Category: Interviews

Law firm marketing and business development experts apply skills honed over many years and often in other industries. To explore their backgrounds, we asked them: What was the last job you had before joining a law firm, and why did you make the change?

Renata Misiewicz, PR and E-Marketing Specialist, Wierzbowski Eversheds Sutherland

Before I started working as a PR professional in law firms I worked in the creative departments of advertising agencies, supporting companies in completely different sectors. I worked on dozens of TV commercials, advertising everything from hypermarkets to washing powder and nappies. After a number of years I decided to choose a different career path that would allow me to better use the qualifications and skills I had gained from my journalism studies and my TV and radio practice, as well as my creative abilities.   

It happens in agencies that sometimes you work on a campaign for two months and the client suddenly then changes his mind for some reason, or completely rejects the project simply because “my wife does not like the color red.” Your response to yourself is often: “stay calm, take a deep breath, this is normal for the profession, they pay you for this, etc.” But after a few years you grow tired and need a change. Creative work took up almost all of my life. I was busy being creative at work, after work, and on weekends, giving my time and 100% commitment freely. When you cannot see the results of your hard efforts, this can be both frustrating and demotivating. Additionally, in an agency each day you may be working on rather monotonous projects that will never receive nominations for any advertising awards.     

I think that among all the colleagues I worked with in advertising agencies about 75% have changed their lives completely. So have I, but not quite so dramatically. In my current position I use my creative, communicative, and journalist skills each day, and I have a real influence on the final shape of my projects. I have worked in three international law firms so far, and I am happy to say that working in the Wierzbowski Eversheds Sutherland PR and Marketing team is what I really like. It gives me complete satisfaction, because I can see the fruits of my hard work in all that I do, from producing a well-organized event, having our lawyers publish well-received articles in main business dailies, winning pitches, producing attractive brochures, and promoting an outstanding social media presence. As a marketing team we fully decide about creative concepts and further execution, with the trust and support of management. And the extra bonus is a bit of legal knowledge acquired, which can be quite helpful in certain situations. 

Mate Bende, Managing Partner, Pro/Lawyer Consulting

I made the transition is two steps. First, I was a lawyer, working as an editor, then later Editor-in-Chief at a legal publisher (Wolters Kluwer). I knew that I didn’t want to work as a lawyer, so I focused on communications (second diploma) – but I didn’t want to lose the legal segment either. So as I knew about law, law firms, and PR, I decided that I wanted to be a communications manager at a law firm. I told this to a recruiter and I landed at Gide as Communications and Business Development Manager. And 5 years later made another transition, from inside to outside advisor for law firms with Pro/Lawyer Consulting.

Idil Baysal, Client and Market Development Manager, Clifford Chance Turkey

I was the Communications Manager of a multinational financial services company for ten years and Head of/Manager for Marketing & Communications at PricewaterhouseCoopers Turkey before jumping into the legal services industry. A senior partner of a well-known law firm on the market gave me the opportunity to pour my expertise into this specific sector by establishing the BD and Marketing & Communications Department at his firm. I worked very closely with the management team as an executive member and once I succeeded in creating a strong department I decided to stay in the industry. As I have a strong background in business development, marketing, and communication from one of the top companies, I found it much more strategic and business driven. In Turkey consultancy/audit and law firms have an advertising ban, and it is definitely more challenging to manage the function under these strict regulations, as it takes all the regular channels from you. It definitely asks you to think out of the box and use the road less travelled to make success happen. I find it very exciting, and very inspiring.

Petra Svoboda, Head of Communications CEE, Taylor Wessing

Before joining the law firm in 2007, I had worked in a PR agency for many years. On the one hand, I loved the variety of dealing with enterprises from so many different sectors (ranging from games & toys to the chemical industry and insurance companies, among others). On the other hand, I always had the feeling of not being able to dedicate myself to each customer with enough time and attention. So the first goal was to change to an in-house position in order to be able to devote 100% of my work and time to just one customer. Landing in an international law firm was a very lucky coincidence because yes, I now work for “just” one company, but there are so many different Practice Areas and teams I deal with, so variety comes in again …! 

Barbara Straziscar, Office Manager, ODI Law

I’m not a lawyer; I even don’t have a legal education. I studied History of Art and the German language, but I have worked all my career in the financial and administration fields. I worked for a Slovenian company, Krokodil d.o.o., which produced plastic housekeeping products and imported the lingerie of well-known Austrian producer Palmers. I was the office manager, and I managed both the production line and a chain of stores selling Palmers products. I joined ODI as Office Manager and my function changed during the years as ODI grew; some tasks were taken over by colleagues and new ones came to me like marketing and HR … That is basically it.

Jana Sosna, Senior PR Manager, Taylor Wessing Prague

Having worked as an Executive Director of a mid-sized PR agency certified in the Association of PR Agencies in the Czech Republic for eight years, I have gained essential experience across a multitude of industries. This valuable experience has shown me that one of the most important qualities of a client is the ability to understand and appreciate public relations. Taylor Wessing Prague, one of our clients at the time, was among the smartest who listened, and subsequently they offered me a position. I have enjoyed working with a very professional and dedicated law firm, as they have proven to be. Making the jump from an eclectic PR agency to a dedicated law firm gave me much more balance in my life. It has allowed me to travel, to explore, and to educate myself beyond the narrow confines of public relations and so help the continued media branding of my firm.

Agne Daunyte, Communications Project Manager, Ellex Valiunas

Before joining Ellex Valiunas I worked in a public relations agency. While working there I gained invaluable experience in project and relationship management. However, after some time I felt the urge to try an in-house position and become a client myself. I am delighted that I managed to achieve my goal and have an opportunity to apply my knowledge and skills and grow as a professional at one of the best law firms in the Baltics.

Biliana Tzvetkova, Business Development and Marketing Manager, Djingov, Gouginski, Kyutchukov & Velichkov

Prior to becoming a BDM in the legal industry, I’d been a senior project manager at an international venture equity company for more than 8 years. I acquired strong practical knowledge of the Bulgarian economic and legal framework and the overall direction and strategy of Bulgarian companies which now perfectly goes along with my current position. I guess that at a certain point I just needed to transition to a position with more everyday challenges. Although I was successful in my project management career, I have realized the aspects of my work I find most rewarding are all in marketing-related functions.

Olivia Popescu, Marketing & PR Manager, Maravela | Asociatii

Before boarding the legal marketing rollercoaster I enjoyed the healthcare marketing ride, which involved organizing large medical congresses (with 3000+ attendees), working together with a Professional Congress Organizer, and dealing with numerous PR, press conference, and marketing-related matters. I did not literally make a change by myself alone; rather, change came my way. Returning to Romania after a two-year stay in sunny Greece, a spin off from a highly-regarded local law firm was just setting sail. I gladly jumped on board, as they were commencing their journey. We have been voyaging together since, and in the meantime, the firm has been named this year’s Romanian law firm of the year, and I am extremely happy to be part of the crew. 

This Article was originally published in Issue 4.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

A steadily increasing number of lawyers from Central and Eastern Europe travel overseas to obtain graduate degrees from prominent law schools in the United States and United Kingdom. To learn a bit about how a successful graduate program works we reached out to Polly Lawson, the Assistant Dean for Graduate Studies at the top-tier University of Virginia School of Law in Charlottesville, Virginia.

CEELM: Can you describe the UVA LL.M. program for our readers?

P.L.: Our Graduate Studies program provides an American legal education to lawyers who have obtained their first law degree in their home countries. Virginia’s LL.M. offers both a broad introduction to American law and legal theory and advanced training in specialized areas of the law relevant to the student’s career in private practice, academia, or public service. By maintaining a small and highly selective program of about 50 students, we ensure a supportive atmosphere. Unlike most LL.M. programs, our candidates take classes alongside J.D. students, allowing participants to fully engage in the community. Because Virginia offers more than 250 courses each year in an array of topics, students in the program also have wide latitude to plan courses of study that are tailored to their individual interests and career objectives.

CEELM: In what other ways does the UVA program differ from those at other schools in the US? 

P.L.: One of the biggest ways is the small class size and supportive, collegial environment. Virginia is justly famous for its collegial environment that bonds students and faculty, and student satisfaction is consistently cited as among the highest in American law schools. Princeton Review rated UVA Law as No. 1 in quality of life and top five for best professors, classroom experience, and career prospects in 2016. LL.M. students not only get to know other LL.M. students from all over the world, but also the J.D. students and our outstanding faculty as well. The same faculty – leading scholars and acknowledged experts in all aspects of public and private law – teach LL.M. and J.D. students.

CEELM: What’s the value of an LL.M. in general? 

P.L.: There are many reasons to pursue an LL.M. degree in the U.S. First, you will be part of a global network of students, faculty, and alumni from all over the world. UVA Law has 20,000 alumni. You will strengthen your English skills, including legal terminology and writing style. You will build confidence and practice in presenting your ideas to others. Classroom discussions and debates are common in U.S. law schools, and it is no different here. LL.M. students can share their experiences with J.D. students, and bring a worldly perspective and experience to the classroom. Substantively, you will have the opportunity to focus on a particular area of the law, and improve your understanding of American law. You will face new rules, new frameworks and a new court system. Some alums have remarked to me that having this alternative lens and being able to analyze issues from a common-law perspective has allowed them to provide more creative solutions to their clients and given them opportunities to advance their careers. Graduates of our program are better able to understand complex global issues and will be more marketable to future employers. Going back to the first point about the global network, these are the colleagues that you are going to refer others to, who will refer business to you, and who will be your colleagues and friends for the rest of your professional and personal life. Each state has different criteria and procedures for admitting lawyers, but some students will take a bar exam and be licensed to practice in the U.S. following their LL.M.

