vietnam (SBV) is a unique public credit registry in Vietnam. ------------------------------------------------------------------------

CIC collects, processes, stores, analyses and forecasts credit information with the aim of supporting SBV supervision functions and monitoring systematic risks as well as providing banking information services to credit institutions, organisations and individuals. The range of products and services is regarded as reliable sources of information which greatly contributes toward SBV management, safe and effective business of credit institutions and enterprises. CIC’s performance has constantly received great appreciation from World Bank and other international organisations. Credit information activities and credit information index have both improved, contributing to the facilitation of access to finance for consecutive years. CIC’s immense database contributed by 100% credit institutions in Vietnam has been developed under modern information technology infrastructure to allow on-line query of information via a system of websites. The historical information is available for

ACQUISITION INTERNATIONAL

Mr Al Lawati is “pleased that a comprehensive jurisdiction system comparable to any international operations exists in Oman”. However, he beleives that more maturity and more details with segregate experience experts in different issues are required. He stated that the country offers a friendly cultural environment and a safe haven for investment, noting that bi-lateral agreements between the countries and councils are being implemented by the Omani authorities in toto. He also highlighted the potential of exploring the manufacturing and tourism sectors; the sound banking system and financial centre; sound and respected relations worldwide with Oman as a country, and very modest taxation compared to other countries. Foreign investment up to 49% is not complicated, and it can increase to 70%. Other attractive factors include the stable political system; the use of English as the lingua franca; and the lack of restriction on repatriation of capital and profits.

manufactured in Oman are of highest standards that compete with best products globally.” Mr Al Lawati noted that Oman has developed its infrastructure vigorously to facilitate the trade and business of Oman, adding that its infrastructure (i.e. roads, sea ports, airports) are among the best in the word. “Its trade policies and Government regulations are hassle free and favour the business community,” he continued. “An incredible amount from the Government’s budget is set towards development of infrastructure every year, thus boosting the local economy. Further the Government is focusing to divert its economy to non-oil sector, thus encouraging the non-oil industries with various incentives. In a nutshell, there are enormous opportunities to prosper the trade and business in Oman for the years ahead. “We attribute our success to His Majesty Sultan Qaboos Bin Said for his vision and foresightedness that made Oman a modern country that we are proud of. Oman is best known for peaceful coexistence and stable economy,” he concluded.

Mr Al Lawati observed that the whole industry has witnessed a staggering growth since 1970. “The First generation industrials witnessed exponential growth thanks His Majesty vision,” he explained. “The companies and industrial established three to four decades ago, has now in a dominant position in the local market and thus reduced reliance on imports to a great extent. Further the local companies have penetrated successfully and exported its products to other Gulf countries and around the Globe. The products

Company: Oman Cables Industry (SAOG) Name: Hussain Salman Al Lawati Email: management@omancables.com Web: www.omancables.com Address: PO Box 25, PC 124, Rusayl, Sultanate of Oman Telephone: +968 2444 6469

5 years with replenished information from other domestic and international sources.

finance companies and some other microfinance institutions.

CIC aims to become the leading credit information registry in the region through its commitments to develop professionals and modern technological capacity so as to offer the best quality products and services in compliance with international standards, meeting the needs of the State Bank of Vietnam and credit institutions for enhancing risk management, and securing fair access to credit by the borrowers.

Some other key figures from CIC’s portfolio are more than 2,400,000 credit reports supplied in 2012, 20 foreign partners among which Duns and Bradstreet, FIBEN, NICE Groups, Nice D&B, ACP, BOL, MIU, Ocean Intelligence. The CIC also benefits from more than 20,000 users from the State Bank of Vietnam and Credit Institutions as well as 500,000 profiles of Corporate Credit Information Database and last but not least 150 staffs of Doctorate, Master and Bachelor Degrees from domestic and international universities.

CIC is devoted to provide independent, objective, fair, transparent, on-time credit information. By embracing information technology solutions, the CIC has developed an advanced credit information system at international standards. CIC has over 15 years of experience in providing credit information reports for state agencies and credit institutions. CIC also offers services in the sphere of credit rating and scoring, credit warning, foreign information, RMS consulting and IT services. According to CIC 100% supervised credit institutions contribute to CIC’s database, including state owned banks, joint stock banks, joint venture banks, foreign banks, credit funds, leasing companies,

Company: Credit Information Centre of the State Bank of Vietnam Name: Uan Cong Pham Email: trangnguyen@creditinfo.org.vn Web: www.cicb.vn Address: No.10 - Quang Trung Street Ha Dong District - Hanoi Telephone: +84 04 33824769

January 2013 /

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in... Taipei / Taiwan

and a Foreign Investment Approval issued by the Investment Commission of the Ministry of Economic Affairs is required. Foreign investors may invest into most of the business sectors except for those on the Negative List. The List is divided into “Prohibited Industries” where no foreign investment is permitted and “Restricted Industries” where special permits/licenses from competent authorities are required. For PRC investments, the Regulations Governing Investments by PRC Persons shall apply. It is advisable to consult a legal counsel in the early stage if you plan to invest in Taiwan.

Taiwan

-----------------------------------------------------------------------By Sophia Hsieh/Janice Lin – Tsar & Tsai Law Firm ------------------------------------------------------------------------

To have a business presence in Taiwan, a foreign company may choose to set up a wholly owned subsidiary, a JV or a branch office. A representative office is a different choice available for foreign companies that only needs an office for liaison purpose with no business or any revenue-generating activity being involved.

Firm Profile Tsar & Tsai is a Taiwan-based partnership found in 1965 and has since become one of the most prestigious law firms in Taiwan. The firm has a long history of international practice and is known for its superior quality of work. The firm has maintained a diverse, international character and prides itself on providing creative problem-solving and strategic advice to its clients.

In general, foreign investments (excluding PRC investments which are subject to a separate set of investment regulations) shall be subject to the “Statute for Investments by Foreign Nationals”

The firm with a total of about 50 lawyers in its corporate department offers a full range of legal services, including banking, financing, capital market, securities, insurance, M&A, cross-border transaction, employment, dispute resolutions, international trade, intellectual property, tax and general corporate practices. In the recent past, the firm has represented clients and advised on a number of landmark transactions in Taiwan, including the first acquisition of controlling stake by a foreign

Germany

authorities may need to be involved,” explained Dr. Vogel. “That makes it almost inevitable to consult experts to comply with all requirements.”

According to Dr. Vogel, setting up a company in Germany is not very complicated in general – if you know how to do it. With only a few exceptions any (foreign) individual or legal entity may establish companies like a GmbH, the standard private limited liability company in Germany, for business purposes. With more than one million registered entities, the GmbH is by far the most common company in Germany. Approximately 91,600 GmbH picked up business in 2011 alone, compared to approximately 64,000 partnerships with unlimited liability and 2,500 stock corporations (AG). German law prescribes a minimum share capital of €25,000 for a standard GmbH. All that is required to set up a GmbH is a founding charter and the company’s Articles of Association, which can be a two-pager. The documents need to be notarised and must be filed to the commercial register together with a personal declaration of the designated managing director, a list of shareholders and evidence for the existence of the shareholders and for the paid-in share capital. Furthermore, the local trade register and tax authorities have to be notified. “However, a wide variety of general and industryspecific regulations may apply and several other

32 / January 2013

‘‘

Access to banking is easy for companies in Germany and most solvent companies will have good access to credit facilities at moderate interest rates, even though in the wake of the financial crisis the requirements for loans have tightened,” he observed. “Corporate taxes are comparably moderate with a federal corporate income tax rate of 15% and a local trade tax rate between seven and 20%.

‘‘

-----------------------------------------------------------------------Dr. Arne Vogel is a Lawyer at PricewaterhouseCoopers Legal AG Rechtsanwaltsgesellschaft, Hamburg, Germany ------------------------------------------------------------------------

According to Dr. Vogel, the formation process for a GmbH improved significantly within the last ten years, especially due to deregulation and widespread implementation of electronic communication with authorities. “If you want to establish a GmbH from scratch, you can have it up and running within four to five weeks nowadays. A shelf company could even be ready for business within a couple of days. However, still too many different authorities are involved in the formation process and too many industry-specific regulations do apply,” he commented. “That makes it difficult, in particular for foreign companies, to start a business and comply with all regulations without counselling a competent advisor. It would therefore be desirable to reduce the number of involved authorities and to further deregulate the formation procedure.”

private equity fund in a Taiwan financial institution, the first cross-border going private acquisition of a Taiwan listed company by a US public company, the first equity investment by a PRC company in a Taiwan-listed mobile operator, and the first PRC investment in the Taiwanese public infrastructure with single transaction value of record high since the signing of ECFA in 2010. The Firm’s legal practice has been broadly recognized by organizations including Chambers Asia, Chambers Global, The Legal 500, IFLR, Asia Legal Business, Asialaw Profiles and China Law Profiles as one of the very best in Taiwan. Being a top tier commercial law firm, the firm continues to seek to define and embody the highest ideals of the legal profession and to remain at the forefront of the profession.

Company: Tsar & Tsai Law Firm Web: www.tsartsai.com.tw Address: 8th Floor, 245, DunHua S. Road, Section 1, Taipei 106, Taiwan Telephone: +886 2 2781 4111 Name: Janice Lin Email: janicelin@tsartsai.com.tw Name: Sophia Hsieh, Integrated Partner Email: sophiahsieh@tsartsai.com.tw

With its well-educated workforce, stable political conditions and a well-functioning judicature, Dr. Vogel believes that Germany provides a reliable environment for business. “The economy in Germany is growing at least at a slow pace, so that formations should not decrease. However, any slump in the world economy would of course also affect businesses in Germany as well,” concluded Dr. Vogel. PwC Legal Germany is part of the international PwC Legal network, whose more than 2000 lawyers provide truly global services to their clients in more than 70 jurisdictions worldwide. It is not only part of the most widespread legal network in the world, it also closely cooperates with the PwC network of professional services firms which deliver high quality assurance, tax and advisory services in 158 countries.

Company: PricewaterhouseCoopers Legal AG Rechtsanwaltsgesellschaft Name: Dr. Arne Vogel Email: arne.vogel@de.pwc.com Web: www.pwclegal.de Address: New-York-Ring 13, 22297 Hamburg, Germany Telephone: +49 40 6378 1233

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

Greece

-----------------------------------------------------------------------Dr Despina Samara has been a senior associate at Calavros and Partners Law Firm, based in Greece, since 2006. ------------------------------------------------------------------------

Calavros and Partners Law Firm was established in 1980 and is acclaimed as one of the leading and most esteemed Law Firms in Greece. With thirty years of company formation experience, Calavros and Partners Law Firm is uniquely positioned to offer up to date and quality services both to national and international clients. The need to address long -existing problems with bureaucracy, confusion as to the applicable legal framework, continuously changing regulations, and lost investment opportunities due to an unwelcome public administration environment has generated a

Uganda -----------------------------------------------------------------------Phillip Karugaba is a Partner and Head of the Corporate and Commercial Department at MMAKS Advocates. ------------------------------------------------------------------------

MMAKS Advocates is full service law firm with a specialised Commercial Transactions team focused on banking and corporate and commercial law, among others. The firm consist of seven partners, eleven associates and three legal assistants with two of the partners in the Commercial Transactions team. MMAKS Advocates in one of the largest firms in Uganda. The variety of services they provide include preparation of the incorporation documents, registration with the Uganda Registration Services Bureau (UBRS), obtaining trade licences or other specific sector licences, tax registration, negotiating, preparation or reviewing tenancy agreements and opening bank accounts.

ACQUISITION INTERNATIONAL

stream of attempts to boost up national growth. Thus, Greece has now a new Investment Incentives Law (No 3908/2011 on aid for Private Investment to promote Economic Growth, Entrepreneurship and Regional Cohesion) and a rather recent law on companies’ formation (No 3853/2010, on simplification of procedures for setting up single-member and limited liability companies) aiming to respond to the difficult financial situation of the country and, in parallel, to create a forward-looking business environment by allowing the set up of companies within only a day (“One Stop Shop” procedures) following the establishment of the General Commercial Register. Along the same line, by the Law on the Acceleration and Transparency of Implementation of Strategic Investments (the fast track licensing of Strategic Investments began with the passage of Law 3894/2010, which was subsequently amended by Law 4072/2012 CHAPTER B), the Greek Government provides the international and Greek investment community with a stable and transparent set of investment rules, procedures and administrative structures for the implementation of large scale public and private projects. Furthermore, in the last two years, Greece strengthened investor protections by requiring greater disclosure, while it introduced a new pre-bankruptcy rehabilitation procedure aimed at enhancing the rescue of distressed companies.

Greek tax regulations are detailed, complex, and change frequently. It is noted that both in 2008 and 2012 Greece reduced the tax burden for companies by reducing the corporate income tax rate. Investors can choose, also, from a range of private and state banking facilities including venture capital and finance for new companies (globally, Greece stands at 83 in the ranking of 185 economies on the ease of getting credit). Overall, since 2004, and in light of the severe economic crisis Greece is facing since 2010, the national legislator has implemented seventeen (17) institutional or regulatory reforms, thus, generating significant investment opportunities. These reforms have helped the economy narrow the business regulatory gap with the best performers in the European Union. That is why, for 2012, Greece ranks among the ten economies that improved the most in the ease of doing business (regulatory environment), globally (according to data collected by the World Bank).

In general, it is noted that Greek regulatory standards are in line with Community legislation. Thus, there are no import restrictions or tariff barriers (freedom of establishment) while capital and earnings can be freely repatriated. Greece has also double taxation treaties with a number of other countries. Nonetheless, it is important to stress that

Company: Calavros and Partners Law Firm Name: Dr Despina Samara Email: samara@calavros.gr Web: www.calavros.gr Address: 19 Vrana Street, Athens 11525, Greece Telephone: 00302103698700

“We help make Client introduction to Banks, Auditors and Landlords with which we have relationships and also ensure that formation is completed within five days of receipt of the executed documents and fees for the incorporation,” commented Mr Karugaba.

are also no local shareholding restrictions and no foreign exchange controls.”

Mr Karugaba noted that there are several requirements in the Companies Act, (Cap 110) in order to set up a company in Uganda: • confirmation of availability of the approval of the proposed name of the company. • the main objects of the company. • the share capital of the company, i.e. the nominal capital, number of shares and their par value • the persons (at least two) who are to be shareholders in the company. • the registered office of the company. • the persons who will be directors and secretary of the company. Discussing the regulations that benefit business growth, Mr Karugaba commented: “The UIA currently offers various incentives for purposes of encouraging business growth, for example, investment capital allowances on plant and machinery, duty and tax free import of plant and machinery as well as export promotion incentives and facilities. “Uganda generally has a favourable business environment” explained Mr Karugaba. “The banking sector is regulated by the Bank of Uganda. There are currently 24 commercial banks licensed by the Bank of Uganda.” Mr Karugaba stated that the corporate tax rate is 30% of the chargeable income and added: “There

Moreover Mr Karugaba explained the main differences between the two types of companies, public and private: “A private company must have a minimum of two members and a maximum of fifty members while a public company must have a minimum of seven members, with no maximum number of members. However, the Companies Act, 2012, which is yet to come into force, makes provision for formation of a one-man company. It also increases the maximum number of members in a private company to one hundred.” Discussing the predictions for the next 12 months, Mr Karugaba concluded: “With the recent discovery of petroleum deposits in Uganda, we anticipate an increase in the formation of companies dealing in oil and gas operations.”

Company: Masembe, Makubuya, Adriko, Karugaba & Ssekatawa Advocates (MMAKS Advocates) Name: Phillip Karugaba Email: karugaba@mmaks.co.ug Web: www.mmaks.co.ug Address: 3rd Floor, DTB Centre, Plot 17/19 Kampala Road, Kampala Telephone: +256312260016

January 2013 /

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in... There are few challenges when it comes to incorporating offshore companies. The only challenge that I can see is the authentication of documents of foreign parent companies. The documents need to be legalised, Apostilled and then further authenticated by the foreign office of the UAE. Apart from that, it is fairly simple to establish a business and it can be easily run by foreign management.

Dubai / UAE

the UAE

-----------------------------------------------------------------------Karteekka Tyaggi is the managing partner Legum Amicuss, based in United Arab Emirates. The firm’s practice areas include corporate, commercial laws, business advisory services, human resource, compliance, legal dispute, alternative dispute resolution and company secretarial advice. ------------------------------------------------------------------------

When it comes to a free, vibrant, welcoming and convivial business environment, the only name that comes to one’s mind is that of the UAE. From the days of clock towers and desert homes to those of busy highways and the world’s tallest structures, UAE has certainly come a long way.

The only thing that we have faced problems with relates to access to UAE laws. There is no proper database of corporate and companies law plus the laws are mostly defined by one federal law. It would certainly be better if there were specific laws for specific subjects and they were also easily accessible, duly translated in English. free zones targeting foreign businesses and efficient government services provide an environment which is conducive to growth of all kinds of businesses ranging from trading companies to services. After witnessing a slump in formation levels in the year 2008 and 2009, UAE is again becoming the preferred choice of businesses around the world. The effective government policies, booming infrastructure, introduction of new modes of public transport in 2009 and timely intervention by the government in helping the businesses that were facing problems and restructuring some major existing deadlocks, has helped re-establishing the lost confidence in the business environment of the UAE.

When it comes to business growth the UAE regulations are fairly simple and are very business friendly. Zero taxes, quick incorporation process, availability of

Trading has always been the preferred sector in the UAE, however, in recent years, there has been a rise in the establishment of service providers and financial businesses.

Colombia

Our jurisdiction has grown exponentially in the formation of big business, thanks to foreign investment that has passed in the last 10 years the sum of $ 18,000 billion pesos.

-----------------------------------------------------------------------Dr. Nelson Roa Reyes is the Executive Director of Gil & Roa Abogados, Colombia, and is responsible for all of the area of litigation and large foreign investment in Business Law. ------------------------------------------------------------------------

Gil & Roa Abogados is a law firm that was created in 1989 by attorneys Nelson Roa Reyes and Rodrigo Reyes Ocampo, with the permanent council of Dr. Facter Gil Jaramillo (Q.E.P.D.), all with the purpose of providing advice legal and financial in the various disciplines of business law. Our firm is a leader in our jurisdiction in setting up new companies primarily of hybrid corporate forms are simplified joint stock companies SAS. Foreign companies and holding processes and also leads to large foreign investments into Colombia. It is relatively easy to set up a new business in our jurisdiction and the requirements are: - One or more primary constituents, capital, purpose, duration and bodies. - The choice of the type of company that may be of interest according to the type of business and thus: • • • • • •

Society Capital SA. Responsibility People Society Ltd. Family Partnership or commandite hybrid society or SAS Simplified Stock. sole proprietorship. processed tax policy, labour contracting and parafiscality

34 / January 2013

Most business formations and new business ventures have been generated in the last 10 years, which were formed mainly in the construction, telecommunications, mining, public infrastructure, hotels and private banking. It’s easy to do business in our jurisdiction, because there are rules that favor the creation of new companies and credit lines soft and flexible and easily accessible, encouraging investment projects, business loans and leasing operations to renew or acquire new technologies and machinery, which is achieved by supporting and strengthening businesses significant tax exemptions if the project contains formalization of new jobs. The process of business formation and incorporation does not raise major differences; increased demand was made in the small and medium businesses, which have special lines of microcredit that has contributed to its exponential growth in the last twenty years. The main challenge in incorporating foreign companies is legal security for foreign investment and its solution is respect state or through protectionist rules in this area, aimed at promotion, creation and relocation of foreign companies, i.e. projects that strengthen corporate migration to our jurisdiction.

With regards to the future of foreign investment in UAE, I foresee a major growth in the financial sector, which will certainly result in a major influx of people and foreign labour.

Company: Legum Amicuss Name: Karteekka Tyaggi Email: karteekka@legumamicuss.com Web: www.legumamicuss.com Address: PO Box 643973, Dubai, UAE Telephone: +971 7 2076709 / +971 50 9656709

With regards to the future, it is possible to anticipate that the economic environment in our jurisdiction will grow significantly by the large investments being made, new TLC signed with USA and the CEE, investor confidence is increasing every day and economic growth goals of the current government. Colombia is an appropriate setting that favours foreign investment and peace achieved, we will have a secure future new business, because in our country has been consolidating a culture of entrepreneurship, Colombians are able to develop new forms of economic production and business, suitable for combining traditional criteria of efficiency and quality, to be elements of progress forgers. Our National and foreign investors will find in the Colombian brand synonymous with efficiency, accountability and productivity, to supply consumers in global markets, all making Colombia an attractive investment focus in Latin America.

Company: Gil & Roa Abogados Name: Dr. Nelson Roa Reyes Email: nelsonroa@gilroaabogados.com Web: www.gilroaabogados.com Address: Avenida 5A Norte No. 21N-79 Telephone: +57 2 667 67 80

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SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

Bangladesh -----------------------------------------------------------------------Tanjib-ul Alam is Head of Chamber at Tanjib-ul Alam and Associates, based in Bangladash. ------------------------------------------------------------------------

Tanjib-ul Alam and Associates is a reputed law chamber in Bangladesh consisting of associates with vast experience in corporate and commercial practice both in Bangladesh and England. The services of the Firm span from setting up a business structure in Bangladesh to ensuring that the day-to-day operations of such business entities are compliant with the regulatory requirements of Bangladesh. It is fairly easy to set up a company in Bangladesh since the requirements for company formation are flexible enough to encourage foreign investment, whether small or large. There is no minimum capital requirement for incorporation of companies. However, to incorporate a private company, it should have a minimum of two members and two directors. The Articles of a private limited company should further contain restriction on transfer of shares and existing shareholders enjoy pre-emption right in case of transfer or issuance of shares. Public limited companies are subject to further requirements of minimum of seven shareholders and three directors for incorporation. There is no restriction on nationality of Directors. Companies are required to submit Annual Returns following AGM and approval of Financial Report. In general, both types of companies should register Memorandum and Articles of Association for incorporation.

Laws relating to incorporation of companies and maintenance of incorporated entities are fairly simple and easy to comply. Due to flexibility of rules and regulations for operating companies and investment, investors are free to take any investment decision based on their growth forecast. To encourage rapid business growth, the laws and regulations in Bangladesh offers various fiscal and non-fiscal incentives. Bangladesh encourages Foreign Direct Investments (“FDI”) and in order to attract more FDI, 100% foreign investment is allowed with unrestricted exit policy, while full repatriation of dividend and profit is guaranteed. During exit, a foreign investor can repatriate the net proceeds after securing proper authorization from the central bank. According to World Investment Report of UNCTAD, Bangladesh received FDI of $1.13 billion in 2011 compared to $910 million in 2010, indicating a growth in formation levels. In our opinion, the liberal FDI regime, with no prior approval requirements or limits on equity participation and ease of repatriation of profits and income, strong investor protection facilities coupled with availability of cheap labour force, are factors attributing to the growth. The Garment manufacturing sector has attracted a large number of investments, involving an uprising trend in formations. Besides the garment manufacturing sector, in last few years, many companies have been formed to conduct businesses in telecommunication, pharmaceuticals, shipbuilding, agro-business, ceramics, electronics, frozen foods, leather and leather goods. France, Italy, Spain, Germany, Turkey, China, South Korea, Malaysia, India, Egypt, Lebanon, Kuwait and United Arabian in Saudi Arabia,” commented Mr Al-Soaib. Al-Soaib Law Firm is one of ten Law Firms in Saudi Arabia who are certified from the Saudi Arabian General Investment Authority (SAGIA).

