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Interview with Cigdem Dayan, the Chief Legal Counsel at ING Bank Turkey.

   

Cigdem Dayan

 CEELM: You started your career at Yapi ve Kredi. How did you get to ING?

CD: I started with Yapi ve Kredi in 1990, June, as a lawyer. And step by step I moved higher. And lastly I worked for Yapi Kredi as a Senior Vice President, and 2006, February, I transferred to Oyak Bank as an Executive Vice President. ING bought Oyak Bank shares, and one year later, the name was changed.

 CEELM: Why did you move to Oyak Bank?

CD: Koc Group bought Yapi Kredi and the structure was not clear. And the job that Oyak Bank offered me seemed a better opportunity for me.  

 CEELM: You never worked in a law firm. Some people think that working in law firms provides a basic level of training and exposure to a wide range of work, and that is useful for training and experience and development. Do you regret not having that experience, or was it not so important for you?

CD: I didn’t prefer it, because in 1990, Yapi Kredi was like a school. I learned lots of things at Yapi Kredi. I had the chance to see different cases, and it is a big bank, so …

 CEELM: Was it a big legal team?

CD: Yes. Working in a big bank gave me an opportunity to see interesting and different cases, and I gained a lot of experience.

 CEELM: So in some ways it was like a law firm – you got to learn a lot of different things?

CD: Yes. It was like a big law firm.

 CEELM: Does that mean that coming out of university you knew you wanted to work in banks?  That’s all you’ve done.  Did you know you wanted your career to be as a banking lawyer?

CD: When I went to university I thought I would stay in academia.  My professor wanted to work with me.  But I waited a long time for an open position.  Nearly one year I waited. At that point I thought, “maybe I’ll try to work outside,” and I applied to banks. Yapi Kredi called me, and I accepted their offer, and six months later a position opened at the university, and my professor called me – but I said “no, I like it here. I prefer to work with the bank.” [laughs].

 CEELM: So you didn’t think, “I’m going to be doing this for the next 20 years of my life”? You liked it, and …

CD: First I thought, “maybe five years will be enough for me.” [Laughs]. “Five years later I’ll move.”  But I couldn’t do it.

 CEELM: You’re still here.

CD: Yes, I couldn’t do it. Because I  do like it.

 CEELM: That’s my next question. How would you describe what you do?  I know you’re the Chief Legal Counsel.  But what do you do? What is your role in the bank, in your own mind?

CD: I and my colleagues are interested in all cases, all law suits all litigation against the bank or by the bank and legal follow-up, labor law, and consultancy, and all branches and the head office.  So we are interested in all of the bank’s legal issues. Of course sometimes we take a … oh, how can I explain … for instance, the Capital Markets Board is a very special area, and Competition Law is a very special area, and we have a consultant – an outside consultant to help with those matters.   

 CEELM: I want to ask a few questions about how you work with outside lawyers. How do you decide what work you keep inside the bank and what work you give to external counsel? When do you give work to external counsel?

CD: Two reasons. One is, if the subject is “specific” and requires a different expertise – for instance, as I mentioned before, matters involving the Capital Markets Board or Competition Law. These are very specialized areas, and Intellectual Property law is another one. We have external counsels to assist us on these subjects. Also for enforcement of non-performing loans, we work with outside law firms. Not counsel. Law firms. Not only in Istanbul. In different cities.

 CEELM: You have law firms in these cities you work with?

CD: Yes, local law firms. We prefer to work with local law firms.

 CEELM: Do you select the firms that you work with yourself?

CD: My colleagues – some of my colleagues – go to different cities in all over Turkey, to check the law offices we engage with, their office space, their equipment, how many people work with them.

 CEELM: These are some of your colleagues?

CD: Yes, I have an investigative team.

 CEELM: Really? That investigates the law firms?

CD: Yes. After we start to work with an external lawyer, for instance one year later, my colleagues make a visit plan. 

Political stability within a market has always been at the top of the list of investor criteria. But after three months of turmoil, public protest, and sporadic violence, Ukraine’s political system is anything but calm. CEE Legal Matters reached out to Ukrainian practitioners to see how they expect the upheaval to affect their M&A practices in 2014.

Business as Usual?

According to Denis Lysenko, Partner and Head of the M&A Practice at Vasil Kisil & Partners, the last quarter of 2013 had the market buzzing over the expected signing of Ukraine’s association agreement with the EU, which was generating “substantial interest in both investments towards Ukraine and of domestic companies towards outside the country”.  As the world knows, that plan was dropped unexpectedly, catching even the political and economical elite by surprise, and triggering the popular backlash that the media has been covering for the last few months. 

 

Mykola Stetsenko, Managing Partner, Avellum Partners

Despite the sudden change, the month of December did not necessarily worry M&A lawyers in the country. “Until probably December the political turbulence meant business as usual in Ukraine. Political life here has never been boring, so people were accustomed to it. Granted, it was not helping much to make the country look more attractive but to some extent, businesses were not affected and it was not the key issue that investors were taking into account at the time”, states Taras Dumych, Kiev’s Office Managing Partner at Wolf Theiss. 

At the same time, Vladimir Sayenko, Partner at Sayenko Kharenko, emphasizes that the situation on the ground is not really as violent as portrayed in the media. Yes, there are protests in parts of the city but “walk for 5 minutes away from it and you will find yourself in a serene environment where children are happily playing outside.”

