A general counsel’s view: supporting business and hedging risks in overseas markets

Olivia Le Horowitz

Rimon Law, Paris

olivia.lehorovitz@rimonelectalaw.fr

Co-Chairs

Nicole Van Ranst Agio Legal, Brussels; Chair, IBA Closely Held Companies Committee Committee

Javier Villasante Cuatrecasas, Madrid

Speakers

Mercedes Benítez General Counsel, Laboratorios Farmacéuticos ROVI, Madrid

Cristina Fernández General Counsel and Secretary of the Board, EXOLUM, Madrid

Luis Gimeno Secretary of the Board, ACERINOX, Madrid

Thomas Wiesner CLO, FERROGLOBE, Madrid

In this session, a panel of general counsel shared insights on how they are safeguarding business operations in overseas markets and how legal strategies can be used to effectively hedge risks, ensuring a robust legal framework that fosters success in the international field. More precisely, the question addressed by the Co-Chairs was to find out ‘What is the work of the general counsel within the process of internationalisation of the business and how does it impact on the relationship with external counsel?’. The panel addressed compliance issues and how to manage risks, conflicts and litigation.

After welcoming and introducing the panel, the session began with the following question: ‘What are the challenges in internationalisation strategy?’

Several challenges were identified by Cristina Fernandez, general counsel of Exolum, such as negotiating complex mergers and acquisitions transactions, the process of exploring a pipeline of international opportunities, international location selection, understanding local legislation, and analysing the risks, challenges and opportunities of the potential investment. Another challenge which was mentioned was the energy transition and the issue of identifying technologies to comply with regulations. Furthermore, the integration of the business was also identified as one of the big challenges.

Panellists also mentioned that due diligence is essential in assessing all the risks in a transaction, and having a very robust and protective share purchase agreement is key. They agreed that there is a need to have very experienced international and local law firms which have a deep understanding of the business sector and can anticipate the risks and be proactive. The panellists concluded that having a solid team and the best lawyers is the best way to face all the challenges.

Next, the moderators asked the panellists: ‘To what extend do you invest time to train the lawyers?’ and ‘How do you deal with the international process, specifically, what is your focus and what are the tools needed to go global?’

Mercedes Bentitez from Laboratorios Farmacéuticos ROVI answered that her company has a lot of in-house expertise. Therefore, they need external advisors to understand their business very well and be fully aware of the implications of the acquisition and anticipate what may impact it. For a company like ROVI in the pharmaceutical sector, which is very regulated, care must be taken in the selection of partners who fit the culture but also match their compliance model procedure and rules of conduct.

Concerning their subsidiaries, ROVI are currently facing the challenge of managing local teams from headquarters. From a legal and compliance standpoint they are initially operating in a centralised way. They can provide, from the headquarters, global specialised support with respect to certain areas such as pharmaceutical compliance, employment, tax, anti-trust, intellectual property and corporate law with the help of a full-service external law firm with an international footprint and local experts. However, when it comes to commercial support and day-to-day business they operate in a more decentralised way, empowering local teams to a streamline management with an easier decision-making process.

Another question asked by the moderators was: ‘At which point is the legal team involved in the process?’

The panellists believed that legal teams and lawyers should be involved at the very beginning and that they should not overestimate their capabilities. They should therefore rely from the start on the knowledge and the expertise of local counsels who are deeply familiar with applicable legislation.

Next, the panellists, who deal with many operations around the world, were asked where ‘they would find more issues and challenges?’

For a company like Acerinox, Luis Gimeno highlighted that barriers to business in the US are very simple. In other regions such as in Western Europe they are more complicated. India and South Africa also have very complicated barriers. Among all countries producing steel there is only one that does not have any barriers: Japan. All international markets are protected which makes it very complicated.  

Then the panel was asked: ‘What about environmental issues?’

The panel responded that they ask their lawyers to be proactive and creative when it comes to environmental issues. One of the problems of globalisation is sustainability which can be an effective and dangerous barrier. The future involves exploring sustainability issues and offering green products.

A question was addressed to Thomas Wiesner from Ferroglobe, which went international through acquisitions and international alliances while being a closely held company. The question was: ‘What is your compliance model?’

He answered that one of the biggest challenges since they became an international company has been integration, which can take between ten to 20 years. As a closely held company, and at the same time a listed company, they must comply with a number of rules and high standards. He must deal with the expectations of a family in a listed company in an unfamiliar jurisdiction to make them understand why they have to give up some of their rights. He needs to make sure they have independent directors and explains that compliance attracts shareholders and increase the share value of a company.

The final question to the panel was: ‘What factors are key in making your selection of outside lawyers, what is going to stand out?’

The panellists responded:

• understanding the industry is key but getting the appropriate language with precise drafting in the share purchase agreement is most important so that ten years later there are no issues;
• the international background of lawyers trained to see the complexity, the knowledge and understanding of critical questions, being able to map the appropriate next steps to be taken and ensure that business and executives have the information they need for making the right decisions;
• knowledge is a must, external lawyers must be our business partners; and
• most important is understanding the business.

The Co-Chairs concluded the session, thanking all panellists and attendees for their contributions.