CEELM: How do you help admitted students prepare for their lives at the law school? 

P.L.: In the spring we create an admitted students Facebook page (or WeChat group for students who don’t have access to Facebook). We connect incoming students and alumni early on. It is not uncommon for the outgoing students to sell cars, furniture, etc., to the incoming group! From that, students will often create a What’s App group to share information quickly and easily. I have visited alums that still maintain and use their What’s App groups!

Our Student Records Office administers a lottery process for course enrollment over the summer. We give 3Ls and LLMs priority in that process, so that they have the first chance to enroll in a particular course. If a student wants to take the NY bar after graduation, for example, we advise them of the required courses and then advise them about other courses that are suited to their academic and professional interests, or otherwise popular with JD students. I end up doing a lot of academic advising over the summer. I clear my calendar and have an hour block for each incoming student to Skype or conference. I have early morning and late night availability so that students can minimize interruption to their work day. Students sign up online and get a reminder just before the meeting time, and I don’t have to worry about the time conversion because the app does it for me! Students can (and often do) make changes to their schedule after that, but this process really helps LLMs think through their course enrollment and schedules and enroll in the courses they want and/or need. 

As to when they are required to be here in Charlottesville, we have a four-day mandatory orientation program prior to JD orientation and 1L classes beginning. We start with a catered breakfast Monday morning in Caplin Pavilion, so students can meet each other and start getting to know each other.  We give tours of the law school and the law library, and sometimes Central Grounds (the law school is located on the northern part of campus, which we refer to as “North Grounds”). We try to balance administrative “how to” type information with substantive instruction with social opportunities. We invite all of the student services offices for introductions, so students can start thinking about how to pay their bill or how to find a job during OPT or how to connect to the secure wifi at the law school. This year, we added lectures about common law and case study and a lecture on the American legal system and the structure of our court systems. We invited professors to lunch with the LL.M. students, and the dean hosted the students for breakfast. We have a welcome picnic for students and their families, and a lot of faculty and staff and their families joined. One of the unique features of our orientation week is that Professor Verdier, Chair of the Graduate Program, meets with all students individually to discuss their course plans for the year, and answer any questions they may have about classes. This all takes place prior to the add/drop period, so students can make any necessary adjustments to their schedules. 

CEELM: What connection does UVA’s LL.M. program have to Central and Eastern Europe? 

P.L.: We are excited about attracting more students from Central and Eastern Europe, and increasing the recognition of the University of Virginia and the Law School abroad. Each of our admitted students has compiled an exceptional academic record in earning the first degree in law and, more importantly, has demonstrated compelling reasons to pursue graduate legal studies at the University of Virginia. We provide these students with a firm grounding in U.S. legal principles and methods as applied in international settings with the ultimate goal of propagating the rule of law in the students’ home countries.  Many of our graduates have gone on to achieve great distinction in government, academics, and private practice in their home countries.

We are especially interested in students whose countries’ economies and political systems are in transition. We believe that graduates from Virginia and other leading American law schools will be uniquely positioned to foster closer trade and political ties between the United States and these emerging markets.

CEELM: Do you enjoy working in the LL.M. program, personally? Why is that?

P.L.: I absolutely love it!  The students are inspiring, and I love getting to know them and learn more about their cultures and experiences. I think of how brave they must be to come to another country, considering that most of them are not native English speakers, and that some bring their families for a year (or more). I remember how challenging law school was for me, as an American citizen growing up in the U.S., and then how challenging it must be for them – to face a totally different legal system and structure, and yet how grateful I am that they are willing to do so. Our students and faculty learn so much from them and I really enjoy working with them. They get to know the wonderful city of Charlottesville and take advantage of all that our beautiful area offers, and have a wonderful time doing so.

CEELM: When was your first visit to CEE, and where was it? What in particular do you remember from that visit?

P.L.: My first visit was to Zagreb, last year as a matter of fact. It is a beautiful city. Unfortunately, I was not there long enough to explore much more than the city market and the Museum of Broken Relationships, which was both compelling and poignant.  I look forward to returning soon to Central and Eastern Europe and exploring more countries – we have some terrific alumni that I can’t wait to visit!  

CEELM: Do you have any trips to the region scheduled for 2017-2018 which would allow interested lawyers to speak to you in person?

P.L.: I will be in Prague and Zagreb this fall in November as part of the EducationUSA LLM European Fair. The event in Prague will be held on Saturday, November 11, from 3:00 – 5:00 p.m. local time. In Zagreb, the EducationUSA LLM Fair will take place on Monday, November 13 at the Sheraton Hotel, from 6:00 p.m. to 8:00 p.m. The EducationUSA LLM European Fair in Vienna is on Wednesday, November 15 from 4-6 p.m. at the Amerika Haus. I hope to return to the area in the spring of 2018, and hopefully visit a few more countries at that time.

CEELM: Finally, what one thing about Charlottesville stands out in your mind as something the LL.M.’s consistently enjoy?

P.L.: Students take full advantage of the beauty of Charlottesville and Albemarle County. Bodo’s Bagels is a local favorite, along with shops and restaurants on the Corner and the Downtown pedestrian mall. Students enjoy outdoor activities such as hiking in the Blue Ridge mountains, having a picnic in Shenandoah National Park, running or biking around Grounds, visiting wineries, attending Foxfield (the local steeplechase race), visiting the historic homes of Monticello or Montpelier, kayaking on the reservoir, and skiing at Wintergreen or Masanutten in the winter. It really depends on what the students enjoy doing in their free time, but there is no shortage of things to do outside of class!

This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Rob Shantz is a partner and the Head of the Corporate practice of Redcliffe Partners. He is a US-qualified lawyer with over 28 years of experience, including some 20 years in Central and Eastern Europe. Shantz specializes in cross-border corporate law and corporate governance matters, as well as in FCPA compliance investigation.

CEELM: Run us through your background, and how you ended up in your current role with Redcliffe Partners.    

R.S.: After practicing law in the US for over seven years, I came to Poland in 1995 with the Peace Corps.  Following the Peace Corps, I ricocheted between PwC and KPMG: PwC in Warsaw from 1996-1999; KPMG in Bucharest from 1999-2001; KPMG in Kyiv from 2001-2010, where I was a Tax and Legal Partner; and PwC in Kyiv from 2011 until 2015, where I was a Partner and Head of the Legal Department. I joined Redcliffe Partners in December, 2015. I much enjoy living in Kyiv, and the common theme is that I changed firms rather than rotate from Ukraine.  Joining Redcliffe Partners was particularly convenient – we’re in the same building as PwC, so I even have the same parking spot!    

CEELM: Was it always your goal to work abroad?        

R.S.: No. I never even considered moving abroad until a girl that I was dating joined the Peace Corps. After several years of practicing with a large US law firm, a change sounded good, and it seemed that I had little to lose – if Peace Corps didn’t work out, I’d return to the US and pick up where I left off.  It turned out to be one of the best choices of my life (except with respect to the girl – she was sent to Ecuador, and I was sent to Poland …).

CEELM: Tell us briefly about your practice, and how you built it up over the years.    

R.S.: My practice consists of advising on and leading Corporate and M&A projects. Recently, I’ve also been very involved with our growing Compliance practice – particularly relative to FCPA and personal data protection issues. Recent clients include IT companies (relating to structuring cross-border provision of software development services and to implementing global personal data protection procedures) and Energy firms (relating to a Ukrainian acquisition and to assessing and updating/improving certain internal policies and procedures).

When considering how to build a practice, I like the quote attributed to Woody Allen that “90% of success is just showing up.” That’s a bit simplistic, but there is something to be said for “showing up” and putting in the effort over an extended period of time to give great service to current clients, and to stay active to meet new clients.  

CEELM: What do your clients appreciate most about you?  

R.S.: Given my past experience with Big Four firms, I’m very comfortable with tax issues, and I think that it’s helpful and appreciated that I can consider these issues while addressing various corporate and/or M&A implications. Also, having worked in a number of different jurisdictions helps me to bring a very practical perspective to cross-border transactions. It’s further very important to me that we do all that we can to add value by solving problems with clear and direct solutions and recommendations (as opposed to a seeming regional, historical tendency to sometimes just answer the specific question posed – even if clearly erroneous or incomplete – with lengthy and ambiguous responses).

But probably what is most appreciated is that I sometimes procrastinate and am slow to issue invoices …

CEELM: Do you find Ukrainian clients enthusiastic about working with foreign lawyers, or – all things considered – do they prefer working with local lawyers?       

R.S.: My experience is that Ukrainian clients are like most other clients – they want good service for good value – and they are generally happy to work with foreign lawyers if the commercial terms are satisfactory. The perception, though, is that foreign-oriented firms are expensive, so Ukrainian clients tend to work with local lawyers for purely domestic issues, but are more likely to consider working with foreign lawyers when they have issues with cross-border implications.

CEELM: There are obviously many differences between the Ukrainian and American judicial systems and legal markets. What idiosyncrasies or differences stand out the most?      

R.S.: One broad difference that comes to mind is that issues here can be less predictable, particularly with respect to interaction with the courts and authorities. This is why many of the transactions that we work on are governed by English or other non-local law, and provide for disputes to be adjudicated outside of Ukraine. A difference in Ukraine’s favor is that the tax laws are generally simpler than the monstrosity of the US tax code. As one former US Senator put it: “The present tax code is about ten times longer than the Bible, a lot more complicated, and, unlike the Bible, contains no good news.” 

CEELM: How about the cultures? What differences strike you as most resonant and significant?  