 

Maria Orlyk, Local Partner in Ukraine’s, CMS Reich-Rohrwig Hainz

Even taking the fish-eyed lens of the media and a not-uncommon element of political upheaval into account, however, the consensus seems to be that in January, real signs for concern appeared. The Prime Minister resigned on January 28, uncertainty with regards to the state budget and public financing for the year became apparent, and the national currency underwent a considerable drop in value. As this point most people agree that 2014 is likely to be an extremely challenging one for the M&A market in the country.

The Invisible Hand at Work

“Aggravating political instability is obviously influencing business and the investment climate in general”, explains Sayenko. He goes on to say that “we can already see that unstable Ukraine has become a lot less attractive to foreign investors. Even excessive regulatory pressures on business which we saw in the past years were a lighter investment constrain than political instability.” 

 

Margarita Karpenko, Managing Partner Ukraine, DLA Piper

According to Margarita Karpenko, DLA Piper’s Office Managing Partner in Kiev, the uncertainty in the market has resulted in potential investors either suspending transactions or revisiting the commercial terms of existing deals to accommodate for the increased risk. At the same time, the market is witnessing more and more businesses trying to pull out. 

However, the current political and social turmoil makes even withdrawal difficult Mykola Stetsenko, the Managing Partner at Avellum Partners, points to instances such as Raiffesen Bank having a hard time identifying a buyer willing to gamble on the market at the moment. 

In fact, Dumych projects that M&A in the Banking industry will be amongst the hardest hit: “Banking and all the industries where there is a strong element of foreign currency leverage are under greater pressure because investors are concerned about the national currency losing ground, which would mean that capital or long-term debt will be devaluated after the purchase.”

 

Vladimir Sayenko, Partner, Sayenko Kharenko

Another industry that stands to be heavily affected is FMCG. Stetsenko points out that during unstable times “people simply tend to save” meaning that premium FMCG companies will feel the blow. However, Sayenko argues, “it will be the small and mid-sized businesses that will be hit the worst, as they largely depend on short-term consumer behaviour and cannot wait for the country to recover”, especially since many of them target the Russian market and how that relationship will evolve is uncertain.” 

At the end of the day Karpenko makes the point that any deal, irrespective of industry, is driven by commercial considerations that factor in the risk level of the market and, as a result, it is likely that every M&A transaction in Ukraine in the current climate will see investors willing to pay less than before to accommodate the increased risk.

There is Always Some Form of M&A Work 

 

Denis Lysenko, Partner and Head of M&A, Vasil Kisil & Partners

However, now all potential buyers are shying away from the market. For example, Lysenko points to Asian countries that tend to be far less sensitive to political conditions and are showing real interest. He does, however explain that, while politics might play less of a role, they “still look at the macro-economics involved and currency developments meaning they will probably be quite reluctant for a while.” He further explains that certain cash-rich domestic buyers should not be left out of the equation since they are not tied to external financing and thus less susceptible to currency fluctuations. Stetsenko further substantiates this. He expects to see a significant amount of consolidation amongst domestic players as a result of the current instability, especially in agribusiness. 

Maria Orlyk, Local Partner in Ukraine’s CMS Reich-Rohrwig Hainz office, points out that investors from Russia, one of Ukraine’s largest sources of foreign investment, remain enthusiastic about the country. Sayenko agrees. He explains that “As the largest historical partner of Ukraine, Russia is likely to play an important role not only on politics in the country, but also on the business environment” and that “large Russian business groups may also participate actively in M&A activity, buying distressed assets in Ukraine not only when this is economically feasible, but also when the Russian government encourages them to do so for political reasons.”

And investors from countries other than Asia and Russia may be interested as well. Graham Conlon, Global Co-Head of International Private Equity and Head of Corporate and M&A in Ukraine at CMS Cameron McKenna, explains that it really depends on the industry: “While investors are naturally keeping a close eye on the situation and things can move quickly in terms of investor confidence, arge energy companies,  for example,  are quite used to operating in jurisdictions  like Ukraine, and hence have the risk appetite to work through crises such as these.”

 

Taras Dumych, Managing Partner Ukraine, Wolf Theiss

Lastly, even to the extent traditional M&A slows down during and in the months immediately following the current crisis, Ukrainian lawyers expect to see an uptick in other types of work as a result of current conditions. Sayenko sees an opportunity in the larger number of distressed asset sales likely to occur, though these transactions will take place at a fraction of the value they had when those assets were originally purchased, and the question of whom the buyers will be is still unclear. At the same time, Stetsenko, foresees an increase in M&A disputes work as a result of potential buyers trying to revisit prices to accommodate the increased risk and having to resort to challenging along the lines of breach of warranties should the price adjustment formulas in the contract not apply.. Also linked to disputes, Dumych explains that clients are paying “far more attention to force majeure clauses since people understand the chance of these occurring is relatively higher these days.”

What Will 2014 Bring?

 

Graham Conlon, Global Co-Head of PE and Head of Corporate and M&A in Ukraine, CMS Cameron McKenna

As Conlon puts it, “nobody has a crystal ball to tell how well things will progress.”  Sayenko as well, when asked what he advises clients to do in this climate, answers: “as a lawyer, I try not to give political advice.” The general consensus among all the partners we spoke with is that what the market will look like in 2014 depends almost entirely on the political class – one of the most volatile elements in the country at the moment. As a result, when we spoke with Karpenko, she admitted to being particularly unexcited at the prospect of initiating the “almost impossible task” of planning a budget for this year. 