Saudi Arabia

-----------------------------------------------------------------------Mohamed H. Al-Soaibis a Lawyer, Legal Consultant, Founder and Chairman of Al-Soaib Law Firm. ------------------------------------------------------------------------

Soaib Law Firm is one of the most experienced business and litigation law firms in the Saudi Arabia. The firm’s expertise and reputation stems from a long and a successful track record of nearly two decades. Since 1995, the firm has been successful in settingup many legal entities for prestigious international companies wishing to invest in Saudi Arabia. “Since it has been founded, Al-Soaib Law Firm has the honour for taking the responsibility of set up more than 500 corporate belonging to different countries such as United States, United Kingdom,

36 / January 2013

On the matter of legal requirements in setting up a company Mr Al-Soaib noted: “The Investment Law requires any company in the Kingdom of Saudi Arabia with foreign shareholders to obtain a foreign capital investment license.” The license, as Mr Al-Soaib commented, is issued by SAIGA. “The establishment of one hundred per cent foreign owned companies is permitted in most cases,” he said. Further, Mr Al-Soaib explained: “Saudi’s non-oil sector has delivered accelerating growth rates as the economy diversifies.” He noted that the consumer confidence is well above the regional average and he outlined robust GDP growth and macroeconomic stability as two of the reasons for it to happen. “Robust growth in government revenues is supporting double-digit increases in government expenditures on social, infrastructure, and other investment projects,” he added. Discussing the taxes in Saudi Arabia, Mr AlSoaib said: “In general, the principal taxes in the Kingdom of Saudi Arabia are income tax, Islamic Tax on wealth known as Zakat and withholding tax. A comprehensive Tax Law was enacted in the Kingdom of Saudi Arabia in 2004.”

Bangladesh is in the process of amending its Companies Act. Under the new regime, one member company would be introduced, which would enable the foreign companies to incorporate wholly owned subsidiaries in Bangladesh. Furthermore, the documents required for incorporation have been clearly prescribed and the power of the RJSC to require further document has been restricted in the proposed legislation to protect investors from undue regulatory compliance and ensure expedient incorporation. The online incorporation and filing system is being given statutory recognition, which is a step towards the complete online formation and e-governance of companies. There has further been more elaborate provisions for default Articles whereby the companies may avoid formulating the articles themselves and choose to adopt the regulations specified in default articles.

Tanjib-ul Alam and Associates Company: Tanjib-ul Alam and Associates Name: Tanjib-ul Alam Email: talam@tanjibalam.com Web: www.tanjibalam.com Address: BSEC Bhaban, Level- 11, 102, Kazi Nazrul Islam Avenue, Karwan Bazar, Dhaka 1215 Telephone: (+8802) 8189240, (+8802) 8189241

Furthermore he explained that the income tax rate is 20% for all taxpayers “except for certain specific natural gas investment activities which are subject to a defined investment tax that provides a base 30% tax rate and additional rates of up to a maximum of 85%, and oil or other hydrocarbon activities which are subject to a tax rate of 85%.” According to Mr Al-Soaib the most common form of company in the Kingdom of Saudi Arabia is the limited Liability Company. “A limited liability company must have a minimum of two shareholders and may not have more than fifty shareholders. Natural persons and corporate entities may be shareholders. Shareholders are, generally, liable for the debts of the company only to the extent of their respective interests in the company’s shares,” he concluded.

Company: Al-Soaib Law Firm Name: Mohamed Hamad Al-Soaib Email: soaib@soaiblaw.com Web: www.soaiblaw.com Address: P.O. Box 305150, Riyadh 11361, Saudi Arabia Telephone: (+966-1) 472 63628189241

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SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

Nigeria

-----------------------------------------------------------------------Oluwakemi Oduntan is Managing Partner at Jade & Stone Solicitors, based in Lagos, Nigeria. ------------------------------------------------------------------------

Jade & Stone Solicitors (J & S) is a Nigerian corporate /commercial law firm with industry experience in areas of law which include but not limited to aviation, corporate and business, energy and solid minerals, environmental, finance, insurance, intellectual property, immigration, pension, telecommunication and real estate. Nigeria is a country blessed with human, mineral and natural resources which has led to the influx of international companies coming to pitch their tents in her. The business friendly environment has resulted in significant business growth in Nigeria. The nation has witnessed the support of multinational and international companies within its terrain. A foreign company wishing to do business in Nigeria must seek incorporation at the Corporate Affairs Commission, the body responsible for the registration of companies. The company may be registered with foreign subscribers or shareholders. To comply with the requirement of the Companies and Allied Matters Act, there must be a minimum of two shareholders. There are no residence or nationality requirements. The company must also have a minimum of two directors who need not be Nigerian nationals. There

the Ivory Coast

-----------------------------------------------------------------------Georges N’Goan is one of the Founding Partners of N’Goan, Asman and Associes, based in West Africa. Here, Georges speaks to AI about forming new companies in the Ivory Coast (Côte d’Ivoire). ------------------------------------------------------------------------

The Commercial Companies in Côte d’Ivoire are regulated by Uniform Act relating to Commercial Companies law adopted by OHADA (international organisation between 16 African State members whose mission is to elaborate an uniform business law applicable in all the State Members).

are no residency or shareholding requirements for directors. The law allows exemption from local incorporation to certain categories of foreign companies. These are: (1) foreign companies invited to Nigeria by or with approval of the Federal Government to execute a specified individual project; (2) foreign companies executing individual loan projects on behalf of donor countries or international organizations; (3) foreign government-owned companies engaged solely in export promotion activities; and (4) engineering consultants and technical experts engaged in any individual specialist project under contract with any of the governments of the federation, their agencies or other bodies where the contract is approved by the Federal Government. In Nigeria, there are no significant foreign investment restrictions, this has helped business growth. The Nigerian Investment Promotion Commission Act contains provisions dealing with foreign investment in Nigeria. The law provides that foreigners may, subject to a few exceptions, engage in any type of business and own up to 100% of a company registered in Nigeria. The restricted areas are the production of military or paramilitary attire and equipment, or the production of narcotic and psychotropic substances. There are few challenges in incorporating offshore/ foreign companies in Nigeria. Approval of name, access to signatory directors/ shareholders and duration of incorporation are some of the challenges. A name already in existence and similar to an existing name in Nigeria would not be approved for declaration, the choice of legal structure of the company. (Cf. Banking, Mines, Telecommunications etc.) The regulation in Côte d’Ivoire benefits business growth first of all because of the principle of freedom to undertake and to invest enacted in the constitution of Republic of Côte d’Ivoire, the Regulation n° 09/2010/ CM/WAEMU regarding foreign Financial Relations of State Members of WAEMU dated October 1, 2010, the Ordinance n° 2012-487 relating to investment Code dated June 7, 2012.

We can say that, except for administrative delay, it is quite easy to set up a company.

Regarding funding businesses and financial environment, Côte d’Ivoire which is a State Member of WAEMU(3) has a reliable banking network which provides good banking services. Many big international banks operate in Côte d’Ivoire through subsidiaries. Besides, there is a Regional Capital Market instituted under WAEMU treaty and its derived Regulations. The market operations are organized and conducted by the Regional Stock Exchange of WAEMU located in Abidjan.

Bye-laws, subscription declaration and payment of share capital have to be authenticated by a Notary.

Regarding tax issues, the rate of corporation profit tax is 25%.

There is no difference in the incorporation process due to the size of the company. The incorporation process is basically the same regardless the size or the legal structure of the company (SA or SARL))

In addition to the new investment Code, many other legal reforms have been undertaken or are underway to improve the legal environment in specific business sector and attract foreign investments (Telecommunications, Mines, Energy).

Two main legal structures of Commercial Companies are organized to conduct businesses in Côte d’Ivoire; the public limited Company (S.A) and the limited liability Company (SARL).

Generally, Small and Medium Enterprises (SME) are incorporated as SARL and big ones as SA. Specific legal requirements can be prescribed by applicable laws regarding the nature of activities (regulated activities). It may concern minimum share capital amount, prior authorization or licence,

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A legal Reform of Commercial Companies law is also engaged, the objectives of the reform is to simplify the incorporation process, reduce the costs of incorporation and improve corporate governance. Since the end of post-electoral crisis, the Government

incorporation. Foreign companies desirous in doing business in Nigeria must make sure proposed name for incorporation is genuine. Often times, proposed directors and shareholders are offshore and may not be available for signing of relevant documents as at when due. It is advisable to appoint a Nigerian director to ensure certain procedures are not delayed. The process of incorporation inNigeria can be improved upon by updating the CAC computer software’s, ensure constant electricity, training of personal and better working environment for CAC staff. With the current privatisation of the power sector in Nigeria, the numbers of foreign companies coming into Nigeria has increased by 20%. We expect this to continue in the near future.

Company: Jade & Stone Solicitors Name: Oluwakemi Oduntan Email: info@jadeandstone.com Web: www.jadeandstone.com Address: 2nd Floor Canaan Mall, Lekki, Lagos Telephone: 234-1 4393371, 8753645,4323016

of Côte d’Ivoire has undertaken a wide program of reconstruction, economic recovery and development. Many major infrastructure projects are being implemented. The government has been awarded a cancellation of a substantial part of foreign debt of Cote d’Ivoire coming under H.I.P.C (Heavily Indebted Poor Countries) program with international financial donors. This results in more financial capacity for the government to devote to public investments. All the above have created a favourable economic environment which attracts foreign investors. This new economic context offers many business opportunities to investors, particularity in the sector of infrastructures projects, Mining, Energy, Telecommunications.

Company: N’Goan, Asman and Associes Name: Georges N’Goan Email: infos@cabinetnas.com georgesngoan@gmail.com scpavocatsnas@gmail.com Web: www.cabinetnas.com Address: 37, rue de la Canebière - Cocody Telephone: +225 22-40-47-05 / 22-40-47-10 Fax: +225 22 40 47 19

January 2013 /

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

The firm provides legal advice regarding transactions held in Paraguay both by national and international companies.

‘‘

We offer services in the fields of civil, commercial, banking, corporate and administrative law; as well as in matters related to telecommunications, petroleum and gas, maritime law, aviation law, international transactions, tax law, litigation and arbitration proceedings, added Mr Angulo.

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Mr Angulo further explained: “Our firm maintains stable network with top level professionals involved in different steps of organizing and operating a corporation, such as accountants, notaries, etc.” Setting up a company in Paraguay is not so complicated, explains Mr Angulo. “It is only necessary to notarise the bylaws and to register them at the Public Registries, in order to obtain a Tax Identification Number. There are no minimum capital requirements or other major formalities,” he added. Mr Angulo highlighted the low tax rate along with labour and social security requirements as the main

Reykjavik / Iceland

Iceland

-----------------------------------------------------------------------Gunnar Sturluson is a Managing Partner at LOGOS Legal Services. ------------------------------------------------------------------------

LOGOS is the largest law firm in Iceland with a powerful team of lawyers and assistants who specialise in services for the business community using their broad range of experience on behalf of our clients in all aspects of business law practice. The firm offers formation services which include the establishing, financing and merging of companies, both domestically and internationally. “It is relatively easy to establish a company in Iceland compared to many other jurisdictions.

38 / January 2013

“There is a perceived growth of companies incorporating in Paraguay over the last years, although there is no official data,” he said. The increase is explained by the economic growth experienced during the last five years due mainly to the improvement of agricultural production and of the international prices of agricultural products.

‘‘

Macroeconomic stability over the last 10 years, with controlled inflation and a stable currency, is also a reason for the increase in foreign commercial activity in Paraguay he commented. Discussing the sectors with the most new formations, Mr Angulo outlined agriculture and agricultural related industries, real state, hotels and restaurants and services in general as the most prospective. “Doing business in Paraguay is relatively easy. There is widespread access to banking services for companies in all major cities,” he said. In addition Mr Angulo explained: “Corporate tax income rate is only 10%. There is an additional 5% tax for distributing profits and a 15% tax for remittance of profits abroad.” Mr Angulo explained that there are no major differences concerning corporations requirements for different types of companies or regarding size of the corporation. He further comment that the

most common type of company used is “sociedad anónima” and explained that it is preferred as it is flexible and allowing the use of bearer shares. “The “sociedad de responsabilidad limitada” is also used in some cases. However, this type of company allows only 25 shareholders and the transfer of shares is subject to additional formalities,” he stated. Still, Mr Angulo considers the requirement set by migratory regulation as one of the main issues for the formation of foreign companies. The requirement requests from people who wish to set up a company “a permanent residence permit in order to be a part of the board of directors of any corporation, in the stage of formation”.

‘‘

-----------------------------------------------------------------------Jorge Angulo is a member of Fiorio, Cardozo & Alvarado working on Corporate, Taxation and Telecommunications Law. ------------------------------------------------------------------------

‘‘

Paraguay

factors that benefit the business growth in Paraguay. “Corporate income tax rate is only 10% on income generated in Paraguay. However, a 20% tax applies on profits remitted abroad.”

After the formation of the company it is necessary to have at least one person responsible before the tax authority. In this stage, the permanent residence permit is no longer required, he concluded.

Company: Fiorio, Cardozo & Alvarado Name: Jorge Angulo Email: jorge.angulo@fca.com.py Web: www.fca.com.py Address: Avda. Perú 708 c/ Tte. Ruiz Telephone: +595 21 20 50 52

Even though Iceland is not a member of the EU the company legislation in Iceland is in harmony with the EU Company-law directives,” commented Mr Sturluson. Further he explained: “Establishing a public or private limited liability company can take as short as only few days and it is quite common for them to be established in less than one week from the time a notification of incorporation, along with supporting documents, is sent to the Companies Registry.”

tourists visiting Iceland grew in number by 85% in the period from 2000 to 2011. In 2011 around 540,000 tourists visited Iceland. Although exact figures for 2012 are not available, it is foreseeable that the number increased from 2011 to 2012.”

Commenting on the regulations that benefit growth, Mr Sturluson noted: “Iceland is still in the process of stabilising the economy after the collapse of its three biggest financial institutions in 2008. Currently there are currency controls in force, and making them more favourable to foreign investors bringing capital to Iceland is important. Exceptions allowing new investments to flow back out of Iceland with the proceeds from the investment, in certain instances and provided procedural requirements are met, have been implemented.”

Commenting on the formation process, Mr Sturluson shares his opinion that: “The formation process is in quite good stand as it is currently. In order to improve the business environment in general it is of most importance to re-establish liquid flow of foreign capital into and out of the country.”

“According to media reports there have been fewer companies founded in 2012 than in 2011,” commented Mr Sturluson. He suggests that this is due to tax authorities who have made an effort in respect of shell-companies and declared companies that are not active and do not file annual statements as required will be dissolved. Discussing the sectors with most formations, Mr Sturluson stated: “The main export industries of Iceland are the fishing industry and aluminium smelting, along with other large scale industry. The tourism industry has also been growing heavily and

Mr Sturluson commented on the structures with the greatest demand by outlining private and public liability companies as “the most common choice made by those establishing a company in Iceland.”

“The biggest risk factors for Iceland in the next 12 months are in my view the situation on foreign markets, with regard to credit markets and markets for Icelandic exports,” he concluded.

Company: LOGOS Legal Services Name: Gunnar Sturluson hrl. Email: gunnar@logos.is Web: www.logos.is Address: Efstaleiti 5, 103 Reykjavík Telephone: +354 5400 300

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SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

The DRC

-----------------------------------------------------------------------Professor Mathias Buabua wa Kayembe is Chief Executive Officer of ANAPI (National Agency for Investment Promotion) based in the DR Congo. ------------------------------------------------------------------------

The ANAPI agency has four basic tasks: • Work for the improvement of the business climate in the DR Congo. • Develop a proactive and multifacial marketing to attract foreign and domestic investments in the country. • Disseminate a positive image of the country as an ideal investment site, bring various facilitations through services before, during and after their establishment so as to allow their easy installation and ensure their competitiveness. • Production of promotional tools among which the web site which is the DRC’s gate in terms of investments. A One-stop Shop has been set up for the creation of companies. It includes all public services involved in the formation of companies. It is composed of three departments, namely: - Commerce Court for granting the NRC (New Trade Register); - Notarial Office for authentication of the Charters; - Government Tax Authority (DGI) for granting tax number.

tax exemptions. Any investor who submits a worthy investment project can import equipment and materials necessary for the implementation of his investment duty-free. During the operating phase, he is exempted from some taxes, including profit tax, land tax, VAT (the amount paid is subsequently retrieved), customs duties on import and export, ad valorem duty during formation of company, etc. The country is now member of OHADA, which is a modern law securing business in Africa. Since 2002, the country is recording an encouraging growth rate, the annual average of which hovers around 7%. In 2012, the growth rate will be 7.2% and 8.2% in 2013. This performance is due to the significant steps taken by the Government to boost the private sector (including the introduction of new incentive laws, the Mining Code, the Investment Code, the Forestry Code, the Agricultural Code, etc..) and good economic and political governance. Booming sectors include: mining, real estate, industry, services (banking, telecommunications) and agriculture.

This reduces incorporation period to at least three days.

Owing to new laws aimed at promoting the private sector, it is now easy to do business in our country. With the help of One-stop Shop, setting up companies becomes easy. Customs and tax exemptions are provided to investors whose projects (production of goods and services and creating jobs) are said to be valuable. Domestic tax rates are being reduced progressively: profit tax is reduced from 40 to 35%, the administrative tax from 5 to 2%, etc..

The country has an attractive and protective legislation for investments: Investment Code. This legislation provides benefits in terms of customs and

We must recognise that access to credit is still a problem. But the Government is seriously concerned about this issue to find appropriate solutions. offering high quality legal advisory services based on international best practices and our on-the-ground Afghan experience. Our legal advisory services range from rule of law projects, such as drafting legislation and legal consultation, to commercial legal support. Our commercial legal support includes new entity registration, branch office registration, sector specific licensing, contracting and subcontracting. We assist with representation and operation of businesses and non-governmental organizations in Afghanistan.

Afghanistan -----------------------------------------------------------------------Asiyah Sharifi is Partner at Afghanistan Legal Services, based in Afghanistan. ------------------------------------------------------------------------

Afghanistan Legal Services offers legal expertise and rule of law advisory services drawn from our work in the legal sector, both in Afghanistan and internationally. Our staff have provided high-level support to the Attorney General’s Office and legal advice to the Ministry of Finance, Ministry of Commerce and Ministry of Women’s Affairs. We also provide commercial legal support, including new entity registration, branch office registration, sector specific licensing, contracting and subcontracting. We assist with representation and operation of businesses and non-governmental organizations in Afghanistan. Afghanistan Legal Services provides high-level legal expertise to governments, businesses and non-profit organizations in Afghanistan. We pride ourselves on

ACQUISITION INTERNATIONAL

Since renewal of registration hinges upon compliance with Afghanistan’s taxation and other regulatory laws, AFS offers turn-key services for both formation and continuing services. Ease in the registration of a company largely depends on the field of company. Generally, initial registration is fairly simple, with subsequent renewal depending upon compliance with Afghanistan’s taxation and other regulatory laws. Initial registration is with the Afghanistan Investment Support Agency (AISA), which acts as a ‘one-stop shop’ for businesses and investors. In addition, certain fields require specific registration with the relevant Ministries. For example, a company specializing in the health field may need to obtain registration with the Ministry of Health. The Government of Afghanistan is steadily revamping its laws to make it more inviting to businesses and investors. Businessmen are regularly solicited for their opinions, as evidenced by the recent Stakeholder meeting regarding the draft Competition Law. Afghanistan is a rapidly burgeoning economy with many opportunities for investment, especially in the mining and extractive industries. Previous growth in the telecommunications sector continues.

Currently the process of formation is almost the same for all types of companies. Authorisation to create some types of companies (company) is removed with the entry into force of OHADA law. The challenge would be to register a company in one day and practice online registration. This challenge can be met with the development of One-stop Shop for incorporation. The Government is determined to meet this challenge. The business climate in our country is undergoing, from day to day, deep changes conducive to investors. The Government is determined to meet the challenge of fundamentally improving the business environment. Invitation is extended to national and international investors to trust the Government and the national leadership.

ANAPI Company: ANAPI Name: Professor Mathias Buabua wa Kayembe Email: anapirdc@anapi.org Web: www.anapi.org Address: Avenue Colonel Ebeya n° 54, 2nd Floor, Immeuble de la Reconstruction (exSozabanque), PO Box 1797 Kinshasa 1, Kinshasa/ Gombe, Democratic Republic of Congo Telephone: +243 99 99 25 026

Particular attention is being paid to the extractive industry and the related service industries. In addition, there is significant investment in agriculture. Further, fields such as education and health care are also proving to be quite profitable. While there are challenges to working in Afghanistan, the opportunities outweigh the burdens. Afghanistan has several banks that are operating at a high level and offering credit to businesses. The challenges that face developing nations also apply to Afghanistan, however, the burgeoning economy continues to promote optimism. Initial registration is not affected by the size of the company. It is the same process for any size company. Dealing with inefficient government entities and subsequent registration seem to pose the greatest challenges for our businesses.

Afghanistan Financial Services Company: Afghanistan Financial Services Name: Sanzar Kakar Email: info@afs.af Web: www.afs.af Address: House 1319, Street 7, Karte 4, District 3, Kabul, Afghanistan, 42281 Magistrate Ct. Chantilly, VA 20152 Telephone: +93 796 000 111

January 2013 /

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

-----------------------------------------------------------------------Arjan Enneman is Managing director of Expatax BV, based in The Netherlands. ------------------------------------------------------------------------

Expatax is a tax and accountancy firm which specialises in assisting foreign companies and employees with doing business and working in the Netherlands. Expatax is only working for international clients. This requires a tailor made approach whereby communication most of the time will take place from a distance and whereby the client is looking for specific advice with respect to their international exposure. Expatax is able to address the issues which the client can face and to offer solutions to work together with the client while establishing a branch in the Netherlands. In this respect the direct approach works. Our advisors and accountants can continue to assist the company after the company is established.