R.S.: As compared to my life in the US, I often say that in Ukraine the highs are higher, the lows are lower, but it’s never boring! The last fifteen years or so have been an exciting time to live in Ukraine. I’ve been in Ukraine through both the Orange Revolution and Euromaidan, and I’m very impressed by the efforts and energy of the many Ukrainians who want their country and its institutions to become more fair and transparent. I’m less impressed with many in the political class, and their corrupt, entrenched interests and schemes. There is real progress and the economy is growing again, but, with a little more political will and foresight, Ukraine could be – and hopefully soon will be – a real growth tiger.  

CEELM: What particular value do you think a senior expatriate lawyer in your role adds – both to a firm and to its clients?       

R.S.: It’s kind of sneaked up on me, but I guess that I’ve become the proverbial (partially) gray-haired partner. Redcliffe Partners is a young firm with much energy and enthusiasm, and many very clever (and very nice) attorneys.  I’m happy that my experience is sometimes helpful for internal issues like procedures and processes, as well as to occasionally provide additional input and perspectives on important client projects that other partners are leading.  

CEELM: Outside of Ukraine, which CEE country do you enjoy visiting the most, and why?       

R.S.: This is a difficult question. I have two British friends from my Warsaw days, and, while we’re all currently living in different countries, we still try to meet at least once a year. This has been the case for close to twenty years now, and, since our meetings tend to rotate between different CEE countries, I’ve been very fortunate to visit many interesting, beautiful, and historic places in the CEE … and a fair number of pubs and taverns. If I have to choose, though, I still have a special fondness for Poland – it was the first foreign country that I lived in, and, with the excellent Peace Corps language training, I was able to learn Polish. It’s always a nicer experience when you can speak the local language.

CEELM: What’s your favorite place to take visitors in Kyiv?      

R.S.: Kyiv is a wonderful city, so, again, a difficult question. The luckier visitors come in periods of warmer weather, in which event my two favorite options are one of the many rooftop terraces (for example, at the Hyatt, Intercontinental, and Avalon, among others), which have panoramic views of gorgeous, ancient churches and/or Dnipro River; or one of the many open air cafes in the city center (such as O’Panas, Chateau, and Chicken Kyiv) which make for good people watching.

This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

UK-born Egons Pikelis is a Partner and Head of Banking/Finance at Ellex Klavins in Latvia.

CEELM: Run us through your background, and how you came to Riga.

E.P.: I was born to Latvian parents who were refugees during WWII. The house we lived in until I was 16, which we shared with my cousin’s family, was an old doctor’s house in the Birmingham suburbs with an enormous garden. My father’s family were farmers in Latvia, and so the garden became a little piece of Latvia. We grew a lot of our own fruit and vegetables, and we kept bees, and while my parents went out to work I would spend the day at home with my grandmother. Each one of us in the house had a beehive allocated to him or her, although the only ones who ever went near the bees were the two grandmothers. When the bees swarmed, they never did so in our garden, but in someone else’s further down the road. The two grandmothers would don their white spaceman outfits and arm themselves with smoke canisters to go and find the swarming bees. The fact that neither of them spoke a word of English only added to the wondrous sight of two smoking octogenarian spacewomen knocking on every door in street looking for their bees. But I didn’t think anything of it at the time, and only later in life did I come to realise that the neighbours must have thought us slightly odd, to say the least. 

The drama of my first day at school when I was five years old also passed me by somewhat, as, having spent all of my time with the beekeepers, I didn’t speak a word of English. I only found out a couple years ago from my mother that on that first day at school she was taken aside by the headmistresses and more or less accused of child cruelty. Within a month or so, I was speaking pretty passable English, so I’m not sure what all of the fuss was about, but in 1960’s England it was probably a rare event, although I suspect that things may have changed in the meantime. 

Once I had started school, I continued to live a dual existence, one in the English world and the other in the Latvian exile world. Latvians, not only in the UK, but in most countries in which they ended up after the war, were pretty well organized, both socially and politically. I spent the majority of my spare time attending all kinds of Latvian gatherings and events, and as a result, I have always had a circle of Latvian friends from other parts of the UK, and later from other countries. I also spent a year in between my A-level years at a Latvian school in Muenster, in Germany. At the time it was the only accredited Latvian school in the West, and while I probably gained more in social terms than academically, I’ve retained a fondness for bier und currywurst. 

Such an environment, however, is pretty politically charged, and the resentment that exile Latvians (and other East Europeans) felt towards the Soviet Union left a mark on those of us who were born outside Latvia as well. It also explains why my first degree wasn’t law, but Russian and Russian Studies. At the time you could have called me a Sovietologist, but as the Berlin Wall fell a year after I graduated, I instantly became a historian by default. It was then that I turned to law and subsequently qualified with Simmons & Simmons. At the time, the big law firms were beginning to look for lawyers who had alternative skills and experience, and I’m grateful that Simmons & Simmons saw something in me which was worth pursuing. Arguably that’s a policy that only the big firms with the appropriate capacity and resources can follow, but I still think that it’s a far-sighted approach.

But these were tumultuous times, and after the Soviet Union collapsed, Latvia regained its independence in 1991. In 1994 I got a call from Raimond Slaidins, who was a Latvian lawyer from California, and who had set up a firm in Riga with another US lawyer from New York, Filip Klavins, and they wanted to know if I was interested in joining them, which after a period of reflection, I did. 

CEELM: Was it always your goal to return to Latvia and work in the country?

E.P.: Before the Soviet Union collapsed, few of us thought considered that such a question would even be a possibility. The edifice seemed impenetrable, and the underlying would even be a possibility. The edifice seemed impenetrable, and the underlying contradictions were to a large extent hidden from the outside world. But once Latvia regained independence, I think that it is fair to say, that, for me at least, it was inevitable that I would return to Latvia. From a UK career perspective, I knew at the time that it would have been better if I would have stayed at Simmons & Simmons longer. Leaving them was an immense risk, as no-one knew which way Latvia would be headed, and whether our firm could survive in the longer term. 

But these were highly interesting times, and ones where you felt that you could tangibly contribute to change. I think a sense of historical perspective made me understand that these events don’t happen every day, and in those circumstances you can either watch from a distance or you can get involved. In the early nineties, Latvia saw the usual story of wealth accumulation and turbulent politics, but having come through it, I’m proud that, rather than seeking refuge in strong-man politics, Latvia has managed to stick to its chosen path of being an open and democratic society. It’s far from being perfect, but looking back from the perspective of those times, I think it’s pretty cool what’s been achieved. 

CEELM: Tell us briefly about your practice, and how you built it up over the years.

E.P.: Latvia’s approach after regaining independence was to sweep away in one go all the legislation from the Soviet era (apart from the labor law and, interestingly, the criminal law), and replacing it with Latvia’s pre-war constitution and laws. Nothing wrong with that other than nobody had any experience in interpreting or applying these laws, and crucially, a lot had happened in the world between 1940 and 1991. In addition, such business practices as there were, were rooted in Soviet tradition. This had some interesting results. I was once advising a Swedish investor who was going into a JV with an agro-products producer, which was represented by an old-school engineer who had privatized the plant. We were negotiating an SHA for the joint venture, and had spent several hours in the meeting discussing the various points of the SHA, often quite heatedly. At one point, my client had to leave the room, leaving me alone with the agro-products chap, at which point he turned to me, put his hand on my arm, and looking me in the eyes, solemnly said “son, I know that you’ll make us a good agreement, but please, no more than two pages long, OK?” 

At a certain point in the early 2000’s, we felt that the local legal environment had matured sufficiently and our firm had grown enough that we were able to start working on a practice group basis, at which point I headed up the banking & finance practice. Our practice has to date focussed mainly on cross border activities, and while I’m of the view that your standard of work is the best advert for your practice, we also invest a lot of time and effort in maintaining relationships with the international institutions who have an interest in our market and with the major international law firms who represent such institutions. Being members of the best professional networks (such as Lex Mundi and World Services Group) has also been a great help.

CEELM: What’s your general opinion about Latvian law and the legal climate in the country, both for lawyers and for investors?

E.P.: I tend to subscribe to Bismarck’s view about being able to live with poor laws and good civil servants, but not with good laws and shoddy civil servants. In Latvia’s case, I don’t consider the laws to be poor, but it’s the application which sometimes tends to fall down, although it is far, far better now than it used to be. Much of Latvian law is based on EU legislation now anyway, and the underlying tradition of Latvian law follows the Germanic system, so the framework is pretty sound. But there are certain factors which are problematic. One is a lack of expertise, particularly in technical areas, such as the more complicated commercial transactions. Some practitioners still prefer arbitration rather than the courts, particularly in complex transactions, but there is quite a lot of training of judges going on which seems to be raising standards. Another area is the relationship between business and politics, and the ripple effect into the legislative environment. Latvia has been struggling to get some areas of its insolvency administration sorted out, and while Latvia is not alone with this problem, it has become a big topic of debate in Latvia, and hopefully now there may be the impetus to sort this out.

CEELM: There are obviously many differences between the legal markets of Latvia and the UK. Can you describe some of the more interesting/challenging differences? What stands out the most?

E.P.: When people find out that I’m a UK solicitor, I get asked questions about why I’m not wearing a wig, which given the state of my hairline these days, probably wouldn’t be such a bad idea.

Apart from the obvious difference between a common-law system and a civil law system, I think that the most obvious differences are in the still nascent legal traditions of Latvia and in the size of the respective markets. Latvia has had no shortage of excellent legal scholars, including in tsarist times before Latvia gained independence, but the experience in interpreting, applying, and developing its legislation and in legal practice has been severely curtailed by geopolitical events. In contrast, the UK legal tradition is arguably the standard of expertise and impartiality which most other countries aspire to, at least those countries which respect a rules-based system.   