Seen from the outside, Ukraine holds a lot of potential and stands to capitalize on it immensely if it stabilizes. Conlon has a final word. “What Ukraine is currently going through is both exciting and scary at the same time.  Ukraine is the last big emerging market in Europe, and  it has not seen anywhere near the  level of  investment that has flown into other like countries in the past two decades. If this crisis results in something positive therefore, then the potential upside is unfathomable.” 

For every international law firm that decides to make a tactical withdrawal from or a strategic restructuring in CEE, there’s another that decides the time is right to expand their presence in the region. And two American law firms, with two very different models, have recently added CEE experts to their teams and taken significant steps towards expanding their presence and capabilities in Europe’s emerging legal markets.

“I think if you look at our clients in the sectors of financial services and private equity and venture capital, our clients continue to expand their reach globally. Both clients we’ve represented in the UK and US look at that region as a growth region. So for example the insurance and reinsurance industry and the insurance broker industry is very excited about that region and sees Turkey as a natural hub in which to expand services. We know from our private equity and venture capital teams that that is a place that is ripe for inward investment” — Alan Levin, Chairman, Edwards Wildman

   

Alan Levin, Chairman, Edwards Wildman

Edwards Wildman Launches “Hub-and-Spoke” Strategy in CEE

In May of 2012 Edwards Wildman adding long-time CEE expert Ted Cominos to its team. Cominos, whose expertise in and contacts throughout CEE are well-established, helped the firm open an office in Istanbul in September of last year, where it now works in strategic cooperation with the Turkish Ismen/Gunalcin law firm. Edwards Wildman thus became the first American or English firm since White & Case in 1985 (and the first since the 1989 fall of the Iron Curtain) to make its first CEE office in Istanbul, a demonstration of that market’s emergence as a regional hub. 

Cominos brings a long-standing passion for CEE and extensive experience in the region to Edwards Wildman. He was Linklaters’ Head of Private Equity for Central & Eastern Europe and a leader of the firm’s famous CEE “Flying Team” based out of Bucharest in the mid-2000s, and then applied his substantial expertise and contacts for two years with CMS Cameron McKenna before joining the 600+ lawyers working at Edwards Wildman. 

In May of 2012 Edwards Wildman adding long-time CEE expert Ted Cominos to its team. Cominos, whose expertise in and contacts throughout CEE are well-established, helped the firm open an office in Istanbul in September of last year, where it now works in strategic cooperation with the Turkish Ismen/Gunalcin law firm. Edwards Wildman thus became the first American or English firm since White & Case in 1985 (and the first since the 1989 fall of the Iron Curtain) to make its first CEE office in Istanbul, a demonstration of that market’s emergence as a regional hub. 

And the new Istanbul office – the firm’s only on continental Europe – is the firm’s 12th overall, including eight in the United States, plus London, Hong Kong, and Tokyo. Cominos explains that the firm’s strategy is carefully considered. “We’re not going to be a firm that’s going to be in all places globally, but we will choose good strategic centers in which to service our clients globally, and between London and Hong Kong, Istanbul is the most natural center for us to have a presence and to build upon.” And, he notes, the firm is hardly the first to notice the unique positioning and potential of Turkey. “A lot of the multinationals and IFIs have taken the same view that Istanbul is the ideal financial center from which to cover the region from. The IFC’s second office is there, a number of multi-nationals have put their regional headquarters in Istanbul because it’s a great hub to jump from and it’s a growing financial center. A lot of banking and other financial relationships are being headquartered out of Istanbul now.”

   

Ted Cominos, Partner, Edwards Wildman

Edwards Wildman Chairman Alan Levin is confident in the move as well, despite the recent political upheaval in Turkey. “We believe that having established a foothold in Turkey allows us to continue to serve Central Europe, Eastern Europe, the Middle East and Africa out of that area,” Levin declares, and “we are happy we are there.” He’s not unaware of the political turmoil in Turkey at the moment, but he isn’t overly concerned. “We believe there is a difference between what’s going on there politically and the economic reality of a region that’s growing. So we continue to be committed and we continue to commit resources to that region to grow the practice.”

And despite not having offices in other CEE markets, Cominos is emphatic about Edward Wildman’s reach and commitment to serving clients throughout the region. He says, referring to the firm’s Istanbul office, “we’re only a few months into this office but I think over the next six months there’s going to be a big ramp-up on our regional strategy. And we want to make that point clear to everybody. It’s not just a presence in Turkey. We’re not going to compete with just Turkish law firms, we’re going in to have a good hub-and-spoke strategy here, where we can really cover a number of markets on high-end, premium cross-border deals or complex issues and service it well without big investment in other countries.”

And indeed, Cominos is excited about Edwards Wildman’s success in serving clients across the region in the almost two years since he joined the firm, noting that “last year we had deals in Greece, Romanic, Serbia, Bulgaria, Turkey, etc., and this year we’ve already got deals tee’d up in Egypt, Romania, Bulgaria, Serbia, Moldova, Czech Republic, and a smattering of things going on in Africa and the Middle East.”  

