ALB Insights March 14, 2017 |
| INTRODUCTION: ABOUT ALB INSIGHTS Welcome to ALB Insights, a weekly, ad-free premium newsletter that provides analysis and opinions related to the important news and trends in Asia’s fast-growing legal markets. With a mix of features, Q&As with key figures, and profiles of some of the hottest firms and service providers, this is a must-read for anyone interested in gaining a deeper understanding of the region’s legal industry. ALB Insights will be sent free to our existing subscriber base during the initial six-week trial. To subscribe, please email taranjit.kaur@thomsonreuters.com. This week’s newsletter features the following: |
| As Japan Inc’s outbound hunger grows, lawyers are needed to manage risk Japanese outbound M&A has already reached more than $10 billion so far this year. John Kang speaks to lawyers advising Japanese companies about how they are helping their clients mitigate risks in the process. Japan Inc’s appetite for overseas acquisitions shows no signs of abating. Deals such as SoftBank’s surprising $3.3 billion purchase of Fortress Investment last month and Takeda’s $5.2 billion acquisition of cancer drug maker Ariad in January boosted the total value of Japanese outbound M&A in January and February to 69 percent higher than last year, according to data from Reuters. These figures show a continuing trend that has been visible for at least five years.
There are a number of reasons behind this buying spree. Japan has a huge amount of cash, very cheap debt, and has been politically stable for a long time. But the main reason is demographics, says Nick Wall, a partner at Allen & Overy’s Tokyo office. “Japan is a shrinking market — there’s currently 125 million people, but over the next 40 to 50 years, it could shrink to below 90 million,” he explains. “And that means companies looking to expand have to go outbound.” But, of course, not all deals work out. Just last month, Toshiba booked a $6.3 billion hit for its American nuclear unit Westinghouse, which it bought from the UK government a decade ago. Kirin also had to atone for a bad deal last month. The Japanese brewer sold the Brazilian business it purchased for nearly $3.9 billion in 2011 for about $1 billion with debt to Heineken. According to Yutaka Kimura, a partner at Baker McKenzie’s Tokyo office, these are not isolated incidents. “Even the top-tier Japanese companies that are viewed as having ample experience in pursuing outbound M&A transactions have recently been hit hard by unsuccessful outcomes of their landmark outbound M&A investments,” he observes. ENTER THE LAWYERS Helping mitigate the risks are lawyers who find their roles have expanded beyond what was traditionally expected of them. “As outbound M&A advisers, our job now goes beyond solid due diligence and contract mechanics at the deal stage. It extends to advising post-merger on the successful integration of assets, ensuring operations are not interrupted by contractual issues and to protect the buyer as best we can from unforeseen turmoil in its new markets,” says Graeme Preston, the Tokyo-based head of North Asia M&A at Herbert Smith Freehills. Wall at A&O says that risk can be reduced by putting a greater focus on due diligence. “We work a lot with specialists in this field, doing joint exercises and analysing these risks. That certainly wasn’t the case five years ago, when people wouldn’t have really looked at compliance and due diligence, for example,” he shares. “Now, at every transaction, people are discussing it.” He adds that post-merger integration, or PMI, which is a hot topic in Japan, is crucial for companies to make acquisitions work. “Helping companies when they are acquired and bringing them into the group, working with them on reporting lines, on global compliance policies... that's a very important part,” notes Wall. “Historically, every corporate has struggled a little bit with it.” Kimura of Bakers believes that a local touch is useful as well. “From a legal perspective, it is not easy even for legal advisors to fully understand the local law and practice in order to fully inform Japanese clients of the same,” he says. To contact the writer, please email john.kang@tr.com. |
| In-house Q&A: Khairuddin Yahya, Avon Cosmetics, Malaysia Khairuddin Yahya is the legal director and company secretary at Avon Cosmetics in Malaysia. He recently talked to ALB’s Raj Gunashekar about what it’s like to be the sole member of the company’s legal team in that country and the perks of being an in-house lawyer at a cosmetics company. Tell us a bit about your career so far.Yahya: I started my in-house career as a legal assistant in a newspaper/ publicly listed company. After five years, I eventually moved to two American MNCs, both as head of legal & corporate affairs/company secretary. To date, I have a total of 26 years of working experience as an in-house counsel and company secretary. When I joined Avon, I was only supporting the Malaysian market. But over time, my role was expanded to provide legal support to Avon offices in Vietnam, Indonesia, Thailand, Brunei, Singapore, Australia and New Zealand. How is being an in-house lawyer in your current organisation different from that of other companies?