The other aspect is the size of the market. In Latvia, we can never expect to reach the strength and depth of the expertise which you find in the UK. We’re inevitably following legal trends in Europe and beyond, whereas the UK is often at the forefront of legal innovation. So I think it will be interesting to see whether and how the effects of Brexit will impact on the role of the UK legal system, particularly with regard to the rest of Europe. 

CEELM: What cultural differences between the two countries strike you as most resonant and significant?

I think the fact that Keeping up Appearances is still going strong here in Latvia. That’s is a bit of an eye opener for me.

Latvians are a very down to earth nation, and their world view is informed by historical events. There isn’t the underlying sense of permanence about the institutions of state or of society which you find in the UK, but people have a far greater sense of self-reliance. That’s not to say that Latvians don’t invest a lot of faith in their country. Despite the Brexit vote, I’d say that Latvians have a clearer notion of the significance of statehood, because they have experienced what it means to have it taken away. But even so, it doesn’t stop Latvians arguing over what that means. As they say here, if you put two Latvians into a room, the result will be three political parties.

But Latvians have a strong affinity for the British view of the world. They take similar views on trade, political freedoms, and values, although there are limits. Nobody in Latvia gets cricket. “Five days?!!” 

CEELM: You’ve lived in Latvia for some time now. What significant changes have you seen during your time there, in the legal industry?

E.P.: In the early nineties, we were almost the only firm offering a Western standard of legal service. That has changed in the meantime. A lot of people have taken advantage of the opportunity to travel, study, and work abroad, which has also had an effect on the legal industry. Particularly in the sphere of business law, the overall standard has risen immeasurably, which, while increasing competition, is something that I can only applaud. 

But the legal industry doesn’t exist in isolation, and I’d say that the level of professionalism within the professions in general, and within the business community – especially the innovative spheres such as start-ups – is particularly encouraging. Estonians have managed to give themselves a good press with their digital economy message, which we will deservedly hear more of during Estonia’s presidency of the EU, but there is evidence that the talent and innovation in Latvia has existed for a while, and that we’re on the brink of a break-out moment in terms of recognition outside Latvia.

CEELM: Does your upbringing and education in the UK give you a particular advantage or make you particularly useful to clients in some way? How?

I don’t think that my UK upbringing and education makes me know anything in particular that any other lawyer in Latvia wouldn’t or shouldn’t know or which would provide me with any particular advantage. Obviously having gone through the ranks at Simmons & Simmons was excellent training, not just with regards to the practice of law, but also as a legal professional, which is something that clients appreciate. Looking back, however, I suspect that the main benefit of the UK background has been the appreciation of the difference between principle and expediency in the choices that you make, and by extension, which you extend to your client. I think that it is an increasingly relevant distinction in our lives, and not just with respect to the practice of law. 

CEELM: Outside of the Baltics, which CEE country do you enjoy visiting the most, and why?

E.P.: We have three relatively small children, so road trips are a challenge, and a lot of the CEE region is, to my mind, within road trip range. So, apart from business trips, my travel within the CEE region has been pre-kids. Prague is everyone’s favourite, and a few years ago, we had a firm trip to Prague which was great. A while before that I went with some friends on a hiking trip in the mountains around Poprad. Compared to the Alps, it is much less manicured but all the more charming for it. It is also the only place I’ve encountered a group of six nuns in full garb with white Nikes doing a mountain trek. On the way there we spent a couple of days in Krakow, which for a history buff is a pearl, but is also simply a beautiful town in its own right.

CEELM: What’s your favorite place to take guests in Riga?

E.P.: While I wouldn’t exactly describe it as a favorite, I would encourage anyone visiting Latvia to visit the Museum of the Occupation of Latvia. Our firm has supported the museum on a pro bono basis for approximately 20 years. For a visitor, I think that it is difficult to understand Latvia today without having an insight to what is shown at the museum.

Much to my surprise, it turns out that Latvians are big foodies, not wedded purely to potatoes, pork, and pickled cabbage, and we have some really good restaurants, some in the old town, but also in the area around the old town – the embassy quarter – which prides itself on having some of the finest art nouveau architecture in Europe.  

This Article was originally published in Issue 4.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Deal:  On March 20, 2017, CEE Legal Matters reported that Primus’s Tallinn office had advised BaltCap on its acquisition of 100% of Sanoma Baltics AS – the operator of the Estonian online classified sites auto24 and Kuldne Bors – from Sanoma Media Finland Oy. Sorainen advised Sanoma Media Finland, and Cobalt advised the management of Sanoma Baltics on the transaction, with Ellex Raidla advising AS LHV Varahaldus on its provision of financing for the transaction.

We reached out to several of the individuals involved in the deal for information.

The Players:

• Primus: Ermo Kosk, Partner: Counsel for BaltCap
• Sorainen: Pekka Puolakka, Partner: Counsel for Sanoma Media Finland
• Cobalt: Kristel Raidla-Talur, Partner: Counsel for Sanoma Baltics Management
• Ellex Raidla: Raino Paron, Partner: Counsel for LHV Varahaldus

CEELM: How did you each become involved in this matter? 

Primus: I have been consulting BaltCap and its portfolio companies on numerous transactions and day-to-day matters for almost ten years. Our cooperation has been so far very smooth and productive, and the Sanoma Baltics’ transaction was yet another transaction we were selected to work on.

Cobalt: I acted for Ilta-Sanomat (Sanoma Group) in 2007 when its subsidiary Kuldne Bors (soon renamed Sanoma Baltics) acquired its first 20% stake in Autoportaal. At that time Autoportaal was the company operating the classified site of auto24 (which contained ads for cars and other vehicles) and Kuldne Bors was operating the classified site bearing its own name (which contained ads for a large variety of goods and products). Margus Tomberg was the CEO of Kuldne Bors and later, after the Sanoma Group had exercised its options to acquire further stakes in Autoportaal from the founders and management until it had acquired 100% of the company, also became the CEO of Autoportaal. Thereafter, Autoportaal was merged with Kuldne Bors (Sanoma Baltics). 

I worked with Margus on the acquisition of auto24 back in 2007 and we have known each other since then. Funnily enough we also became neighbours in the same residential building in the center of Tallinn around the same time. I lost Margus as my good neighbour when my husband bought his apartment a few years later to cater to the needs of our growing family. Margus contacted me again about a year ago to discuss the potential acquisition of Sanoma Baltics and this was the beginning of our co-operation on this particular deal. 

Sorainen: We have a long-term relationship with Sanoma Media Finland and we have assisted them in the past with various issues as well, including transactions.

Ellex: Ellex is known for its experience in M&A and B&F matters and specifically on work related to capital markets and corporate debt issues. LHV approached us with the request to provide legal advice on the financing of the transaction and on the bond issue. Our work on the matter started in February 2017.

CEELM: What, exactly, was the initial mandate when you were retained for this project?

Primus: When we first got involved with this project, BaltCap had just signed a non-confidentiality agreement with Sanoma Media Finland Oy. Thus, we were engaged from the very beginning of the process in order to do the due diligence and advise the client on the transaction structure.

The structure of the transaction was a bit more complicated than usual, as there were several counterparties to the transaction. The initiative to buy [Sanoma Baltics AS] actually came from the management of AS Sanoma Baltics (now auto24 AS) and BaltCap was engaged by them as a strategic investor. Additionally, as the parties needed external financing for the acquisition, relations with an external creditor had to be structured. Ultimately the external financing came from the pension funds of AS LHV Varahaldus, which provided financing through a note issue, which again is not the usual practice in Estonia. 

So the transaction did not just cover the acquisition transaction with Sanoma Media Finland Oy, but also included the regulation of internal relations between the purchasers – BaltCap and the management of the target company – and relations with the external financer and the security agent.

Cobalt: When we first got involved, Sanoma was in the middle of an auction process. We gave some guidance to the management as they were in an uncomfortable position, wishing to acquire the company in co-operation with a private equity fund and at the same time presenting the company, with Sanoma, to several other bidders. We also discussed potential funding structures, shareholder relations, and management agreements going forward.

Sorainen: Our mandate was to provide legal assistance in carrying out the divestment.

Ellex: We advised the pension fund management company LHV Varahaldus as the investor and helped the issuer as their client to organize an issue of unsubordinated and subordinated bonds that could be then purchased by pension funds managed by LHV Varahaldus to finance a buy-out of Sanoma Baltics AS by the management and BaltCap. The transaction set a precedent and helped to develop the Estonian capital market by creating an instrument enabling Estonian pension funds to invest in Estonia (generally, there is a demand for securities issued by local issuers among Estonian pension funds). Our work included preparing the bond terms, collateral agreements, and collateral agent agreements, as well as participating in choosing the collateral agent and representing the client in negotiating the agreements.

CEELM: Who were the members of your team, and what were their individual responsibilities?

Primus: The head of the team was me, and I was the person ultimately responsible for the negotiations and preparation of transaction documents with all counter-parties. The other team members were Counsel Toomas Kasesalu who advised on the financing part of the transaction and helped with carrying out the legal due diligence; Senior Associate Sandra Vark, who managed the legal due diligence process, assisted with the preparation of acquisition documents and agreements with the management, and prepared the merger notice regarding the transaction for the Competition Authority; Senior Associate Dmitri Rozenblat, who assisted with the legal due diligence; and Associate Marilin Laud, who assisted with the legal due diligence and preparation of the merger notice.

Cobalt: Senior Associate Triin Ploomipuu was the main task force working on all aspects of the transaction with me. We tried to keep the team small and efficient and involved other associates for very limited tasks only. 