He may find himself running into a familiar face in some of those markets – one, like Cominos’, now associated with a new firm.

“It started with a trickle in 2012, it’s building up in 2013, and I expect it will really start to hit the ground in 2014 – there’s been a huge interest from our clients, from investors – Western investors – in developing markets, and specifically Africa and Central and Eastern Europe. And the reason for that is it’s not as competitive a market, there’s still attractive pricing, and with the accession of so many Central and Eastern European countries into the EU, which gives an overlay of legal framework and regulation, there’s a little more comfort with the legalities of the local countries, and yet, you’re still getting enough of the return that it’s an improvement over Western Europe”> — Denise Hamer, Partner, Richards Kibbe & Orbe

Richards, Kibbe & Orbe Extends Reach from London and Vienna

   

Denise Hamer, Partner, Richards Kibbe & Orbe

Whereas Edwards Wildman has over 600 lawyers working in 12 offices around the world and can trace its pedigree back to the 19th century, Richards Kibbe & Orbe has 90 lawyers working in 3 offices and is approximately 20 years old. But the ability to see and respond to opportunity is not solely a function of size, and RK&O is confident the time is right to expand its reach into CEE as well.

In January 2014 Partner Denise Hamer joined RKO, thus giving that firm a well-established CEE expert of its own as it expands its distressed debt and secondary loan market expertise further east. Hamer herself specializes in finance, distressed debt, financial restructuring, and special situations, with a particular focus on developing markets. She has more than two decades of practice in the region, and before joining RK&O she worked in Societe Generale, Citigroup, and BAWAG. Most recently she was with regional powerhouse Schoenherr in Austria.

Though Hamer will officially be based out of RK&O’s London office, she will also be using Austria as a second base to manage her CEE practice. 

Richards Kibbe & Orbe founding Partner Jon Kibbe is excited about having a lawyer with Hamer’s experience and skill leading their practice in emerging markets. According to Kibbe, “we had worked with Denise obviously when she was at Citigroup and at Bawag, we knew her well, and she is the ideal candidate not only to grow the existing Western European business, but to expand our restructuring and insolvency practices and know-how to CEE.”

And Hamer’s knowledge of and passion for the opportunities in CEE was immediately obvious to Kibbe. “The thing that was exciting to us about Denise was her investment thesis on CEE.” he says. “It’s where her heart is.” He laughs that, “when I first met her I said ‘if I had a million dollars and I was a hedge fund, where would you tell me to put that money?’ She just smiled and rolled up her sleeves and said: ‘One word: Slovenia!’”  Kibbe was impressed. “I did not expect that answer … and it is the answer that makes an awful lot of sense if you understand our desire to be in markets that are emerging and where legal expertise counts, and that is very attractive to many of our clients who want to be off the beaten path a little bit, in to partner with a law firm that sourcing new opportunities, ideas, and themes.”

For her part, Hamer believes Central Europe’s time in the spotlight is now. “We recognize that our clients are chasing yield, and reward is correlated to risk, and therefore, the higher risk regions offer the greatest opportunities for return. So there is definitely, and has been since around 2009 a focus of US investors on Europe, and most recently, since around 2011 and 2012 and 2013, there has been a focus of people investing in Europe on Central and Eastern Europe. And so being very prescient and seeing this, Richards Kibbe have recognized that there is a great opportunity for us as well to support our clients, and we should follow them to Europe, and with my hire, we’re following them even beyond London. 

   

Jon Kibbe, Partner, Richards Kibbe & Orbe

We’re following them into Central and Eastern Europe. And in some cases leading them, to be honest. Because once they get comfortable with the entire risk profile, or at least they identify the risk profile, they’re comfortable to make investments there.”

Hamer doesn’t think RK&O’s smaller footprint in Europe is going to be a problem. For one thing, Hamer has an extensive network of local firms she’ll be working closely with throughout the region, and decades of experience working in an international role – she jokes that: “I’ve lived on planes my whole life, and you’d be surprised what great Christmas gifts you can get at Duty Free.” And she’s confident about her ability to serve as a conduit for RKO’s “very deep well of knowledge about what our western clients’ goals and objectives are, what their economics are, what sort of investments they’re looking at, what sort of returns they hope to achieve.” In any event, Hamer is excited about the flexibility RKO’s model provides her. “I’m really not keen to establish a huge team, because I think that lean-and-mean is the way to go now. Our clients want it, and we want it.”

Hamer has hit the ground running, and she helped prepare and organize a February “teach-in” in the firm’s New York office on distressed investing in CEE, featuring experts in the shipping, mining and Central and Eastern European real estate markets. And Kibbe explains that the firm’s clients have already taken notice of their increased capability. He says that “a number of hedge fund client have raised their hands and said ‘Eastern Europe is going to be interesting.’ We are hoping it is a solid trend … it makes a lot of sense for us.”

Of course, talk to ten different law firms, with ten different client bases, ten different internal structures, and ten different philosophies, will get you – at least – ten different strategies for how best to serve clients around the world, and  – at least – ten different opinions about where best to allocate resources.  But as far as Hamer is concerned, the developing markets of CEE are where the action is. “I’m kind of a contrarian,” she says, and “my whole perception of the world is contrarian. And where other people see risk, I see opportunity. And the issue is not to be afraid of the risk. It’s simply to identify the risk. And to optimize the deal in spite of the risk.”

