Cross-Border M&A Strategy: Navigating Complex International Deals with Arash Attar-Rezvani

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I'm.

Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, what actually happened during M and A Deals. Hello and welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A is done. That old school seller led approach? It's dead. Buyer led. M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. And let's be real, it's not just about closing the deal, it's about making it successful. We uncover what truly works in M and A by learning directly from the best. I'm your host, Kisan Patel, Founder and CEO of Deal Room and Chief scientist at M and A Science. Today I'm joined by Arash Attar Razvani, M and a partner at Scadden, based in Paris. Arash has spent over two decades advising on some of the most complex cross border M and A transactions in the world. From telecom to tech to luxury, his deals span multiple jurisdictions, legal systems and cultures. In this conversation, we unpack how to structure international M and A deals, navigate regulatory landmines and build creative legal structures when no playbook exists. Arash, how are you doing today?

Hey Kiesen. Great. I'm delighted to be here.

Bonjour. Thanks for hosting me here live in Paris at Skadden's office.

Enchante. It's my pleasure. Thank you.

I'd love to kick things off. Just a brief on your background.

I'm French and Persian. My name is a Persian name, Atar ezbani actually means the perfume seller of paradise. I was born here. My parents are both from Iran, met in Paris 10 years before the revolution. My father was a world renowned photographer, a war photographer. What you see behind me is photography of Muhammad Ali during this fight in 1974 in Zaire called the Rumble in the Jungle against George Foreman. The reason I'm mentioning this is because a lot of my background has to do with an international context. And I think if I now work in international law, a lot of it probably comes from my family background. I have English, Jamaican brothers, and in my family, close family, there's Venezuelans, Colombians, Singaporeans, British, Persians and French. And this is just my father and my brothers and so on. Coming from this kind of background, it was natural for me to study international law, which I was very fortunate to be able to do both at the Sorbonne here in France. And then I went to Oxford University in England to study for a master's degree, came to Skadden, worked for a few years, and then went to Columbia Law School in New York, where I could further my education, and spent a year in Skadden's New York office in 06 07, just before the financial crisis, before coming back full time in Paris in 2007. When I've been doing M and A and basically going up the echelons of the promotions here at Skadden, I've spent all my career, almost 25 years in September at this great firm.

25 years at Skadden. I can imagine you worked on all types of deals, but what keeps you engaged and locked in over here at Skadden?

First and foremost, I'd say the people. I was recruited by somebody who became my mentor and friend, Pierre Sarvant Schrebert, who was the managing partner here for the first 15 years of my career at Scandinavian Paris. And he was just a great guy in the office. He has this mug that says World's best boss. I had the world's best boss. It wasn't just a joke. The people, and not just Pierre, everybody you know from Armand was our managing partner. Today to generations upon generations of lawyers who have come, and now I'm by presence the oldest lawyer in the office. And it's just the people. Of course, the deals were amazing. The firm is amazing. The collegiality of the firm. But great deals you have in lots of places, people of that quality that justified it, that I've been here since the beginning and always saw myself at scan.

Can you tell me a little bit about just your journey or the types of deals that you've worked on.

I started the first few years doing capital markets work, IPOs, privatizations of air France Telecom, these kinds of deals. Just before going to New York, I switched to M and A. My practice basically has been public and private M and A. And today I work mainly with clients that we developed here in Paris in telecom and tech. One of them is Xavier Niel. He's a French entrepreneur and billionaire who has built the sixth largest, fifth largest European telco. With his team at Iliad and njj. We've been doing a lot of telecom work. I'd say one of the highlights was last year when we worked on this multi jurisdictional takeover tender offer of Millicom, which is very unique, but at the same time, for some reason, this is. Most of the groups that I represent these days are a little like this very multi jurisdictional. Millicom is a group that is incorporated in Luxembourg, was listed in New York, NASDAQ and in Stockholm, and has all these operations exclusively Latin America. They used to have them in Africa with another client, by the way, we bought operators from Millicom in Senegal and Tanzania. But when we did the tender offer, they were based in nine or ten Latin American countries. So it presents unique challenges. You have to be quite agile to tackle l', Occitane, the premier skincare brand, also a client. We've been advising for about 10 years on all its acquisitions, including Sol de Janeiro, which most people will know by now. Yeah, I've been working on a wide array of public private transactions, JVs, energy work, renewable energy, battery cells, photovoltaic, et cetera.