Sorainen: I was the Supervising Partner. Counsel Paul Kunnap was primarily responsible for handling the case. Associates Olga Vijard and Mirjam Vichmann and legal assistant Katlin Robas were involved in various roles in completing the transaction as well.

Ellex: I worked with Senior Associates Helen Metsar and Martin Maesalu as a team.

CEELM: Please describe the final agreement in as much detail as possible: How was it structured, why was it structured that way, and what was your role in helping it get there?

Primus: The agreement with Sanoma Media Finland Oy was a share purchase agreement with customary provisions on conditions precedent, closing procedure, parties’ representations and warranties, liability clauses, and non-compete and confidentiality obligations. The purchaser under the agreement was a special purpose vehicle ultimately owned by BaltCap Private Equity Fund II SCSp and the management of AS Sanoma Baltics (now auto24 AS). 

But as I mentioned above, the deal did not just cover the agreement with Sanoma Media Finland Oy; it also included agreements between the purchasers and financing and security agreements. My role was to advise on the most efficient set-up of the different parts of the transaction.

Cobalt: We worked on all aspects of the deal. The priority for the management was negotiating the investment and financing documentation with BaltCap. Accordingly, we spent most of our resources on relevant documentation and negotiations. However, as the deal between BaltCap and the management was related to the acquisition of the company from Sanoma Group and additional financing provided by LHV pension funds, we also assisted the management in reviewing relevant documentation. 

Sorainen: From the vendor’s side the transaction was a share deal with many typical MBO features. There were also some issues which were particular to the case due to specific [and confidential – ed.] circumstances related to the target company.  

Ellex: BaltCap was not a direct party to the financing structure developed and documented by Ellex Raidla. Financing was provided to a project company indirectly owned by Baltcap and the management of Sanoma Baltics. Security interests for the bonds were provided by upstream project companies, including one owned by Baltcap’s fund.

CEELM: What was the most challenging or frustrating part of the process?

Primus: As there were a lot of counterparties involved in the transaction, the most challenging part of the process was to ensure that all aspects of the legal relations between the different counterparties would be covered and that all transaction documents were duly and timely prepared. There was real time pressure before the closing, because we got the official merger approval just two days before the closing date.

Cobalt: I think for us and the management the most difficult task was going through all the “what if” scenarios. What if growth is not as expected? What if there is a default under one agreement, potentially triggering negative consequences under other agreements? What if someone is not able to continue in the management team? As lawyers we also went through the usual closing challenges, trying to make everything happen at the same time. But I would not call any of that frustrating in this particular deal.

Sorainen: Unfortunately, during the negotiations, the Estonian government began considering whether to institute a new car tax in Estonia or not. Instead of developing a policy and then sticking to it, the government made several announcements about the upcoming tax only to withdraw them later, creating a lot of uncertainty to all involved. Given that such a tax could have an impact on the business of the target company, the government’s public vacillation on the subject caused a need for a lot of additional negotiations to take the possibility into account. Since then the government has dropped this plan.

Ellex: Although the project was innovative – to our knowledge it was the first time bonds were specifically issued to finance an M&A transaction in Estonia – there was no frustration in the project. Habitually bond issues are driven more by the issuer, not the investor.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth?

Primus: Although obtaining merger approval just two days before the closing was on the one hand a challenge, on the other hand the merger process with the Competition Authority itself went very smoothly. According to law the Competition Authority has 30 days to conduct the merger proceedings, but we managed to get the merger approval in approximately two weeks. As we wanted the closing to take place at the beginning of a month, if we had received merger approval just a day later, we would have had to postpone the closing by a month.

Cobalt: I think the closing dinner went well. (laughs). On a more serious note, I believe the whole process was quite smooth for a complex transaction such as this one. Of course at times the parties felt a bit stuck with various items subject to negotiations, but overall the process was quite smooth, especially as regards negotiations between the management and BaltCap. I believe there was a good match which allows us to believe that parties will also be successful in growing the company as one team. 

Sorainen: All parties were professional and acted in a professional manner and the transaction process ran very smoothly with the exception of the disruptions inserted by the government’s announcements I mentioned above.  

Ellex: By the time our work started, our client and the acquirers had a relatively clear idea about the financing conditions which needed to be implemented into the terms and conditions of the bonds and related security documents. The good preparation naturally made the process quite smooth.

CEELM: Did the final result match your initial mandate, or did it change somehow from what was initially anticipated?

Primus: Our general mandate stayed the same – to conduct the legal due diligence, help to negotiate the transaction structure, prepare and negotiate the transaction documents, assist with the performance of conditions precedent (i.e., prepare and submit the merger filing) and closing process, and take care of post-closing issues. 

The structure of the deal changed somewhat during the initial phase of the negotiations. The primary changes concerned the financing of the transaction and the set-up of the holding companies of the purchasers. 

Cobalt: Our initial mandate was “any assistance the management may need.” At the time it was not clear what the financing structure would look like, who would be the private equity partner, and so on. So our scope of work was subject to constant change, but we did not mind; it was an interesting journey and very pleasant co-operation with the management team.

Sorainen: Yes.

Ellex: The final result at large matched our initial mandate.

CEELM: What individuals at your clients directed you, and how did you interact with them?  

Primus: We worked mainly with Oliver Kullman, one of the partners at AS BaltCap. During the most intense period of negotiations we communicated with him almost daily, either by phone or e-mail. Additionally, from time to time we had internal meetings face-to-face. Oliver is always very hands-on with his projects and likes to review all major transaction documents, but at the same time he trusts our legal expertise and does not interfere with purely legal matters.

Cobalt: Margus Tomberg was our main point of contact [at Sanoma Baltics] and, as usual these days, most of the communication was by phone and email. We also met on several occasions with the entire management team (four people) to go through drafts and discuss our comments. The management also had a financial advisor who was present in these meetings. I enjoyed working with the team. It was impressive that the whole team went through all transaction documents in detail and contributed to the discussion. I think it set a strong base for business going forward as the entire management team has a good overview of the terms agreed with BaltCap. 

Sorainen: The project was directed by Sanoma’s M&A Director and in-house counsel. We were in contact mostly by telephone as they are based in Helsinki, but there were also some in-person meetings. The communications were often improved by the ability to keep the internal talks in Finnish.

Ellex: Kelli Valdek (Compliance), Maido Lillemets (Legal), and Romet Enok and Kristo Oidermaa (Portfolio managers).

CEELM: How would you describe the working relationship with your counterparts at the other firms working on the deal? 

Primus: The working relationship with both Sorainen, the representative of the seller, and Cobalt, the representative of the management, was efficient and friendly. Mostly we communicated by phone or e-mail, but we also had a few meetings in person. 

I believe we all shared a common goal to get the deal done with all parties being satisfied, so we were all reasonable and willing to make compromises if needed. Most of the biggest issues during the negotiations concerned commercial matters, and not legal ones, which we managed to agree on pretty smoothly.

Cobalt: We had a very good working relationship with Primus. It was not the first transaction we both worked on and I’ve always considered them reasonable and efficient. No reason to change my mind based on this deal.

We had less interaction with Sorainen as negotiations with Sanoma were mostly handled by BaltCap and Primus.

Sorainen: Our interactions were limited to Primus. Most details were ironed out in local counsels-only meetings held in person. Larger commercial issues were negotiated in telephone conferences, and there were a couple of negotiation sessions in person in Helsinki. We were very pleased by the professional attitude and the no-nonsense manner in which we could carry out the process.

Ellex: The whole process lasted for more than a quarter. Communication was mainly performed via e-mail, but also included some meetings in the most intensive stage of the negotiations regarding the bond documentation.

CEELM: How would you describe the significance of the deal to Estonia? 

Primus: I guess the most outstanding part of the deal is that the acquisition was financed by local pension funds through a note issue. Usually acquisition transactions in Estonia are externally financed with bank loans.

Cobalt: First of all, it should be noted that both auto24 and Kulne Bors are very well-known brands in Estonia; the sites have an extremely wide user base and even people who have never used the services themselves are likely to know the brands. 

Another important aspect is that the deal was financed by strong local players. While BaltCap has been in the private equity business for many years, the financing provided by LHV pension funds was possible only due to recent legislative changes. 

I believe it is good for both the business and users that the company was acquired by the management together with a private equity investor such as BaltCap. It enables the company to concentrate on developing new and innovative solutions for the benefit of its customers. Several media companies were also among the bidders and their strategies would have likely been different.

Sorainen: The transaction was one of the largest of its type this year in Estonia (note that given the size of Estonia there are not that many large transactions). The target company is also the clear market leader in its business. So the transaction has significance purely on those terms. Otherwise, the company will continue under the same management and there presumably will not be significant changes to the business. Given the smooth transaction process, it will also, hopefully, serve to develop the transactional legal practice in Estonia by a small increment.

Ellex: This was the first time in Estonia when pension funds invested in an instrument for financing of an M&A transaction to such a large extent.

This Article was originally published in Issue 4.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

English lawyer Daniel Cousens has been based in Linklaters’ Warsaw office since 2006. He advises international corporates, private equity sponsors, and strategic investors on M&A deals and inbound and outbound investments in Central and Eastern Europe, particularly in Turkey, Ukraine, and Poland. Cousens co-heads Linklaters’ Turkey desk and is a member of the firm’s CEE and CIS teams. Before moving to Warsaw, he spent five years in Linklaters’ Moscow office. He studied English and French law at University College, London and Universite Aix-Marseille, and he speaks English, French, Russian, and Polish.

CEELM: Run us through your background, and how you came to Warsaw.  

