Global Joint Ventures - The Keys to Success

Transcription

1 Global Joint Ventures - The Keys to Success Olesya Barsukova-Bakar Partner, (Washington, D.C.) Elizabeth Donley Partner, (Washington, D.C.) Suzanne Law Marisa Director, Legal, Transurban (USA) Inc. 27 February 2014 from 12:30pm 2:00pm

2 Speakers Suzanne Law Marisa Director, Legal Transurban (USA) Inc. Olesya Barsukova-Bakar Partner Elizabeth Donley Partner 2

3 Agenda Why a Joint Venture? Reasons to Use JVs JV Life Cycle Dispute Resolution Take-Aways 3

4 Why a Joint Venture (JV)? Domestic (U.S.) Access to capital in a tight financing environment Access to technology Access to specialized market International / Cross Border Market access in a new / heavily regulated jurisdiction (e.g., China, Russia, various African countries) Mitigation of entry risk in an expansion strategy Market access in a regulated industry (e.g., aviation, television, mining, oil and gas) 4

5 Reasons to Use JVs Advantages Spread cost/risk Test market entry Gain access to resource/expertise/markets/industries Accounting treatment (possibly) Tax breaks Disadvantages Lack of total control Not permanent need to plan for change Cross - border cultural mismatch Higher potential for conflict and deadlock 5

6 JV Life Cycle Due Diligence Political Risks (e.g., unstable political environment, risk of nationalization or high regulation) Legal Risks (e.g., underdeveloped legal and enforcement system) Know your partner and its principals and related parties (background checks) Partner's reputation and connections Would partner's practices fit your policies? In some cases, local law allows certain practices that would go against your policies Look for complementary goals and the right culture 6

7 JV Life Cycle The Beginning Legal documentation is not a substitute for a good working relationship MOU / LOI or draft Agreement Identify show stoppers early Identify key terms early Work on the business plan upfront Have detailed discussions about how you see the venture s operations 7

8 JV Life Cycle Structure Legal Entity vs. Contract Jurisdiction of Formation (treaties, tax breaks, etc.) Tax analysis Required governmental approvals Valuation of initial and subsequent contributions Intangibles are hard to value - partners may disagree over the significance and value of their contributions: e.g., operational expertise, connections, land, IP Dividends and Distributions Repatriation analysis 8

9 JV Life Cycle Structure (continued) Who controls day-to-day operations Not necessarily a majority partner Usually, a partner with operational expertise in the industry and/or country Minority / Majority The size of investment does not necessarily define control over the venture Minority Reduce capital risk Need to carefully consider minority protections: veto rights, ability to take action on behalf of a JV Majority Increases capital risk, but may provide leverage in negotiations Minority protections given to the partner need to be carefully considered 9

10 JV Life Cycle Key Documentation Joint Venture Agreement/Operational Agreement/Shareholders Agreement Other organizational documentation of the JV (e.g., articles of association, bylaws, etc.) Licencing Agreements (trademark, patents, technology, etc.) Parent guaranties Loan Agreements (if the venturers provide debt to the JV) 10

11 JV Life Cycle Potential Areas of Conflict Capital contribution requirements Dividend policy Acquisitions / Disposals Access to IP Major / Minor decisions as to day-to-day operations 11

12 JV Life Cycle Operational Control/Protections Management Integration and Training Decide the composition of management Possible relocation of managerial employees Training programs / secondments 12

13 JV Life Cycle Operational Control/Protections (continued) Voting Rights Matters over which a minority partner would require a veto Matters over which a minority partner would retain a right of action (i.e., director and management appointment and removal) Matters over which a majority vote is acceptable Who is exercising voting rights: the board or shareholders depending on how the venture is structured and how many partners are in the venture, certain matters maybe reserved for the board and others for shareholders Fiduciary duties 13

14 JV Life Cycle Operational Control/Protections (continued) Consult local counsel to determine Which minority protections are statutory in the applicable jurisdiction Whether additional protections are allowed under local law Which document should contain these protections (articles or shareholders agreement) Will the additional protections be enforceable? Guaranty by parent Compliance / Risk Management 14

15 JV Life Cycle Exit Rights/Termination Upon transfer Other partner s approval to transfer Affiliate transfers are allowed Preapproved transferees lists ROFR puts burden on the transferring partner to market its interests first; time-consuming process can limit interest of third parties, so consider ROFO ROFO puts burden on the non-transferring partner to come up with an attractive price if it wants to buy out the interests Drag / Tag Potential to sell the entire JV Protects non-transferring partner from being stuck with a new undesirable venturer Allows the transferring partner to control the sale of 100% of the JV 15