You ever worked on a deal that just fundamentally changed the way you think about M and A?

I would say probably my first one, the one I did in 2004, it was Quicksilver's acquisition of Rossignol. Quicksilver, as you may know, Kissen is this apparel brand that sells surfing, you know. And back then, Quicksilver was actually led by a French CEO, Bernard Mariette. Double digit growth. This is early 2000s. The brand was exploding. And Rossignol was the opposite. They called it, actually, they termed it the alliance of the sea and the mountain. Rossignol is this international, based in France, but international ski brand. And they at that time sold a lot of hardware, skis, and they had these unique partnerships with world champions, Olympic champions. That's the first. I mean, I mean, talk about being fortunate. I had never done any M and A. I told Pierre, listen, after four years of Captain Markets, I really should do some M&A. Because it sounded interesting. And Pierre, against all logic, a lot of people would have said no, why don't you stay and do capital markets? You're doing well. You know all the players. You've done all these deals for so many years. He said, all right, let's do it. And we did this takeover of Rossignol by Quicksilver. We worked extremely hard. It made me fall in love with M and A because of the creativity. Because unlike capital markets, where it's really a lot about precedent, there's a documentary piece of it, but it's basically really creative, it's subject to negotiations and the sky is the limit. So I really enjoy that. The collegiality, the creativity of it. It's like a Swiss clock. Everyone in the team has a very particular function and we all work together. And if one aspect of the team or one part of the clock falls down, the whole team can fall apart. I really like that. And high stakes. And a couple of weeks ago, after 20 years, I came across Bernard Mariette, the former CEO, at Pierre's birthday party. And it was just so great to reminisce. These deals, they forge friendships with your clients because you are in the trenches with them for such a long time, working really hard to reach a common objective. And even though the merger itself, the acquisition, didn't quite work out, two years later, we actually were hired by Quicksilver. We advised them to sell Rossignol because there were too much debt and for other reasons, it did remain, for me very impacting as a transaction, both professionally and the personal relationships I made on it.

I like that Swiss Clock analogy. And then the relationships you build is really important. A couple of things that came to mind. One was size of deals. You kind of mentioned this example transaction, like two major brands. Are there any patterns or just lessons learned around the size of transactions? Right. You could do this acquisition, merger of equals. You could have a company, maybe it's a billion revenue, acquiring a business, doing 500 million, which is pretty transformative. And then you got roll ups doing a series of small acquisitions, tuck ins and so forth. What have you learned from that?