Mexico

-----------------------------------------------------------------------Carlos Manuel Martinez is a Partner - Corporate Legal Services at Pricewaterhouse Coopers, S.C.. ------------------------------------------------------------------------

Pricewaterhouse Coopers, S.C deals with a range of services such as analysis of Mexican investment, structuring planning, fillings of basic corporate and tax registrations, incorporation and registration of entity, public attester services, valuation of assets, shareholders agreements and investment agreements, analysis of anti-trust issues, jointventure negotiations and others. Discussing the legal requirements for setting up a company in Mexico, Mr Martinez commented: “The requirement for the incorporation of a company within the Mexican territory in accordance to our jurisdiction varies depending on the type of company. The most common type companies such as the Sociedad Anonima de Capital Variable (S.A. de C.V.), Sociedad Anonima Promotora de Inversion (S.A.P.I) and Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.) require a minimum of two shareholders,”. Mr Martinez further commented that the minimum amount of shareholders required to incorporate a company varies depending on the type of company. On the regulations Mr Martinez noted: “Mexican legislation has notoriously been modernised in the past 30 years with the incorporation and promotion of the foreign investment in Mexican companies, adapting to regulatory and international

40 / January 2013

With regards to growth, we have experienced an on-going demand for our services with respect to company formation. This is due to the fact that the Netherlands are interesting to do business for a lot of reasons, like for example the logistic position in Europe with the harbour of Rotterdam and Schiphol Airport, the international workforce, the level of education, the political stability, the number of international companies already present and certainly also the tax advantages and the wide network of tax treaties. Benefit of the Netherlands is that companies most of the time know what to expect, the country is supporting companies and really lets people do business. Although the economic tide is not as good as it used to be, The Netherlands still form a safe haven for international companies and is able to compete with other countries in the European region. It is easy to do business in the Netherlands. There is of course a lot of paperwork which has to be taken care of, but the rules are clear and the same for everybody (up to a certain level of course). The corruption level is extremely low in the Netherlands. The government is working with you instead of against you, although it depends of course on the individual person who is helping you. The corporate tax contains some tax advantages, a competitive tax rate which starts at 20% for companies with a taxable profit up to

€ 200,000 and a rate of 25% for the remainder of the profit above that. The wide network of tax treaties also provides certainty in which country a certain income will be taxed. Due to the banking crisis we experience that banks are much more cautious when it comes to offering banking and credit facilities. The Flex Act however made it possible to open a bank account after the formation of the company finished and therefore it will not delay the formation. It is also possible to use a bank account with a bank in the EU or the EEA. Business formations are currently increasing, a lot of companies waited for the Flex Act. And the Netherlands do form a safe haven for international companies. Due to the economic crisis more people become self employed too whom are looking to establish a limited company. So I expect that the number of formations keep increasing.

Company: Expatax Name: Arjan Enneman Email: arjan@expatax.nl Web: www.expatax.nl Address: Keizerstraat 3, 3512 EA, Utrecht, Netherlands Telephone: +31 (0) 30 246 85 36

environments in which the manufacture, energy, touristic, and service industry, among others, have emerged to be an ideal area for investment”.

enables us to better “translate” the Mexican legal and business environment to our client and help them achieve their goals,” he commented.

Further he discussed that regulatory processes have become a priority for the Mexican governments in the last years.

Mr Martinez concluded with his thoughts on the next 12 months in terms of doing business in Mexico:

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Mexico has developed a very friendly environment to do business for national and foreign investors. Banking and credit facilities are available regardless of the origin of the investment, either national or foreign, Mr Martinez noted. He stated that the most common legal types used in Mexico are: • Sociedad Anonima de Capital Variable (S.A. de C.V.) - “Corporation” • Sociedad Anonima Promotora de Inversion (S.A.P.I) – “Corporation suited forJoint Ventures” • Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.) – “Limited Liability Company” Mr Martines further outlined that one of the main challenges of incorporating offshore/foreign companies is the understating of the Mexican legal and business environment by foreign investors. “Our experience with international clients with the structuring and negotiation of their ventures, with partners and governments, as well as our Worldwide Corporate Secretarial services Network

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Over the past decades, the investment environment has been experiencing very dynamic changes, especially in key industries such as automotive, auto parts, mining and health, among others. Regardless that we are in election year for presidential office, we do not visualize a negative effect on the business environment.

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The Netherlands

The Netherlands is always looking for companies who want to open a branch in the Netherlands. Since 1 October 2012 the Flex Act has been introduced which makes it a lot easier to set up a company in the Netherlands. Besides that, the new rules provide more flexibility with respect to the way the company is organised.

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Utrecht / The Netherlands

Company: Pricewaterhouse Coopers, S.C. Name: Carlos Manuel Martinez Email: carlos.manuel.martinez@mx.pwc.com Web: www.pwc.com/mx/es Address: Ave. Rufino Tamayo 100, Colonia Valle Oriente, San Pedro Garza García, Nuevo Leon, Mexico, C.P. 66269 Telephone: +52 (81) 81 52 2043

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

ACQUISITION INTERNATIONAL

January 2013 /

SECTOR SPOTLIGHT:

Doing Business in 2012 - Forming Companies in...

Company formation experts from around the world :

Belarus

Cyprus

Dominica

Company: GS Plus Name: Sergey Khostovich Email: director@gsplus.by Web: www.gsplus.by Telephone: +375 17 2909241

Company: Nicos Papacleovoulou Advocates & Legal Consultants Name: Evi Papacleovoulou Email: evi@papacleovoulou.com Web: www.papacleovoulou.com Address: 3, Alkiviades Street, P.O.Box 60555, Paphos, 8011, Cyprus Telephone: +3 57 26933218

Company: Yearwood Chambers Name: Dawn Yearwood Email: dyearwoodchambers@hotmail.com Telephone: +1 7674400013

Kuwait

Malawi

Yemen

Company: Alnaqeeb & Partners Name: Faten Al Naqeeb Email: faten@alnaqeebpartners.com Web: www.alnaqeebpartners.com Address: Al-Salhiya Al-Sour St. Al-Sour Tower – Mezzanine Floor P.O Box 5706, 13058 Telephone: +9 65 22447415

Company: DUMA Electrics Control Systems and Energy Management Name: Charles Mvula Email: ckmvula@dumaelectrics.com Web: www.dumaelectrics.com Address: P O Box 932, Lilongwe, Malawi Telephone: +2 65 01710498

Company: Khaled Al Buraihi for Advocacy & Legal Services Name: Khaled Al Buraihi Email: info@kab-bizconsultyemen.com Web: www.kab-bizconsultyemen.com Address: Yemen - Sana’a, Al-Saeed Trading Center, Floor No. 8, PO Box: 884 Telephone: +9 67 1202918

42 / January 2013

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Managing High-Risk Litigation

MANAGING HIGHRISK LITIGATION l Managing high-risk litigation requires careful planning, precise coordination and excellent communication. Acquisition International speaks with experts in the field to examine some of the methods developed by insurance and legal communities alike which are used to achieve a successful outcome.

OTHER EXPERTS IN THIS AREA Company: Scarborough, Hull & Miller Name: Matthew Scarborough Email: matt@shmlegal.com Web: www.shmlegal.com Address: 601 N. Ashley Drive, Suite 1200, Tampa, FL 33602 Telephone: + 1 813 2530097

-----------------------------------------------------------------------Brian S. Fraser is a Partner at Richards Kibbe & Orbe LLP. -----------------------------------------------------------------------High-risk litigation tends to increase in the aftermath of substantial world, macroeconomic or financial markets events. For example, Black Monday in 1987, the Savings and Loan Crisis of the late 1980’s, the Federal Reserve interest rate spike in 1994, the Russian debt crisis and the collapse of Long Term Capital in 1998, the attacks of September 11, 2001, and, of course, the financial crisis of 2007 to 2009 all led to substantial litigation. The litigation itself may or may not have been directly related to the event, but events of such magnitude have numerous ripple effects as those affected directly by the event look to offset losses however they can.

Cases are high-risk when 1) there is a lot of money at stake, 2) the subject matter of the litigation is not easy for a judge or jury to understand and 3) the governing law is not wellsettled. Many cases that arose from the recent financial crisis fit this model. There have been large numbers of lawsuits filed regarding complex derivatives, asset-backed securities and collateralized debt obligations. Those types of transactions typically involve hundreds of millions, if not billions, of dollars. They are complex financial instruments apparently not understood even by some of the people who engaged in them. And the courts had no experience with these complex matters because there had been relatively little litigation involving these structures in the years before 2008. Success in these cases comes from a genuine and deep understanding by the litigator of the subject matter. To

44 / January 2013

explain something complex and make it simple, the lawyer needs genuine fluency in the terminology, the economics, the market and the motivations of the participants in the transaction. That fluency gives the court or jury the confidence to accept the litigator’s explanation of the case and the arguments in favor of the client’s position. Of course, all of the other things that go into any successful litigation also apply. Before the case even begins, the right team must be in place. Not a large standing army, but a few experienced and extremely able lawyers with the background fit for these types of matters. That team must be supported by the most advanced technology managed by specialists who understand the litigators’ needs. Finally, there is hopefully a close and cooperative relationship with the in house lawyers who participate in every major decision and bring their own essential perspectives to the litigation. High risk litigation also requires a very thorough investigation of the facts at the outset to assess the severity of the risk faced by the client, which will be a factor in all of the major decisions to follow. Finally, a thorough damages analysis must be conducted as soon as possible. It is not unusual these days for complaints to allege enormous damages amounts. Many times an analysis of the problems of proof, intervening causes, and judicially imposed limits on the type and amount of damages that are recoverable will expose a plaintiff’s exaggeration of its damages early in the case.

What will the next big economic or market events be? Dissolution of the Euro Zone? A United States government debt crisis? No one of course knows, but we do know that high-risk litigation will follow. -----------------------------------------------------------------------Brian S. Fraser heads the civil litigation practice at the financial services law firm of Richards Kibbe & Orbe LLP in New York. RK&O also has offices in Washington, D.C. and in London. The firm represents some of the world’s leading investment banks, commercial banks, broker/dealers, hedge funds and Fortune 100 companies in complex litigation, transactional and regulatory matters. The firm is currently representing numerous financial firms in litigation and regulatory investigations in the United States and worldwide arising from the financial crisis, and the Boeing Company in all 9/11 related litigations.

Company: Richards Kibbe & Orbe LLP Name: Brian S. Fraser Email: bfraser@rkollp.com Web: www.rkollp.com Address: One World Financial Center, New York NY 10021 Telephone: 212.530.1820

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Managing High-Risk Litigation fashioned sense of ethics acquired over 80 years of practice, with a cutting edge technological ability and understanding, intricate data management tools, virtuosity in the areas that are key to their client and a deliberate decision to open up to other cultures.

Gilbert McGloan Gillis has evolved a winning solution that pairs the traditional expertise, broad and specialized knowledge of the law, and the old -----------------------------------------------------------------------Orlando F. Cabanday is Of Counsel at Samuels, Green & Steel LLP. ------------------------------------------------------------------------

Samuels, Green & Steel LLP is a Los Angeles - Orange County based law firm providing Civil Trial Litigation and Transactional services worldwide. Mr. Cabanday has successfully tried complex civil matters throughout the nation. “A case may become high risk if the client and retained counsel do not take steps at inception to properly analyse the claim, marshal and preserve all evidence and witnesses, and develop a strategy to either limit or maximise the expected discovery,” commented Mr Cabanday. According to Mr Cabanday the set of key skills required of litigators in high-risk cases are: “the ability to reduce a complex issue in a manner which can be understood by anyone”. He explained that he prepares all his contested client matters as if the case will proceed to trial in every -----------------------------------------------------------------------James Rosenblum is a Partner at Rosenblum Newfield, LLC. ------------------------------------------------------------------------

Rosenblum Newfield is focused on healthcare providers in New York and Connecticut in defending claims involving a wide array of medical and medical products issues, including obstetrical care, anaesthesia care, paediatric neurology, pathology, cardiology, home health care agencies, and nursing homes, plus issues involving electronic health information, and related medical products. Mr Rosenblum explained that Rosenblum Newfield LLC is frequently in court and has many years of trial experience to step on. The company employs cutting edge litigation techniques including neuro-science approaches to litigation.

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We also have extensive technical knowledge of diverse areas of medicine, health care and medical products, added Mr Rosenblum.

ACQUISITION INTERNATIONAL

Litigators in high-risk cases need to constantly balance their client’s desired result against the risks. This is a client specific exercise. To achieve the best result for the client, the high-risk litigator must anticipate and prepare for any contingency. Rodney J. Gillis focuses his practice on civil litigation, commercial litigation and class actions. He has served

instance “recognising that only a small percentage of cases actually go to trial”.

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By looking at a case from trial backwards, my clients and I can see what the adverse evidence will be, what theories can be developed off the evidence, and what steps are necessary to posture the matter for a favourable result at trial. Discussing the challenges in such cases, Mr Cabanday noted: “One of the greatest challenges that clients face in litigated matters is cost. To overcome this issue, I develop litigation budgets where the client can understand the up-front costs; and in turn, the client can make informed decisions whether from a business perspective it should proceed, how to proceed, and make other cost-benefit positions. “In the United States, the legislatures have made it easier to certify class actions and imposed requirements which prevent defendants from

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Verdict inflation – juror perception of values – traditionally increases faster than inflation and is affected by news reports of soaring incomes and high costs of health care. Many judges also provide great deference to juries and lack precise guidelines for evaluating the amount of verdicts for non-economic aspects of verdicts, like pain and suffering, he commented.

Company: Gilbert McGloan Gillis Name: Rodney J. Gillis, Q.C. Email: rjgillis@gmglaw.com Web: www.gmglaw.com Address: 22 King Street, Saint John, New Brunswick, E2L 1G3 Telephone: +1 506-634-3600

disposing of questionable matters before trial” he commented on the recent changes in legislation. “During steep economic upturns or downturns, litigation explodes for obvious reasons. Given the current economic climate, I foresee high stakes litigation only increasing,” he concluded.

Company: Samuels, Green & Steel LLP Name: Orlando F. Cabanday Email: ocabanday@sgsattorneys.com Web: www.sgsattorneys.com Address: 19800 MacArthur Boulevard, Suite 1000, Irvine, CA 92612 Telephone: +1 (310) 686-5338 +1 (949)263-0004 Mr Rosenblum also outlined that a successful outcome cannot be ensured:

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‘‘ ‘‘

Gilbert McGloan Gillis is an acknowledged litigation leader in Atlantic Canada. The firm has reached that pinnacle through the quality of its service to clients and its ability to adapt to meet new challenges - often going to where the client are to meet them.

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-----------------------------------------------------------------------Rodney J. Gillis, Q.C. is the senior partner at Gilbert McGloan Gillis. ------------------------------------------------------------------------

High-risk litigation is a by-product of globalization and the resulting cultural differences in negotiation and agreement. While Canadians have historically been very conservative in their corporate acquisitions, the need to compete globally has led to an influx of international partners. With these new opportunities comes new risks. The result has been an increase in high-risk litigation in Canada as well as for Canadian’s in overseas markets.

as local, regional and national counsel for a variety of clients. He has extensive experience working with team approaches to complex litigation, ranging from trials to strategic partnering on technical and expert defense issues in complex cases. He has appeared as first chair trial counsel throughout New Brunswick in with the Court of Queen’s Bench and Court of Appeal and also with the Federal Court Trial Division and the Supreme Court of Canada.

Furthermore Mr Rosenblum identified cases involving severe, permanent neurological injuries affecting children or severe injuries to multiple people as highrisk cases. He said: “To defend high-risk cases, it is important to limit issues in dispute insofar as possible, provide simple explanations supporting defendants, having witnesses who can effectively relate to and communicate with jurors, and having effective graphic evidence to bolster testimonial evidence. An appreciation of neuro-scientific principles applicable to trials is also important.”

The goal is to effectively evaluate risk and plan for the down-side of risk and maximise the opportunities for reducing the risks he concluded.

Rosemblum Newfield LLC

Company: Rosenblum Newfield, LLC Name: James Rosenblum Email: JBR@JBResq.com Web: www.rosenblumnewfield.com Address: One Landmark Sq, Stamford, Ct Telephone: 203.358.9200.

January 2013 /

SECTOR SPOTLIGHT: Fund Formation

FUND FORMATION

l Whether you’re a first time sponsor, a new or even experienced manager, the legal, tax and accounting issues associated with forming funds are detailed and complex. From forming structures, raising capital, attracting investors, to tax efficiency, virtually every type of fund can raise similar critical issues. Fund lawyers and formation experts can provide full coverage of the laws and regulations that govern fund formation and explain the features, advantages and disadvantages of the various types of fund that exist in their respective region or field. In the early stages of any fund these experts can prove to be invaluable. Acquisition International spoke to a number of industry leaders to get their opinion on fund formation issues. -----------------------------------------------------------------------Donnacha O’Connor is a partner in the Irish law firm Dillon Eustace and he specialises in fund formation. ------------------------------------------------------------------------

Forming a fund involves input from multiple parties including fund administrators, custodians, brokers, distributors, directors, regulators, investors as well as the client. “Being able to marshall the various interests involved, having good commercial sensibility and knowing the market are key skills which fund formation requires outside of the skills normally expected of a lawyer,” notes O’Connor. “Traditionally, fund formation involves many jurisdictions and associated cross border issues” he commented, “so being able to source for the client legal, regulatory and tax advice in a number of jurisdictions and knowing those markets well is also important”. “Being flexible and sensible when it comes to charging structures, particularly for start-up managers has become far more important: the relationship with a client should be a long-term partnership and getting off on the right foot is important” he added. Currently, the greatest challenge that O’Connor sees his clients facing is the capital raising environment, however, O’Connor remarked that the impact that regulatory change is having is also very significant. -----------------------------------------------------------------------Rolf Lindsay joined Walkers in 2005 and is a partner in the firm’s Global Investment Funds Group. His practice focuses primarily on private equity funds and their activities, and encompasses the structuring of fund sponsor vehicles, the formation of alternative investment funds and the consummation of transactions undertaken by them. ------------------------------------------------------------------------

Walkers focuses principally on corporate and international finance law with an emphasis on investment funds, private equity and capital markets and structured finance. Our firm delivers clear, concise and practical advice based on an in-depth knowledge of the legal, regulatory and commercial environment in the British Virgin Islands, the Cayman Islands, Ireland and Jersey. Walkers’ Global Investment Funds Group is one of the largest specialist offshore teams worldwide. We have established funds for our clients with virtually every known style and strategy. Our team has extensive first-hand experience in numerous structures used in the investment funds market and has in-depth knowledge of the practical and legal

46 / January 2013

“The domicile and structure of a fund is driven almost entirely by the target investor market– by investor type, sophistication, jurisdiction, tax, and other factors, but the manager’s capital raising strategy, budget and size are also relevant. Some managers don’t want a fund that will be all things to all people and some prefer unregulated products for speed to market, flexibility and cost reasons,” he explained. “Time spent at the outset critically assessing the domicile and structure that will work will be time well spent.” According to O’Connor, the main considerations when designing a structure to meet a fund’s investment goals are “balancing the needs of the investor market and the requirements of the various jurisdictions involved with the needs of the manager, particularly start-up managers”. He observed that the regulatory environment for nonUCITS funds in Europe is undergoing fundamental change with the implementation of the EU Directive on Alternative Investment Fund managers, and this is informing many managers’ decisions as to where and how to structure their funds. “We saw a general increase in the number of long only or long biased equity based funds being set up in Ireland towards the end of 2012 with debt and credit funds continuing to be popular. Traditionally most private equity and real estate funds for the international market may have been set up off-shore outside of the EU, but we consequences as well as the commercial rationale behind them. Walkers represents the majority of the top fifty hedge fund managers and private equity fund managers worldwide. The need in the developed world and in the emerging markets for efficient means of raising international capital has rarely been more acute than at this time. From a private equity fund formation perspective, the Cayman Islands in particular offers a well-developed and widely-understood limited partnership structure under a statutory regime that is highly responsive to changes in the global marketplace, and within a common law system that is renowned for its sensible approach to commercial disputes. Add to that the ability to raise capital efficiently in a tax neutral environment, and the benefits to investors and the jurisdictions in which they deploy their capital are significant. From a transactional perspective, there has been a notable increase in interest and appetite for the use of International Financial Centres such as the Cayman Islands to structure complex transactions efficiently. Recent rhetoric in the developed world

see fund promoters re-examining this in light of this new Directive.” Looking ahead in 2013, O’Connor believes that the emphasis on transparency will increase and this will be driven by regulations affecting fund formation directly and by regulation affecting investors. “We don’t expect a major shift one way or the other when it comes to domiciles but the marketing passport for non-UCITS under the Directive on Alternative Investment Fund Managers should create some pull towards European domiciles particularly for the bigger managers,” he concluded.

Company: Dillon Eustace Name: Donnacha O’Connor Email: donnacha.oconnor@dilloneustace.ie Web: www.dilloneustace.ie Address: 33 Sir John Rogerson’s Quay, Dublin 2, Ireland Telephone: + 353 1 6731729

has given way to an understanding that jurisdictions such as the BVI, the Cayman Islands and Jersey are at the forefront of jurisdictions that enforce robust anti-money laundering policies and procedures. The focus of regulators in those jurisdictions on transparency and the management of systemic risk has all but eliminated concerns about capital raising in the leading IFCs.

Company: Walkers Name: Rolf Lindsay Email: rolf.lindsay@walkersglobal.com Web: www.walkersglobal.com Address: 190 Elgin Avenue, George Town, Grand Cayman KY1 9001, Cayman Islands Telephone: +1 345 914 6307

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

The Evolving Role of the Actuary: Ensuring Effective Risk Adjustment

THE EVOLVING ROLE OF THE ACTUARY

— Ensuring Effective Risk Adjustment l Actuaries can provide a compelling combination of skills and expertise that are critical to effective leadership in risk management and are often recognised as a unique resource for business executives. Acquisition International speaks to leading experts in the field to discuss the vital role actuaries play. profit testing, reinsurance, valuations and most other aspects of consulting work. He has been the sole proprietor of Abbott Associates, an independent actuarial consulting firm since 1984. In the late 1990’s Abbott Associates joined the worldwide network of Milliman, retaining independence but acquiring access to international resources. His association with that firm continues with the Boston Massachusetts office of Milliman, which shares office space and a client referral agreement with Abbott Associates.

techniques used to assist businesses in analysing future financial events. However he also added: “Beware of garbage in and garbage out.” Discussing the key challenges faced when researching, pricing and managing investments, Mr Rayner pointed out volatility control, expenses of rebalancing and lack of reliable research as the main threats. Mr Rayner concluded with a prediction for the next 12 months in terms of actuarial services: “It will get even busier.”

