Corporate investors: panel report

Nicoleta Lupea

Craveth, Swaine & Moore, London

nlupea@cravath.com 

Co-Chairs

Sandeep Mehta  JSA, Mumbai; Diversity and Inclusion Officer, IBA Closely Held Companies Committee

Eduardo Nebot  RCD, Madrid

Speakers

Caroline Basdevant-Soulié  Oyat, Paris

Natalia Ruiz  Net Zero Ventures, Madrid

Mona Stephenson  MLL Legal, Geneva

Peter Villani  Fasken Martineau DuMoulin, Montreal, Quebec

The panel discussed the benefits and perceived drawbacks of investments by strategic investors, as compared to traditional financial or sectorial venture capital (VC) investors. The speakers highlighted the difference in investment horizons, noting that strategic investors generally prefer longer term investments, while financial investors typically seek to exit the business after three to seven years.  

In line with the different investment rationale and horizon, financial investors are more likely to prioritise board representation, preemption rights, dilution protection and other key investor rights, whereas strategic investors are more likely to focus on establishing strong commercial relationships, such as supply contracts and collaboration agreements, which need to be carefully managed by companies in order to avoid issues around intellectual property rights.

The panel agreed that both types of investors can provide companies with industry-specific advice and access to valuable resources, including expertise and new or complimentary markets. Further, reputable and well-known strategic and financial investors can also provide valuable visibility, as well as validation of the company’s business. Finally, the panellists highlighted the fact that investments by strategic investors provide them with an opportunity to get to know companies over a long period of time, aiding potential acquisitions processes down the line. However, strategic investors may operate more slowly compared to traditional financial investors or (VCs) due to their structure within larger organisations. In conclusion, the panel noted that companies can derive benefits from balancing the interests of strategic and financial investors.