D.C.: It’s a bit of a long story but it probably starts with meeting my now wife, who is a Manchester Pole, when we were studying together in London. After my studies I worked and lived in (former Soviet) Georgia for two years on conflict resolution projects after which I realized I should probably come back and take up my offer of a training contract in the UK. Quite soon after qualifying we moved to Moscow – me to work with Linklaters, my wife to work with another firm. After five fun years in Russia the time came for a move and Warsaw was the obvious choice – we’ve been here 10 years now.

CEELM: Was it always your goal to work abroad?      

D.C.: Probably – I certainly knew for sure when I qualified that I wanted to go abroad.

CEELM: You have a fairly diverse practice, with unique geographic coverage. Tell us briefly about your practice, and how you built it up over the years. And how did you come to co-head Linklaters’ Turkish desk?      

D.C.: From Warsaw it made sense to concentrate on the wider region – Ukraine was the first country I concentrated on, mostly because it made most sense after my time in Russia and later I was lucky enough to be able to help build up our Turkey practice and, in particular, get to know and work with the Turkish corporate groups.

CEELM: There are obviously many differences among the various jurisdictions you focus on. Can you describe some of the more interesting/challenging differences? 

D.C.: I think seeing the differences in culture and just the way things are done is one of the most interesting parts of my job – behavior which might be normal in one country could cause great offence in another.

CEELM: Focusing primarily on Poland, what cultural differences between that country and the UK strike you as most resonant and significant?     

D.C.: After so long here and living in a mixed Polish / British family I’m not sure I can see the differences anymore! Joking apart of course there are lots of differences between the UK and Poland but I don’t think you can generalize– in both countries there are all sorts of people with all sorts of ways of looking at the world.

CEELM: You’ve lived in Poland for over a decade now. What significant changes have you seen in that time, in the legal industry and/or market?

D.C.: I think the legal market in Poland has got a bit more sophisticated, there are fewer international firms and fewer expats, all of which is probably healthy. Since 2008 the markets in the region seem to have been more volatile and we’ve all had to get used to operating a bit differently and doing different types of work – less M&A and more disputes in my case.

CEELM: What particular value do you think a senior expatriate lawyer in your role adds — both to a firm and to its clients?     

D.C.: I’ll let the clients decide that!

CEELM: Outside of Poland, which CEE country do you enjoy visiting the most, and why?     

D.C.: I really enjoy my time in Turkey, where the people are wonderful, the views are spectacular and the food is amazing.

CEELM: What’s your favorite place to take guests in Warsaw?     

D.C.: I like to take guests out rowing on the Wisla – a wide, wild and empty river, right in the center of Warsaw.

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Deal: In February 2017, CEE Legal Matters reported that CMS had advised Integer.pl S.A. on the investment made into the company by private equity fund Advent International. Clifford Chance advised Advent International on the deal.

The Players:

• For Integer.pl: Rafal Wozniak, Counsel, CMS

• For Advent International: Slawomir Czerwinski, Counsel, Clifford Chance

CEELM: How did you and your firms become involved with Integer.pl and Advent International on this matter? Why and when were you selected as external counsel initially? 

CMS: In August 2016 Integer announced its decision to seek an investor who could support its growth and development. CMS was engaged shortly afterwards. We were chosen not only because our offer was acceptable for Integer but mostly because of our deep expertise in M&A and ECM transactions. As Integer is listed on the Warsaw Stock Exchange we had to offer complex services related to typical M&A advisory and also show our great experience in the ECM market.

CC: I think that the first time we discussed this project with Advent was late summer last year. It was one of those meeting we have with them from time to time to discuss current business opportunities. We worked with Advent on a number of projects in Poland prior to this one and my impression was that once they made the decision to pursue this transaction they also decided to go with us.  

CEELM: What, exactly, was the initial mandate when you were retained for this project, Rafal?

CMS: We were engaged to support Integer during the process of obtaining a new investor, but I cannot comment on the exact scope. 

CEELM: Were you engaged to help them find the new investor, or had that process already been completed by the time you got involved? 

CMS: Our scope of engagement related only to legal matters. We were not supporting process of finding investor.

CEELM: And what about you, Slawomir? What was the initial mandate when you were retained by Advent?

CC: Our mandate covered the whole transaction, from the due diligence of the asset, through advice on the structure, merger control and negotiations of the relevant documentation, to certain post-completion restructuring of the group. By the time we got involved by Advent, I think they were pretty close on the investment concept and decided to launch the formal part of the process.

CEELM: Who were the members of your teams, and what were their individual responsibilities?

CMS: Our team consisted of many lawyers from different practices. I was the leading lawyer, and I was supported by Senior Associate Zuzanna Jurga from the corporate team. The team also included also such corporate lawyers as Partner Dariusz Greszta, Senior Associate Rafal Kluziak, Associate Magdalena Trzepizur, and Lawyer Jakub Szczygiel responsible for corporate law advisory. In addition, Senior Associate Agnieszka Ziolek – the head of our restructuring practice – was involved on restructuring and banking matters. In addition, Partner Graham Conlon and London-based Senior Associate Valentina Santambrogio from the International Private Equity practice at CMS were involved in the deal.

CC: I led the Clifford Chance team. The core corporate team consisted of Senior Associate Jaroslaw Gajda, Counsel Jaroslaw Lorenc, and Of Counsel Nick Fletcher. They were supported by Senior Associates Mateusz Stepien, Kamil Sarnecki and Aleksandra Lis-Rychlinska, and Associates Antoni Wandzilak, Joanna Pominkiewicz, and Katarzyna Aleksandrowicz. Associates Marta Michalek-Gervais and Associate Marta Matynia assisted with merger control aspects, while Associate Pawel Dlugoborski from the banking team assisted with issues on the financing aspects of the transaction.

CEELM: As we reported in our original story, as part of the agreement signed on February 23, the parties agreed to announce tender offers to subscribe for shares in Integer.pl and its subsidiary InPost and to delist the shares of both companies from the Warsaw Stock Exchange. The transaction was financed solely by Advent International through its subsidiary AI Prime Luxembourg, which would allocate approximately PLN 170 million for debt refinancing. The fund would also provide an additional approximately PLN 500 million for the purposes of financing future funding needs. Can you add any details to that original summary?

CMS: [declined to answer].

CC:  There were two agreements governing the transaction: The investment agreement and shareholders’ agreement.

The investment agreement described the investment process and provided for different scenarios which would allow acquisition and de-listing of target companies, depending on the ultimate result of each of the tender offers. The transaction also involved arrangements with a number of current institutional investors of the Integer Group and with Mr. Rafal Brzoska who agreed to re-invest in the Integer Group’s new holding company. This will be carried out as a roll-over of the investors’ current investment in Easypack (one of the Integer Group’s main operational companies) into a holding company in Luxembourg and a swap of Mr. Brzoska’s shares in Integer.pl for new shares in the same holding company.

The shareholders’ agreement governs shareholders’ relations in the Integer Group.

CEELM: What’s the current status of the deal?

CC: The tender offers were successfully settled in April 2017 and the so-called squeeze-out procedures in both Integer and in InPost, aimed at the acquisition of all of the shares in both companies held by the minority shareholders who did not disposed their shares through the tender offers, were finalized on May 29, 2017.

CEELM: What was the most challenging or frustrating part of the process?

CMS: As always with public M&As you never know whether minority investors will respond to the tender offer and whether the transaction will close. I think that execution risk is most challenging aspect of these processes.

CC: Definitely structuring and timing. As both target companies are listed on the WSE they were acquired through two tender offers launched in parallel. These offers were announced at the same time and were structured in a way that allowed Advent not to complete the transaction if one of the tenders was not successful. Advent’s investment decision was based on the assumption that the Integer Group would be taken private, so the transaction structure provided for different scenarios which would allow this goal to be achieved, depending on the ultimate result of each of the tender offers. This structure has very few precedents on the Polish market.

Moreover, the timing and dynamics of the transaction were extremely important given the dire financial situation of the Integer Group. The substantial part of its current debt financing scheme was approaching its repayment deadline and the Integer Group had to agree on amending the terms and agree on the “stand still” arrangements with the lenders in order to enable the transaction to proceed. The repayment of the debt has been postponed and will be effected with the assistance of Advent, both through equity funding and debt refinancing.

CEELM: Was there any part of the process that was unusually or unexpectedly easy?

CMS: The process itself was rather standard. However, what made it different from others was the scale of Integer’s operations and the financial condition of the Group. We had to beat the clock and only managed to be successful through the hard work of everyone involved, including Integer’s management board, [and] its key employees and advisors. 

CC: I think that both tender offers went very well. After settlement Advent and Mr. Ralal Brzoska controlled over 90% of shares in both Integer.pl S.A. and InPost S.A. so we could immediately initiate squeeze-out procedures in both companies aimed at the acquisition of all of the shares held by the minority shareholders who did not dispose their shares through the tender offers. This made our life much easier.   

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

CMS: [Declined to answer.]

CC: It was a very complex deal, but Advent had from the very beginning made up its mind to pursue this investment pretty much in the manner we actually did. There were some changes to the structure we had to introduce to take account of the status of the negotiations or address certain legal issues that arose down the road that had to be made, but nothing material in terms of the overall investment concept.

CEELM: What individuals at Integer.pl directed you, Rafal, and what individuals at Advent instructed you, Slawomir – and how did you interact with them? 

CMS: We communicated directly with the management board and key employees using all available channels: email, phone and personal meetings to make the process as smooth as possible given the time pressure.

CC: The deal team we worked with directly was led by Advent Director Peter Nachtnebel in Frankfurt, and included Vincent Bergin (Legal Counsel at Advent) and Assistant Director Lukasz Golebiewski, in Warsaw. The interaction was rather tight, as the deal team wanted to be on top of all matters in the transaction, and thus in the most intense period we worked face to face during negotiations and internal meetings. Generally, Peter conducted negotiations. However, certain issues were negotiated between the lawyers only.