The international Eversheds Law Firm has published its third in a series of reports focusing on the future of the global legal market. Titled “21st Century Law Firm: Inheriting a New World”, the new report looks specifically at what the next generation of lawyers wants from their future careers and from their employers, and how they see the profession ten years from now.

   

Krzysztof Wierzbowski, Managing Partner of Wierzbowski Eversheds

The firm spoke to some 1800 young lawyers (23-40 years old) around the world to take a snapshot of the sector’s future leaders.

The responses revealed a driven, ambitious, and mostly satisfied group of young professionals. While they have much in common with previous generations, the report found, there is a great deal they would like to change. 

The report found that young lawyers feel the partnership model is out of step with modern business practices, and they would like to reshape the legal profession in key areas so it becomes more like a commercial business. Engaging and connecting with clients is key. In Europe, 71% of young lawyers would like to become partner, while 29% do not have this ambition. For CEE countries the number hoping to make partner rises to 78%. 

On average for all regions, the majority (68%) of lawyers still want to become a partner, although there is an important gender variation: 77% of men want to make partner compared to only 57% of women.

By far the majority of negative comments were directed at law firms’ focus on billings. Many are averse to hourly billing and the pressures it creates to work longer hours, regardless of efficiency or value to the client. These negative aspects of law firm culture were also felt to hinder positive teamwork, creativity, and innovation at law firms.

Young lawyers believe innovation is needed. They are excited by how technology will transform the practice of law and help them achieve better results, more quickly, and in different ways. The report states a belief in the fact that this generation will use technology and new business models to work more smartly and more effectively for clients.

According to Krzysztof Wierzbowski, Managing Partner of Wierzbowski Eversheds in Poland, “the global trends described in the report are also observed in the CEE legal services market. Young professionals strive to manage their time in a way that allows them to combine family life, personal interests and professional career. One of the key aspects of business success is not only recruiting the best experts, but also skillful managing of human resources, such that employees can fulfill their potential in all areas. This approach results in an increase of their effectiveness and creativity at work.”

On January 1, 2014, the new Serbian Law of Seats and Jurisdictions went into affect. Milan Lazic, Partner in the Dispute Resolution team of the Serbian Karanovic & Nikolic Law Firm, reports that the most significant effect of the new law is the change in the number of “basic courts”(which sit in the larger cities), and “basic court units”(which sit in nearby municipalities and smaller towns).

   

Milan Lazic, Partner, Karanovic & Nikolic

Traditionally, judges have been required to preside over both basic courts and basic court units. As Milica Savic, Associate in Karanovic & Nikolovic, explains, this has meant that many judges are only able to spend one or two days a week at each of the basic courts and basic court units in their jurisdictions, which has in the past led to frequent and unavoidable delays in proceedings.

Before January 1, 2014, there were 34 basic courts and 102 basic court units. Now, thanks to the new law, there are 66 basic courts and 29 basic court units. The Government’s underlying reasoning in the reform was that an improved allocation of resources would improve accessibility to courts and provide citizens with a more effective system to exercise their rights to trial. According to Lazic, as basic court units only handle civil cases, while criminal cases are exclusively heard in the basic courts, it is hoped that the increase in the number of basic courts will improve efficiency both in criminal trials and other cases.

Interview with Adam Hornyanszky, the Counsel for International Operations & Business Development at Beres Pharmaceuticals.

   

Adam Hornyanszky

 CEELM: Let’s start by telling our readers a bit about Adam Hornyznszky and his background.

AH: While many think as of me as a lawyer first and foremost, my actual first degree was in Business Administration. Only once I graduated in this field did I start law school. After receiving my law degree and passing the bar exam I worked briefly as a trainee for an international firm but quickly found out that I was missing the business side of things. 

 CEELM: Indeed, you were lucky to find a role that allowed you to leverage both your business and legal training with Beres Pharmaceuticals. What does your current role entail exactly?

AH: My official title is that of “Counsel for International Operations & Business Development”. Specifically, I am responsible with identifying and approaching potential partners outside of Hungary, following which, I need to use my legal training to negotiate and draft those international business development contracts. I do not consider myself a General Counsel really. I am more of a “special counsel” due to this dual nature of my role. 

I have to say, I love my current role as I suspect I would get bored if I were only exposed to one of the two dimensions. When I worked as a trainee in the international law firm I mentioned, I hated not seeing the business part as well. Not being truly exposed to the clients we were advising meant I lacked a thorough grasp of the operations of the business. Here I am fully immersed. I understand our business from A to Z and I am not exposed strictly to dry and boring legal work. Instead, I get the opportunity to truly understand what we do, how our business works, what our partners’ business models are and I get the opportunity to develop creative business solutions that create a win-win situation for everybody, which I then translate into a legally binding agreement. 

 CEELM: Since you mentioned it, what is Beres Pharmaceuticals’ business model and what work does it entail for you?

AH: When it comes to our international business, we have two working models. The first is opening up representative offices, such as in Romania and Ukraine, where we employ our own marketing and sales team on the ground. It made sense to follow this model in these two markets out of historical considerations. Because our flagship product, the Beres Drops, acts as an immune strengthener, especially useful for cancer patients undertaking chemotherapy, it became highly popular in Ukraine following the Chernobyl disaster. In Romania, the product, so popular in Hungary, gained a lot of traction due to the considerably large Hungarian minority present in the country. 