Mr Rayner explains that independence is the main factor that distinguishes his firm from the well-known competitors, Deloitte, Ernst & Young, KPMG and PwC. He believes an expert understanding of finance, probability and statistics is a key attribute in serving clients that other non-actuarial consultants do not necessarily possess. -----------------------------------------------------------------------John W. Rayner is a sole proprietor of and consulting actuary for Abbott Associates, a small actuarial consulting firm based in Bermuda. -----------------------------------------------------------------------John Rayner is involved with many Bermudian insurance and reinsurance companies. His clients include insurers and reinsurers, health and retirement plans and trusts. His experience includes pricing, reserving, feasibility studies, -----------------------------------------------------------------------Neil Cantle is Principal at Milliman. ------------------------------------------------------------------------

Mr Neil Cantle is leading the global development of Milliman’s ERM thought leadership and sits on a number of professional and industry bodies relating to ERM. Mr Cantle was also one of the 10 UK actuaries awarded the CERA designation as a thought leader. Discussing the firm’s main advantages over both local and international competitors, Mr Cantle noted: “Our firm invests in top quality people and encourages them to develop thought leadership. By investing in, and encouraging, cutting-edge research we are able to bring genuine insights for clients to help them with their most challenging problems.” According to Mr Cantle, business and technical skills are vital for actuaries in order for them to understand and predict “how events may unfold”. He also outlined communication skills as important as actuaries “need to be able to explain these developments to other people”. “Perhaps the most important aspect of actuarial work is the fact that we are a Profession. This brings obligations around ethics, quality and independence

48 / January 2013

According to Mr Rayner the main risks that businesses face are “poor investment returns coupled with extended life expectancy and inflation in medical costs”. Further Mr Rayner discussed the approach Abbott Associates takes to advise clients: “We assist businesses and governments by measuring the extent of deficits and by suggesting how they can lessen them by amending benefit levels and making periodic or lump sum payments.” Mr Rayner pointed out simulations models as one of the

and a range of standards that actuaries must apply to their work so that the outputs and opinions produced by actuaries can be relied upon and understood,” he stated. Discussing the methods used in assisting businesses in managing the risks they face, Mr Cantle said: “Traditional methods of work often involved statistical models but our work at Milliman now brings methods from areas such as complexity science and social science as we need to help clients understand more complex uncertainties.” Moreover Mr Cantle explained: “The complexity sciences tell us that when the underlying drivers of something are complex (i.e. result from many interacting non-linear factors) then such a statistical approach will not work because they assume the underlying mechanism leading to the outcome has not changed over time or that it changes in some predictable way – neither of which are typically true in modern business.” “It is, however, possible to use simple methods like scenario modelling or statistical models to get an overall sense of what the future might look like, particularly for ranges of outcomes which arise most

Company: Abbott Associates Name: John W. Rayner Email: jrayner@logic.bm Address: Suite 204, International Centre, Bermudiana Road, Hamilton, Bermuda. Telephone: +441 295 8352 Mobile: +441 505 6790

often,” Mr Cantle commented on techniques used to assist businesses in analysing future financial events. Commenting on the key challenges faced when researching, pricing and managing investment, Mr Cantle concluded: “The trick is to think carefully from multiple dimensions about what could cause the outcome to deviate from the planned one and then consider how each of those things could arise. Often a combination of relatively innocuous factors can lead to unexpectedly bad outcomes so it is worth taking the time to look carefully.”

Company: Milliman Name: Neil Cantle Email: neil.cantle@milliman.com Web: www.uk.milliman.com Address: 11 Old Jewry, London, EC2R 8DU Telephone: +44 (0)20 7847 1500

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

The Evolving Role of the Actuary: Ensuring Effective Risk Adjustment

-----------------------------------------------------------------------Paul is the Managing Director of Warren FAM, an actuarial consultancy that services Southern/Eastern Europe, Russia and the MENA region from its base in Cyprus. He is also founder and partner of Al Mana & Warren, his management consultancy that operates out of Bahrain. ------------------------------------------------------------------------

He has more than 30 years of experience and advises across a broad range of actuarial and management issues for insurance companies and Insurance Commissions in Europe and the Middle East. In the first part of his career Paul worked for major European insurance companies as a senior manager and actuary. Paul is a Fellow of the UK Institute of Actuaries and has been the Institute’s representative in several countries promoting the profession.

to. For example keeping to a well-defined modelling deliverable is not much help to a client that requires a range of management advice, which can stretch across all major operations, including human resourcing and sales remuneration systems. Improving management information, and enabling a greater range of modelling exercises, should always be on the radar for business consultants - that happen to have an actuarial qualification.

Promoting actuarial skills in developing markets requires a skill set that is not common for actuaries in developed markets. Fortunately regulators are gradually coming to the assistance of what might be regarded as a profession with serious marketing challenges.

By no means should this skill set only apply to financial companies. All companies produce 3-5 year business plans, and within those projections lie a multitude of risks unquantified by the rigour of a probabilistic approach. Most standard plans vary by degree of optimism, but seldom do they effectively quantify or tackle risks even when they have been identified. This is bread and butter for actuaries in the insurance business, but do we have the skills to convince potential clients of our value in non-traditional areas. On this note, the business awareness of pension actuaries can be seen to be of general business value to clients, which has led to further work in the non-pension area of the business.

Actuaries can add great value from a number of perspectives, and in developing markets they will need

Finally I would like to encourage young actuaries to consider moral (more than professional) behaviour no

-----------------------------------------------------------------------Faye Miravite is a CEO and Actuary at FFMiravite Inc. ------------------------------------------------------------------------

FFMiravite Inc was established in 1964 as the pioneer Philippine actuarial consulting firm. “Our approach combines both qualitative and quantitative expertise and support: the quantitative solution does not exist in a vacuum but is significantly determined by an understanding of the economic context, which in turn is affected by political events,” commented Ms Miravite. She explained that FFMiravite Inc. provide expertise in Macro-Financial Risk Analysis, Monetary Economics, Macroeconomics and Equity Valuations which, along with theoretical due diligence by a full Professor of Mathematics with industry consulting involvement complete the list of advantages the company has over its local and global competitors. The skills required by actuaries are complex and include probability distributions, stochastic differential equations and enterprise risk management principles. Discussing the methods used by the company, Ms Miravite said: “Our risk engagements have so far involved mainly retirement plans with the exception of a Mathematical model for dynamic asset allocation

ACQUISITION INTERNATIONAL

strategy (2008), developed in Matlab for a HK-based private wealth management company. The model included Cluster Analysis, Principal Component Analysis and Markowitz optimisation procedures.” Ms Miravite noted the following key consideration points when designing and advising company on pension scheme: • Contribution budget, as a % of total payroll • Employer Business Risk profile • Select competitive plan features that comply with statutory laws; • Monitor growth trend of both plan liabilities and assets; monitor the retirement fund investment performance and recommend an asset liability management (ALM) study. For predicting and analysing future events, Ms Miravite cited Monte Carlo simulations, Predictive Analysis e.g. Credit Scoring, as well as Capital Asset Pricing Model for “predicting” the best portfolio and maximise return. According to Ms Miravite, the key challenges faced when researching, pricing and managing investments are: • Research: Adequate data may be unavailable, e.g., credit risk information specific to a financial

less important than technical expertise. I’ve found that the Institute and Faculty give excellent advice in this area, which is essential to the future wellbeing of your own reputation and the profession. The financial crisis is also a moral crisis. Actuaries need to play their part to restore confidence in financial professionals. This is a great and important opportunity for our profession and for society.

Company: Warren FAM Ltd Name: Paul Warren Email: warren@cytanet.com.cy Web: www.warrenfam.com Address: 1, Amazonon St, Platy, Nicosia, Cyprus Telephone: +357 99668881

• •

institution leads to information asymmetries. Pricing: The credibility of equity valuations and ratings depends on many factors, e.g. information asymmetries. Managing: Developing appropriate market and asset allocation strategies; having appropriate tools for analysing and predicting market movements.

Looking ahead, Ms Miravite anticipates “more risk management for defined contribution plans”.

FFMiravite, Inc.

Actuarial & Risk Modelling Services

Company: FFMiravite Inc Name: Faye Miravite, FSA Email: faye.miravite@ffmiravite.com Web: www.ffmiravite.com Address: 20/F, Fort Legend Tower, 3rd Ave corner 31st St., Bonifacio Global City, Taguig City, Philippines Telephone: +63(2)8567118

January 2013 /

RiskCom carries out a competent risk analysis of the real estate property or facility in regard to non-compliance with the environmentally relevant legislation. In addition, we also offer a prognosis of the financial implications of a purchase or sale. This improves valuation accuracy for our clients. Our risk software allows us to conduct portfolio analyses including provisions and reserves reports. The results of almost 100 due diligence assessments have so far been accepted by all the major auditing companies around the world.

RiskCom GmbH Friedrich-Naumann-Weg 38 D-75180 Pforzheim ph +49 7231 166 7078 mobil +49 152 2920 3397 fax +49 7231 133 9949

Email info@riskcom.de

www.riskcom.de/acquisitions

SECTOR SPOTLIGHT:

Managing Environmental Risks in M&A Transactions

MANAGING ENVIRONMENTAL RISKS IN M&A TRANSACTIONS

Acquisition International discusses environmental risks and issues in M&A with the leading experts.

-----------------------------------------------------------------------Duncan Spencer is the Director of EDIA Limited, an Independent Environmental Insurance Consultant and Broker. ------------------------------------------------------------------------

Mr Spencer explained that comprehensive due diligence is imperative in M&A transactions as understanding the risk allows it to be managed and mitigated. “It is important that existing insurance programmes (and the associated environmental cover) are assessed as part of the due diligence process– what protection is already available, and what can be transferred,” he commented. Absence of protection from environmental liabilities under Public Liability insurance policies is a key environmental risk to be considered. “Often, companies consider that they are protected by the “Sudden and Accidental” pollution cover under standard insurance products,” said Mr Spencer. “However, this type of insurance provides no protection for losses from older infrastructure (that fails as a result of “wear and tear”) or against specific legislation such as the Environmental Liability Directive.

ACQUISITION INTERNATIONAL

“This lack of awareness is often driven by advice given by non-specialist brokers and consultants, highlighting the need to have the correct people providing the correct support.” He stated that it is very important to consider the distribution of liability in a transaction, as this is the only way for the residual liability of the client can be assessed and a strategy for its management to be identified. “However, it is just as important to understand what ability the vendor or purchaser has to retain and deal with that liability (i.e. what happens if the liability exceeds the value of the property?),” he added. Commenting on changes in enforcement and regulation, Mr Spencer observed that the implementation of the Environmental Liability Directive in 2009 has only just started to be recognised – particularly the role of NGO’s or other “interested parties” in driving enforcement. “Environmental liabilities will be realised in areas that are currently not anticipated – particularly

as a result of the growth of “interested parties”, predicted Mr Spencer. “Also, the continuing clarification of the scope of pollution cover (or lack thereof) provided by Public Liability insurance policies will help define methods of environmental risk management in the future,” he added. “As a result, the role of insurance in the management of these liabilities (that are not anticipated and so not measured) will increase, especially as operators start to realise the gap in protection.”

Company: EDIA Limited Name: Duncan Spencer Email: duncan.spencer@ediainsurance.com Web: www.ediaenvironmentalinsurance.com Telephone: +44 (0) 203 463 9658

January 2013 /

SECTOR SPOTLIGHT:

Managing Environmental Risks in M&A Transactions

-----------------------------------------------------------------------Paul Jackson is a Transaction Services Consultant at Environmental Resources Management (ERM). ------------------------------------------------------------------------

ERM is a leading global provider of environmental, health, safety, risk, social consulting and sustainability related services. The company has over 140 offices in 39 countries and territories employing more than 4,700 people. Over the past five years the company has worked for more than 50% of the Global Fortune 500 delivering innovative solutions for business and selected government clients helping them understand and manage the sustainability challenges they face. Mr Jackson commented on the methods and strategies the company uses in its M&A work: “ERM understands that every M&A deal presents a unique set of environmental health & safety, and sustainability risks and liabilities which require rapid and rigorous quantification as part of the transaction process. We have developed a due diligence approach encompassing broader sustainability issues to enable us to help clients understand the implications of these on their transaction – these issues can include product liability, supply chain management, climate change impacts and other sustainability concerns as well as environmental, health and safety liabilities and compliance issues.”

Mr Jackson explained that providing this type of information to their clients allows them to make better informed decisions through the transaction process and following successful completion of the deal.

“The better the information, the easier it is for both parties to reach an agreement on how liabilities should be managed and apportioned for specific solutions such as environmental insurance or indemnities,” he stated.

“A potential buyer does not want ‘unpleasant surprises’ once they have acquired a business,” he commented. In addition discussing the key benefits to potential buyers, Mr Jackson noted: “We are increasingly using the due diligence process to help clients identify opportunities in a target business, through an understanding of future regulatory changes or focusing on the “green” potential of particular products or services.”

“Many of the transactions we work on are international in nature, and so we are required to keep abreast of enforcement and regulatory issues globally,” commented Mr Jackson on the matter of the recent changes in the enforcement and regulations. He added: “Key themes we are seeing include: evolving energy policy associated with carbon trading and the exploitation of unconventional resources such as shale gas; increasing focus on product liability through regulations such as REACH; and harmonization of regulations, for example the Industrial Emissions Directive in the EU.”

Discussing the environmental risks, Mr Jackson said: “Environmental risks can vary considerably between sectors, and so we work with our clients to identify key risks and issues for the Target business prior to embarking on due diligence. Common issues though include environmental liabilities from soil and groundwater contamination, compliance and regulatory record, carbon taxes and trading, product liability and climate change impact.”

Mr Jackson outlined that the company usually work with their clients at the start of the process to identify the key issues and risks with target business “and then align our scope of work accordingly”.

As for the importance of the distribution of liability between the buyer and the vendor, Mr Jackson said: “In practice this can be hard for both sides to reach agreement on . We find it effective to be able to present liabilities transparently and pragmatically so that they can be discussed by both parties and appropriate mechanisms put in place to manage the liabilities.”

“We focus on the potential business impact of an issue, which includes likelihood and timing as well as financial aspects. We will also offer advice on how particular issues can be managed along with the associated costs, as well as identifying potential sustainability opportunities associated with a business,” he commented.

Further he outlined that understanding the likelihood, timing and cost implications associated with environmental liabilities, including identifying the potential impact of existing data gaps and other uncertainties, were key factors to successfully reach agreement on how liabilities can be managed and so help to close a deal.

52 / January 2013

Mr Jackson concluded with his views for environmental due diligence over the next 12 months: “Our clients are increasingly wanting to include broader sustainability issues within the scope of our due diligence assessment, and with more and more investment focused in emerging markets, we see this trend increasing.”

Company: Environmental Resources Management Ltd Name: Paul Jackson Email: paul.jackson@erm.com Web: www.erm.com Address: 2nd Floor Exchequer Court, 33 St Mary Axe, London. EC3A 8AA Telephone: 07557 540484

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

Managing Environmental Risks in M&A Transactions

â&#x20AC;&#x201D; Transforming Environmental Due Diligence into Sustainability Due Diligence Who we are and what are we doing ? ERM is the leading global advisor in sustainability due diligence; our Transaction Service line is present in 42 countries and represents 800+ consultants within the 5,000 ERM consultants. Who am I ? Teddy deroy is a Partner with ERM. He is currently managing the ERM France 25+ consultants Transaction Services Team. The importance of environmental Due Diligence It is now widely recognized that not assessing environmental risks in a deal with industrial assets is putting the financial success of the transaction at risk. The evolution toward sustainability M&A Due Diligence services had already shifted from pure environmental liabilities assessment (in relation to soil and groundwater impacts mainly) to Environmental, Health & Safety compliance that can lead to material Capital Expenditures (environmental discharges compliance, permits, machine safety guarding, occupational illnesses, etc.). The approach to Due-Diligence is now evolving with the rise of sustainability issues. Now, the entire value chain can be impacted by sustainability issues : raw material

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sourcing (substances of high public attention such as rare minerals, cotton, palm oil, etc.), Supply Chain (child labor, ethics, etc.), Company Governance (brand sustainability positioning with comparison to competition, fair trading, etc.), assets vulnerability to climate change, product stewardship (substances with health impacts to consumers, carbon and water footprint), etc. This is a deep shift in the DueDiligence approach and scope as the issues to be assessed are wider and not only the physical assets are concerned. Trade buyers and financial institutions have different strategy to respond Trade Buyers usually operate industrial assets that are often already exposed to the sustainability agenda either through cost-driven initiatives (such as energy and water consumption reduction, etc.) or regulations (carbon quotas, REACH, etc.), and they are keen on maintaining their performance in this regard. The private financial sector has structured its approach around the Principle for Responsible Investment (UNPRI - www.unpri.org/) with 1138 signatories in January 2013. They require more consideration for Environmental Social and Governance (ESG) issues in investment decision making and portfolio management but also more transparency and disclosure.

Prediction for the next 12 months Several private equity houses are leading the way with full sustainability due diligence being systematic for all their investments while some other investors are relying on minimum environmental scope or simple sustainability questionnaires. This is highly dependent on whether the investor had already experienced a very significant sustainability issue on a deal. Bottle neck is also the ability to provide cost estimate on some soft sustainability issues such as social and governance issues, we are still at the beginning of the learning curve and it is key to rely on specialists to properly identify and quantify risks and opportunities.

Company: Environmental Ressources Management (ERM) Name: Teddy Deroy Email: teddy.deroy@erm.com Web: www.erm.com Address: 13 rue Faidherbe â&#x20AC;&#x201C; 75011 Paris Telephone: + 33 153 24 10 30

January 2013 /

SECTOR SPOTLIGHT:

Aerospace: Airplane Carbon Trading

AEROSPACE

— Airplane Carbon Trading l The European Union (EU) recently backed down from enforcing its airplane-emissions carbon-trading program. The fight over this attempted solution has been incredibly contentious, and governments around the world have condemned the EU for the idea. The EU’s proposed action was the world’s first attempt to affect other countries’ climate policy, requiring airlines to buy permits accounting for their full flight emissions unless the country of origin had similar carbon controls as the European emissions trading scheme. President Barack Obama recently signed a law to prevent U.S. airlines from contributing to a European carbon-trading scheme, but negotiations for a global compromise will continue at a branch of the United Nations. Acquisition International speaks to leading experts to examine aviation emissions. -----------------------------------------------------------------------Tallat Hussain is Environmental Counsel at White & Case LLP in London. White & Case LLP is a leading, full-service global law firm with 38 offices in 26 countries. It provides counsel and representation in virtually every area of law that affects cross-border business. ------------------------------------------------------------------------

The EU ETS Aviation Directive addressed two concerns: (i) the EU’s desire to be a world leader in addressing transportation as one of the major contributors to the looming 2% increase in global temperatures; and (ii) that no single international response had been developed to counter the negative effects of aviation emissions. The EU’s regional solution to a global problem might have been valiant in principle. However, by extending the reach of its legislation to include foreign airlines, the EU failed to address early criticism of the possible effects on the global aviation industry. In addition to the fact that the resources available for industryled solutions to aviation emissions reduction would need to be diverted to compliance with the Directive, it also slowed the progress of any global solution by effectively undermining the UN’s ability to handle aviation industry-specific issues on a global level (e.g., through the International Civil Aviation Organisation (ICAO)). -----------------------------------------------------------------------Thirty Nine Essex Street is a full-service law practice with specialist advocacy and advisory departments. It has recently merged with other law practices to become the largest set in London, incorporating expertise in all aspects of aviation law, policy, strategy and regulation, headed up by John Steel QC, the 2012 UK Aviation Law QC of the Year. ------------------------------------------------------------------------

Having recently opened a South East Asia office in Singapore, Thirty Nine Essex Street is at a distinct advantage over local and global competitors, acting as a hub for the set’s broad expertise in all aspects of Aviation Law in the region. The EU Emission Trading Scheme (ETS) is a highly controversial extension of the EU’s wish to regulate the environmental impacts of the aviation industry beyond the geographical borders of the EU. However the scheme imposes substantial charges, which are seen as a penalty by airlines. The objective is clearly meritorious, namely to benefit those who live and work in the EU by creating a better and cleaner environment, but that objective is not being achieved as well as it could be if the total amount

54 / January 2013

Another criticism is that Directive is seen as a tax on the industry, not the consumers that are fuelling the demand for air transport. Although the cost of compliance will ultimately be filtered down to consumers, in order to attract customers in this highly competitive industry, cuts will need to be made in other areas, including services. This helps neither the industry nor consumers. Since revenues generated from the payment of charges and fines for non-compliance will not see their way directly to the aviation sector, the future of innovation to reduce aircraft emissions will be another cost for the industry, consumers and ultimately, the environment, to bear. With more countries like the US, India, China and Russia challenging the validity of the Directive, a consistent international response is emerging against the EU and the preferred solution has been to condone breach of the EU laws. In the face of this, the EU has had to come around full-circle, by publicly dropping the regulation of aviation emissions in the lap of the ICAO. With its face-saving one-year moratorium on EU ETS compliance by foreign airlines, the EU hopes to buy time for an international solution. An international agreement on aviation emissions is no small task, and this leads to the obvious question obtained from the charges were channeled directly into technological improvements and fuel cost incentives to lessen emissions from aviation itself. The current system of charging results in clear anomalies on a global basis, albeit unanimously found to be wholly lawful in the European case of Air Transport Association of America & Others v The United Kingdom Secretary of State for Energy and Climate Change KC-366/10. The European Commission has proposed to suspend its application to flights into and out of the EU until after the ICAO Assembly in the autumn of 2013, in order to give the ICAO an opportunity to reach a multilateral consensus. This is a clear political recognition that the scheme may place Europe at a competitive disadvantage, in particular if it could be bypassed by flights via the Middle East. It is clearly right for there to be a multilateral agreement for commission trading. This however requires the ICAO member states to reach an agreement, which will not be easy. A clear option for improving the effectiveness of the scheme is to use the charges to fund direct incentives for

as to what happens if the ICAO cannot close the deal by Autumn 2013. History certainly does not help. The EU has admitted that to date ‘the negotiations have been tough’. The Kyoto Protocol has not been extended past the first phase and no internationally agreed carbon emissions reduction and trading system is likely, within this decade, if at all. If the EU holds true to its threat that the Directive will apply to all airlines after the moratorium expires, will foreign airlines be prepared to continue to breach EU laws and will the EU be prepared to enforce them? The end result may leave EU airlines at a significant competitive disadvantage and the whole application of the EU ETS to aviation emissions may be threatened. This time, there may be no easy facesaving options left for the EU. Company: White & Case LLP Name: Tallat Hussain (Environmental Counsel) Email: thussain@whitecase.com Web: www.whitecase.com Telephone: +44 (0) 207 532 2376

more efficient aircraft engines with lower fuel burn and emissions, and to fund a new scheme of discounts for the cost of fuel used by the more fuel efficient engines and aircraft. Such incentives would speed up the replacement of older less efficient high emission engines by newer, more efficient lower emission ones. The consequence would be that current targets for emissions would be able to be met, not only sooner but also on a global basis. This would be a prize worth winning and should be promoted by all environmentally conscious ICAO member states.

Company: Thirty Nine Essex Street Name: John Steel QC Email: john.steel@39essex.com Web: www.39essex.com Address: 39 Essex Street, London WC2R 3AT Telephone: +44 (0)20 7832 1111

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT:

The Importance of Effective Due Diligence

THE IMPORTANCE OF EFFECTIVE DUE DILIGENCE l Due diligence is an essential part of many corporate processes and can make the difference between success and failure in pivotal business decisions. Effective due diligence, both practical and commercial, is vital for all companies considering a merger, sale or acquisition, whether they are the buyer or the seller. Complete and extensive due diligence is often only made possible by expert third party assistance, seeking advice from those in the know can prove essential in order to prevent delay in a deal and to anticipate any financial issues or disputes which may prove costly to those involved. In still somewhat turbulent times, business executives need to operate with great caution when embarking on a deal and complete and comprehensive due diligence is essential. Many make the grave error of not looking beyond the basic financial due diligence but businesses are wise to explore further and ensure in-depth financial, environmental, commercial and legal due diligence is carried out from the off-set. Acquisition International spoke to leading experts to discuss why effective due diligence is absolutely essential.