CEELM: How would you describe the working relationship with each other on the deal? 

CMS: Most of our contacts were made through email and phone calls, but personal meetings were also required. As leading M&A firms we have similar standards implemented on our projects and both teams were very professional and business-oriented. I would like to make particular mention of the great work done by Slawomir Czerwinski.

CC: The relationship with CMS has been quite good. The team led by Rafal Wozniak is very professional and generally in the know regarding the company (they worked with them for quite some time). This is not the first time we worked with them on the transaction so I knew what to expect. I do not know exactly what was the proportion of emails and phones vs. in person meetings, but definitely we had a lot of interaction with them. The transaction is very complicated so we had to negotiate quite a lot of documents and at times we were almost in a constant contact with CMS.

CEELM: How would you describe the significance of the deal to Poland? 

CMS: Integer is a leading postal and APM operator. I believe that with Advent’s support it could become a global player. 

CC: I would not say that this was a mega deal in Poland. The transaction received a lot of attention due to Mr. Brzoska’s involvement and the fact that, according to rumors reported by some media, his relations with certain investors are less than perfect. Moreover, the transaction is generally rather complicated, with two tender offers in parallel and a complex restructuring of certain investors of the group to Luxembourg, so a number of major law firms with presence in Poland has been involved and therefore the deal received a lot of publicity in the legal world as well.

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Jeffrey McGehee is an American lawyer living and practicing as a Partner at Squire Patton Boggs in Prague. He received his law degree from Baylor University in Texas in 1989 and moved to Central Europe in 1996. 

CEELM: Run us through your background, and how you ended up in Prague.

J.M.: I am a Texas native (born and raised) and worked as a young lawyer at a large firm in Dallas. After a few years, I was pretty bored with the practice there and ultimately decided to try and work abroad (speaking no foreign languages and, as every recruiter told me, with “quite limited” travel experience). It was 1996, and fortunately there were opportunities for expat professionals in Central Europe. I was able to find a job in Prague with Squire Patton Boggs (then Squire, Sanders & Dempsey) and have been with the firm ever since.

CEELM: Was it always your goal to work abroad? 

J.M.: When I started working, I don’t think I even knew that working abroad was a thing. But a year before I moved to Prague, I was put on a rare international project for my Dallas firm and ended up spending about 6 weeks in Taipei. I loved both the challenge of working in a foreign business environment and the culture shock of living somewhere very different. I was immediately hooked and went back to Dallas having decided an overseas assignment was my goal.

CEELM: Tell us briefly about your practice, and how you built it up over the years. 

J.M.: My practice is business transactions (both corporate M&A and real estate), usually involving foreign law or an international counterparty. I have been fortunate to have a great diversity of projects over the years, both substantively and geographically throughout CEE. Practice growth, of course, arises from the business relationships you develop over time, just as it does anywhere else. The challenge as an expat in a market like the Czech Republic is that foreign interest ebbs and flows over time, and foreign players in the market change often, so you must constantly be developing new contacts.

CEELM: What do your clients appreciate most about you? 

J.M.: I am generally interested in learning about a client’s business or industry, which I think is appreciated by the client and also important to providing them the best possible legal advice. Like most good lawyers, I try to be practical and commercial. And with experience comes the ability to quickly separate the wheat from the chaff and not to become fixated on minor points at the expense of the client’s ultimate goals.

CEELM: Do you find Czech clients enthusiastic about working with foreign lawyers, or — all things considered — do they prefer working with local lawyers? 

J.M.: I guess that depends on the individual client, but I don’t think most care. Clients simply want the best, most effective counsel available to them. If I wasn’t resident in Prague or elsewhere in the region with substantial experience here, then I guess nationality might be a factor but really only in that it would relate to relevant experience. And with deals involving a cross-border element (which is the majority of my work), I think being an American lawyer is an advantage.

CEELM: There are obviously many differences between the Czech and American judicial systems and legal markets. What idiosyncrasies or differences stand out the most?

J.M.: While Czech law has evolved, it remains more formalistic than US law and less forgiving of technical errors or omissions. There is more uncertainty in Czech law; it’s newer and not as extensively developed and court-tested as US law, which is a large part of the reason practice here has been very interesting over the last 20 years. Americans are very litigious, which leads to longer contracts attempting to address every possible risk scenario. There are pluses and minuses to both systems. 

CEELM: How about the cultures? What differences strike you as most resonant and significant? 

J.M.: Czechs are generally more reserved – just listen to a group of American tourists roaming Prague. They are more formal in personal and business relations and tend to be more respectful of institutional hierarchy. I think Americans are sometimes better at creative thinking and trying to find solutions “outside of the box,” but the gap has definitely narrowed over the years. I would still give Americans the advantage when it comes to customer service. 

CEELM: What particular value do you think a senior expatriate lawyer in your role adds — both to a firm and to its clients? 

J.M.: Many of our deals are governed by laws other than those of the Czech Republic, in which case I have more experience than the majority of Czech lawyers. But even on domestic transactions, I believe an expat adds a slightly different (and useful!) way of thinking and approach to issues. For international clients, the Czech Republic is often an unknown market. As an American, I provide some intangible comfort to that “foreignness” as well as help explain the differences (and the reasons for them) between the Czech legal process and that with which a client is familiar at home. 

CEELM: Outside of the Czech Republic, which CEE country do you enjoy visiting the most? 

J.M. All of them of course! I do think each country has something interesting to offer people who like to travel and enjoy different cultural experiences (especially when you get to work there – you get a very different perspective). That said, my children are half-Slovak so I have a special relationship with our neighbor to the east.

CEELM: What’s your favorite place to take visitors in Prague? 

J.M.: For me, Prague is a city that is most enjoyable when you just roam about – incredible architecture, cobbled streets, spires everywhere, a castle on a hill. It is exactly what an American imagines when he thinks of Europe. So I typically take visitors to places where they can see the city – current favorites (given spring weather) are the Letna and Riegrovy Sady parks where you can escape the crowds, have a lovely view of the entire city and, of course, drink any number of beers.

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Deal:  On February 16, 2017, CEE Legal Matters reported that Glatzova & Co. had advised Denemo Media s.r.o. on its acquisition of a 50% shareholding in FTV Prima, with Allen & Overy advising Modern Times Group, the seller. Denemo Media is a Czech joint venture between Alphaduct, a.s. (with 75% ownership) and GES Media Asset, a.s. (with 25% ownership). Alphaduct, a.s. is owned by Czech businessman Vladimir Komar. GES Media Asset a.s. is part of the GES Group, which already owned 50% of FTV Prima Holding.

The Players:

• Glatzova & Co.: Jiri Sixta, Partner

• Allen & Overy:  Hugh Owen, Partner

CEELM: How did you each become involved in this matter? Why and when were you and your firms initially selected as external counsel? 

J.S.: I was recommended to Mr. Vladimir Komar [the owner of Alphaduct, a.s., which owns 75% of Denemo Media a.s. – ed.] by his transactional advisor as someone who had broad transactional experience in the media market.

H.O.: We have worked for MTG for as long as I can remember (at least 15 years), first in Russia and then in the Czech Republic, Bulgaria, Hungary, Latvia, and the Netherlands, as well as on other contemplated transactions across pretty much the whole of CEE. We also worked for MTG on their entry into FTV Prima so it made sense to use us for this transaction too.

CEELM: What, exactly, was the initial mandate when you were each retained for this project? 

J.S.: To prepare (together with transactional/tax advisor) the most effective structure for acquisition of 50% of shares in FTV Prima Holding a.s. (FTVPH).

H.O.: We were retained to assist MTG to evaluate its options for the Czech business, principally exit options and therefore ultimately on this exit.

CEELM: Who were the members of your team, and what were their individual responsibilities? 

J.S.: As the project was extremely confidential, our team was small. There were only four individuals: myself, Jan Vesele (Managing Associate), Gabriela Praskova (Senior Associate) and Nela Zelenkova (Associate). Nela, working under Jan’s supervision, was primarily involved in the legal due diligence of the FTVPH group, including FTV Prima s.r.o. (“TV Prima”). I and Jan were involved in negotiations and drafting of transactional documentation. Gabriela was responsible for filing with the Czech Anti-Monopoly Office.

H.O.: We got the instruction on the last day before my sabbatical last year so originally our London team took the instruction (Lisa Goransson, Head of our Nordic desk [MTG is a Swedish company], and Marton Eorsi, a Senior Associate of mine in Budapest who had done lots of MTG work and then moved to London and now works with Lisa). Later on, it was a relatively small team but included me as the M&A Partner, Prokop Verner (Counsel), and then Magda Pokorna as the Senior Associate coordinating the transaction as a whole, as well as Ivana Dobiskova and Iva Bilinska in Prague on antitrust aspects. Jana Svarickova assisted on some media regulatory aspects. 

Charles Andersson from the Hamilton law firm in Stockholm advised on Swedish law aspects.

CEELM: Please describe the final acquisition in as much detail as possible: how was it structured, why was it structured that way, and what was your role in helping it get there?

J.S.: Mr. Vladimir Komar (via his holding company Alphaduct, a.s.) established the special purpose vehicle Denemo Invest s.r.o. Denemo Invest s.r.o. then established a joint venture with GES Media Asset, a.s., called Denemo Media s.r.o., which is controlled by Denemo Invest, s.r.o.

Denemo Media, s.r.o. subsequently acquired 50% of shares in FTVPH from MTG Broadcasting AB (MTG). The remaining 50% shares of FTVPH is owned by GES Media Europe B.V.