Yahya: The role then was more traditional, and some would probably view it narrowly, doing things like providing back office support and drawing out contracts, with no involvement in the management or decision-making of the business. Now, the role of in-house counsel has become dynamic amid sweeping changes in the corporate world, such as financial crises and globalisation. Companies crossing borders to tap new market opportunities, laws like the U.S. Foreign Corrupt Practice Act and Sarbanes-Oxley, modern business models, approaches to corporate management style, clients’ expectations, trends in the external marketplace, legislative and regulatory environments and escalating external legal cost also influenced how the role has evolved. Because of these reasons, Avon recognised the value of in-house counsel. I’m part of the senior management team as well as various committees that work hand in glove with the other departments to support business initiatives and are involved in business operations early in the process. An in-house counsel strives to be regarded as a trusted business partner of the company by: - Applying the law and giving the business a competitive edge instead of telling the business people what the law is
- Providing clear, “black or white” answers
- Knocking on doors and sitting on the same table with the operations or business professionals to better understand the business and their issues
- Giving business professionals enough details about issues so that they can make decisions
- Monitoring the pulse of the business – understand operations, KPIs, and profit and loss
How many lawyers does your team consist of, and how does the structure work as a whole?Yahya: It’s “me, myself, I” in the legal department! Avon is a matrix organisation wherein employees have a dual-reporting relationship. I report to the APAC regional counsel based in Singapore, and also do dotted-line reporting to the managing director of Malaysia and other functional regional and global heads. I’m part of the global legal team and have access to resources, precedents and best practices across the world. All in-house counsels are part of the Avon global legal organisation, and we are constantly updated via teleconferences and emails. In APAC, we have monthly teleconferences with the rest of in-house counsels in Asia as well as one-on-one sessions with the APAC regional counsel. What is the best advice you have ever received?Yahya: “An in-house counsel is not in the business of law but in the law of business. Therefore, you are a businessman first and a lawyer second.” To contact the writer, please email raj.gunashekar@tr.com. |
| Bourses for courses: Aramco IPO has limited destination choices Ever since Saudi Aramco announced plans for its IPO that could potentially raise $100 billion, stock exchanges around the world are actively looking to attract it. Una Galani and Nicolle Liu of Reuters Breakingviews weigh up the pros and cons of the leading bourses, including those in Asia. Aramco is too big to experiment. Every global stock exchange would love to handle the debut of the world's biggest oil producer. A Reuters Breakingviews analysis weighing six market-related, political and other factors suggests New York is the most attractive locale and Tokyo a top wild-card. See graphic here. Kingdom authorities reckon the fossil-fuel colossus may be worth some $2 trillion. If only 5 percent of the company is listed next year, as expected, that would translate into $100 billion of shares on offer. Aramco Chief Executive Amin Nasser said recently that Riyadh's Tadawul and one or two other venues internationally would host. If a warm embrace of foreign enterprises is the top priority, Aramco might choose Singapore. Almost 40 percent of its listed companies come from beyond its borders. That’s a higher proportion than on the half-dozen other bourses reviewed by Breakingviews. Aramco’s market value would dwarf the city-state's exchange by almost threefold, however, and is one reason Singapore rates near the bottom. Tokyo would be a good option for shoring up ties with a customer. Japan bought more than a third of its total crude imports from the Saudis last year. The Tokyo Stock Exchange – though it has accommodated no oil and gas IPO of significance since 2010 and is the least welcoming to foreign companies – also could provide ample liquidity. That helped it place second overall in the Breakingviews rankings. Strip out oil ties and London jumps to the second spot, followed jointly by Hong Kong and Toronto. Tokyo then would fall, and sit ahead of only Singapore and Australia. Aramco also may have a soft spot for the British capital given its board includes oil grandees Mark Moody-Stuart, former chairman of Royal Dutch Shell and Anglo American, and Andrew Gould, BG Group's former chairman. There's no obvious winning point for Hong Kong. Swiss commodities trader Glencore, which is also listed in London and Johannesburg, received a tepid reception in the special administrative region of China from investors in its 2011 flotation. The city is now mainly a site for IPOs from the People's Republic. The best destination, by far, is the New York Stock Exchange, assuming only one of the city's exchanges gets the nod. It has the largest market capitalization, the most trading and has led the way by a large margin on recent oil and gas listings. Even if the national climate is becoming more hostile to foreigners, the Big Apple bourse itself is notably welcoming, too. Despite many attractions elsewhere, finance fundamentals will have to come first for Aramco. |
| ALB Hot Startups: Vakilsearch ALB Hot Startups is a series that looks at the most promising new legal tech companies in Asia. This week, Raj Gunashekar trains the spotlight on India’s Vakilsearch, which connects small businesses with legal and other support.
Firm name: Vakilsearch
Year of founding: 2011 Headquartered: Chennai, India Founder: Hrishikesh Datar What they do: Vakilsearch enables small businesses to have easy access to legal services at reasonable prices. “We offer legal and other professional services to small businesses. Over the past five years, our service suite has grown to be quite comprehensive. We incorporate around 5 percent of all Indian startups, manage their intellectual property, provide compliance services, manage their accounts and even prepare contracts and agreements,” says Datar. The startup prices its services between 899 rupees ($14) and 50,000 rupees (a little over $751). Capital raised till date: Undisclosed, but self-funded till 2015 Key clients: In the last five years, the company has served various startups including Housing.com, Grofers, CommonFloor, Chaayos and BigBasket.com, among others. How the idea came about: Though Datar hails from a family of lawyers, he was not keen on pursuing a career in law. During his college days, he decided to take the entrepreneurial route after graduating from law school and started Vakilsearch. “I founded Vakilsearch five years ago. I graduated from National Law School (NLS) in Bangalore, the most prestigious law school in India. However, by the end of my five years at NLS, I was more passionate about entrepreneurship. In fact, in my fifth year, I began attending sessions at the Indian Institute of Management in Bangalore and started a small business selling t-shirts. After graduation, I turned my attention to the legal field, as it is one that I understand more thoroughly. My father is a lawyer and I have many relatives in the profession, too,” Datar adds. What’s next: The firm recently launched a practice management software tool called Libra for Lawyers. “Libra is the first Indian legal ecosystem that enables case research, practice management, billing, expense tracking and document storage. Launched just three months ago, it has already seen traction within Chennai, our first market,” Datar says. What clients say:“The best thing about Vakilsearch is they take proper care to understand your requirements before proceeding. The website also clearly displays the costs involved upfront, so there are no surprises later.” – Nischal Shetty, CrowdFire App founder To contact the writer, please email raj.gunashekar@tr.com. |
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