The second model, and the one we use a lot more often, is a natural one in light of the fact that, despite its flagship product being an internationally recognized brand, Beres Pharmaceuticals is still a mid-sized, family-owned, Hungarian company. Since the founding family wanted to avoid international financing, we chose to expand in other countries by finding partners on the ground that have a strong track record in launching products in those markets. This is the approach we took in a number of markets, including Russia, Belarus, Slovakia, Lithuania, Albania, Serbia, Montenegro, Macedonia, Vietnam, Mongolia, and others. 

The specific nature of the partnership does vary. In some cases, we look at deals where we offer them a good wholesale price on top of which they add their margins to cover their marketing and sales costs on the ground. Others include co-branding of our products with other Pharma companies on the ground. Lastly, deals might include licensing of our products to be sold completely under the partner’s name, which may or may not include clauses to our own branded products to exist in that specific market. At the same time, the scope of the partnerships differ as well as we cannot force upon our partners our entire pallet of about 70 products, especially since it is usually they, with expertise on the ground, who will know what the market will be most receptive towards.

As to what that means for me, I am the sole person responsible for managing all of these partnerships, as I mentioned, starting from identifying the best possible partners to negotiating and closing the agreements and following up on their accurate implementation.

 CEELM: I assume this is where you legal training comes in particularly useful.

AH: Yes, and no. It is definitely incredibly useful to be able to have the exploration of potential partners and the first approach under the same umbrella with negotiating the specific terms and drafting the actual contracts. In the latter, it is obviously that my knowledge of corporate and contractual law is quite useful but there are rarely other areas of law that I still use on a day-to-day basis. 

There are, of course, other legal aspects that Beres needs to address from tax to debt recovery and even, on rare occasions, litigations but those tend to be outsourced to external counsels. What is particularly useful is the dual nature of my qualification as it allows me be at the center of both of the mentioned aspects.

 CEELM: Your role entails interacting with a lot of CEE markets. Which ones do you find to be the most challenging and why?

AH: I would have to point to Ukraine on this topic. It is particularly difficult to work in the market these days due to the current unrest, but even in the past few years, the market posed quite a few challenges. Constant legislative changes are difficult to stay on top of and each new government, and there have been quite a few, likes to “pick on” the pharmaceutical industry to address any existing budget deficits. It is difficult for an international company to operate such uncertain waters, especially when you dedicate yourself to stay within the legal framework without having envelopes flying around as we do. It also makes sense that it is one of the main markets we look at since we have an actual representative office there. 

 CEELM: What about jurisdictions where you are looking to set up partnerships in?

AH: Those are a different story. The challenge there is not operating in the market itself since the operational aspects of running the business are the partners’ to deal with. The challenge that we have in these instances is the same irrespective of the market we deal with, which is to identify the right partner. This is a critical aspect long before anything else since we need to identify players that we will feel comfortable building a long-term relationship with. We always look at securing such agreements for at least a five year period making the discovery of potential partners stage by far the most important one. 

 CEELM: As a last thought, is there any change from a legislative perspective that you would like to see implemented because it would help Beres Pharmaceuticals develop further?

AH: Since almost all of our products are registered over the counter/food supplement products, most of the regulatory frameworks under which most pharmaceutical companies operate do not affect us. Even in terms of R&D/developing new products, Beres has a “well-established use” approach where we use standard active ingredients that have already been tested in different combinations. This means that, even R&D regulations generally, not just those applicable to the industry, rarely affect our daily operations.

In light of this, it is actually my business side, rather than my legal one that can see how the company can grow. I understand that, in light of our products, elements affecting us are general market factors such as supply and demand. In fact, this is also evident in the fact that, unlike most companies in the industry that employ former doctors within their marketing/sales teams for example, we tend to hire people coming from the FMCG industry.

Interview with Adam Hornyanszky, the Counsel for International Operations & Business Development at Beres Pharmaceuticals.

   

Adam Hornyanszky

 CEELM: Let’s start by telling our readers a bit about Adam Hornyznszky and his background.

AH: While many think as of me as a lawyer first and foremost, my actual first degree was in Business Administration. Only once I graduated in this field did I start law school. After receiving my law degree and passing the bar exam I worked briefly as a trainee for an international firm but quickly found out that I was missing the business side of things. 

 CEELM: Indeed, you were lucky to find a role that allowed you to leverage both your business and legal training with Beres Pharmaceuticals. What does your current role entail exactly?

AH: My official title is that of “Counsel for International Operations & Business Development”. Specifically, I am responsible with identifying and approaching potential partners outside of Hungary, following which, I need to use my legal training to negotiate and draft those international business development contracts. I do not consider myself a General Counsel really. I am more of a “special counsel” due to this dual nature of my role. 

I have to say, I love my current role as I suspect I would get bored if I were only exposed to one of the two dimensions. When I worked as a trainee in the international law firm I mentioned, I hated not seeing the business part as well. Not being truly exposed to the clients we were advising meant I lacked a thorough grasp of the operations of the business. Here I am fully immersed. I understand our business from A to Z and I am not exposed strictly to dry and boring legal work. Instead, I get the opportunity to truly understand what we do, how our business works, what our partners’ business models are and I get the opportunity to develop creative business solutions that create a win-win situation for everybody, which I then translate into a legally binding agreement. 

