In the past year, Danish company Flugger has begun a significant expansion across Europe and Russian-speaking parts of the world. We reached out to Flugger General Counsel Torben Schwaner Dehlholm to learn more about the company’s business and expansion, as well as its M&A strategy and in-house legal dynamics.
CEELM: Please tell our readers a bit about Flugger’s history and where the business is right now.
Dehlholm: Flugger was established way back in 1783, and since the 1950s it has been owned by the Schnack family, operating successfully since then. It became publicly listed and entered into trade in the 1970s, but it still remains a family-controlled business – since the spring of 2021 with Sune Schnack as the CEO. Flugger has, historically, operated mainly in the Nordic region, but it has begun expanding out into other markets, including China and Eastern Europe. Most notably, with the recent [2020] acquisition of the Eskaro Group, we expanded into Finland, Estonia, Latvia, Russia, Ukraine, and Belarus.
Today, the Flugger Group has more than 2,600 employees. Flugger has production facilities in eight jurisdictions, more than 20 companies in 13 jurisdictions, and exports to more than 50 jurisdictions worldwide. Flugger successfully offers its products via e-commerce, DIY stores, and the Flugger Decor retail chain, with more than 400 stores.
Also, Flugger is on a green journey – with the goal of overhauling our entire value chain, all the way from inventing products, through logistics lines, and up to selling the products. The idea is to comprehensively focus on an ecosystem of sustainable growth and development in every aspect of the business. This heavily impacts the tasks in our Legal & Compliance team.
CEELM: We last talked in January 2020, when Flugger expanded with Unicell in Poland, and Flugger has since acquired both the Eskaro Group and e-commerce paint supply provider Malgodt. What did these transactions bring to the table?
Dehlholm: We wanted to expand in order both to widen and increase our presence and focus on more locations. The directions in which Flugger is heading now, when it comes to new markets, is the furthering of both European and Russian operations and a focus on continuous growth, while at the same time developing all our present sales channels and developing new markets. Following our Eskaro expansion, which gave Flugger a foothold in the Russian-speaking markets, we plan to establish a strong local presence, but also to keep expanding the local business to adjacent markets.
Now, from a legal perspective, I have to say that these expansions went off without a hitch. Not saying that each M&A transaction is not a massive task – but we had the legal foundation ready for the newly acquired companies. For the near eight years that I have been with Flugger, we have been working hard on establishing a Legal and Compliance setup, including using systems to foster a strong legal organizational foundation for the business to expand. All systems, processes, and policies we developed within our legal department are prepared to scale. An in-house legal function should always be prepared to support the goals of the business. In that regard our foremost objective is to have a strong legal and compliance set-up that never stops the business – but, to the contrary, provides a solid legal foundation on which the business can thrive. The legal and compliance function should never be solely a cost – it should be a strategic advantage of the business.
While this was a lot of work, especially given Eskaro’s size, it was a quite controlled process, in which we used both our in-house lawyers and an excellent local law firm in each jurisdiction. Weronika Achramowicz, from Baker McKenzie Poland, was our highly skilled and valued legal partner, assisting with both the massive cross-border due diligence and the drafting of agreements.
What is new for the legal and compliance team post-acquisition is that, even though we had a strong legal team [to assist] with this to-an-extent organic growth, we still needed some ‘boots on the ground’ so we now have team members both in Russia and Ukraine. This brought the total size of our legal team to eight, with a continuous evaluation of whether this is sufficient.
The new jurisdictions we now cover directly are well-positioned to have a strong platform, and their quick integration into our legal processes is a good thing. Flugger and Eskaro can continue to focus on business operations knowing that a solid legal foundation is in place.
CEELM: What would you say was the most complex legal element you had to explain or translate to management?
Dehlholm: There were several interesting areas where careful threading was of the utmost importance. Besides the obvious goal of wanting to acquire a strong business, from a legal standpoint what we were most keen on pursuing was ensuring high levels of compliance, both with the regulatory framework and with our own code of conduct and social responsibility. It was my job to make sure that each new acquisition could adhere to the same requirements immediately, or as soon as possible. In addition, the new business should fit into our green strategy. Of course, there is a need to localize and zero-in these requirements to each local jurisdiction. Even with Flugger being a Denmark-listed group, room had to be made for specific local adjustments as well. There are, naturally, the bright-lines of what is legal and what is not, but different markets require different approaches in an effort to achieve this, given the various legal frameworks and historical approaches to work.
To understand fully how something is done locally, and why, we had to understand the crux of our target’s business before we began transformational work. We had to, simply put, learn new things before we could impart our lessons to others.
And, given the size of Flugger’s entire operation right now, we had our work cut out for us. The entire company did, but especially finance and legal, with global responsibility for the group.
CEELM: As the company continues growing, how has your position as GC changed? In what directions do you see it evolving? And how has this impacted your day-to-day activities?
Dehlholm: I have been with Flugger for close to eight years now. I first began as the sole lawyer in the group. We grew to a mid-sized legal team with an ever-growing number of responsibilities and jurisdictions. Today, we cover in the range of 20 to 35 different areas of law per jurisdiction – so that simply sums it up. And now more than ever, with all the expansions and acquisitions, the legal and compliance team is doing more and more work.
Naturally, as things developed, my daily tasks changed too, and the role grew into a more strategy-oriented position. My job now is to see that all team members are performing their tasks up to par and that the business strategy of Flugger is legally sound and prudent. It has been extremely interesting and, honestly, quite challenging, exciting, and fun to be a part of this journey. Also, now, to be involved with the crafting of different go-to-market strategies as well as wider business strategies – it is a very dynamic position!
The bottom line is that, from this position, I can and must make sure that every single business decision Flugger makes is supported by and built on top of a strong foundation and that each new contractual obligation that we undertake opens more options and poses no hindrances to present and future corporate operations.
CEELM: What is Flugger’s strategy now? Where do you plan on expanding next?
Dehlholm: You could sum it up in three broad directions. First, we seek to increase our presence in the e-commerce sector and be a much stronger player in that field. To that extent precisely we recently acquired Malgodt, a primarily online-operating Danish company.
Second, our M&A strategy remains to keep growing both organically in the markets in which we already find ourselves, and to keep looking at other markets for potential openings. We wish to be quick on our feet, ready to explore any potential avenue for expansion that presents itself, and grow omnidirectionally.
Finally, the dream is, as I mentioned earlier, to tailor all our operations to our green journey overhaul. To keep going in the right direction and continue with our efforts to usher in a more sustainable development environment.
This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.