I've been lucky at Skadden. I've been working on major transactions. I can cite two LVMH's acquisition of Tiffany's or Nokia's acquisition of Alcatel, both in the 15 billion euro range. Last year we did a combined $11 billion between the takeover of Millicom and the take private of l', Occitane, being the lead partner on both of them. But One thing I've learned is huge doesn't necessarily mean more complex. Actually, counterintuitively, quite the opposite. In a huge transaction, there's dozens of lawyers involved. Usually you're working with quite sophisticated companies where they things fall in order. It's well organized. So there's a lot of coordination, of course, to do. We routinely coordinate teams of 20, 30, 40 hardware lawyers across 10 firms. The two transactions I mentioned to you from last year was the case. We had teams and teams of lawyers. Not just a Scadan, but we had the lead role. But in a way, the smaller acquisitions, they're the ones that present the most challenges because they tend to be especially founder led enterprises. They have been built in a very organic way. There's less, let's say, discipline in some of them. You encounter much more array of issues that you have to solve. Two of the most complex transactions I've done are probably the two smallest I worked on. I can give you an example. Has to do also with my father's. He was a member at Magnum Photos. Magnum Photos is this agency that was founded in the forties, just after the Second World War by Robert Capa, Henri Cartier, Bresson. Those guys are legendary photographers. All the photos you've seen from D day, in particular the Spanish Civil War, et cetera, from those guys. I'd been advising them in an informal capacity for many years now. But in 2017 they hired us as a firm to work on an 8 million investment. Which sounds simple enough. But because there were unique challenges of protecting the photographer's brand, their artistic process, we had to create a different entity. We had to have the estates or the actual photographers. Elliott Erwit, Barnold, Legendary name. Joseph Koudelka, Martin Par. Legendary names of photography. Adhere to a plan. Explain to them what this corporate deal was. It's extremely complex and the signing was probably the most challenging signing I've had ever because I had to send documents to people. Some of them, I remember one of them wrote an email to me saying, listen, you want my signature on this contract? I'm in Iraq on the front. I'm going to the front now. He knew he might not come back tonight. So is that okay? If I can just send you a photo of my signature, Would that be valid for the contract? Of course. You have these types of issues. You have to. Is that legally binding? Does it work when somebody is actually risking their lives? Am I really going to insist that. No, you should print it somewhere and PDF me a signature. It was actually very funny because one of the Estates, Marilyn Silverstone. She had given the estate to a Buddhist monastery in Nepal. The person basically who was going to sign the contract was a Buddhist nun who would go down the monastery to the local village. Had Internet connection, maybe once every three weeks. I said, okay, please sign. And you have to have a witness. It was a British deed. And when the signature came back, the witness was Mathieu Ricard, who's basically the most famous French companion of the Dalai Lama. It's almost if the Dalai Lama had signed as a witness the agreement. Some stories like this. And I mean, I could go on. So the smaller deals, often they present the most challenges. And you have to work around the fact that it's a small size, but it's way more complex than you would expect in a large company. You expect it to be complex and there's a specialist army of people dealing with those issues.

It's a larger company, more mature finances and things kept in order. Just working with the working professionals. Is there a sweet spot? If I say companies like a hundred million ev, is there like a sweet spot in terms of, okay, a 1 million EV companies like buying one of those small businesses, but then you buy another 100 million EV company. Is there like 20, 30% of your enterprise value? Like what? Is there like a sweet spot you've seen.

Can I be frank? Because of Skadden's business model, we don't deal with a lot of these smaller.

Okay, let's add a zero to it then.

The example I gave you is because this was very special. It was something. So that's why we did it. But I don't know if there's a sweet spot in a way, every situation ends up being quite unique. I know it's a little cliche to say this. I've learned to not pay too much attention to size. What size does. The difference is the exposure to media and publicity. And there's some form of pressure this way. We represented air France in 2009. He was 8 and 9 in its the largest aviation, civil aviation. JV, Air France and KLM, which were our clients, were doing this JV with Delta and Northwest. And Delta was acquiring Northwest in the middle of it. So of course I remember vividly. We had very little time to negotiate because there was a lot of pressure because of who the clients were. It was valued at $10 billion at the time. So it was one weekend in New York, one weekend in Amsterdam, one weekend in Paris, one weekend in Amsterdam, et cetera. Very fast paced to negotiate day and night because we had. And when we were negotiating the final stages of the agreement. We had all the journalists, all the TV stations, et cetera, were waiting in the hotel where the deal was going to be presented. And there was no question we had to sign that agreement by then. So it comes with a kind of pressure, but it doesn't necessarily. I don't think of it as any different. My job is the same.

Less about the size, what about strategy? Is there sort of certain strategies whether you're buying for capabilities, buying for revenue or geographic expansion? Anything that you've seen play out well from all the deals you worked on?

Yeah, actually you see the wide range of why people do M and A. It's either because you work to acquire market shares or geographical footprint, as you said, or very often a technology or some people, especially when you work in tech and it, the people and the tech are really essential to what you're doing. In some cases you're buying ebitda, you're buying profitability, or you might be buying revenue. So you see the full range. And again, it really has nothing to do with the size of the deal. It really has to do with the vision that the buyer may have. Entrepreneurs, we work with all kinds of companies. I represent quite a few founders and families and what I appreciate with them is that more often than not there is a strategic vision and there's this concern of transmission across generations. Some of them have built it on their own and want to pass it on to their next generation. Others have received it from the previous generation and want to grow it to pass something even more stable to the next generation. Definitely those are really interesting because these are people also in the way they take risks. A CAC Fortune 500 companies will approach risk in a very different way than a founder or a billionaire or a family office.

