M&A Execution: Strategy from Skadden Expert Arash Attar

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1:54I'm Kisan Patel and you're listening to M &A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, and what actually happened during M &A deals.

2:19Hello and welcome to the M &A Science Podcast. This podcast is part of a mission to rethink how M &A is done. That old school seller-led approach, it's dead. Buyer-led M &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 &A by learning directly from the best. I'm your host, Kisan Patel, founder and CEO of Dealroom and chief scientist at M &A Science. Today, I'm joined by Arash Atar Razvani, M &A partner at Skadden, based in Paris.

3:01Arash has spent over two decades advising on some of the most complex cross-border M &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 &A deals, navigate regulatory landmines, and build creative legal structures when no playbook exists. This episode is part two of our conversation from last episode. If you missed part one, I recommend giving that a listen first. Otherwise, let's pick it up right where we left off. When do we want to play that scenario out?

3:38Do 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 mentioning 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 the situations, Kisan, to be honest, it's very rare that exactly what you're going to be doing the moment you close.

4:14As 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, it's probably wiser to wait, get into the LOI process, knowing that you're willing to engage and maybe go to a certain level before you definitely commit the LOI to, 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. In terms of working with French. Yeah. After this meeting, I got to go around the corner to one of your well-established private equity firms and talk to them about one of their non-performing assets.

4:49What's like a good way culturally being mindful here because in America, we tend to be pretty direct. It's a brush of like, hey, you got this thing. I'm interested in it. Really forward. Teach me. So I can actually get this deal. So do you speak French? Bonjour. You can use that. So that's one of the cultural elements I was talking about. You got a good point. I noticed if you just walk up to somebody who's talking English, boom, they're going to get offended. If you start with just bonjour, bonsoir, and then you start talking English, they'll actually respond to you. It can help. It can help.

5:21We've seen a lot of different responses. you have people you speak French to them and they'll still speak English to you and others you speak English to them and they'll switch to French. It's gotten much better. It used to be that you'd be in a meeting with 20 people, five of whom would not speak French at all. And then all the French speaking at some point will switch to French. We see that a lot less. In France, yes, you guys are direct because, you know, I'm plugged into American society and your standup, your culture. Since we're kids, basically, and I live there, I work in an American law firm, I studied there, so I understand probably the culture a lot more than the average French.

5:55Yeah, you guys like to be direct. But also, interestingly enough, you might not be direct at all communicating what you really want. There could be a lot of, oh, it's such a great idea. And in the end, you're just going through the motions of turning everything into a positive, everything. And when I speak to my French clients after we've had this kind of negotiations with Americans, sometimes they're like, yes, everything's beautiful. Everything is wonderful. Everything is rosy. but we don't know what they think. And in a way, the French are sometimes criticized for this, you know, for being arrogant and so on.

6:28I think I'm just trying to say there's never one color or one aspect to the culture because the French can go around a little bit and it's good to start with some small talk and so on, but they'll be very direct as well. I've seen American counterparts being shocked by how direct the French are because you guys may be direct, but you like to keep the form of being polite. You know what I mean? whereas the French will deliver it to you raw sometimes. I've definitely seen both sides of that. Partly I don't see myself as just French because I told you I have a lot of that background. So I look at it as an observer sometimes.

7:01If you speak your mind in an honest way, you don't take them for fools. You just communicate clearly what it is you want and why you want it. And you respect the other side. France is an old nation. They have or we have probably a higher opinion of ourselves and our culture and history than the current place of France in world affairs might suggest. And I'm not going to say more. The French always revere the times of Louis XIV and Napoleon. And the Americans are acutely aware that's not the case anymore. If you come what we call your Texan boots on the ground and it's like, you guys are all second class, but you're all clowns.

7:38We know how to do things. We'll explain to you how it works. That's not going to work in the French context. You need to put a little bit of decorum and have what in the most sophisticated American canaposit you mean that have the sensitivity to a different culture. A little bit of that goes a long way. Okay, start off with some pleasantries. Sounds like just generally being open-minded, but generally being forward. Yeah. In this case, they have an asset that's underwater. Now there's a mix because I'm American, but I'm also Indian. I was raised by immigrant parents, so I'm very cheap. I like buying things, pennies on the dollar, basically.