 CEELM: Since you mentioned it, what is Beres Pharmaceuticals’ business model and what work does it entail for you?

AH: When it comes to our international business, we have two working models. The first is opening up representative offices, such as in Romania and Ukraine, where we employ our own marketing and sales team on the ground. It made sense to follow this model in these two markets out of historical considerations. Because our flagship product, the Beres Drops, acts as an immune strengthener, especially useful for cancer patients undertaking chemotherapy, it became highly popular in Ukraine following the Chernobyl disaster. In Romania, the product, so popular in Hungary, gained a lot of traction due to the considerably large Hungarian minority present in the country. 

The second model, and the one we use a lot more often, is a natural one in light of the fact that, despite its flagship product being an internationally recognized brand, Beres Pharmaceuticals is still a mid-sized, family-owned, Hungarian company. Since the founding family wanted to avoid international financing, we chose to expand in other countries by finding partners on the ground that have a strong track record in launching products in those markets. This is the approach we took in a number of markets, including Russia, Belarus, Slovakia, Lithuania, Albania, Serbia, Montenegro, Macedonia, Vietnam, Mongolia, and others. 

The specific nature of the partnership does vary. In some cases, we look at deals where we offer them a good wholesale price on top of which they add their margins to cover their marketing and sales costs on the ground. Others include co-branding of our products with other Pharma companies on the ground. Lastly, deals might include licensing of our products to be sold completely under the partner’s name, which may or may not include clauses to our own branded products to exist in that specific market. At the same time, the scope of the partnerships differ as well as we cannot force upon our partners our entire pallet of about 70 products, especially since it is usually they, with expertise on the ground, who will know what the market will be most receptive towards.

As to what that means for me, I am the sole person responsible for managing all of these partnerships, as I mentioned, starting from identifying the best possible partners to negotiating and closing the agreements and following up on their accurate implementation.

 CEELM: I assume this is where you legal training comes in particularly useful.

AH: Yes, and no. It is definitely incredibly useful to be able to have the exploration of potential partners and the first approach under the same umbrella with negotiating the specific terms and drafting the actual contracts. In the latter, it is obviously that my knowledge of corporate and contractual law is quite useful but there are rarely other areas of law that I still use on a day-to-day basis. 

There are, of course, other legal aspects that Beres needs to address from tax to debt recovery and even, on rare occasions, litigations but those tend to be outsourced to external counsels. What is particularly useful is the dual nature of my qualification as it allows me be at the center of both of the mentioned aspects.

 CEELM: Your role entails interacting with a lot of CEE markets. Which ones do you find to be the most challenging and why?

AH: I would have to point to Ukraine on this topic. It is particularly difficult to work in the market these days due to the current unrest, but even in the past few years, the market posed quite a few challenges. Constant legislative changes are difficult to stay on top of and each new government, and there have been quite a few, likes to “pick on” the pharmaceutical industry to address any existing budget deficits. It is difficult for an international company to operate such uncertain waters, especially when you dedicate yourself to stay within the legal framework without having envelopes flying around as we do. It also makes sense that it is one of the main markets we look at since we have an actual representative office there. 

 CEELM: What about jurisdictions where you are looking to set up partnerships in?

AH: Those are a different story. The challenge there is not operating in the market itself since the operational aspects of running the business are the partners’ to deal with. The challenge that we have in these instances is the same irrespective of the market we deal with, which is to identify the right partner. This is a critical aspect long before anything else since we need to identify players that we will feel comfortable building a long-term relationship with. We always look at securing such agreements for at least a five year period making the discovery of potential partners stage by far the most important one. 

 CEELM: As a last thought, is there any change from a legislative perspective that you would like to see implemented because it would help Beres Pharmaceuticals develop further?

AH: Since almost all of our products are registered over the counter/food supplement products, most of the regulatory frameworks under which most pharmaceutical companies operate do not affect us. Even in terms of R&D/developing new products, Beres has a “well-established use” approach where we use standard active ingredients that have already been tested in different combinations. This means that, even R&D regulations generally, not just those applicable to the industry, rarely affect our daily operations.

In light of this, it is actually my business side, rather than my legal one that can see how the company can grow. I understand that, in light of our products, elements affecting us are general market factors such as supply and demand. In fact, this is also evident in the fact that, unlike most companies in the industry that employ former doctors within their marketing/sales teams for example, we tend to hire people coming from the FMCG industry.

Emre Ozer is a Partner at the Gen & Temizer / Ozer Law Firm in Istanbul.  Before opening Gen & Temizer / Ozer with two partners in 2011 he spent seven years with Slaughter & May in London and two more with White & Case in Istanbul.

   

“But actually I think the vast majority of transactions including many big size deals are able to be serviced by smaller firms.”

The three of us came from White & Case.

Yes. I worked from 2009-11 in Istanbul. Before that I was at Slaughter and May, but I came directly from London to White & Case. And then Baran [Gen] and Ebru [Temizer] were local lawyers at White & Case. Prior to that they had also worked a bit at Ece Guner’s office when it was allied with Dentons.  But not for very long.

Yes. That was in October 2011.