Interesting. So it is about the strategy, but more about on this vision that you have and executing a strategy against that vision. And then the founder ones can feel a little bit more of the personal touch. The relationship you've worked with clients over years and years. What is the value of using the same law firm relationship? You get the sense of like hey, me as a founder, you sort of establish rapport, maybe even built that friendship. Hey, I like where Keystone's got the big vision and wants to build a billion dollar business in the next 10 years. But is there things outside of that, of just that relationship that really is accretive for me to continue working with you as work on a series of acquisitions?

When you look in this business, you're not just somebody's lawyer. You end up being what we call the trusted advisor, the conciliary. If we take a Godfather analogy, the idea is someone that you know and trust. Trust is basically our current in this business is trust. The value of having the same counsel over and over is that your counsel knows you. He or she knows what you want, where your soft spots are, where your hard line in the sand are. After a while, with a lot of my clients, I don't have to ask them. I know what they want, they know I will represent them, of course, to the best of my abilities. It becomes this kind of organic situation where when it has to do with M and A, there is a lot of efficiency because I understand their vision, I know what it is they want to accomplish. I know what kind of risk they're willing to take. You know, as lawyers we advise, yes on structures, on strategy, we advise a lot on risk. There is not one way of approaching risk. Our job I think is to create options, to tell them, listen, you have three options. Behind door number one, there's something super safe. The cost of reaching it may cost you in terms of money or in terms of the quality of the relationship with the other side or in terms of efficiency. Door B has maybe more risks, but more rewards. And door three is extremely risky, but maybe it has other advantages. You advise them what their options are and if they ask you a recommendation. I firmly believe, I'm part of the lawyers who believe you have to be able to give a recommendation, but your client is making the decision. The value of a long term. That's why we're in this game, Kissen. I mean I'll be honest, I'd love a multi billion deal. But if I don't hear from the client again, I'd rather have a 10 year as I have 10 year, 15 year, 20 year relationship that we have here at SCAD in Paris with clients that have been trusting us over that amount of years because they know we understand them. And basically at the end of the day what client wants is they want you to think about them. Even by the way, if you don't work with them. And that's what you bring. And after a while it branches out into yeah, some of them, they become your friends, your families know their families, they give you work that have to do with their own family work or personal issues. And it's part of what you do because at the end of the day I think you want the best result for your clients and you're happy when you get that and you don't have to get a thank you note by the way. The satisfaction comes in the job well done.

Building trust. Let's talk about cross border deals. What are the real complexities of doing cross border deals that no term sheet captures?

So the first thing it captures is the trust. I always tell my clients, you can have the most ironclad contract, whatever. If there is no trust in a relationship.

Trust all around trust, relationship with attorney, but then your counterparty, you have to.

Have a level of trust. Exactly. Trust all around. Because let's say you're doing a JV, very high stakes joint venture, a 50 50. This is somebody that's going to be your partner for a number of years. I've been on JVs where the principals fully trusted each other and their vision and it got done very quickly. Even though the terms and condition, contractual terms, were probably not perfect, but they were the best and the most balanced and they've had very fruitful collaboration and relationship after years and years of it. And I've been involved in situations where we were doing these JVS and there was no trust. And it took us years to just be able to reach an agreement. And basically in an agreement we were negotiating the conditions of the divorce before we owe much more than we were the conditions of the marriage. And that has to do with trust. So that's a lot of the difficulty. The other one I would say is the cultural element of it, the cultural friction. When you work cross border multi jurisdictional, you need to be agile, you need to respect other jurisdictions that may not have the level of sophistication that yours has. And you have to keep an open mind. That's what makes it more challenging. I'm lucky enough, I speak five languages, so I can really relate to a lot of people in their own language. And language is a real barrier to negotiation in a multi jurisdictional context. If you can speak Spanish or Portuguese, for example, to negotiate a deal with people from that area, it's always a plus. And if anything it helps create a rapport, it helps create some form of solidarity or connection. Then you can always rely on because negotiations, it's a lot of psychology. What we do is the people's business. At the end of the day you deal with people. As long as we're not dealing with machines, maybe that time will come. We may talk about it later. But as long as you deal with people, the negotiation is extremely psychological and subjective.