8:10So in this instance, and I know for an investment firm, they have an asset underwater and they want to at the least get their money back. But for me, it's like, you've raised X amount. Can I get it for 50 cents on a dollar? Pleasant trees argue your position, respect their culture and their position with argue. So having a business case of like why it should be 50 cents on a dollar. That's a concern. I was like, I guess my view of the French stereotype here is they're a little more serious. We do a little playful bantering in the US and joke around a little bit. I'm like, I don't know if that's going to land as well.

8:40It's tricky. Humor is tricky because humor is not accepted or taken the same way. Exactly. That sounds always universal. There's like different flavors of humor and then some just flat out. I can tell you what my approach is. I really, and it sounds super corny, but it's true. And as the years go by, it's even more true. I'm just being myself. I like to use humor also to diffuse some situations. Doesn't mean sometimes it's tense and it has to be tense. But most of the times you get a feel for who you have. Of course, if you have a very, I'm going to take also some cliche, very stuck up French person who's really into themselves and so on.

9:14and you start with some dirty humor, that might not be their brand of humor, their strand of humor. But by seeing people and seeing what they react to, I've had a very positive experience. Just being myself, being approachable, having this light demeanor, but serious on the topics. Always serious on topics, respect the other position, listen. Listen goes a long way. 90 % of the success of any meeting is listening. Listen to them, look at them, see how they interact between each other. If they use humor, okay, that might be something they appreciate from you. If they don't, that might not be the right approach.

9:48So you just go through your meeting. But what I've noticed everywhere around the world, I've been from India to Brazil to Africa. If you are sincere, you don't take them for fools and you argue your positions and you have to know where to give. You can't always take. If you know difference between what really matters to you, which really you need to get, whether you express it or not. Sometimes you may not want to express it right away, but where to give them things that are important to them and not to you, that's the key to getting a successful negotiation over time. And if not, even if it fails, you'll get the respect.

10:24And I'll tell you one thing, I've gotten probably more clients referred to me by other lawyers who are sat opposite or clients I sat opposite than I've had in any other way. That's the best compliment that anyone can pay you. Somebody was telling me the same thing recently is that when another lawyer refers work to you, it means they see you as somebody not only competent, but probably trustworthy. And it's the best compliment they can pay to you. Okay, I'm going to take your advice. I'm going to go to this meeting and I'm going to start off with listening. I really kind of understand their point of view.

10:56And with what I learned from listening, I'm going to essentially be mirroring, right? A little sense of humor. I'm going to play into that. Stay true to yourself and then call me and tell me if it was a huge success or a catastrophic failure. And I'm still going to be myself for sure. I'll still be myself, but picking up the room. From that, I'll build my business case or my sort of position and see where we can land. Absolutely. That's what I do. And I'll be honest, it's worked well for me. So hopefully... If I get next steps, I'm going to call you because I may need representation out here. Please do with pleasure.

11:27Going broadly back to like cross-border deal, because I do respect the fact outside of France, you've worked with so many different jurisdictions. What would you define as like high stakes cross-border situation? When people say this is a high stakes cross-border deal, what does that actually mean? I'll be a little cynical. I think people like to hype themselves up, you know. For me, high stakes means there's lives at stake, right? So let's be clear. If today I was going to negotiate an agreement between Israel, the US, and Iran, this would be high stakes. Okay. But let's be clear and let's not give ourselves too much importance in what we do.

11:58Maybe this is M &A, we put a dollar figure. It's almost like anything at a billion plus enterprise values of high stakes. Exactly. But at the end of the day, you know what? when it's just about money, come on. You know, yes, it's high stakes, but it's just about money. Just about money, yeah, exactly. When I think it's high stakes, when people's lives are at stake, where M &A has people's lives at stake, I go back to the employees. M &A can be done and then people losing their jobs, losing their livelihood. And that's why I think even though I'm hardcore pro-M &A, pro-business, pro-capitalist, everything you want, little does are remembering there's people behind some of those things and they may suffer.

12:31Is that so crazy that we have to ask them their opinion, which by the way, we don't really care at the end of the day what it is, because it's going to affect them. They're not just numbers. That goes back to what I was telling you earlier, Kisan, which is when you have entrepreneurs with a strategic vision and a industrial vision, they're building, you know, one of my clients is the Axion Group. There's this French Indian family called the Hiriji family based out of Madagascar. They're originally from India, but established in Madagascar for five generations. And they all have since then the French nationality.