-----------------------------------------------------------------------Sebastien David is a Partner at Advancy. ------------------------------------------------------------------------

Mr David stated that business cycles have shortened: new competitor’s arrival, demand downturn or upturn, pricing dynamics can change within a few months. “In the so long-lasting low-growth environment we are currently experiencing, it becomes critical to search for assets with high quality strategic positions: undisputed technology or cost advantage, high quality product offer and customer base, favourable competitive environment…” He observed that consequently, a superior return on investment will be generated from i) the ability to further improve operations, ii) the ability to consistently deliver innovations, new products and new contracts, and iii) the ability to position oneself on “GDP++” market segments. “Comprehensive and complete due diligence is critical to reduce risks of over-estimating ROI or acquisition prices,” he added.

56 / January 2013

Due diligence often helps potential buyers see the target from a different angle, explained Mr David. This can give a “fresh view of a specific business, its competitors and its environment”. It also contributes to identify future potential growth areas and can ease the anticipation of a necessary company repositioning (i.e.: exit from “dead dog” market segments). “Beyond theoretical financial business plan and basic market dynamics understanding, we assess realistic operational improvement potential as well as realistic downsides that are key to determine the true value of an asset for a given buyer,” he stated. When advising management teams, Advancy consultants frequently face situations where incomplete due diligence had short term consequences on the company profitability. Certain factors can have dramatic consequences on ROI including unforeseen change of raw materials price or availability; competitor’s unexpected capacity add-up leading to unfavourable demand / supply environment; obsolete technology; substitution of company products; and higher maintenance capital expenditures. Mr David stated that in the majority of

those cases a comprehensive risk assessment had not been duly performed beforehand. Looking ahead, Mr David predicts a low level of activity for the first quarter of 2013. “We see a surge in vendor due diligence for the second quarter to prepare transactions of the second half of 2013. There is a need for many private equity firms to exit or invest this year,” he concluded.

Company: Advancy Name: Sebastien David Email: s.david@advancy.com Web: www.advancy.com Address: 176 avenue Charles de Gaulle, 92200 Neuilly sur Seine, France Telephone: +33 1 40 88 95 10

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SECTOR SPOTLIGHT:

The Importance of Effective Due Diligence -----------------------------------------------------------------------Zafar Anjum is the Group Chief Executive at CRI Group – Corporate Research & Investigations, Pvt Limited. ------------------------------------------------------------------------

A seemingly endless stream of business fraud allegations flows continuously over our news tickers. The growing preponderance of corruption, collusion, coercion and fraud in business contracts has thrust companies into the international limelight and forced organizations to become more accountable. Be it major grant work awarded by government or other funding agencies, securing lucrative contracts around the globe, or using third-party intermediaries to aid in new business development, business organizations worldwide are becoming increasingly susceptible to corporate fraud and increasingly scrutinized by law enforcement agencies – and the public – in the manner by which they conduct business. And the risk of collusion increases markedly in the context of the economy and greater levels of subcontracting. In the past year, law enforcement agencies have taken a more proactive stance to identify, apprehend and prosecute perpetrators of corporate fraud, levelling record fines against companies and harsh sentences against executives as a way to demonstrate intolerance towards fraud and judgment on those found guilty. Business organizations worldwide – under the auspices of the Foreign Corrupt Practices Act (U.S.), the UK Bribery Act, and a myriad of other laws laid down by governments worldwide – have been cajoled into re-examining their fraud compliance programs and incorporating tighter internal and

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external controls to identify irregularities, pinpoint infractions and mitigate the risk of damages. To avoid being held liable for corrupt acts, the company should exercise due diligence and take all necessary precautions to ensure that business relationships have been formed with reputable and qualified partners and representatives. Due diligence is an integral component of integrity violations, backed by technical support and outside advice from counsel. Such due diligence may include investigating potential foreign representatives and joint venture partners to determine if they are in fact qualified for the desired position, whether they have personal or professional ties to the government, the reputation of their clientele, and their reputation with local bankers, clients and other business associates.

l Maintain a database of debarred and questionable third-party individuals, organizations and other entities to simplify the due diligence process before contracts are awarded and to prevent contracts from inadvertently being awarded to such entities. l Review and revise contracts used to engage translators and interpreters to include language on adherence to the highest ethical standards of the company’s anti-corruption policy. Through the proper establishment, administration and communication of a company-wide anti-corruption program the business will not only mitigate the monetary and legal damages associated with fraudulent, collusive or coercive practices, it will be capable of properly defending itself in the court of law (and the court of public opinion) when such allegations arise.

Businesses should train outside agents regarding all corruption and anti-bribery laws and consider adding requirements for compliance with these laws in all contracts with outside agents. Further measures: l Tight controls should include the exclusion of providers where there are reasonable grounds for deciding they cannot be entrusted with public money. The organization should also interview questionable providers rather than relying solely on paperwork and certificates. l Take preventive measures to lessen the overall role of agents or conduits, thereby reducing opportunities for kickbacks.

Company: CRI Group – Corporate Research & Investigations, Pvt Limited Name: Zafar Anjum CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI Email: zanjum@crigroup.com Web: www.crigroup.com Address: 33 Level, 25 Canada Square, London, E14 5 LQ, UK Telephone: +44 (0)7588 454959

January 2013 /

SECTOR SPOTLIGHT:

Q4 — Report Q4 Report

l Acquisition International’s final quarterly review of 2012 examines the factors driving the global economy, discusses some of the major findings of the last quarter and profiles the leading experts.

-----------------------------------------------------------------------Mr. Chiagozie Hilary-Nwokonko is Managing Partner and Head of the Energy & Natural Resources Group. ------------------------------------------------------------------------

Commenting on the most recent growth forecast Mr. Chiagozie Hilary-Nwokonko said: “The National Bureau of Statistics predicted a GDP growth rate of 6.77% for 2012 at the start of the year which is fairly consistent with the actual growth rate observed this year give or take a few percentage points.” Further he added: “This projected growth rate is at odds with the shrinkage in GDP seen in the developed world. The most recent forecast from the NBS estimates continued growth at these rates (68%) between now and 2015 and projects continued growth in the Nigerian economy. Their position tallies with the increasing attentions of states and institutions bringing in foreign direct investment to Nigeria.” Mr. Chiagozie Hilary-Nwokonko noted the following deal from the last quarter: “We acted as solicitors in the acquisition of 45% participating interest in an

58 / January 2013

onshore mining lease known as OML 40 by Elcrest Exploration & Petroleum Nigeria Ltd.” He further added: “In the course of the transaction, we oversaw the incorporation of the special purchase vehicle and the eventual fulfilment of the purpose of acquiring the 45% share of the oil asset jointly-owned by Shell Petroleum Development Company, Total Exploration & Production Nigeria Limited and Nigerian Agip Oil Company in OML 40.

Mr. Chiagozie Hilary-Nwokonko stated that the overall attitude towards growth and deal opportunities is positive. “Growth is progressing largely according to forecast and a major stumbling block to that progress namely, power sector reform, is finally being addressed,” he concluded.

“The eventual listing of Eland Oil & Gas Plc on the AIM, a subsidiary exchange of the London Stock Exchange, was the largest listing on the bourse by an oil and gas firm in the last five years” he noted. He stated that the time needed to complete a deal could vary between 6 and 12 months. That depends on various factors: “The degree of technical expertise required, the disposition of the parties, the nature of the transaction and whether it is in the public or private domain, the size of the enterprise involved and the scale of financing required”.

Company: Streamsowers & Köhn Name: Mr. Chiagozie Hilary-Nwokonko Email: chiagozie@sskohn.com Web: www.sskohn.com Address: 16D Akin Olugbade Street, Victoria Island, Lagos Telephone: 271 3846, 461 1820 and 461 3852

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Q4 Report

“In early October, a steering committee announced a $34 billion master plan for Jakarta, following a meeting held in Tokyo with the participation of a number of Japanese companies and the Indonesian Coordinating Minister for Economic Affairs. Additionally, an MoU between the US Overseas Private Investment Corporation (OPIC), and the Indonesia Infrastructure Guarantee Fund (IIGF) has been signed. Such outreach by Indonesian public institutions and the support associated will go a long way to attracting potential investors and increase their comfort level with Indonesia-based investments” he noted.

Jakarta / Indonesia

-----------------------------------------------------------------------Dr. Mohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS). ------------------------------------------------------------------------

With more than 30 years of legal experience, Dr Ganie specialises in commercial transactions and commercial litigation, including alternative dispute resolution. His work includes general corporate/ company law, banking law, finance, bankruptcy and restructuring, mining, investment, acquisitions, infrastructure projects/project finance, antitrust, and shipping/aviation, with a particular focus on corporate governance and compliance. LGS is the largest corporate transactions and corporate litigation firm in Indonesia. It was founded in 1985 by Timbul Thomas Lubis, Dr Ganie and Arief Tarunakarya Surowidjojo.

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Commenting on the previously independent state oil and gas contracting agency (BP Migas), which was the counterparty to all Indonesian production sharing contracts (PSC) and its recent placement under the Ministry of Energy and Natural Resources following a Constitutional Court decision concerning Oil and Gas Law, Dr Ganie said: “This creates some temporary uncertainty as the regulatory regime and business practices are adjusted and heralds the likely introduction of a new Oil and Gas Law in the near future”. Dr Ganie further spoke about the major fiscal policies and economic reforms that were recently introduced and outlined their intended outcomes.

Dr Ganie shared his thoughts on the Government which appears to be backing away from some of the restrictions placed on the mining industry at the start of the year. “This has materialised through an earlier softening of the unprocessed mineral export ban and recent talk of a postponement of the divestment obligations,” he concluded.

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

January 2013 /

SECTOR SPOTLIGHT: Q4 Report

-----------------------------------------------------------------------Calum McKenzie is the Managing Director of Folio Corporate Services Limited, a BVI based company offering a full suite of offshore corporate services in a number of jurisdictions. ------------------------------------------------------------------------

Continuing the recent trend in the BVI, the perception is that general business levels in quarter four were positive, especially in the traditional Business Company sector. How positive the upward trend is will be revealed when the comparative statistics are released by the Regulator in late quarter one 2013. From the investment business sector the exciting news for practitioners and clients alike is the introduction effective December 10, 2012 of the Approved Manager regime under SIBA. As discussed in previous quarterly releases, the purpose of the ‘Approved Manager’ regime is to essentially establish a legal framework for approved investment managers and advisers providing a regulatory ‘light-touch’ approach for their approval meaning a lower and more appropriate level of regulation for those that qualify. Amongst other benefits, Approved Managers will not be required to prepare and submit audited financial statements and will not need to have a formal Compliance and Money Laundering reporting Officer appointed. Folio anticipates that the demand for this product will be high amongst both existing clients and users of the BVI and also those who have previously used alternative jurisdictions and products. One other small but significant piece of legislation that has been introduced is an amendment to the Mutual Legal Assistance (Tax Matters) Act, 2003. As a result of the amendment, all companies and

limited partnerships registered in the BVI are now required to maintain “records and underlying documentation” and to keep such records and underlying documentation for a minimum of five years. The records and underlying documentation can be kept at any location(s) but if they are not kept at the office of the company’s registered agent the company must provide a written record to its registered agent of the physical address of the place or places at which the records and underlying documentation are kept. These amendments are effective immediately so clients and users of the BVI Business Companies should expect contact from their BVI agents soon providing clarity on this matter. Should you require any further information or assistance with the foregoing matters or indeed any BVI business related matters please do not hesitate to contact Calum Mckenzie.

Company: Folio Corporate Services Limited Name: Calum McKenzie Email: calum@folioadmin.com Web: www.folioadmin.com Address: Folio Chambers, PO Box 800, Road Town, Tortola, VG1110, British Virgin Islands Telephone: +1 284 494 7065

www.egfa.com.ar

We regularly represent lenders, arrangers, underwriters, placement agents, borrowers and issuers of securities in all kinds of financing transactions, including the most sophisticated and innovative deals in the market. We also count with a notable experience in merger & acquisitions, as well as general corporate matters and assistance in regulatory matters and governmental affairs. Our clients include corporates, financial institutions, private equity funds, and hedge funds.

We advise corporates, private equity funds and other investors on every type of domestic or cross-border M&A transactions, involving public or private companies and controlling stakes or minority positions, and either on the buy or sell side. The transactions often include stock or asset sales and purchases, joint ventures or corporate reorganizations. We assist our clients in bid preparation, due diligence, negotiation and drafting of stock purchase and shareholders’ agreements and other documents, and filings to obtain any necessary governmental approvals, such as antitrust or industry related authorizations. Torre Fortabat - Bouchard 680 - C1106ABH - Buenos Aires - Argentina - Tel (5411) 5236 4400 - Fax (5411) 5236 4401 - estudio@egfa.com.ar

60 / January 2013

ACQUISITION INTERNATIONAL

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

SECTOR SPOTLIGHT: Q4 Report

a similar year and all businesses, companies and individuals will need to make “Balanced Decisions”. One such decision saved one our clients an estimated £70k, our client was about to purchase Printing Machines to that value, we were in discussions concerning another enquiry for the client when they happened to mention this “Really good deal”, although a Director of the client had past meetings with the seller, and seen the goods they were still advised to have the seller checked out. It transpired that the Machines were stolen and had, in fact, been sold to another company the day before our client decided to purchase, this is why the seller was asking for a £35k deposit, which our client was willing to pay before “Bluemoon” stepped in, if we had not our client would have certainly been caught. So, make a “Balanced Decision” now, make note of our contact details. -----------------------------------------------------------------------Keith Walker is the Managing Director of the Bluemoon Investigations Group, based at their HQ in Peterborough. ------------------------------------------------------------------------

To take or not to take? That is the Question that a lot of our clients were asking themselves earlier in 2012, this was obviously due to the recession. During this final quarter in 2012 we have noted that the answer has become an increasing “Yes”. However, to take, or make, a “Balanced Decision” one first has to have all the information available and the facts verified. As the year has moved forward we have seen an increasing number of clients seeking advice about this deal, this merger, this possible acquisition, in particular for “facts”.

We have seen an upturn in “Diligence, Surveillance and Fraud” enquiries from Small, Medium and National Companies, it seems to have been a common trend. So why this upturn now? The answer is simple, clients are more concerned, cautious and cost conscious therefore they want to be able to make better decisions. Yes there is a cost to saving money, there is a cost protecting yourself, your position or your business but having no protection can be very expensive, if not critical. We have seen our own business “ebb & flow” over the past couple of years but there has been a constant, our client base continues to grow and their needs get ever diversified. It is believed that 2013 will be

Company: Bluemoon Investigations Group Name: Keith Walker Email: operations@bluemooninvestigations.co.uk Web: www.bluemooninvestigations.co.uk Address: 26 Priestgate, Peterborough, Cambridgeshire, United Kingdom, PE1 1WG Telephone: +44 (0) 1733 306597

Local, National & International Private Investigators

Solutions start here Bluemoon Investigations

Leading

Private Investigators and Detectives offering a complete service for Commerce, Industry, The Legal Profession and the General Public.

Adviser 2012

Ideal for Individuals. Comprehensive for Companies. Offices throughout the UK.

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www.bluemooninvestigations.co.uk 62 / January 2013

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Q4 Report

Hunt & Associates, P.C is a company which specialises in advising and helping clients concerning their entity structure with respect to tax and areas of risk, governance issues and issues between and among equity owners; employment issues, expansion by acquisition or other means and downsizing. Commenting on the growth and deal opportunities in his region of work, Lawrence B. Hunt, President of Hunt & Associates, said: “While some are quietly optimistic about the potential for growth in their own business, there is general apprehension about the immediate future for the economy as a whole”. Mr Hunt remarks that the forecast for the last quarter was “essentially flat.” However this could be explained with the long term of time that deals take to complete: “Depending on various variables, 4 – 6 months funded primarily by private equity sources” he adds. -----------------------------------------------------------------------Dr Alexander Loos is a partner at Hogan Lovells International LLP, office Düsseldorf. ------------------------------------------------------------------------

Dr Loos has been ranked as one of Germany’s Top-20 arbitration and mediation lawyers, particularly for corporate matters, since 2005. On his recent deals Mr Loos commented:

‘‘

I have been involved in a number of disposals by Italian vendors regarding their German affiliates, especially industrial component suppliers for power generation. “The German GDP is expected to grow per 2.6 % in 2012,” commented Dr Loos on the consistency of the last quarter. Dr Loos further outlined German energy-related industry, cable production and cable installation as the drivers in the last Q4 period. -----------------------------------------------------------------------Dr Muhammad Razikun is the founder of MUC Consulting Group (MUC) and a Public Accountant Firm, namely KAP Razikun Tarkosunaryo (KAP RTS). ------------------------------------------------------------------------

MUC has been acknowledged as one of leading tax firms in Indonesia according to surveys by International Tax Review that is published by a Euromoney Publication in the World Tax Book. “My role is to ensure that MUC and KAP RTS have achieved its objective to be a leading business firm in Indonesia by enhancing ethical value and provide one stop business consulting services with international standard of quality,” said Dr Razikun. He further states that “throughout 2012, BPSStatistics Indonesia records the Indonesia economic growth at 6.3% (First Quarter), 6.4% (Second Quarter), and 6.17% (Third Quarter)”. He noted that the third quarter this year is lower by 0.2% than the forecasted 6.32%. “However, in general the growth is relatively good,” he concludes.

ACQUISITION INTERNATIONAL

“Some manufacturing, distribution and service businesses are now exceeding ’09 numbers” commented Mr Hunt on the sectors that recorded the most investment and growth over the Q4 period. Mr Hunt also commented that the “Banks remain hesitant to lend” which affected the growth levels throughout this Q4 period. Mr Hunt expressed his uncertainty about the outcomes of the recent fiscal policies and economic reforms “We remain uncertain about the federal tax situation for 2013 as well as the increasing needs of state and local governments to increase their revenues to meet present and future obligations primarily due to employee retirement benefits”. From the company commented that doing business in the light of attracting new investment, setting up new business and getting access to banking and credit facilities has not improved much.

In comparison with Q4 2011, Mr Loos described a growth in the deal values: “The number of deal opportunities has remained static while average deal values have increased by approximately 12 %.” Moreover Dr Loos added: “While import volumes have remained quite stable, export volumes from Germany continued to grow throughout 2012. However, indicators for the business climate are dwindling.” He stated that due to the increased tax revenues, the German federal government will not need new loans in order to fund public households. Dr Loos noted that this has not happened in 30 years in Germany. Further Dr Loos added that the increasingly dense regulatory legislation, both in the financial and in the environmental sector, has made it more and more expensive to establish new businesses “especially if small or medium sized. Access to credit facilities is considerably facilitated by the ECB’s policy of flooding the market with liquidity,” he said.

According to Dr Razikun, the sectors showing the most investment and growth in Indonesia in Q4 are automotive, construction, transportation, and communication industry. He also commented on the regulations: “Some of significant changes which may impact the growth level are the increase of down payment on leasing of motor vehicle and limitation on exportation of certain mining goods. Some believe that these policies may eventually reduce the interest in investing in the sector of automotive, financial, and mining. “Based on the data we acquired, cumulatively, the Indonesia’s export volume from January-September 2012 was US $143.00 billion or 6.06% lower than the same period in 2011. Similarly, the export volume from non-oil and gas sector was US $114.36 billion or decreased by 5.35%. The decrease on export volume was resulted from the global crisis.” On the ease of doing business Dr Razikun said: “Indonesia eased incorporation and post incorporation

“We have lost some clients,” he further notes “but gained others due to pressures resulting from the economic downturn and relatively slow recovery”. Finally, Mr Hunt revealed that the predictions regarding the GDP growth for 2013 would be “flat at best”.

Company: Hunt & Associates, P.C. Name: Lawrence B. Hunt Email: lbh@huntpc.com Web: www.huntpc.com Address: Suite 805, 101 S.W. Main St., Portland, Oregon 97204 Telephone: 503-226-1162

‘‘

-----------------------------------------------------------------------Lawrence B. Hunt is the President of Hunt & Associates. ------------------------------------------------------------------------

Dr Loos concluded that the so called ‘Eurozone debt crisis’ is, from a German perspective, nonexistent and, compared to other currencies, the relatively stable Euro together with the healthy German economy are still attracting investors from abroad.

Company: Hogan Lovells International LLP Name: Dr. Alexander Loos Email: alexander.loos@hoganlovells.com Web: www.hoganlovells.de Address: Kennedydamm 24, 40476 Düsseldorf, Germany Telephone: +49 211 13 68 416

processes for new business registration through use of on-line service, increasing efficiency at the registry and cutting the company deeds legalization.” Discussing the predictions regarding GDP growth for 2013, Dr Razikun concluded that the projected gross domestic product is around 6.5%.

Company: PT Multi Utama Consultindo (MUC Consulting Group) Name: Dr. Muhammad Razikun, CPA Email: info@mucglobal.com Web: www.mucglobal.com Address: MUC Building, Jl. TB.Simatupang 15, Jakarta 12530 -Indonesia Telephone: 021-788 37 111 (hunting)

January 2013 /

SECTOR SPOTLIGHT: Q4 Report

Lead by Project Manager Alastair McIntyre, Senior Managing Director-Asia and supported by industry veteran team members Nigel Dentoom and Paul Shellman, our practical experience and advice helped position the Exchange for a better understanding of the overall business and provided commercially relevant support to the Exchange leading to the successful agreement of the LME purchase. Behre Dolbear was previously commissioned by the Stock Exchange of Hong Kong as its sole technical advisor to provide revisions to the Chapter 18 listing rules for natural resource companies and continues to work with the group.