These fundamentals don't change trust, culture and psychology. I want to unpack that. There's some key things I really want to learn from you today. But the thing that we do see that is outside of those is around regulations and those nuances. I know one of the things we talked about before is global data laws. You have Cloud act, gdpr. Love to hear about your view on that. In terms of how do you manage those aspects when doing these kind of cross border deals.

Yeah, there's everything that has to do with data and GDPR and then separately it has to do with regulatory, antitrust, foreign direct investment. I'll start with data and gdpr. So definitely the role that these issues have in M and A deals has been increasing tenfold in the last few years because those regulations were adopted with the advent of technology. Off the bat, what we can see is they're not applied the same way or have the same importance depending on where you are. Obviously GDPR was adopted early and even though a lot of countries are catching up, we were confronted with those a lot more and first in Europe than we were elsewhere. Basically what happened was it started with some due diligence. We needed to be done on those aspects to such issues as where is that information going, how is it processed? So it's become major, let's say terms of deals with Cloud Act. What is interesting is these days we're spending a lot of time structuring contracts and transactions in a way that preserves basically the data of a client's clients, their own customers, for example, because of the far reach of those regulations, which are extraterritorial by nature. Cloud act means that US authorities can gain access to to data that is not stored in the US not held by US companies just because there is a nexus with the US and it could be something as simple as your European company using Gmail. Now you have this connection to Google, which is a US company, a law enforcement or public authority in the US can go to Google and get your data in Europe. So you have to be very cognizant of this and structure in a way that guarantees the safety and protection of your client's data. Definitely something to pay attention of. And if we mention the regulatory even more so in that space where we can see mushrooming legislations and regulations around the world.

I'd love to hear that because it sounds like there's like two big components. There's this sort of data regulation, data laws, and then a big piece is just doing diligence how companies are currently complying and where there may be gaps. And then we have this broader regulatory environment. We talk about anti competitive, but then there's just general, like politics and national security.