Actually, it’s completely  the opposite for us. The challenge we have is that we spend so much time on transactions that we don’t do enough admin work, or business development. We just do deal to deal. We just kind of fall from one transaction to the next. But that’s deliberate. Our perspective is that being a boutique … the key way you can differentiate is a kind of personal service. From my perspective the disadvantage of the big firm is that you’re never going to see the partner. Unless it’s a mega-deal. If you’re talking about the sale of a major bank, that will be a partner who will be involved every day. But if you’re talking about a mid-size sector deal which is where most of the sector is focused in Turkey, they don’t have time to do it, to focus on it. It may not give them a profit margin. So that’s kind of what we’re trying to focus on, actually, is partners giving that client attention. On the fee side, well, we may be competitive – I’m sure our peers are competitive. But … I mean on one or two occasions we’ve actually given fee quotes, and the client would say, “well, you know, a big international firm has offered half of what you’ve just asked for.” So I’m not sure … what I’ve heard is that big firms have offered very cheap fees, where they may get a significant margin on another transaction which they can kind of then cut on another deal.

Yes, exactly. That’s something that I didn’t really think about until we started this. (laughs). I mean the advantage of being a very big firm is that you’ve got bulk, you’ve got economy of scale. I mean, you know, I agree with the general problem in the market about fees … it’s not profitable for many.

There’s a lot of competition. And there’s a lot of competition for people who may be considered, rightly or wrongly, perfectly competent in one way or another to do a “plain vanilla” transaction where it is a “plain vanilla” one. That’s one. Second, you know, it’s still a developing market. I’m not sure there’s that many big-ticket deals. A lot of the sector is crowded into mid-size, smaller transactions.  And there’s a lot of firms who are offering that. It’s not like America or the UK where there may be many more M&A deals in those markets.

Yes, I’d say mid or smaller deals. I think if it’s really big ticket work, where a client may say “I need a firm with a presence in 20 jurisdictions,” then that suddenly cuts it down to, what, two or three firms that are capable of bringing sufficient team members to do that kind of deal. But actually I think the vast majority of transactions including many big size deals are able to be serviced by smaller firms. And I think the other thing is … and this is a cultural thing, professional services are … I think clients in Turkey are quite demanding in terms of fee expectations. I think if you can demonstrate a real value add, then that’s what you have to focus on. Whether it’s a specific sector expertise, or you can genuinely add value to a transaction through, you know, negotiation or structuring or something like that. Otherwise it can be seen as just a commodity. I think it’s quite a demanding market from that perspective. Whereas if you go to Switzerland, people say, “these are our hourly rates,” and they’ll say “thank you very much. Send the bill.” (laughs). 

I’d say generally in the market it’s much more common to give either caps or very clear estimates, and people are expected to stick to them.

Yes, if we have a good reasonable idea of how complicated a transaction is going to be. If we have a term sheet or we know the client and their expectations, then you can be more flexible on fee arrangements. And as I’ve said it’s a competitive market. I’m not sure it’s entirely the fault of smaller firms. I think it’s a matter for both big and smaller firms to consider and it’s a small pie compared to some of the mature markets. And I think law firms are competing.

It’s something you wouldn’t see in the UK market, which has solidified. You just couldn’t set up a M&A practice that could compete with the big City firms. There’s just no way. Whereas in Turkey you actually can, and clients are prepared to see different alternatives. Because I think it’s still a maturing market. One of the reasons we split is that, before the market gets very consolidated or kind of rigid in terms of the firms available to give this kind of service … there is space to offer this kind of boutique service. That’s one of the good things about Turkey is that you can do that, compared to other jurisdictions. I’m pretty sure that in the big jurisdictions you just couldn’t do this kind of thing.

Yes, exactly. Exactly. That’s right. You’re probably familiar with the structure of … even the big firms there’s often just one Turkish partner that really runs the show.  And there’s salary partners, they have a title, whatever. But you know there’s not the same kind of collegiate partnership structure that you can find in other jurisdictions, I think.

I think it is there. But you know, before getting a real management role, you’d have to wait for somebody to retire.

Yes, exactly. To take control of your career. Your business planning, business development. Which is something you’d learn much later down the line. I think in places like White & Case those opportunities were open to us in terms of being a local partner, or salaried partner or fixed income partner. However you want to call it. Those are available. But in terms of having real management control, and control of your career this was very attractive to us.  

Yes, I think that’s a concern for many clients.

Yes, that’s what they expect.  The interesting thing that you said before is that it’s fundamental for firms like us to deliver that.

To be honest, it’s a mix. Sometimes it’s the lowest fee, sometimes it’s, they like you. And, you know, recommendations are important. I think especially here. If a guy’s worked with you before, and happy with your work, then they have recommended us. Actually it’s just as important as a brand. But yeah, we have to differentiate, because, you know, the brand and the scale of the bigger firms we have to compete with. Not just in fees, but for the long term it has to also be in terms of the personal delivery of the services as well. Otherwise I think the big firms can always compete on fees. For a period anyway.

I suppose the biggest deals we did last year … we were both competing with very established firms, actually. I know the clients went to several different firms, which were both very big firms, and also very established Turkish firms, let’s say, that have a very good reputation.

Yes, that’s the most exciting. But on another big-size deal where you know, it was actually just a recommendation. We’re either competing with somebody who’s similar to us, or it’s actually just one-to-one.