-----------------------------------------------------------------------Alastair McIntyre is Senior Managing Director-Asia at Behre Dolbear. ------------------------------------------------------------------------

Behre Dolbear Group Inc. is one of the oldest, continuously operating, mineral industry advisory firms in the world. Since 1911, the firm has specialised in studies for commercial and multilateral financial institutions, mining companies, governments and governmental agencies, legal firms, and other parties with interests in the minerals industry. Behre Dolbear’s global experience covers the full spectrum of technical, operational, and financial issues in a broad range of commodities including base and precious metals, coal, industrial minerals, diamonds and gemstones, ferrous metals, and construction materials. -----------------------------------------------------------------------Kehinde Aina is Managing Partner at Aina Blankson, LP, based in Nigeria. -----------------------------------------------------------------------My proficiencies are the fields of Mergers & Acquisitions, Corporate Finance, and I have an equally enviable track record in commercial arbitration. My knack for lateral thinking, coupled with the in-bred belief that nothing is impossible, given the right mix of creativity and ingenuity are the foundations upon which my law practice is built; and for my clients, the joy is always in exceeding expectations. Staying relevant in the 21st century requires that lawyers anticipate the ever-changing nature of commercial disputes and be innovative in proffering business solutions even before inception of the challenges. In Nigeria, the National Bureau of Statistics maintains and regularly publishes economic indices and statistics regarding the Nigerian economy. Its most recent forecast indicates that the economy would witness a growth rate of 6.65% in terms of GDP for 2012. Inflation will hover around 13.57%; and in terms of this fourth quarter, the picture is pretty much consistent with previous predictions, largely due to the Central Bank’s monetary policy of achieving single digit inflation. Through this Q4, the sectors which have shown the most promise are banking, telecoms and oil & gas. The Central Bank

64 / January 2013

Behre Dolbear, through its subsidiary Behre Dolbear Capital Inc., was the Commercial Advisor to the HKEx for the acquisition of the London Metals Exchange. Using the Behre Dolbear model, team members with hands on practical industry experience and an in depth understanding of the LME business, financial modelling, the market and customers, competing bids, metals trading and the regulatory environment provided a unique knowledge base for the HKEx to draw from. This strategic position also added a significant value add for the participating advisors supporting the acquisition on the banking, legal and accounting side. recently issued merchant banking licences to two new banks – FirstRand Merchant Bank Limited and First Securities Discount House Limited – with the added effect of boosting liquidity in the sector In telecoms, apart from Shanduka’s investment in MTN Nigeria, Starcomms Plc is also set to receive over $210million in investments from Capcom, after the latter acquired Multilinks Telecoms earlier in the year. Consequently, the business horizon remains bright. We only have to consider the crisis in the Eurozone, and the soap opera that is the US fiscal cliff to really appreciate how much the spotlight is on emerging economies. That said, oil theft is still massive and organized, while the loss attributable to the Boko Haram menace will probably amount to trillions of Naira when all is accounted for. The country is once again falling into debt, as the Debt Management Office forecasted that Nigeria could own about US$25billion by 2015. Notwithstanding, there is reason to be optimistic. The semi-privatization of the power sector is ongoing, and that’s a big positive for an economy like ours. Efforts to address weaknesses in the banking sector have largely paid dividends; there is buoyancy in the capital market with the Nigerian Stock Exchange recording 25.5% expansion in the first three quarters of the year. Investments have been heavy in tourism and real estate, and we expect to see more of that in 2013.I think overall, the national economic growth

Mr. Alastair McIntyre is Senior Managing Director, Behre Dolbear Asia in Hong Kong. Mr. McIntyre has more than 30 years of global experience in the mining business including 17 years in the banking and finance sectors. Mr. McIntyre began his career as a geologist and holds a B. Sc. (Geology) and a B. Comm. (Bus Admin and Economics) from Dalhousie University in Canada. Throughout his career, Mr. McIntyre has held senior positions in the mining, finance and banking sectors in Hong Kong, Sydney and Toronto and has been involved in numerous multi-product commodity capital markets and hedging deals. Mr. McIntyre has a diversified understanding of the mining and metals business through running metals sales and marketing desks, managing mining companies and working as an underground mine geologist. His combined technical experience and financial experience in the capital markets provides him a unique perspective into understanding and executing client’s needs and opportunities.

Company: Behre Dolbear Name: Alastair McIntyre Email: alastair.mcintyre@dolbear.com Web: www.dolbear.com Address: Level 18, Wheelock House, 20 Pedder Street, Central Hong Kong Telephone: +852 2293 2358 remains positive, and opportunities abound for foreign investments as well. Most experts are of the view that GDP growth rate for Nigeria will be about 6.6%; however this outlook is invariably affected by government policies, especially the Central Bank’s monetary policies. That said I believe the figures should hold steady, and I am positive of a very good outlook for the economy in 2013.

Company: Aina Blankson, LP Name: Kehinde Aina Email: k.aina@ainablankson.com Web: www.ainablankson.com Address: 5/7 Ademola Street, off Awolowo Road, SW Ikoyi. Lagos, Nigeria Telephone: 08033477966

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Q4 Report

remove longevity risk at little or no cost by selling gilts to buy bulk annuity policies. We also advise on ‘surgical’ de-risking such as enhanced transfer value (ETV) exercises and pension increase exercises as well as use of the increasing range of liability driven investment (LDI) products. In each case, the appropriate solution depends on the client’s risk appetite and circumstances.

-----------------------------------------------------------------------Jonathan Seed is a director at Xafinity Consulting and part of the Corporate Solutions team providing advice on pensions and benefit issues for buyers, sellers and trustees. ------------------------------------------------------------------------

Xafinity Consulting has a deep understanding of the issues faced by companies, gained through many years of experience. With transactions, effective communication of the relevant issues and associated risks is key. Of course technology also plays a part and our advice is supported by market leading software, modelsolutions, which provides real time information and scenario modelling. Our aim is to ensure that our clients can make fully informed decisions within their timescales. The latest information published by official sources (in Q3 2012) shows that overall M&A activity in the UK is low, due to risk aversion and lack of confidence in the current economic climate. However, the value of the UK’s private equity buy outs is up 23 percent

66 / January 2013

compared to 2011. This is due to the UK being seen as the safest location in Europe combined with banks’ willingness to finance quality deals. When it comes to pensions, liabilities can be large and volatile. A small change in bond yields can have a large impact on pension liabilities; this can significantly impact on a company’s purchase price. Pensions are also complex because of the many ways the value of liabilities can be assessed, all of which may have a different purpose and require different assumptions. It is essential that any deal is based on the appropriate value of pension liabilities. We help our clients to de-risk pension schemes by combining a long term risk reduction approach with dynamic de-risking so that clients can take advantage of market opportunities. The recent spike in gilt prices was such an opportunity with clients able to

If economic conditions improve and interest rates rise in 2013, we may see dynamic de-risking strategies being triggered. In the meantime, long term plans will continue the gradual de-risking of defined benefit schemes. In addition, more employers will need to comply with the UK Government’s auto-enrolment requirements - the direct and indirect costs should be considered as part of any deal. The secret is to plan ahead and to be ready to move quickly when the time is right!

Company: Xafinity Name: Jonathan Seed Email: jonathan.seed@xafinity.com Web: www.xafinity.com Address: 3 Minster Court, Mincing Lane, London EC3R 7DD Telephone: +44 (0)7500084651

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Q4 Report

-----------------------------------------------------------------------Joaquim L. Mendes is a co-founder of Grant Thornton Consultores and currently Managing Partner of the Tax and Advisory Services, besides acting as Country Head of Tax. ------------------------------------------------------------------------

Grant Thornton provides high quality and partner led advice. “We help dynamic organisations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Proactive teams led by approachable partners use insights, experience and instinct to solve complex issues for our clients,” commented Mr Mendes. Mr Mendes expressed his thoughts on the growth forecast for 2013: “It is estimated a decrease in the economic activity of 3%,” he said. “The previous official forecasts have all pointed to decreases but unfortunately they do not seem to have been able to grasp the complexity of the situation and therefore have indicated smaller decreases than those that came to happen in reality.” Mr Mendes noted that his company has assisted with a financial and tax due diligence the acquisition of -----------------------------------------------------------------------Keith Provins is Head of Corporate and Nigel Rowley is Managing Partner at Mackrell Turner Garrett. ------------------------------------------------------------------------

As a national and international award winning law firm based in London and with offices in the South of England we are ideally placed to handle Corporate and M&A transactional work both UK based, and Internationally. We are a founder member of Mackrell International – www.mackrell.com – an international association of law firms with 87 firms in 110 cities; this gives us access to over 4500 lawyers in just about every jurisdiction in the world, and equally gives us the necessary experience to comment on the nature and development of global transactions.

the health branch (HPP) of the Portuguese Public Bank (CGD) over the last year. On the matter of the length of time it takes to complete a deal, Mr Mendes commented: “During the last two years and likely during the next couple of years as well, most of the deals happening in Portugal will be made by the Government. In fact, many companies that are still State-owned are now being privatised. They cover a wide range of economic areas, from electricity and infrastructures, to healthcare, aviation and transportation, airport management, water supply and waste management, etc. In all these sectors, deals have happened or are planned to happen soon.” Mr Mendes further commented that severe measures such as cuts on expenditure and investment, tax increases and others that take place in Portugal since 2011 when Portugal got under an International Assistance Program led by IMF, the EU Comission and the ECB “are having an impact on investment levels and therefore on growth levels as well”.

On the subject of growth and deal opportunities since Q4 in 2011 Mr Mendes said: “As a consequence of the measures that are being taken, the general attitude is of suspense. Everyone understands the need to make some sacrifices and expect that such sacrifices are for the greater good.”

Company: Grant Thornton Consultores, Lda Name: Joaquim L. Mendes Email: joaquim.mendes@pt.gt.com Web: www.grantthornton.pt Address: Alameda António Sérgio, nº 22, 11º, Miraflores, 1495-132 Algés, Portugal Telephone: +351 21 413 46 30

definite increase in corporate confidence, in a variety of sectors. We have handled recent M&A deals in the sectors of recruitment, food and beverage, cosmetics, computer software, transport, finance, and particularly property; all of these areas were affected by the downturn in 2008 but all are showing significant signs of renewed confidence. Deals are not necessarily massively complex; they are equally not necessarily high value. However, in the main they tend to need a very quick conclusion, something which with our international network we are very good at doing.

Company: Mackrell Turner Garrett Web: www.mackrell.net Address: Inigo Place, 31 Bedford St, Strand, London WC2E 9EY Telephone: +44 20 7240 0521 Name: Keith Provins Email: keith.provins@mackrell.com Name: Nigel Rowley Email: nigel.rowley@mackrell.com

Whilst the media outlook on the future remains negative, the reality is somewhat different. The quantity [and quality] of international and national corporate transactions that we have seen in the last couple of years continues to improve; there is a

The future of corporate transactions in the UK depends on the confidence of the parties; without that confidence, corporates will not transact. There is every reason to believe that with confidence comes an increase in transactions and thus a boost to the corporate economy; something that the Bank of England manifestly fails to appreciate.

-----------------------------------------------------------------------Flávia Turci is a founding partner of Turci Advogados. ------------------------------------------------------------------------

highest value among all airlines in the world, and we are proud to have participated in this transaction.”

Brazilian and foreign companies. I expect to see more deals closing.”

“In relation to the legal environment, one relevant fact this year was that a new anti-trust law was enacted. Now, the approval of the local antitrust authority became a condition precedent for the effectiveness of closed deals, and the criteria to determine whether a transaction must be submitted became clearer and more focused” she explained. “The new law aligned Brazil with the most modern jurisdictions.”

Mrs Turci concluded: “We believe that even if the crisis persists, Brazil continues to be a growing market in general, with a huge potential for expansion, with several industries still with plenty of room to mature and consolidate.”

Turci Advogados specialise in corporate law. The firm also has relevant experience in mergers and acquisitions as well as in assisting businesses ran by families. Mrs Turci shared that the prediction published by official sources is for a growth of 0.98% for 2012. “Up to now, Brazil has managed to stay only a bit below the previous growth forecasts, but, like anywhere else in the world, there is a considerable level of uncertainty right now as to how the economy will behave in the following quarters,” she added. “Despite difficulties faced by some industries as a reflex of the global economic conditions, 2012 has been a generally positive year for Brazil. There have been relevant deals, such as the business combination between TAM Airlines and LAN Airlines, the result of which was LATAM Airlines Group” commented Mrs Turci. “Its market value was recently estimated as being around US$ 14 billion, which at the time was the

ACQUISITION INTERNATIONAL

Regarding the growth and deal opportunities for 2013 Mrs Turci added: “There is a general feeling in the sense that now is a good time to focus on the internal Brazilian market, where the crisis has had a smaller magnitude so far. Moreover, the government has adopted a number of anti-cyclic measures to stimulate consumption, and several industries have thrived as a result. Perspectives remain high as the FIFA World Cup and the Olympics approach and heavy investments are being made in infrastructure, both by the government and by

Company: Turci Advogados Name: Flávia Turci Email: turci@turci.com Web: www.turci.com Address: Rua Fidencio Ramos, 100, 7o andar – São Paulo - Brazil Telephone: +55 (11) 2177-2177

January 2013 /

SECTOR SPOTLIGHT: Q4 Report

AZB & Partners is one of the prominent law firms in India. The firm provides clear, concise and practical advice based on an in-depth knowledge of the legal, regulatory and commercial environment within which their clients operate and a full understanding of their overall business objectives. The legal services rendered by AZB & Partners cover the corporate, commercial, regulatory, and financial and tax planning aspects of modern businesses. Also the company has been involved in in advising in the field of mergers, acquisitions, joint ventures and general corporate, regulatory practice and securities laws, private equity, capital markets, funds practice, banking and finance, microfinance, derivatives, infrastructure and project finance, real estate, media and entertainment, information technology and business process outsourcing, employment, insurance, intellectual property, pharmaceuticals -----------------------------------------------------------------------Panagiotis Drakopoulos is the Senior Partner in Drakopoulos Law Firm. ------------------------------------------------------------------------

Drakopoulos Law Firm is a regional firm offering legal services in 11 countries throughout Southeast Europe. “We always keep in mind that what clients need is not lawyers who know the law and tell them what they cannot do, but rather lawyers who know the law, understand their business vision and assist them materialise their objectives in a secure, effective and sustainable way,” said Mr Drakopoulos. The firm offers turnkey solutions to businesses from incorporation to liquidation. On the matter of the time it takes to complete deals, Mr Drakopoulos commented: “The timeframe for completion depends largely on the type and size of each deal; moreover, funding through bank financing has become scarce, which means more equity is required nowadays.”

68 / January 2013

He believes that US growth rates should outpace most growth rates in the European Union in 2013, as the US emerges from its recession.

Company: Neff Law Firm, a Professional Law Corp. Name: Richard E. Neff Email: richard@nefflaw.com Web: www.nefflaw.com Address: 1600 Rosecrans Ave., Media Center, 4th Floor, Manhattan Beach, CA 90266 Telephone: +1 310 321 7660

and biotechnology, taxation, aviation, competition law, and litigation and arbitration.

Discussing the fiscal policies and economic reforms and their outcomes Mrs Mody stated:

‘‘

Mrs Mody noted the following deals from the last quarter: • AZB & Partners was Indian counsel to Infosys Limited in the acquisition of 100% of Lodestone Holding AG by Infosys Limited • AZB & Partners acted as transaction counsel to Tech Mahindra Limited (TML) in the acquisition of 100% of the Hutchison Global Services Holdings Limited shares from Hutchison 3 Global Services Holdings Limited (seller). She stated that the timelines for deals vary from six to nine months. However she further noted that “leverage funding is not easy available”. “There has been tighter oversight by the regulators which will affect the M&A space, specially, for example the Competition Commissioner of India,” commented Mrs Mody on the change of regulations throughout the recent Q4 period.

Mr Drakopoulos noted that “things seem to be improving compared to last year,” however he further added: “growth and concrete deal opportunities are not in the picture as yet”. According to Mr Drakopoulos, “the Greek trade deficit has decreased, mainly due to the austerity measures imposed”.

‘‘

-----------------------------------------------------------------------Zia Mody – Managing and Founding Partner – AZB & Partners, a national Indian Law Firm ------------------------------------------------------------------------

Mr Neff also suggests that “another drag on growth in the United States has been the uncertain regulatory framework. Laws that affect tax levels, investment incentives (deductions and credits) and health care are all in flux, which many executives blame for holding back growth and higher employment”.

In Greece, a lot of new policies and reforms have been introduced, with the intention to restructure public finances, improve market conditions and induce growth. Mr Drakopoulos explained that his firm was indeed affected by the Eurozone crisis. “Having one of our main offices in Greece, i.e. in the middle of the Eurozone crisis, we have certainly been affected, mainly in relation to work coming from domestic businesses.”

‘‘

A few economic reforms have been introduced e.g Foreign Direct Investment into Multi-brand retail. India hopes as a result to get a large inflow of FDI in next four to five years on this account.

Company: AZB & Partners Name: Mrs. Zia Mody Email: zia.mody@azbpartners.com Address: Express Towers, 23rd Floor, Nariman Point, Mumbai 400 021, India Telephone: + 91 22 6639 6880

‘‘

We are truly unique for a small firm in the scope of our international practice, our knowledge of international laws and our ability to do deals in multiple languages. I spend a large portion of each week working in Spanish and Portuguese, and we have handled French transactions as well, added Mr Neff.

Regarding growth in 2013, Mr Neff said: “In 2013, the tech sector in the United States should grow about 5%, perhaps double the rate of the US economy in general. The growth of Cloud services and mobile apps should continue. Companies that sell networks and system software may experience continued difficulty from slow growth in much of the world.”

‘‘

The Firm is focused on technology, ecommerce and media, with about one-third of the Firm’s clients based outside the United States, in Canada, France, Germany, England, Sweden, Switzerland, Brazil, Chile, Malta and Belorussia. Their clients range from $4 billion public companies to tech and internet startups.

Mr Neff commented that despite the tough financial times some of the leading players in the technology/ internet world such as Google, Apple and salesforce. com have remained “virtually recession-proof”. However he noted that “the key problem faced by some of my larger clients has been very slow growth in the European Union, and some slowing in BRIC economies such as Brazil, China and India. Weak European sales are definitely affecting the tech sector worldwide”.

‘‘

-----------------------------------------------------------------------Mr Richard Neff is the founder and senior partner of Neff Law Firm, a Los Angeles-based transactional boutique law firm with a strong international presence. ------------------------------------------------------------------------

As for the GDP growth for 2013, Mr Drakopoulos concluded: Although the outlook does not

seem optimistic, the Southeast Europe region seems to be generally in a better position with regard to GDP growth, compared to Central and Western Europe.

Company: Drakopoulos Law Firm Name: Panagiotis Drakopoulos Email: pdrakopoulos@drakopoulos-law.com Web: www.drakopoulos-law.com Address: 332, Kifissias Avenue, 152 33 Halandri Athens Greece Telephone: + 30 210 6836561

ACQUISITION INTERNATIONAL

SECTOR SPOTLIGHT: Q4 Report

2013 - The Year of Regulation with the Private Equity and Real Estate managers and we are already assisting clients with issues and helping them manage through the processes.

Company: Augentius Name: David Bailey Email: david@auentius.com Web: www.augentius.com Address: Two London Bridge, London SE1 9RA Telephone: +44 207 397 5453 -----------------------------------------------------------------------David Bailey is the Group Head of Marketing, Communications and Product Development at Augentius. ------------------------------------------------------------------------

The Alternative Investment Industry will start to become highly regulated during 2013. This is the first time that the industry will be expected to comply with high levels of regulation. This global phenomenon is arriving in a number of guises. However there is no doubt that it will have a substantial effect upon the day to day operations of managers, increase operating costs and, as a result of the costs involved, have the potential to reduce returns for investors. Both the volume and complexity of the new global legislation is having a major effect upon fund managers and their organisations. Augentius specialises working

ACQUISITION INTERNATIONAL

Traditionally such managers have been small, boutique, investment houses. Focussed around the asset management processes and being actively involved in their portfolio investments, few Private Equity or Real Estate managers have had the need for substantial “back office” resources or infrastructure. With the increased level of legislation not only are managers having to consider how they manage their businesses going forward but also how they are able to resource to meet the legislative and reporting requirements going forward. In addition Investors and Regulators are becoming more demanding. More data needs to be collected, understood and processed. Systems need to be enhanced and developed and resources hired (if that is the considered option) to cover this additional workload. Undoubtedly the fixed costs of the Manager will increase at a time when management fees are fixed or even reducing due to the difficulties of the fund raising market. As a consequence there is an increasing trend to outsource work to the professional administrators around the globe. Outsourcing provides a flexible solution – you only pay for what you need – and

provides levels of technical ability and technology unlikely to be achieved by the manager in-house. The outsource providers themselves are sophisticated businesses, expert in what they do and for many a very safe pair of hands. As the world becomes more complex and competitive, the businesses that survive and grow will be those that are expert in everything that they do and deliver the required products and returns to their clients/ investors. The days of the “jack of all trades” has gone - it is the experts that will survive. And that means doing yourself what you really are good at and delegating the rest to other experts. About Augentius Augentius is a specialist in the servicing of Private Equity and Real Estate funds. It’s all we do. With 200 staff in offices right across the globe Augentius, unlike others, is a truly global player. No matter where you are based or your fund is domiciled Augentius can provide you with the services that you need. Over 100 fund managers have selected Augentius to administer their funds. They receive the highest levels of service, from qualified staff, who are expert in what they do, and will always go the extra mile for their clients.

January 2013 /

SECTOR SPOTLIGHT:

Meet the Experts - The Importance of Protecting Intellectual Property

MEET THE EXPERTS

â&#x20AC;&#x201D; The Importance of Protecting Intellectual Property l Intellectual property (IP) rights are valuable assets for any business, possibly among the most important it possesses. The IP rights of a business can set them apart from their competitors, form an essential part of their marketing or branding and can often be used to secure loans or sold or licensed providing an important revenue stream. It can be surprising to some how many aspects of the business can be protected, from the company name or logo to designs, inventions and works of creative or intellectual effort. It is of the upmost importance that the senior management of a business understand the importance of their intellectual property and seek the right advice in order to ensure that it is protected.

Law Firm: Tan Peng Chin LLC Name: Wong Liang Kok (Senior Director) Email: wonglk@tpclaw.com.sg Web: tpclaw.com.sg Address: 30 Raffles Place #11-00, Chevron House, Singapore 048622 Telephone: +(65) 6532 1808 / + (65) 6622 3818

ACQUISITION INTERNATIONAL

January 2013 /

DEAL DIARY:

M&A from around the world

DEAL DIARY — Deal index 73

ABEC

McCAMBRIDGE GROUP HOLDINGS

ANGLIA BUSINESS SOLUTIONS

MONGOLIAN GOVERNMENT

ANGOLA ENVIRONMENTAL SERVICES

ORC

BAIDU INC

BATTERSEA POWER STATION

BULGARIAN TELECOMMUNICATION COMPANY

CARDIOSCAN

CAREMA HEALTHCARE

CONTEX

CREM

DEHYDRO FOODS LIMITED

FEELUNIQUE.COM

HOSPITAL MANADO AND MAKASSAR

INDISYS

ISTRAT AND MARKETGATE

KP SNACKS

MAMA GROUP

80 80 81 81 82 82

P&C INSURANCE BUSINESS

PACIFIC ISLAND RESTAURANTS

PALABORA

PREMIER HYTEMP MBO

STX OSV

TEAM AMBIENTE

MATECO

72 / January 2013

ACQUISITION INTERNATIONAL

DEAL DIARY:

M&A from around the world ANGLIA BUSINESS SOLUTIONS

l The specialist in emerging and developing market exhibitions, ITE group plc has acquired 28.3% of Asian Business Exhibitions & Conferences Ltd. (ABEC). The company acquired the shares from the previous holder Airgate Holdings Ltd.

l An executive team at VAR and ISV, Anglia Business Solutions, has completed a management buyout (MBO) at the firm. The funding was provided by the current management team, WestBridge Capital, the Co-Operative Bank and an investor based in the US.

Asian Business Exhibitions & Conferences Ltd. (ABEC) is India’s largest private exhibition organiser by holding 8% of the market shares in the country. With revenue of £12.5 million for 2012, ABEC is running 19 exhibitions across 11 vertical markets among which construction, architecture, design, education, lifestyle, oil & gas and real estate.