And by nature, national security and regulatory are game changers in terms of the way I can see this evolving in the last 10 years. No need to go further back suddenly 20, 25 years ago. But if anything, in the last 10, 12 years have dramatically impacted, I'd say the way we do M and A. Because let's start with antitrust. We used to have two, three, four jurisdictions where if you wanted to close a deal that had antitrust impacts on the markets in Europe or the U.S. for example, you had to go and seek an approval. Or in the US you just let time go by before you could close your deal. It was what we call a worldwide bar on closing your transaction. You could not close it before you had some form of approval. If it did create that merger. Consolidation did create antitrust issues. You had to go through whole process of remedies. You knew more or less what to expect. There have been some surprises, but you knew more or less what to expect. What's happened in the antitrust field in the last 10 years is that you've had more and more jurisdictions that have set up their antitrust regimes in a way that has global impact as a tool for geopolitics. By the way, it's not just protecting a local market. It's also, of course, to play in the global arena. So I remember I was in Brazil in May 28th of 2012 when the Brazilian antitrust regime went into effect. And of course, as you might expect, it was a race for everybody to sign their deals before the law would change so they would not fall under it. But then Brazil, they did China, they did Russia, and these are major countries that were emerging at that time as brics. This was when we were still mentioning the brics. And over the years, what's happened is you've had the second layer and third layer of countries that had adopted those regime. The problems. What are the problems? A, the way these rules are drafted. It's either extremely strict and stringent. You can have to file transactions with a very low threshold, as low as 5%. Currently, I have a transaction in a country in Africa. We have a notion of control, which is referred by reference to a 10% ownership stake plus one board seat. In any normal legal regime, a 10% does not give you control. One borsheed out of 10 does not give you control. But they've defined very stringent rules to give them access to those deals, even though the impact in the market is minimal. B, some of these laws are very Vague. There have been recently some in Latin America, for example, where they're drafted in a way that you don't know if they apply to an indirect change of control, it's not specified. So there's uncertainty. Or you don't know if it should apply to a listed company that has a fragmented ownership as opposed to a privately held company where there's clearly you can identify who the owners are or it's just drafted in a way that creates a lot of uncertainty. B is it's vague. C There is no case law. There is no established case law for at least in the US In Europe you have decades of it. By no means am I saying that other countries should not protect their markets and customers the way Western Europe and the US are doing. Absolutely they should do it. What I'm saying is it does create new challenges because we don't have the depth of practice. They have not been tested. I've had to do it even in Europe. I've had to deal with new legislations in terms of antitrust, for example, or other regulatory regimes where we just didn't know what the authority was going to do because of what I said. It's either too stringent or too vague or not enough perspective and testing or some of the above. And if I talk about national security, it's the same national security everywhere. We have now regimes of control which are modeled after what CFIUS is doing in the US and every European country now has adopted them, even though they're trying to give a framework. You're dealing with something highly subjective on national security. You can have Some legislations will be extremely wide, some will be more constrained. What it means in terms of the M and A is a. The first question. One of the first questions you asked yourself and a client comes and sees you, is to see if there's a regulatory angle. Is there any national security, foreign direct investment component? B, is there any antitrust? C, is there any other regulatory? Banking, telecom, insurance, et cetera? Because basically what it creates is the interference, or to be more positive, the role of an outside party inside of an M and a transaction which normally is relatively contained. So now you have to deal with some authorities, some of them in foreign jurisdictions where you really don't know how they're going to approach this. There's going to be a political element on top of it. What's been the impact on M and A basically is it impacted the timeline of those transactions. You have to take into account sometimes months and months, because that's the other thing the Legislation may say you have 30 days or you have three months to clear, but very often the caseload is too important or they have some questions, they will suspend the timing and delay and the registration says three months. But the local council will tell you, listen, in practice it's more six to nine months than three months and that has a huge impact on the transaction. So as a M and a lawyer, you have to learn to recognize them. And when you can, you have to find a creative solution. One of the things I've done with some success recently is to see if we can maybe carve out a local aspect, make some undertakings to the authority or the local government. And if you can carve it out from a global transaction where that country is a small piece of it, relatively speaking, then I can proceed with my global transaction. Otherwise it mainly basically can kill it. You can kill a global transaction because two or three smaller, I don't mean smaller by geographies, but the importance of the market in those countries are smaller, can derail a whole transaction that has very little impact there. So you have to take into account the timing, the complexity and educate your client through it so early.

My deal process, I want to identify all these third parties because every country is popping up with the regulations around anti competitiveness and they have different varying views on it. Some may start regulating you, even having a small percentage ownership of the transaction. Some just have really vague definition of what these regulations involve. Some have much more extended history of case law. Some have very little, none. Just knowing what you're dealing with early on is going to be key. That way you can start thinking of these solutions where, hey, maybe you have less than 1% of this market, it's going to be easier just to carve it out instead of having your whole deal hinged around their approval.

When should we recruit you? This is a perfect summary.

Well, I just want to make sure I learned.

But also what it means is your choice of local council. When you work in all these different jurisdictions, you cannot have an office everywhere. We have 22 offices around the world, but we're not going to have it in all these countries. It means that the choice of local council is key because increasingly you not only need somebody that knows the law, you need somebody who knows the players in the government, in the regulatory, because they need to know what their approach is going to be. Often there's just been a change of government, new people are coming in place. We don't know what their philosophy is. Other times it's been tested a little more so you have to be very careful also who you work with in those jurisdictions.

How about doing deals in France? What's like surprisingly easy, uniquely hard about doing deals here in France Compare to the U.S. make it easier.