We were involved in the legal due diligence of the FVTPH group (including TV Prima), the establishment of the JV (the other JV partner was represented by Ludmila Kutejova of the Kutejova, Marsal, Briasky law office), and the negotiation of the entire deal with MTG on behalf of Denemo Media s.r.o. (in cooperation with Ludmila Kutejova) as well as negotiations with the financing bank (CSOB). 

Finally, we handled the clearance of the transaction with the Czech Anti-Monopoly Office.

H.O.: It was on the face of it fairly simple, as it was the sale of a 50% stake to a purchaser in which the other 50% shareholder held a minority stake. We also needed to regulate the sale of the stake pursuant to the shareholders’ agreement to ensure compliance with Swedish law. In order to ensure certainty of funds there was also a Debt Commitment Letter and an Equity Commitment Letter. Finally there was an escrow agreement to ensure funds flow at completion to secure a delivery versus payment mechanism for the transfer of the shares.

CEELM: What was the most challenging or frustrating part of the process?

J.S.: Confidentiality was the key factor in the transaction. There were other parties interested in acquiring TV Prima, and we had to work in such a way that no one knew what was going on until the deal was signed.

The only frustrating part of the process was that our team was not able to participate in the regular skiing trip organized by our office. While the rest of the Glatzova team enjoyed three days of fresh snow and sunshine in Austria, we were working around the clock in order to finalize the transactional documentation.

H.O.: The timing of the transaction was challenging. The deal was signed two weeks from the circulation of the first draft of the SPA. This intense timing required all parties involved to be constructive and approach the negotiations with a commercial mind set.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?

J.S.: As all parties wanted to close the deal as soon as possible, the deal was completed very quickly. It took only approximately five weeks from commencement of the legal due diligence to signing of the SPA.

I was surprised that even negotiations with CSOB (which was represented by Baker McKenzie) were relatively smooth. Baker was very flexible and cooperative – which is not a common approach of lawyers representing banks.

H.O.: Not really… Is there ever?

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

J.S.: We were hired as a transactional legal advisor, and we fulfilled that role. The only task that was not initially anticipated was representing Denemo Media, s.r.o. in negotiations with CSOB as the financing bank.

H.O.: It fairly quickly turned into a bilateral process, so the focus was keeping competitive tension and getting the deal done as soon as we could.

CEELM: What individuals in Denemo Media directed you, Jiri, and what individual at Modern Times Group directed you, Hugh – and how would you each describe your interactions with your clients?

J.S.: Due to sensitivity of the transaction, we mostly worked directly with Mr. Vladimir Komar. Given the dynamics of the transaction, there was not space for regular meetings. Our meetings were held ad hoc as needed – in our offices, in the offices of the JV partner (GES), at Baker McKenzie (with respect to financing), and of course in Allen & Overy’s offices.

Mr. Komar likes to give “general direction” and is ready to solve most important/critical issues, but he leaves the details to be handled by lawyers. Therefore, he usually participated in the key part of the negotiations but quite often left and let the lawyers earn their fees.

H.O.: We were instructed by the former Head of M&A at MTG. He has now moved on, but we retain a good relationship with the GC and also with the replacement in-house M&A counsel. MTG also have a deal execution team member who gave us day-to-day instructions and ran the negotiations. We have also known him for some ten years or even more.

We have a very good relationship with the client team that instructs us. As mentioned above, we have known them for a long time, but I hope it is also OK to say that the Swedes are very direct, practical, and no-nonsense. This really helps us to get things done quickly and efficiently. They know their business extremely well, so we get very relevant and useful feedback and instructions. They are experienced in M&A, so all the discussions are based on a shared platform of knowledge on all the usual M&A sticking points, and we are able to decide on issues with shorthand discussion.

CEELM: How would you describe the working relationship with your counterparts at Allen & Overy, Jiri, and you with yours at Glatzova & Co., Hugh?

J.S.: I think that we established a very good working relationship with Allen & Overy, represented primarily by Magda Pokorna. Obviously, there were difficult tasks (caused primarily by the fact that MTG is a listed company and there were certain internal processes to be followed) but at the end, we always found a mutually acceptable compromise. 

There were a couple of phone calls, but the vast majority of work was done personally in meetings. I would say that final negotiations took approximately one week – but it was a very intensive one.

In the SPA, we agreed to consult with Allen & Overy (as representatives of the seller) regarding all our submissions and steps towards the Czech Anti-Monopoly Office. Even at this phase of the transaction, they were prompt and cooperative. 

H.O.: As mentioned above, the negotiations were intense and lasted less than two weeks. G&Co focused on material issues, and the process was smooth; they were very responsive both on the phone as well as in the meeting room. Decisions were made quickly. The negotiations took place until the very day of signing, but this was mainly due to the added complexity of the escrow and the involvement of the purchaser’s financing bank and the escrow agent.

CEELM: How would you describe the significance of the deal to the Czech Republic? 

J.S.: This deal was the biggest deal on the media market in the Czech Republic for the last several years.

H.O.: The target group is the No. 2 private TV in the Czech Republic. The deal was the biggest media transaction in the Czech Republic in the last three years.

By Jiri Sixta, Partner, Glatzova & Co., and Hugh Owen, Partner, Allen & Overy

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As consumers conduct an ever-increasing amount of their shopping and banking on-line, the digitalization revolution is having a significant effect on both industries, and payment service providers – companies offering online services allowing merchants to accept electronic payments by, among other forms, credit cards or bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking – are working with both merchants and banks to facilitate their operations. 

Schoenherr’s Prague office has developed a strong practice in the Czech Payment Services field in recent years, led prominently by Partner Vladimir Cizek. We reached out to Cizek for information about his team’s expertise in the sector.

CEELM: What’s Schoenherr’s experience in the Payment Services sector in the Czech Republic? What sort of deals and client matters has your team worked on in recent years, and what expertise/assistance are you able to offer clients?

V.C.: We have built a strong payment services practice and track record in recent years, mainly based on assistance we have provided to major merchants acquiring businesses’ disposals driven by the introduction in 2015 of the EU’s Interchange Fee Regulation (the “MIF Regulation”), which was designed to address varying and often excessive hidden interchange fees, and on providing day-to-day advice and counsel to clients on payment service matters.

CEELM: In general, what is the current state of compliance with the 2007 Payment Services Directive – designed to regulate payment services and payment service providers throughout the EU – as revised in 2015 by PSDII? 

V.C.: In a nutshell, the PSDI has been duly implemented in the Czech Act on Payment Services, though naturally there are some exemptions. Generally, the PSDII will strengthen consumer rights, including extending the protections of consumers against fraud, abuse, and other payment problems. Also, the promotion of innovative mobile and Internet payment services may materially impact current bank operations. Third party providers will be allowed to manage customer finances by, for instance, procuring payments or analyzing spending habits and will gain access to customer data kept with the bank via an application program interface. In practice, these third-party providers will create an additional layer of services in bank infrastructure. This will have irreversible and a super-material impact on payment services as we see them today, and current service providers will need to rethink their commercial approach.

CEELM: In 2016 EVO Payments entered into a payment card acceptance alliance with Raiffeisenbank in the Czech Republic, and Worldline entered into a similar agreement with Komercni Banka – both of which your team worked on. Do you expect to see more such deals in 2017 and in the years to come, or are most necessary alliances already in place?

V.C.: Practically, these are one-off deals resulting from the MIF Regulation, as banks were not able to tackle lowered fees as required by the regulation, so they decided to dispose of their merchant-acquiring businesses to monoliners who process much greater numbers of transactions and thus can generally achieve better profitability. Alliances have been formed, and now we may see a phase of merchant migration – that is, merchants being switched from one original operating platform to the operating platform of the alliance partner. This will also have an impact on contractual arrangements in some cases. Alternatively, some banks have decided to in-source merchant acquiring (within their groups).

CEELM: What were the more challenging aspects of the Raiffeisenbank/EVO and Komercni Banka/Worldline deals?

V.C.: On the Raiffeisenbank//EVO deal we had to combine knowledge of traditional M&A with substantial add-ons concerning Payment Services regulation (for instance, issues related to licensing regimes, transfers of existing customer contracts without “wet” signatures, clearance from the Czech National Bank, the legal implications of asset deals needing to be closed all at once, and so on). Ultimately, the regulatory/payment services element played a more important role than the M&A part. 

On KB/Worldline, we provided assistance specifically for the transfer of the client portfolio to the JV entity and contemplated post-closing migration; again, M&A was not core, but we saw that the parties were not really thinking through such relevant matters as transferred enterprise determination, liability issues, consideration of BINs/ICAs’ transfers within card schemes, problems with the merchant portfolio transfer, and so on.

 

All in all, what we tested here as pioneers were two things: (i) introducing third-party merchant contracts (a JV entity without a payment institution license plus a JV partner entity with a payment institution license providing services on a cross-border basis); and (ii) finding a solution for an asset deal involving the transfer of (part of) an enterprise otherwise requiring a submission to registration with a commercial register (here, by having a public notary make a remote on-line submission in real time). Essentially, we introduced a three-party merchant contract model based on the opt-out rule under the PSD (i.e., adding one more party without needing to re-create the entire contractual package). Also, since each transaction involved transferring part of the enterprise we developed a legal route that allowed us to instantly achieve legal effect while still complying with laws providing that transfers of parts of enterprise to parties registered as entrepreneurs in the Czech Commercial Register are effective only when handover protocols are lodged in the acquirer’s Collection of Deeds. This allowed us to tie closing to a specific moment without needing to rely on a court official submitting the document into the Collection of Deeds; this tool can be used in any transfer of part of enterprise.

By Vladimir Cizek, Partner, Schoenherr Prague

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.