Carlton Strategy Advisors Limited represented WestBridge Fund Managers Limited. The deal was the second occasion when CSA has supported WestBridge. The first was in connection with WestBridge’s earlier MBO of Aero Stanrew Limited. David McClelland, Director, led the team. He commented: CSA’s commercial due diligence examined the Anglia business plan, prepared by company management in support of the buyout. Anglia is a market channel partner for Microsoft Dynamics ERP software and has developed a leading presence in the fresh food industry vertical. A key David McClelland feature of the due diligence covered by CSA was to examine the business’s further growth prospects by way of both new product introductions and geographical extension, which it did through its analysis of market demand and customer referencing.

‘‘ ‘‘ ‘‘

With expertise in this sector and its strong international sales network, ITE can deliver significant value to ABEC’s business. Along with ITE’s business in India, this gives ITEA a leading position in a dynamic region with an exhibition industry that is currently experiencing strong growth. ABEC’s Chairman, Mr S. M. Gandhi added: ITE has a large portfolio of construction, old & gas, and related events, which complements ABE’s domestic events. We are excited about the synergies that we will derive from ITE’s expertise and international presence and are confident of ABEC scaling new heights. PwC represented ITE Group and has worked with the company in the past on many other transactions.

Sanjeev Krishan

‘‘

Vaidison K.

We had a challenging time frame and had to deal with specific domestic sector issues. We had a team with past experience of working in this space looking at other targets. This helped us anticipate the issues and tailor our scope and approach accordingly, stated Sanjeev Krishan, Executive Director. sanjeev.krishan@in.pwc.com vaidison.krishnamurty@in.pwc.com

ACQUISITION OF MINORITY STAKE IN ABEC

‘‘

Westbridge Capital asked The Catalyst Group to provide an Information Technology industry M&A perspective on the planned transaction, taking in both the current financial structure and the potential market for and valuation of the business in the future.

John Scholes

Catalyst’s team, led by Partner John Scholes, used its 25 year experience of software M&A and operations on both sides of the Atlantic to guide Westbridge on funding the MBO, and on which areas of the business to focus on to build market prominence and value.

HW Corporate Finance represented the sellers including the senior management who were effecting the MBO, led by Richard Hall, Partner. He said: Complex for a relatively small deal, Anglia comprised 2 related but separate transactions, the first involving a US strategic investment partner, considered key to the expansion plans of the business; the second effectively Richard Hall rolling this deal into a full buyout of the existing shareholders. Further complexity was added by the principal shareholders’ family taking over the majority shareholding on the death of the founder/shareholder. Obviously lacking the same detailed knowledge of the business, this compounded the normal issues with getting sellers comfortable with the deal.

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Chief Executive Officer, Russell Taylor, commented: ABEC has quality portfolio of events with strong market position in sectors where ITE has an established presence such as construction old and gas and security. ABEC’s events in the construction and design sector total more than 65,000m2 net of sold exhibition space, giving ITE an interest in India’s dominant trade shows for this growing sector.

ANGOLA ENVIRONMENTAL SERVICES l Consolidated Infrastructure Group (CIG) has acquired a 30.5% interest in Angola Environmental Services (AES). AES is an Angolan based company providing waste management services to the oil and gas sector. CIG management believes AES is an exceptional first step as part of its growth and strategy by offering high growth potential in the oil and gas sector in Angola and Africa in general. The company holds in good legal standing the necessary commercial operations permit. AES is well aligned with the CIG growth strategy focused on operating multiple highperforming infrastructure and service related businesses on the African continent. With its highly competent and committed management team, AES offers outstanding technical expertise which is in line with the management profiles found in CIG’s current businesses. Furthermore AES has a blue chip client base, and resultant order book, consisting of international oil companies operating in Angola. Environmental Business Strategies (Pty) Ltd represented Angola Capital Partners on the deal, led by James Brice. The company has worked with Angola Capital Partners since 2011. Environmental Business Strategies (EBS), led by James Brice, represented Angola Capital Partners on the deal. EBS has worked with Angola Capital Partners since 2011.

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Mr Brice commented: AES has brought international best standards to an James Brice important aspect of the waste business in the oil and gas industry. They are a preferred employer in Luanda, and offer excellent career opportunities to local professionals. The critical issue raised during our ESG due diligence was the encroachment of communities in a classified buffer zone around the landfill operated by AES. Placing the responsibility of managing the local community on local government was an important issue which was resolved as a result of this due diligence. The EBS team also made recommendations to the management company on various environmental and social issues, and which have been incorporated by the company into their operational plans.

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ABEC

This is an example of the ESG benefits that private equity investments can bring to emerging economies when performed by competent professionals such as EBS.

ANGLIA BUSINESS SOLUTIONS COMPLETES MBO

CONSOLIDATED INFRASTRUCTURE GROUP ACQUISITION OF 30.5% INTEREST IN ANGOLA ENVIRONMENTAL SERVIÇOS

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DEAL DIARY:

M&A from around the world BAIDU INC

BATTERSEA POWER STATION

l Baidu Inc., the leading Chinese language Internet search provider, has completed a Security and Exchange Commission (SEC) registered notes offering, the first ever for the Chinese company. The notes were offered in two tranches, $750,000,000 of 2.25% notes due 2017 and $750,000,000 of 3.5% notes due 2022.

l A Malaysian consortium comprising Sime Darby Berhad, S P Setia Berhad and the Employees Provident Fund (EPF) have acquired London’s iconic Battersea Power Station for £400 million.

Skadden, Arps, Slate, Meagher & Flom advised Baidu Inc. on the offering. The Skadden team was led by Hong Kong corporate partners Julie Gao and Jonathan Stone. The underwriters J.P. Morgan Securities and Goldman Sachs were represented by Davis Polk & Wardwell. Jingtian & Gongcheng acted as the PRC legal counsel to the Underwriters (J.P. Morgan Securities LLC and Goldman Sachs (Asia) L.L.C), and has a long-standing working relationship with them. Mr. Gao Xiang, Partner, led the team. Team members included Gao Xiang, Deng Jinmei, Zhang Fangfang and Tian Mingzi.

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Commenting on challenges faced in completing the deal, Mr Xiang noted: We were required to advise on the validity and enforceability of material contracts as to VIE (Variable Interest Entities) structure. Due to the tight time schedule, we had to conduct enormous due diligence work considering the great deal of legal documents of Baidu’s PRC entities and subsidiaries, the rapid change of PRC regulations and rules, etc.

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As the PRC legal counsel to the Underwriters, on one hand, we were conducting due diligence work independently as to the PRC legal counsel of the Company; on the other hand, we could promote better communication between the Underwriters and the PRC legal counsel to the Company, or the other domestic agencies.

A team from offshore law firm, Mourant Ozannes, operated as Jersey legal advisors to the Malaysian consortium in connection with the acquisition. The team, which was led by two partners, Joel Hernandez and James Hill and assisted by Kerill O’Shaughnessy and Matt Satchell, provided the Jersey advice to the Malaysian consortium on the joint venture aspects of the acquisition.

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Joel Hernandez commented:

We are pleased to have been involved in the Battersea Power Station joint venture. This deal reinforces our own observation that London commercial properties remain attractive to our international sovereign wealth and pension fund clients, particularly those in South-East Asia.

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Baidu was founded in 2000 by Robin Li, creator of visionary search technology Hyperlink Analysis, and its aim is to provide the best way for people to find what they are looking for.

The three parties formally entered into a joint venture agreement on Wednesday, 4 July 2012, in Jersey, Channel Islands to form the Battersea Project Holding Company Limited (BPHCL). Sime Darby and S P Setia each has a 40% stake in BPHCL, while the EPF has the remaining 20%. BPHCL’s wholly owned subsidiary Battersea Project Land Company Ltd subsequently signed the sale and purchase agreement with the Joint Administrators and Receivers, Alan Bloom and Alan Hudson of Ernst & Young LLP (“EY”).

Shearn Delamore & Co advised S P Setia Berhad in respect of the joint venture agreement. The transaction was led by Sar Sau Yee, Head of the firm’s Real Estate Practice Group.

BULGARIAN TELECOMMUNICATION COMPANY l The Bulgarian telecom giant, Viva Telecom EAD has acquired a 93.99% stake in the Bulgarian Telecommunication Company (BTC) AD. This becomes a fact following an approval of a comprehensive restructuring of BTC and its group that resulted in affiliates of VTB Capital PLC (VTB) and Corporate Commercial Bank AD (CCB) acquiring a majority equity stake in the restructured group. Analysys Mason completed advisory work in support of the acquisition of Vivacom, a leading multi-play telecoms operator in Bulgaria, by a consortium led by VTB Capital. The Analysys Mason’s team, led by Marco Cordoni (Partner within the Transaction Support team), directly advised VTB Capital on the transaction.

Philip Hertz

Analysys Mason carried out a commercial due diligence of Vivacom, including a review of the business plan prepared by the company’s management and an analysis of projections for the voice, broadband and TV retail market segments. Analysys Mason also provided recommendations for the preparation of a revised business plan to be used for the valuation of Vivacom.

Clifford Chance advised the Senior Coordinating Committee in relation to the €1.7 billion corporate restructuring of Vivacom which utilised an English law scheme of arrangement. Philip John Dawson Hertz, Partner and Joint Head of Restructuring and John Dawson, Partner, led the team. The restructuring employed a structure commonly used for over-leveraged groups of companies, including: • a controlled acceleration and enforcement of a Bulgarian law governed share pledge and the transfer of the shares to a new special purpose vehicle (SPV) • the payment of cash consideration by the purchaser in exchange for a number of shares in the SPV; • a debt write-down by existing lenders; and • the promotion of the schemes to effect the restructuring of the liabilities under the existing facilities.

SKADDEN, DAVIS POLK ON $1.5 BILLION BAIDU BOND OFFERING

MOURANT OZANNES ADVISES MALAYSIAN PROPERTY CONSORTIUM ON ACQUISITION OF LANDMARK LONDON PROPERTY

VIVA TELECOM BULGARIA ACQUIRES 93.99% IN BULGARIAN TELECOMMUNICATIONS COMPANY

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M&A from around the world CARDIOSCAN

CAREMA HEALTHCARE

CONTEX

l Harbert Australia Private Equity (“Harbert”), the private equity firm targeting lower-middle market investments, has acquired a substantial majority interest in Cardioscan Services Pty Ltd (“Cardioscan”), a provider of cardiac testing services to large Australian pathology and hospital groups.

l Ambea - owner of Carema Group with a core business of running care homes - and Capio have signed an agreement to transfer Ambea´s Swedish healthcare operations Carema Healthcare to Capio. It includes 35 primary care centres and a number of specialist businesses around Sweden, with total sales of around 1, 700 MSEK.

l Ratos’s subsidiary Contex Group has signed an agreement to sell Contex A/S to the private equity fund Procuritas (Procuritas Capital Investors V LP). The selling price (enterprise value) amounts to USD 41.5m. In conjunction with completion of the deal Contex Group will be wound up and a dividend paid whereby Ratos will receive approximately SEK 175m. The exit result in Ratos is expected to amount to approximately SEK -125m.

The existing management team will remain in place with Paul Kelly as CEO and Merredea Hudgson as General Manager. In the past few weeks a number of experienced industry professionals have been recruited to strengthen the management team and ensure the group is appropriately positioned to meet the planned growth.

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We are thrilled to have secured Harbert as a partner in Cardioscan, commented Paul Kelly, Cardioscan CEO. Harbert brings a depth of experience in working with businesses such as ours and providing access to capital at a time when many small businesses are highly capital constrained. Harbert shares our vision for the future of the business and we are very excited about working together to achieve this growth and strengthening Cardioscan’s position as the preeminent provider of cardiac testing services to the Australian market.

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HARBERT PRIVATE EQUITY BUYS MAJORITY STAKE IN CARDIOSCAN

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Capio wants to continue being a leader in Swedish health care through high quality and remaining at the forefront by introducing better and less invasive therapies - modern medicine. Together with Carema Healthcare employees, we will now be able to offer good primary care to twice the number of listed patients, and we reinforce our specialist offerings particularly in orthopaedics and psychiatry. An increasing number of counties open up for care choice in more specialties and today’s acquisition provide new opportunities to offer Capio as an option for more patients, added Thomas Berglund, CEO Capio.

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Cardioscan intends to use Harbert’s experience and financial capacity to bolster its operational capabilities, expand its management team, and better position the company to execute a number of newly won contracts in addition to continuing to meet its service levels for key customers. Harbert will also support the company’s aspirations for medium term expansion which include a multitude of identified growth opportunities in its target market and adjacent areas.

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Today’s agreement means that Carema streamlines operations to care. Being the largest private care provider in Sweden, we can now focus on providing high-quality care together with all of our dedicated employees, thereby enhancing confidence for private care in Sweden. Swedish care faces huge challenges in the next decade that will require large investments. The sale of Carema Healthcare ensures a higher rate of investment in both existing and new care homes and we expect to launch at least 10 new care homes a year, said Fredrik Gren, CEO Ambea Group.

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Cardioscan was established in 1984 and is Australia’s oldest continuously operating cardiovascular and respiratory monitoring service provider. The company provides cardiac testing equipment (Mainly ECGs, Holters and Ambulatory Blood Pressure Monitors) and monitoring services to large Australian pathology lab and hospital networks, analysing cardiac data using its own team of specialised cardiac technicians and cardiologists, and returns test results to clients within two – four hours.

Carema Healthcare operates 35 primary care centres and a number of specialist care operations around Sweden. The business has about 325,000 listed patients at its clinics and welcoming annually a total of 650,000 patient visits. Carema Healthcare has approximately 1,400 employees with forecasted sales in 2012 of roughly 1,700 MSEK.

CAPIO ACQUIRES CAREMA’S HEALTH CARE OPERATIONS

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The Danish company Contex A/S is the world’s largest manufacturer of large-format 2D scanners. Contex sells both under its own brand and as an OEM supplier to HP, among others. In 2011 Contex A/S’s sales totalled USD 46.1m and operating profit (EBITA) adjusted for costs affecting comparability amounted to USD 4.9m. Ratos acquired Contex Group in 2007 when the company consisted of three subsidiaries: Contex A/S, Z Corporation and Vidar Systems. The two latter companies were sold to the American company 3D Systems in 2011. The selling price (enterprise value) amounts to USD 41.5m. Once the sale is completed, Contex Group will be wound up and a dividend of the remaining assets in the company (approximately SEK 175m) will be paid. CORE Strategy Consultants conducted the commercial due diligence for Procuritas Partners. The CORE team was led by Partner Karsten Petersen and Managing Partner Poul Bukh. The cooperation is the most recent in a long series of co-operations between CORE and Procuritas senior people, which started in 1997. A substantial challenge in the work was establishment of a trustworthy market overview as Contex’ business is a niche to a large extent. Centre of gravity was development of a bottom-up market qualification model where CORE worked closely together with Contex management. Through this, alignment across Contex and Procuritas was established on strategic focus going forward, before the deal was closed.

CONTEX A/S SOLD TO PROCURITAS Commercial Due Diligence Provider

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January 2013 /

DEAL DIARY:

M&A from around the world CREM

DEHYDRO FOODS LIMITED

l In co-operation with the founders and company management, Priveq Investment Fund IV L.P. (“Priveq Investment”) and SEB Venture Capital (“SEB Venture”) have invested, through a new holding company, in the coffee machine producer Crem International Holding AB (“Crem”). The sellers are the private equity funds Accent Equity 2003 KB and Accent Equity 2003 LP (“Ac-cent”), which have been the main owners of the company for more than five years.

l Olam International, the leading global, integrated supply chain manager and processor of agricultural products and food ingredients announced today that it has acquired 100% equity interest in Dehydro Foods Limited for US$30.8 million including an estimated amount of US3.5 million for net working capital.

l Palamon Capital Partners, a pan-European growth investor, led a transaction to acquire a majority interest in beauty e-commerce specialist feelunique.com, one of Europe’s fastest growing on-line beauty retailers. The transaction was agreed at a head-line enterprise value for feelunique of £26 million.

Dehydro Foods Limited was established in 2000 and today is the largest exporter of dehydrated onions from Egypt which accounts for about 85% of the company annual revenue with the balance 15% from processed herbs and speciality vegetable oils. The company operates two facilities located just outside Cairo with current capacity of 8,500 tonnes in dehydrated onions and 2,300 metric tonnes in herbs in finished form.

feelunique is a leading on-line retailer of premium products in hair care, skincare, cosmetics and fragrances, selling full-permissioned stock from almost all of the major brands including Dior, Lancôme, Clarins, Guerlain, Yves Saint Laurent, Benefit and Kerastase. The company has built a strong reputation for its customer service and website editorial content, which is directed by Newby Hands, a beauty journalist and Harper’s Bazaar Beauty Director-at-Large. It was founded in 2005 and employs more than 125 staff at its headquarters and logistics centre in the Channel Islands.

Crem has 260 employees and sells to roasting houses, machine leasing companies and the so-called HoReCa (Hotel, Restaurant, Catering) market in Europe, Asia and North America. The group has three production sites in Åmotfors (Sweden), Gandia (Spain) and Shanghai (China). Crem offers a complete range of professional coffee machines and accessories on all markets. Brewing machines and coffee machines are sold under the brand name Coffee Queen and espresso machines under the brand name Expo-bar.

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In combination with a first-class production facility in Shanghai, Crem’s broad product offering means that the company is well equipped for continued growth in new and existing markets. More and more people around the world are drinking coffee and we will carry through our efforts to make Crem a market-leading supplier of high-quality coffee and espresso machines together with the original founders, say Karl-Johan Willén, Partner and Investment Manager at Priveq Advisory AB, and Babak Etemad, Senior Investment Manager at SEB Venture Capital, in a joint statement.

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ACCENT EXITS CREM INTERNATIONAL

The investment is expected to deliver 28% in EBITDA margin and 45% in equity IRR at steady state. The transaction is part of Olam’s strategic thrust to become the leading supply chain partner to its major global customers.

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With its headquarters in Åmotfors in Värmland, Crem has developed since its foundation in 1983 into a complete supplier of coffee and espresso machines. Coffee Queen of Sweden and Crem Aparatos of Spain merged in 2008 to form the new group. In addition to Accent, Coffee Queen’s founder Georg Möller and Crem’s founding family Olaso also became part owners of the new company.

Greg Estep, president of Olam and Global head of Spices & Vegetable Ingredients commented: Dehydro produces high quality dehydrates and its plants are accredited with key customers so we believe they have a strong franchise and a very strong potential for growth in exports into the Middle East, Europe, Brazil and Japan. Further he noted that Dehydro fits very well with our overall spices portfolio where we have a global market leading position.

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In addition to sales growth from Dehydro’s customers in the Middle East and Europe, Olam expect to push their products even further with their existing customer network. In the recent years OLAM has built a global leadership position in businesses such as Cashew, Spices & Dehydrates, Cocoa, Coffee, Cotton, Wood products and others. Olan currently ranks among the top 40 largest listed companies in Singapore in terms of market capitalisation and is a component stock in the Straits Times Index (STI), MSCI Singapore Free, S&P Agribusiness Index and the DAXglobal Agribusiness index.

OLAM INTERNATIONAL ACQUIRES 100% STAKE IN DEHYDRO FOODS IN EGYPT FOR US$30.8M

Virtual Data Room Provider

FEELUNIQUE.COM

Palamon will purchase a majority shareholding from the founders and earlier-stage investors and will provide further capital to support the company’s growth plan. Sirius Equity will invest alongside Palamon in the transaction. Following Palamon’s investment, Sirius co-founders Robert Bensoussan will join the Board of the Company as Chairman and Jim Sharp will join the Board as a Non-Executive Director. Mr Bensoussan also is Chairman of L K Bennett, a board member of Interparfums and former investor in and CEO of Jimmy Choo. Palamon’s and Sirius’ investment stems from the strong underlying growth in the on-line beauty retail segment driven by the increasing shift in consumer spend to on-line, as occurred in the fashion retail sector. feelunique is also taking significant market share by progressively expanding its product range and increasing loyalty through its customer-centric model. This has driven growth in company sales by more than 40% per year to more than £30 million of annual revenue. Javelin Group completed Commercial & Operational Due Diligence on feelunique.com for Palamon Capital Partners, led by Michael Fine, Director.

Michael Fine

OC&C completed Commercial Due Diligence.

PALAMON AND SIRIUS ACQUIRE BEAUTY RETAIL SPECIALIST, FEELUNIQUE.COM Commercial Due Diligence

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M&A from around the world HOSPITAL MANADO AND MAKASSAR

Stirling Coleman Capital Limited acted as the Independent Financial Adviser to the Independent Directors and the Trustee in relation to the Interested Party Transactions. Stirling Coleman Capital Limited acted as the IFA for their previous transaction in 2010. FIRST REIT COMPLETES ACQUISITION OF SILOAM HOSPITAL MANADO AND MAKASSAR Trustee of First Reit

Indisys empowers users and organisations to focus on what they need rather than on how to get it, and to reduce costs while increasing user satisfaction and fidelity. The company’s headquarters is in Seville and provides a natural language and dialog management solution that enables functional, social and emotional virtual intelligence, context awareness and flexible human-like conversational abilities.

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Commenting on the deal, Marcos Battisti, Managing Director Intel Capital Western Europe and Israel, said: Intel Capital is pleased to have led the latest funding round in Indisys, our first investment in Spain. The company is at the forefront in the field of machine-human interactions, and we are very well placed to assist the company, by providing them with access to Intel Capital’s expertise and extensive network. Indisys has a deep background in computational linguistics, artificial intelligence, cognitive science, and machine learning, said Erik Jorgensen, Investment Director, Intel Capital. We believe that natural language dialogue will play an increasingly important role in the way people communicate with their devices. A number of large innovative banks, telecoms and retail companies have already experienced the many benefits of INDISYS’s solutions and services. With customers and channel partners in Europe, Latin America, Oceania and the US, this new round of funding will enable INDISYS to accelerate its international expansion.

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Ken Morse, a serial entrepreneur based in Boston and Barcelona, is set to join the board of Indisys. Pilar is a world class, results-oriented entrepreneur who has built around her a strong team and a fast growing base of enthusiastic customers. I have watched the company relentlessly achieve many challenging milestones over the past four years and feel honoured to serve on the Board and continue to support the company’s next phases of global growth.

iStrat was founded in 2003 and it is an integrated digital agency which provides solutions across all forms of digital marketing. The agency headquarter is based in Delhi and employs a team of 50 , providing the full range of digital communication services including e-commerce store fronts, search engine optimisation, social media and rich media . MarketGate on the other hand was founded in 2005 and delivers a range of services such as business growth planning, marketing strategy, brand positioning, portfolio strategy, brand architecture development and marketing skills development. The agency has 7 consulting experts who aim to rejuvenate brands and power their growth by deploying marking processes throughout their clients’ organisation. As a part of the acquisition Publicis Groupe will also acquire MarketGate Dimensions, a subsidiary providing research based solution to business, marketing and brand issues with offices in Mumbai Delhi and Bangalore. After the acquisition a couple of changes have been announced. iStrat will be rebranded to Publicis iStrat and will open as a unit within Publicis Modem, Publicis Worldwide’s global digital network. Both companies’ leaderships will report to Nakul Chopra, CEO South Asia for Publicis Worldwide. Bharucha & Partners represented the selling shareholders, Shripad Nadkarni and Sharda Agarwal and were involved in negotiating the transaction documents, including the Share Purchase and Shareholders’ Agreement. The Bharucha & Partners team comprised of Alka Bharucha, Senior Partner, Natasha Mahajan, Senior Associate and Srinivas Anirudh, Associate.