It might surprise you. The hardest part, actually, you know, what it is, is to convince our American and other clients that it's way easier to do deals in France than they think. That's the hardest part. There's a psychological barrier and I think France is very bad at selling itself. In the last few years it's done a little better. But people think of France and of course great for holidays you're going to spend, you know, you're going to see the Eiffel Tower go down to the Riviera and so on. But when they think in France in terms of business, I've noticed more often than not they think, you know, it's this overly bureaucratic country with very high tax regime with these labor consultations and why are we consulting the employees when I'm doing M and A. So people are scared by all of this. Part of what we do, part of my job is to explain to them that, look, if you know what you're doing and you know how to navigate the labor consultations, yes, you need to go through it. But how many times have we had a problem or a serious problem or litigation twice, maybe in 25 years. The tax, there's a lot of exceptions. There's a lot of ways to structure your deal in a tax efficient way. The bureaucracy, yes, it's bureaucratic. Is it more bureaucratic than a lot of other European jurisdictions? Based on my experience, no, not necessarily. We're bad at selling ourselves. There are some challenges, but there's a reason France is always in the top three of the inbound foreign direct investments and sometimes even before Germany and some years and the uk. There's a reason because also we have normally at least a very stable government. There's infrastructure. We have an amazing, you know, you talk about tech and science, amazing engineering schools and workforce, highly skilled workforce. There's a lot of advantages. The difficulty, number one, is the psychological, sometimes prejudice, frankly that people have that is going to be way more complicated. And very often it's happened to us that the clients, you know, were said, well, it wasn't that difficult. See, we told you there is exception, of course, but more often than not it's way easier than they think with a lot of opportunities, size of the domestic market, the importance of the middle class, et cetera. And then I'd say the other Challenge, Yes. You have to deal with the administrations, depending on what you're doing. Purely private M and A is never going to be a concern. If you're dealing with the public market, securities markets, or you're dealing with specific, you might have to deal with the administration. But I'd say more often than not, it's a rational conversation.

Labor consultation I was always first. When I think about doing any deal in Europe is labor laws are a lot more stringent than they are in us. We have this thing called employment at will. And I don't think it's as simple over here. Can you tell me a little bit more of what goes into the.

You're right, definitely. France is a country that protects the workforce probably more than. And it's one of, I believe, only two countries worldwide, the Netherlands being the other one that has a law. I'm going to simplify, but in a change of control situation, if there's a works council at the level of the target or the seller. I'm talking now about a foreign buyer coming in and buying a French asset. If there's a works council at the level of the target or the seller, or both, you need to consult them, the works council of the seller and or the target before you can sign a binding spa. So of course, for an American buyer that comes in, they're like, this is insane. So I have to ask the employees what they think about this transaction before I can sign a binding spa. Binding contract. And it's one of those things. It's the French way. Yes, you have to consult them, but somehow it doesn't matter if they say yes or no. It just needs to be done. So it's a process. And with structured deals in a certain way that the practice has developed, this practice of a put letter. So basically you do sign an agreement, but only the buyer is bound to buy. The seller is not bound to sell until you've done the consultation. And in the last few years, the government has really done a lot of efforts to put a lot of framework around it. So the consultation takes one month in some cases, maybe two. But mainly it's done in one month. 95% of the cases, there is no problem at all. You just have to go and explain to the employees, listen, that's our project. This is what we're going to do with our plans are intentions. Of course, it doesn't have to do with employment necessarily because it's way too early at that stage to know any concrete plans in terms of the employment. And often M and A yes, it could be employment destructive sometimes, but in a lot of cases it saves because it brings new money, fresh money inside a company could save a lot of jobs as well, although it seems crazy like that. And the problem is if one of the parties is not well advised by people who calmly tell them, listen, I've done 50 of those, this is how we should do it, this is how we should negotiate the agreements. You will not have a problem. But when the parties again back to trust parties not trusting each other, it probably took more time to negotiate that small employee consultation related agreement than the SPA itself, because the parties did not trust. What could happen if you could do this, you could do that. Could the seller instrumentalize the workforce to try and screw me, the buyer, pardon my French, it could create. But this is 1 out of 10 case maybe, let's say I'm looking at.