13:00And I met their four partners, the two uncles and the two sons of the third uncle who unfortunately passed away. My contact has been one of the sons, Asenai Niriji, who's African CEO. He's a very successful person, one of the nicest human beings, one of the smartest people you'll ever meet. And with Asenai and his group, over 10, 12 years, we did all their M &A. We went through Togo, Senegal, Tanzania, Uganda, French islands of La Réunion Mayotte, and he's built the sixth largest telecom group in Africa, Axion Telecom. We went through all of this hand-in-hand building on a vision that he had. There, yeah, there are high stakes because you are negotiating, you know, giving access to telecom these days.

13:40You cannot do anything without a smartphone. And in Africa, where there is poverty and all of what you want, but they are more advanced than we are, by the way, in terms of money banking and this sort of services that go through to the phone, it's crucial because it brings not only development, it brings financial inclusion. Because once you have a phone, once you have electricity first, and we've actually, with The group, they have also an energy group and we've helped them bring energy, renewable and so on. A lot of regions in Africa. Once you have a phone, you have access to a bank account.

14:09You have access to being able to raise money or use money to build a small company and then maybe a larger one. It's a whole inclusion socially, financially and otherwise. That's high stakes. To me, what defines high stakes is when there's lives at stake. Everything else which is building on helping a company become bigger and selling more products. It's great. Love it. You know, basically it's what I do. But I would not call that high stakes. It's about the people. Yeah. Some people may have a perspective that it's about the money. When you look at that situation, when you're doing those transactions, what are you anchoring on?

14:42Is it sort of those specific things where it's impact that this deal is going to have? So I anchor on all these various aspects. There's a technology to what we do that has to anchor you on because it's fun to do. I love what I do. And it's super creative. is it intellectually extremely challenging? So that's a source of motivation for me to create something. When you do this job, you have to be creative. You have to want to find solutions. When my kids ask me, and it's too difficult to explain to them what I do, I just say, basically, I find solutions to my clients' problems. That's what we do.

15:18So that anchors me, as I said before, the psychological, emotional, people aspect of it, the human adventures that you live through those transactions, also a great source of motivation. And then you want your firm, your team to be as efficient and performing as possible. So clients are happy and come back because it's a business at the end of the day that we're building. If I've done a transaction where I have a happy client, we find the way for them to do it that no one else had found or thought of. And we made it possible because of our innovation and creativity. It doesn't get any better. Tell me more.

15:50Give me examples. I know you've worked on some sort of first of the kind type of deal structures and things that are unique. Give me examples of that. I'll mention one. Last year, we did the stake private of L 'Occitane, the national skincare. L 'Occitane is incorporated in Luxembourg, has its roots in France, of course, headquartered in Switzerland and was listed in Hong Kong. So we had to find a transaction whereby the majority owner of L 'Occitane, who owns 72 % of the stock, was going to take it private by the remaining minority shareholders listed in Hong Kong and make it back into a privately held company.

16:23The problem is that when you have a company that's incorporated in one country and listed in another, there is no legal path to do a tech private because the laws of, in this particular case, Luxembourg and Hong Kong, but it is true for France and the US, it's true for others we've done, are not compatible. They don't allow you to do it in the traditional way that each jurisdiction would do it. So let me take an example. In Luxembourg, you would have to do it through a merger. there is no legal regime to merge a Luxembourg entity with a listing in Hong Kong without having go through some form of complex procedure.

16:57So what you would do is a tender offer, except that the tender offer would be subject to securities laws, i.e. the Hong Kong stock exchange. And in Hong Kong, they would tend to do it by way of other transaction structures, scheme of arrangement, and so on, which Luxembourg does not recognize. We had to find a very original way, I think it's the first worldwide of doing a take private. So we did a tender offer subject to govern under Hong Kong laws. But for the final squeeze out of the minority shareholders, we used the bylaws of the company. We did not use a law or regulation. We used the bylaws of the company, which had a provision that we could build on.

17:33We had to comply with two sets of laws and regulations that were not necessarily compatible, creating basically a race to the most stringent. Because if, like St. Brookes said, to be able to squeeze out the minority, which means force them to sell once the tender offer is closed. In Luxembourg, the threshold is 95 % of the share capital voting rights of the company. If you reach in the tender offer more than 95%, then you can force the 5 % minority to sell to you. But in Hong Kong, it's 90 % of the minority that remains. So in effect, it was a threshold of 97.2 or 3%. So we had to take the most stringent of the two.