16 JV Life Cycle Exit Rights/Termination (continued) Upon Deadlock, Change of Control or Breach Put / Call usually, at a pre-agreed price or formula may not work well if the pricing does not reflect the market may not work well if the partners % ownership of the JV is very different and financing is hard to get may not work in a jurisdiction or industry where a foreign investor may not own more than a certain % local law may prevent such transfers without shareholder s consent Buy / Sell generally, a fair mechanism to resolve deadlocks may not work well if the partners % ownership of the JV is very different and financing is hard to get may not work in a jurisdiction or industry where a foreign investor may not own more than a certain % 16

17 JV Life Cycle Exit Rights / Termination (continued) Lock-up for a certain period after formation Winding down Is this really an option? Other mechanisms may work better Sale of the JV / IPO Allows the partners to exit/get liquidity Non-competes upon exit / termination Technology ventures vs. other IP Rights Who owns originally contributed IP Who owns improvements Licensing of IP to the other partner 17

18 Dispute Resolution Choice of Law International: English law is very common especially in former CIS, Africa and Australasia Especially with U.S. companies, U.S. (New York) law has been gaining ground Local law is rare, except in respect of the issues governed exclusively by local law (JV s bylaws/articles of association) Domestic U.S. JVs: New York or Delaware are the preferred jurisdictions 18

19 Dispute Resolution (continued) Courts or Arbitration International: Arbitration for relative ease of enforcement (but seat of arbitration is important preferably in a jurisdiction signatory to New York Convention) Domestic: Many partners prefer courts to arbitration 19

20 Take-Aways Do your homework in choosing the right partner Know your partner s expectations, sensitivities and culture and whether they fit with yours Put together JV s business plan upfront Get expert advice (both local and transactional) Discuss details upfront to avoid pitfalls in the future: Focus on JV control issues Discuss how you will resolve disputes Negotiate exit mechanisms 20

21 Questions and Answers 21

22 Thank You! Olesya Barsukova-Bakar Partner,, Washington, D.C. T olesya.bakar@hoganlovells.com Elizabeth Donley Partner,, Washington, D.C. T elizabeth.donley@hoganlovells.com Suzanne Law Marisa Director, Legal, Transurban (USA) Inc. T smarisa@transurban.com 22

23 has offices in: Alicante Amsterdam Baltimore Beijing Brussels Budapest* Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jakarta* Jeddah* Johannesburg London Los Angeles Luxembourg Madrid Miami Milan Moscow Munich New York Northern Virginia Paris Philadelphia Prague Rio de Janeiro Riyadh* Rome San Francisco São Paulo Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington DC Zagreb* "" or the "firm" is an international legal practice that includes International LLP, US LLP and their affiliated businesses. The word "partner" is used to describe a partner or member of International LLP, US LLP or any of their affiliated entities or any employee or consultant with equivalent standing. Certain individuals, who are designated as partners, but who are not members of International LLP, do not hold qualifications equivalent to members. For more information about, the partners and their qualifications, see Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney Advertising All rights reserved. *Associated offices