A company in France and my plan, buying a little tech company, is to completely eliminate their management team. This is what we're going to do purely around the synergies. We have a dominant management team. We really don't need their management team at all. There's a handful of people on the tech engineering side because we're probably going to end up sunsetting their product and going to keep it in maintenance mode for the next couple of years. Two years out, we're going to immediately probably reduce the staff 30, 40% and then over two years completely eliminate it. Pretty aggressive cost synergies. That is very much on the employment capital side, which we don't think twice about. In the US you just do it. But here, knowing what you just talked me through, how would I work with you on that?

At the philosophical level, which is where you sort of had to start, we probably consider the workforce more than you do in the US because in the US there's maybe a lot of social mobility. When a European thinks of the Wild west, that is the us. So people lose their jobs, have no social protection. Most of them don't have any. So it's either you find another job or I'm not saying die in the gutter. It's extremely cutthroat type of situation, which is maybe one of the reasons also your country is very dynamic and very successful, successful, et cetera. But so you look at it from the employers, from the business owner's perspective, which is healthy. That's how capitalism works, et cetera. Most European nations, they're built on this concept of social democracy and so on, where workforce does matter. You're not just endangering them unnecessarily I fully understand. A lot of people will say, well, that's why we're so agile in the US and we're so dynamic and you guys are not. And probably true as well, except we've had a lot of success in the tech space recently. So in those cases, a, there's not always a works council. You have to have certain conditions, more than 50 employees, et cetera, to have a works council. There's not always a works council, but if you have collective layoffs and more than nine people, yeah, there will be some form of process. In some cases the administration will look into it. It's a risk reward strategy. You look at it, you're well advised as to what the timing and cost will be for your plans to be implemented. And then you decide, take an informed decision of is it worth for me buying it? Maybe you're buying it in your example. Clearly you're not buying it for the people. You might be buying it for the tec. You may be buying it for other reasons. In most cases that I've seen, unless you're in distress, M and A and so on, you actually want the people, most of the people sustain. Let's say you don't.

That's why I picked that example.

You don't want them. So you will have a clear plan as to listen, this is how much it's going to cost you, this is how long it will take you. And then you decide, take an informed decision as to is it worth for me doing it?

So that's going to be the biggest consideration is knowing that, hey, at the end of the ultimately you have to take care of the people and that's going to be some cost attached to that. And there's going to be timelines around it and you just need to factor that in.

You factor it in, it may translate into the price you're willing to pay. It may translate into the actual current owner starting the process of dismissing them and having them on their end. Often we see that where the buyer tells the owner, listen, you're taking care of that and it becomes just a term of the deal and the owner, if they're willing to again, it's always a negotiation and where your interest lie and what you're ready to do. And sometimes the owner will do it, sometimes the owner will say, you know what? No, you do it and we'll give you a discount on the price of such. So it just becomes another variable in the transaction.

When do we want to play that scenario out? Do we want to do that before loi or after loi, you have to.

Have enough information on the target to be able to assert what it is. So before after loi, it depends on the strategy. If it is clear to the seller that it must be done and every buyer they will talk to will insist on that thing being done, there's no reason to not mention it upfront and wasting everybody's time. Often you might be in an auction process, you might be in a competitive auction. Maybe not everybody will have the approach that you have. So it might be wise to wait to have more information about the target and most of situations. Kiesen, to be honest, is very rare that exactly what you're going to be doing the moment you close, as you said, it could play out over the next year, two years and you may change your mind. And I've seen that a lot of times. So in that kind of situation, probably wiser to wait, get into the LOI process knowing that you're willing to engage and maybe go to certain level before you definitely commit the loi, which is a non binding document. So the non binding loi to binding loi stage would be where I think you'd be doing that assessment.

That's where we'll pause the conversation for now. We covered a lot of ground. In the next episode we'll pick it up right where we left off and keep digging in. Thanks for listening. We'll see you in part two. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.