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Alka Bharucha

A team of lawyers of ALTIUS MA, leaded by the managing partner of the firm, Alberto Pérez-Solano, were in charge of the negotiation of all the steps of the transaction. Alberto Pérez-Solano commented timing was critical, as well as to reconcile the interest of the Alberto Pérez-Solano company with such of its shareholders and directors.

Alka Bharucha commented: A unique aspect of the transaction was that the selling shareholders would continue to lead the two companies. The challenge was therefore, to ensure adequate protection of the rights of the selling shareholders, in their capacity as shareholders as well as employees, while aligning the management and Natasha Mahajan operation of the two companies with Publicis Groupe’s requirements.

INDISYS CLOSES A NEW ROUND OF FUNDING WITH INTEL CAPITAL

PALAMON AND SIRIUS ACQUIRE BEAUTY RETAIL SPECIALIST, FEELUNIQUE.COM

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LPKR, as Master Lessee of the two properties, has signed conditional master lease agreements for lease terms of 15 years, with an option to renew for a further term of 15 years. This is expected to benefit First REIT as it enjoys stability in gross rental income over the next 15 to 30 years. As well, the step-up feature of the base and variable rent components under both master leases are expected to provide locked-in organic growth in First REIT’s cash flow.

l Publicis Groupe has acquired two different agencies in India: iStrat and Market Gate.

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Siloam Hospitals Manado and Hotel Aryaduta Manado is an 11 storey mixed use development located in Manado, North Sulawesi, Indonesia. Siloam Hospitals Makassar is a hospital located in Makassar City, South Sulawesi, Indonesia. The acquisitions will not only enhance First REIT’s growing portfolio but would also further strengthens its income streams. The increased absolute size of First REIT’s asset base will enhance its overall capital management flexibility, and serve to facilitate future acquisitions.

l The Natural Language and Intelligent Conversation Company, Intelligent Dialogue Systems (INDISYS), has closed a US$5m round of funding led by Intel Capital, along with participation from Inveready SCR.

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On 21 September 2012, First REIT entered into two conditional sale and purchase agreements for the proposed acquisition of two properties in Makassar and Manado from PT Lippo Karawaci Tbk (“LPKR”), for a total consideration of approximately $142.9 million. This will boost First REIT’s portfolio to span 12 properties across 3 regions, with a total asset size worth $782.2 million.

ISTRAT AND MARKET GATE

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l First Real Estate Investment Trust (First REIT) has completed the acquisition of Siloam Hospital Manado, Siloam Hospital Makassar and Hotel Aryaduta Manado.

INDISYS

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DEAL DIARY:

M&A from around the world KP SNACKS

MAMA GROUP

l Intersnack Group (“Intersnack”) and United Biscuits (“UB” - owned by Blackstone and PAI Partners), have signed an agreement for Intersnack to acquire KP Snacks, UB’s snacks unit, from UB for an undisclosed sum. Intersnack and KP Snacks together will combine their unrivalled market expertise to further develop KP Snacks’ brands and explore new markets. The transaction is expected to close during the first quarter of 2013.

l HMV has sold Mama Group, its live music division, to Lloyds Development Capital, private equity group. LDC, owned by Lloyds Banking Group, is also buying HMV’s 50% stake in the venue operator Mean Fiddler Group as part of a £7.3m deal.

l TVH Group, the Belgian replacement parts supplier and rental company, has acquired Mateco, Germany’s second largest powered access company, from its private equity owner Odewald & Compagnie. The price was not disclosed.

LDC will keep the current management team, headed by the chief executive Dean James, as it seeks to expand the business through acquisitions in Asia and America.

Mateco is the largest aerial platform rental company in Germany, with a fleet of 4800 platforms, around 30 depots and 560 employees. Its revenues in 2012 will be around €90 million. It operations in Poland and Luxembourg are also included in the acquisition.

KP Snacks is one of the largest manufacturers in the UK and famous for its iconic brands, including McCoy’s, Hula Hoops, KP Nuts, Space Raiders, Nik Naks, Wheat Crunchies, Skips, Phileas Fogg, Discos, Roysters, Choc Dips, Brannigans, Frisps, KP Crisps, KP Mini Chips and Cheese Footballs. In addition to these brands, the transaction includes, among other assets, KP’s UK manufacturing facilities and a head office. UB will retain ownership of its baked bagged snack brands manufactured in its biscuit factories including Mini Cheddars and Twiglets. With an annual turnover of £280m (€346m), KP Snacks has shown consistent top and bottom line growth over the last five years. The company employs approximately 1,500 people. This combination brings together two companies with longstanding history and creates a strong alliance with combined net sales of more than £1.7bn (€2.1bn) and 8,000 employees. Intersnack was advised by US firm McDermott Will & Emery on the deal which fielded a team including corporate partner and London office head Hugh Nineham and London partners Mark Crofskey (corporate), James Ross (tax), Katie Clark (employment) and Rohan Massey (IP).

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“Intersnack is a longstanding client of McDermott, principally of our German offices, but we are delighted to have advised them on such a significant transaction in the UK”. - Hugh Nineham. FRESHFIELDS AND McDERMOTT SNACK ON £500m KP SALE BY UNITED BISCUITS

Mama Group owns venues including The Forum in north London and also operates festivals including Lovebox and Global Gathering. It organises more than 2,700 events annually in the UK with up to one million people visiting its venues and 150,000 attending its festivals. The deal follows the sale of the London Hammersmith Apollo venue in May for £32m, which allowed HMV to extend a £220m facility to late September 2014. HMV has reported a £38.6m loss for the year ended in April 28. Wyvern assisted the MBO team in preparing their business case, acquisition strategy, funding requirements and information memorandum before introducing the team to potential funders including Lloyds Development Capital (‘LDC’). The firm negotiated management terms with LDC and assisted in preparing the offer made to HMV for the MAMA business. The transaction was led by Brian Rutherford and Anthony Gahan, both of whom are partners at Wyvern. Wyvern represented the MBO team led by Dean James. James was introduced to Wyvern about two years ago. According to Wyvern, the main challenge in the deal was the coordination of the transaction while the Vendor was disposing of the Hammersmith Apollo at the same time and obtaining consents from third parties. www.wyvernpartners.com info@wyvernpartners.com

MATECO

TVH is best known as a supplier of parts for forklifts and other industrial equipment worldwide. In recent years the company has entered the powered access rental sector with its own rental business in Belgium and the acquisition of Pon’s aerial platform rental and sales businesses Gunco, HDW and Milcon in 2011. It also unsuccessfully tried to buy Lavendon group in late 2010. Mateco was founded in 1973 and acquired by Odewald & Compagnie in 2007 as part of a succession plan. TVH was founded in 1969 by Paul Vanhalst and Paul Thermote and is now run by the second generation of the families. It has 20000 customers in 160 countries with subsidiaries and branch offices in 22 countries and approximately 3000 employees. In 2012 TVH Group expects total revenues of approximately €800 million, excluding Mateco Alexander Gross, Director at Merrill DataSite in Frankfurt, supported provision of the virtual data room (VDR) used throughout the due diligence process on this deal. He was brought into the project by both Odewald & Compagnie and Cannacord Genuity Hawkpoint, with whom he has a long standing relationship. The VDR element involved securing thousands of pages of confidential information for review by the bidding team. TVH Group was able to review critical company information about Mateco, which ultimately helped facilitate the successful and speedy conclusion of this asset sale.

HMV SELLS MAMA GROUP MUSIC ARM TO LDC

TVH BUYS GERMAN RENTER MATECO

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M&A from around the world

The business, which operates from four primary manufacturing locations in the UK, and a further facility in Poland, will now be renamed post completion and aims to act as a platform to grow into the pre-eminent supplier of private label and branded cakes to the UK retail and foodservice sectors. NBGIPE is supporting Andrew Johnson as McCambridge’s Cake Division’s new Chief Executive. Mr Johnson has an extensive previous experience as Chief Executive in a successful buy-in into Elisabeth the Chef in 2004, a private equity-backed supplier of chilled private label cakes to UK supermarkets that recorded growing sales from £45m to £70m during his three year stay there. Andrew Johnson commented: This is a really exciting opportunity to seize the initiative and become the preeminent cake manufacturer in the UK food industry by providing industry leading levels of innovation, quality and service.

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Annie Gray, Director at Highwire Consulting, led the Management Due Diligence team. She commented: This is one of several deals this year that we have worked on with NBGI, and we are delighted that the hard work that we all put into this deal has reached a successful conclusion. Our team had to work to a tight Annie Gray time schedule, assessing the existing management team and the buy-in CEO in a short space of time.

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Introducing a new CEO to work with an existing management team is always an opportunity which carries some risk, and we were able to confirm that there was real potential for value to be realised in the new structure moving forward. www.highwireconsulting.co.uk

l Mongolia has successfully traded its Government Bond worth US$1.5 million on the international stock market. At the trade a US$500 million, five-year bond was sold at its launch price of 4.125% yield and a US$1 billion 10 year bond was sold at 5.125%. The trade was previously announced to be held at the Hong Kong or Singapore Stock Exchange. Shearman & Sterling advised the Government of Mongolia in its debut sovereign international debt offering. This landmark US$1.5 billion deal was led by Asia Managing Partner, Matthew Bersani and associates Vanina de Verneuil and Yan Xiao. Commenting on the deal, Matthew Bersani said: We are honored to have advised the Government of Matthew Bersani Mongolia in its very successful debut bond offering. We also recently worked on a corporate bond issuance by the Mongolian Mining Corporation, which was the first high yield bond ever out of Mongolia. This is evidence of the fast evolution in the Mongolia debt markets and our central position in it. Mongolia is a rapidly developing economy and there will be many opportunities for us there over the coming years.

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Lehman, Lee & Xu Mongolia acted as local counsel on the government side of the bond offering, led by Tuvhshin Javkhlant, Senior Attorney; with support from John C. Cronin, Executive Director.

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l NBGI Private Equity (“NBGIPE”) has backed a £23.5m management buy-in (MBI) of the cake division of McCambridge Group Holdings Ltd., one of the largest producers of private label cakes for the UK food industry.

MONGOLIAN GOVERNMENT GLOBAL BOND OFFERING

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MCCAMBRIDGE GROUP HOLDINGS LTD

Tuvshin Javkhlant commented: The timetable for this transaction was extremely tight, but through the tireless efforts of Lehman, Lee & Xu Mongolia’s Senior Attorney Tuvshin Javkhlant, the effort was made to Tuvshin Javkhlant meet all necessary deadlines.

NBGI PRIVATE EQUITY TAKES THE CAKE

MONGOLIAN GOVERNMENT GLOBAL BOND OFFERING

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The Company Highgrowth is an independent financial company which, by means of two clearly differentiated lines of business, invests in innovative companies with growth potential, and offers them support, advice and guidance. These two lines of business are: l Venture Capital. l Financial Consultancy.

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January 2013 /

DEAL DIARY:

M&A from around the world ORC

P&C INSURANCE BUSINESS

PACIFIC ISLAND RESTAURANTS

l Orc Group AB successfully placed a EUR 60 million five year inaugural Nordic High Yield bond.

l If P&C Insurance Company Ltd (Finland), a company belonging to Sampo Group, has signed an agreement to acquire the P&C insurance business of the Finnish branch of Tryg A/S for a consideration of EUR 15 million.

l Brentwood Associates (“Brentwood”), a leading consumer-focused private equity investment firm, announced it has completed the sale of Pacific Island Restaurants, Inc. (“PIR”), to Nimes Capital, LLC (“Nimes”). PIR is the sole franchisee of Pizza Hut and Taco Bell throughout Hawaii, Guam and Saipan. Terms of the transaction were not disclosed.

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Per E. Larsson, Chairman at Orc Group AB commented on the deal: With this financing solution in place, Orc is geared to develop its business and to break new ground as one of the strongest global brands in the financial technology industry. Securing long-term financing in such short time following the launch of the bond issue transaction is a welcome and rare milestone, which reflects the great trust in Orc as a business partner and supplier, and as a quality investment.

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Mark Bulmer, Partner and Head of Banking, NC Advisory commented on the deal Nordic Capital is very satisfied with the result of Orc’s bond issue. Companies need financing solutions that are adapted to their specific characteristics and situation. For many companies, the bond market is an interesting complement to conventional bank financing and the high yield bond market is expected to play a more prominent role in the financing of private equity owned companies in the future. Nordic Capital believes a well-functioning Nordic bond market will provide companies with interesting new financing solutions and be beneficial for the Nordic economies in general. The Orc bond quickly became oversubscribed - a strong testimony to the investor community’s confidence in Orc, and ultimately in Nordic Capital as an owner Since the start in 1989, Nordic Capital Private Equity Funds have invested in large and medium sized companies, primarily in the Nordic region. The company creates value in its investments, through committed ownership and by targeting strategic development and operational improvements. The most recent fund is Nordic Capital Fund VII with EUR 4.3 billion in committed capital, principally provided by international institutional investors, such as pension funds, asset managers and insurance companies.

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ORC GROUP AB SUCCESSFULLY PLACES A EUR 60 MILLION FIVE YEAR INAUGURAL NORDIC HIGH YIELD BOND Financial Adviser

Tryg’s branch had a premium income of EUR 84 million in 2011, approximately 155,000 customers and a market share of approximately two per cent. Tryg’s approximately 200 employees in Finland will be transferred to If. The acquisition is expected to have a minor positive impact on If P&C’s result in medium term. The deal is subject to approval by the authorities and is expected to be completed during the spring of 2013. If P&C and Nordea have signed a partnership agreement whereby Nordea will market If P&C’s products in Finland, Sweden, Estonia, Latvia and Lithuania. The partnership will begin no later than 1 July 2013. Kromann Reumert acted as outside counsel to the Seller, Tryg Forsikring A/S. Caroline Pontoppidan led the Kromann Reumert team. Caroline Pontoppidan has been the Tryg group’s outside counsel since 2002 and has advised the Tryg group on various cross border and national M&A deals as well as on the public listing of Tryg A/S in 2005.

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Ms Pontoppidan commented: The sale of Tryg’s Finnish business had some interesting cross-border authority approval issues resulting in double filing for FSA approval. Merlin Piscitelli, Director, Merrill DataSite International, worked on provision of the virtual data room (VDR) for this deal. He was brought into the transaction directly by TRYG, the parent company involved in the asset sale.

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The transaction was well received by the market, as evidenced by a very strong demand with the offering oversubscribed and closed already before completion of the investor road show.

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The notes, maturing on November 27, 2017, will bear a fixed coupon of 8.5% (paid semi-annually) and be subject to incurrence based covenants only, consistent with international high-yield transactions.

Mr Piscitelli commented: There was an extremely streamlined and professional due diligence process involved in this project, with expert and knowledgeable buyers, who were able to selectively review and assess information about the asset to bring this deal to its swift and successful conclusion.

IF P&C TO TAKE OVER TRYG’S FINNISH BUSINESS

Since acquiring PIR in 2004, Brentwood has worked with the PIR management team to help them build upon their very strong market positions in both brands. The Company implemented one of the most successful call centers in the Pizza Hut system, while also opening six new restaurants and acquiring six restaurants. They have been able to capitalize on the strength of the Taco Bell and Pizza Hut brands to drive what has been a very successful investment. Anthony Choe , Partner at Brentwood, commented, “The PIR management team under Henry Katsuda‘s leadership has done a tremendous job executing on the company’s growth initiatives. We are confident the company will continue to thrive under new ownership.” Rahul Aggarwal , Managing Director at Brentwood, added, “PIR is one of the elite operators in the YUM! system, with incredible employee tenure and loyalty at all levels of the organization. It’s been a true pleasure working with them and our partners at YUM!” Commenting on PIR’s partnership with Brentwood, CEO Henry Katsuda said, “Brentwood has been an extremely supportive partner, providing us with the resources necessary for us to continue to build upon our success. We feel very well positioned for the future ahead with our new partners at Nimes.” 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.

BRENTWOOD ASSOCIATES ANNOUNCES SALE OF PACIFIC ISLAND RESTAURANTS

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M&A from around the world

The purchaser is a consortium comprising South African and Chinese entities led by the Industrial Development Corporation of South Africa Limited and Hebei Iron & Steel Group, who are committed to the ongoing sustainable management of Palabora. The sale is subject to customary regulatory approvals in South Africa and China which are expected to take four to six months.

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Guy Elliott, chief financial officer of Rio Tinto said: Palabora is a good business but is no longer a natural fit within Rio Tinto’s portfolio. Selling our stake reflects Rio Tinto’s policy of continually reviewing our portfolio to generate best value for shareholders.

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I expect Palabora to continue prospering under its new ownership. During the transition we will continue to run the operations efficiently and safely. Mrs Guohua(Annie) Wu and Mr Xiaodong Zheng, senior partners of the firm, led the Jincheng, Tongda & Neal team on this transaction. JT&N is acting as lead counsel to the Chinese Consortium, including Hebei Iron and Steel Group Co. Ltd, the largest Xiaodong Zheng steel producer of China, General Nice Development Limited, and Tewoo Group Co., Limited, and has maintained a long working relationship with some of them.

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Guohua Wu

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Acting as lead counsel, we are required to manage every aspect of the deal, while dealing with multiple government entities and global conglomerates, commented Mrs Wu. JT&N is a regular adviser to many Chinese companies, and is becoming increasingly active in its clients’ globalisation strategies.

JT&N ADVISES CHINESE CONSORTIUM ON ACQUISITION OF CONTROLLING INTEREST IN PALABORA MINING COMPANY LTD

l The UK midmarket buyout house, Dunedin, has backed the management buyout of Premier Hytemp, a global leader in the manufacture and supply chain management of quality engineered alloy components for the offshore and onshore oil and gas industry. The deal comes just days after Dunedin announced its exit from market leading conference and training venue business. Premier Hytemp turns over in excess of £42m and supplies and supplies high integrity machined parts for the gas and oil sector. The group was formed in 2008 when Premier Alloys Limited acquired Hillfoot Steel Limited. The company has over 200 employees worldwide and has a very strong heritage of engineering excellence working with nickel and low alloy steel used in critical components required for drilling and production purposes.

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Dougal Bennett, partner for Dunedin and future board member of Premier Hytemp commented: Premier Hytemp fits with Dunedin’s strategy of investing in UK headquartered companies that are market leaders in the niche and which have strong international growth prospects. Commercially, Premier Hytemp is one of the few companies within its sector that has the requisite engineering skills, customer approvals, certifications and geographical reach to meet the increasingly demanding needs of this global industry.

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l Rio Tinto has reached a binding agreement to sell its 57.7 per cent effective interest in Palabora Mining Company Limited (Palabora) for US$373 million.

PREMIER HYTEMP MBO

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PALABORA MINING COMPANY

Donald Wilson, CEO of Premier Hytemp noted: We have seen how Dunedin works with its portfolio companies to grow their operations internationally and we believe that this offers a very exciting opportunity for us. Involved in leading the transaction for Dunedin were Simon Rowan (investment director), Jon Ma (investment director), Oliver Bevan (investment director) and Jamie Moodie (senior associate). Three of Dunedin’s last four exits, WFEL, Capula and Femau were all niche industrial companies and Dunedin has significant expertise of growing such businesses both in the UK and overseas. All were subsequently sold to international trade acquirers.

DUNEDIN BACKS £34.5M BUYOUT OF PREMIER HYTEMP Legal Advisor to the Management Team

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M&A from around the world STX OSV l Italian state-run shipbuilder Fincantieri is planning to acquire Singapore-listed offshore support vessel company STX OSV Holdings in a $1.2 billion takeover deal. Fincantieri announced on 21 December that its whollyowned subsidiary Fincantieri Oil & Gas had agreed with the South Korean fabrication group to buy a controlling stake in the latter company in a move to double its size and retain long-term competitiveness in the offshore support market. Under a share purchase agreement, Fincantieri is purchasing a 50.75% stake in STX for a cash consideration of S$730 million ($594.9 million), at S$1.22 per share. Fincantieri said the closing of the acquisition was expected within the first four months of this year. In addition, the company has made a mandatory cash offer at the same price of S$1.22 per share to acquire all of the remaining issued ordinary shares in STX. STX made reference to this as it reported to the Singapore Exchange on Wednesday that US asset manager OZ Management and its related parties, as substantial shareholders of STX, sold a total of 4.92 million shares and thus reduced its shareholding to 11.68%. Once pre-conditions have been fulfilled, Fincantieri will launch the mandatory cash offer for the remaining shares it did not already own, control or had agreed to acquire.

TEAM AMBIENTE l Eco Eridania, a waste management firm backed by the private equity investor, Fondo Italiano di Investiment, has acquired Team Ambiente. Eco Eridania S.p.A., based in Arenzano, Genova received a €14.3m equity investment to fund the acquisition. The company used the proceeds from the investment to acquire Prato-based Team Ambiente, which was active in the special waste management sector. The operation will generate a group with 280 employees and a turnover of over €54m. Founded in 1983 and based in Prato, Team Ambiente specialises in waste management in the centrenorth of Italy. The company has a €29m turnover and employs around 130 members of staff. Founded in 1988 by major shareholder and CEO Andrea Giustini, and his sister Rossella, Eco Eridania specialises in transport and storage of both hazardous and non-hazardous. The company is also leader in the North-West of Italy in the collection, transport, storage and disposal of medical waste and industrial, has grown from a turnover of about 14.8 million, the 2010 budget, to a turnover of €24m for 2012. Currently Eco Eridania employs 160 people.

The total value of the transaction, including the acquisition of the controlling stake plus the mandatory cash offer, has been estimated to amount to about S$1.45 billion ($1.18 billion). As Fincantieri is a major fabricator of cruise ships, this acquisition represents a major diversification into the offshore construction segment.

“This will strengthen Fincantieri’s commitment to pursuing a strategy of diversification and development in order to retain our long-term competitiveness and generate important positive impacts for our Italian assets,” he said in a statement last month.

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The Company Axon Capital is a growth capital investment firm with the mission to create value by investing in and supporting innovative entrepreneurs and management teams to help them gain the largest possible client-base for an exciting set of products and services. Our tools include a team with entrepreneurial track record, broad industrial knowledge, access to markets, active participation in the investee companies. Our own investors (apart from ourselves) include financial institutions, multinationals and large private investors who trust Axon Capital to work in an ecosystem with extraordinary business potential.

Fincantieri chief executive Giuseppe Bono said the acquisition of STX would enhance the company’s position as a leading international competitor.

FINCANTIERI TO TAKE OVER STX OSV

AXON

ECO ERIDANIA BUYS TEAM AMBIENTE

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We always seek strategic alliances to improve performance of our companies, and we put all our networking power to work on behalf of the entrepreneurs we work with. We invest from 100,000€ to 10 million Euros. For seed companies, we are typically below 500.000€. For companies in expansion stage, we tend to invest above 2 Million €, tranching the funding according to milestones.

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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.