24 Olesya V. Barsukova Bakar, Partner, Washington, D.C. Olesya Barsukova-Bakar focuses her practice on advising and representing emerging and mature private and public companies in a wide variety of corporate matters, both U.S. and international, including various aspects of asset acquisitions and dispositions, mergers and acquisitions, joint ventures, strategic alliances and partnership transactions, venture capital financings, private placements, debt and equity financings, recapitalization and restructuring transactions (both public and private), and other general corporate matters. A key part of Olesya's practice involves the representation of the sponsors of, and investors in, private equity, venture capital, real estate and other investment funds on a wide range of fund formation and governance matters. She has represented sponsors of both domestic and non-u.s. funds and has experience with structuring funds for, and negotiating with, a wide range of investors, including endowments, foundations, governmental entities, pension plans and non-u.s. investors. In addition to private fund formation, Olesya also regularly represents issuers and investors in other private capital-raising activities, including private equity and debt financing, venture capital financing (including in early stage companies), and joint venture and strategic alliance matters. She also advises clients regarding various aspects of compliance with Investment Company Act, Investment Advisers Act and Dodd-Frank Act. Olesya has represented clients engaged in diverse industries in multi-billion dollar transactions. Recently, her clients have primarily been private investment fund sponsors, international organizations, and large private and public companies operating in a variety of industries, including real estate, clean energy and technology, life sciences and agriculture, in the U.S. as well as worldwide, including Latin America, Europe, Africa, Middle East and Asia. REPRESENTATIVE EXPERIENCE Representation of The JBG Companies in its $2.5 billion joint venture with MacFarlane Partners. Representation of The JBG Companies in the formation of eight real estate investment funds raising approximately $3 billion. Representation of a private investment fund investing in clean energy and technology emerging companies. Representation of International Finance Corporation (IFC) in venture capital financings of emerging clean energy, technology and life sciences companies. Representation of fund sponsor Barceló Corporación Empresarial, SA in the formation of Playa Hotels & Resorts, S.L., a $582 million real estate fund focused on the acquisition and ownership of all-inclusive resorts located in Caribbean countries. Representation of a private equity fund in the formation of a joint venture to invest in resort properties in Mexico and Caribbean countries. Representation of the Government of Liberia in concession agreement negotiations. Representation of major financial institutions in connection with their investment in a joint venture which acquired a major apartment complex, with the transaction value of over $5 billion. Olesya V. Barsukova Bakar Partner, Washington, D.C. T olesya.bakar@hoganlovells.com EDUCATION J.D., cum laude, University of Georgia School of Law, 2000 B.B.A., summa cum laude, The University of Georgia, 1996 PRACTICES Private Equity/Venture Capital Mergers and Acquisitions Corporate Commercial REITs Finance

25 Elizabeth M. Donley, Partner, Washington, D.C. Elizabeth Donley focuses her practice on U.S and cross-border mergers and acquisitions, joint ventures, partnerships and strategic alliances, technology licensing transactions, and general corporate and commercial matters. Elizabeth represents clients in a variety of industries, including industrials and consumer goods, aerospace, defense and government services, technology, automotive, life sciences, and real estate and hospitality. She regularly represents clients in the acquisition and disposition of assets and securities, mergers, and other business combinations, and the formation of joint ventures, partnerships, and strategic alliances. She also represents clients in licensing and various commercial arrangements. Prior to joining the firm, Elizabeth was a partner with another international law firm. Previously, she completed a federal clerkship with The Honorable J. Owen Forrester of the U.S. District Court for the Northern District of Georgia. REPRESENTATIVE EXPERIENCE Representation of PPG Industries, Inc. in connection with a variety of transactions, including its acquisition of the North American architectural coatings business of Akzo Nobel, N.V. Representation of Lockheed Martin Corporation in connection with the divestiture of its Enterprise Integration Group business. Representation of Lockheed Martin Corporation in a variety of mergers, acquisitions, divestitures, joint ventures and other transactional matters, including the acquisition of the government business of a nanotechnology company and related intellectual property licensing arrangements. Representation of a global automotive company in connection with various acquisitions of businesses and facilities in North America. Representation of a global hospitality company in the acquisition of hotels and resorts in North America and the formation of various joint ventures, including hotel management and tour operator companies. Representation of a multifamily real estate investment trust in the divestiture of various properties and the formation of partnerships and tenancies in common. Representation of several leading pharmaceutical companies in the acquisition and sale of pre-clinical and clinical stage drugs and therapies, including licensing arrangements and manufacturing and supply arrangements. Elizabeth M. Donley Partner, Washington, D.C. T elizabeth.donley@hoganlovells.com EDUCATION J.D., Vanderbilt University Law School, 1998 B.A., Phi Beta Kappa, magna cum laude, University of South Carolina, 1994 PRACTICES Corporate Mergers and Acquisitions Commercial Corporate Governance Licensing and Technology Transfer

26 Suzanne Law Marisa, Director, Legal Transurban (USA) Inc. Suzanne Law Marisa currently holds the position of Director, Legal at Transurban. Transurban is an Australian toll road owner/operator with its North American operations located in Alexandria, VA. Ms. Marisa graduated from the American University, Washington College of Law in 1996 and spent a number of years practicing law overseas, both in Europe and the Middle East. Her transactional background (commercial contracts, joint ventures, M&A, project finance, corporate governance) comes from both large law firm and in-house experience. She loves the challenges of being an in-house lawyer, and is considered to be a very practical and business savvy attorney. Suzanne Law Marisa Director, Legal Transurban (USA) Inc. T smarisa@transurban.com