18:07So we had to be such a successful offer that at the end, there was less than 2.5 % outstanding that we could force to sell. And we had to convince both sets of authorities that this is something that could work, that it could comply, protect the rights of minority shareholders in both jurisdictions. And that was not subject to litigation. And I can tell you, it was a huge effort. A dozen of the largest law firms were involved for one party or another. We were coordinating the deal. It was an effort between our Paris and London and Hong Kong offices. We had 40 scouting lawyers probably working on it, than over 100 lawyers.

18:40And to the risk of sounding immodest, very few firms would have been able to coordinate something like this. That sounds expensive. Take privates aren't cheap, are they? They're not. Definitely they're not. And clients will always complain that they pay their lawyers too much. That's what I'm saying is, what's the value of finding a way to do something that's impossible? What's the value to you? That's true. When bankers do it and they charge percentages of transaction value, they could get paid dozens of millions of dollars. It's worth it at that point. Because, you know, when law firms do it, we bill by the hour.

19:11So definitely it's going to be, you know, legal fees usually, except for maybe one firm worldwide probably that we all know or we suspect has a different billing model. When you look at it, the legal fees, the larger the transaction, of course, they're between 0.5 and maybe 1 % of the transaction value. I'm curious, you brought up Wachtell because that's what they're infamously known for is having success fees, almost matching the banker's fees in some cases. How do you see like AI, right? Obviously, AI is like a burgeoning. We built a product last year that does contract extraction. And we have a lot of in-house counsels using it.

19:44We don't currently sell to the external firms, but maybe they'll change in the coming years. And what I was curious about, because you see these in-house counsel using it to reduce some of the reliance, especially when it's like pretty tactical contract review that they're doing. They're just looking to extract key clauses. How do you see that affecting, one, just how you start perceiving utilizing AI, but like how your business model may change? Because my theory is that firms will start going more towards a mix between a flat rate and success fee model just to stay aligned. So that way there is clear incentives of, yeah, let's leverage AI.

20:20Let's get the best results. And then maybe not like matching the banker's fees. Maybe the banker's fee should be split between everybody else, consultants and lawyers. I don't think bankers would like to share their fees. We have to give them a choice, do we? That's true. No, I agree with you. definitely the way we work is impacted by AI and the way we are compensated will ultimately have to change as well. To be honest, I've always believed, and in some cases I've been able to do, that it's okay to have part of our fees paid in a form of a success fee. Obviously, it's easier to do in litigation or in some cases where you can calculate the actual value of what you do.

20:58When you do M &A, it's hard to put a number to what it is you're doing. And take another example, you said what you need to be working across the border, etc. It reminds me of this Star Wars quote. Master Yoda says, you must unlearn what you have learned. And what I mean by that is you have to keep an open mind to not come with all of your reflexes and prejudices in a different jurisdiction. When you do that, you might find a path that no one had seen, tying to the conversation first and then tying it back into AI and the compensation. So when you find a transaction structure that doesn't exist, how do you put a value on this?

21:32When you win a litigation, will or lose, in most cases, you can calculate how much a client has won or lost because that's an amount that the judge will allocate to the other party. So if you win and you win$150 million, let's say, it's easy to see, okay, what was the value of what you did? You won$150 million for your client or$10 million, whatever. Or when you have tax advice, you've saved that much money. When you do M &A, it's much more subjective. The success fee discussion has to go back again to trust and good faith that the client will see the value of what you're bringing. You have an open discussion for that.

22:01But what AI does currently, it saves time. Contract review is speedier, you know, have a bigger scale, risk flagging and so on. I don't think necessarily it's a bad thing because it does save us time. It allows us to focus on the higher value aspects of what we do, because I don't think, at least not in the current state, maybe in five, ten years, who knows. But we are in this complex human interactions and negotiations. Maybe even the contracts, when we tell them, let's do this and that, AI will produce the contract that goes with it. But I think in the type of job that we do, and that's what ultimately might differentiate, maybe a lot of law firms will disappear because everything that's basic to do, that's a low value, can be done by the machine.