Business Lunch (#3 March 2018)

Main Asset

The Ukrainian legal market is not saturated by international law firms. This is a reasonable outcome of its economic development as FDIs that always empower international outfits are far from the desirable level. Meanwhile, those offices operating in Ukraine are constantly at the high-end tier, finding themselves enlisted for cross-border mandates. Big internationals bring their standards of legal work and running business, policies and strategies. Graham Conlon, managing partner of CMS Cameron McKenna Nabarro Olswang Ukraine, tells the UJBL about recent developments at his office, the views of foreign investors, what the firms main asset is, and why managing people is even more about managing life.

Could you please tell us about you and your background?

Graham Conlon: I originally commenced my career at Linklaters in London. I joined CMS London in 2010, and after a couple of years the firm asked me if I would consider spending a few years on secondment to Ukraine, to give a boost to our M&A practice here. I said yes, and somehow Ive been around ever since having got married to a Ukrainian in the process.

Youve recently taken over as managing partner of CMS Cameron McKenna Nabarro Olswang in Ukraine. What plans do you have in your new role?

G. C.: I have ambitious plans for our Kiev office. Other international law firms have left the market in recent years, whereas we are doing the exact opposite. We are in the process of investing a very significant amount of money into refurbishing our office (my apologies to our fellow law-firm tenants in the building we will try to be as quiet as possible!), thereby bringing the style and overall design into line with that of our new award-winning London office. Were also recruiting quite significantly to satisfy our client business levels, and investing heavily into our IT.

One of the first things you did as managing partner was to implement a new agile working policy in Ukraine. What is that all about?

G. C.: In a competitive market, law firms do not succeed by simply providing an ok service to their clients. They do so by going above and beyond expectations, such that clients, and the market generally, say youve got to use these guys theyre amazing! For that to work, you need to have lawyers who are genuinely committed and enthusiastic about what they do recognizing that our people are our main asset, with lives beyond just working all the time. Our culture is really important to us therefore, and we only recruit (no matter how busy we are) where we believe the person will fit-in with, and respect, that ethos.

As part of this, one of the first things I did as managing partner was to implement a new agile working policy, which is basically designed to ensure that our lawyers can manage their lives (e.g. how long they work, when they work, and from where they work) in a manner that is best suited to their individual circumstances, recognizing that the clients interests come first.
The new policy has been positively received so far, and global statistics show that morale and productivity typically increases in such circumstances.

Could you please explain to us what it means to be an English-qualified solicitor in the Kiev office of a global firm?

G. C.: As you know, many M&A deals in Ukraine are governed by English law, and so having English-law capability on the ground in Kiev really helps to ensure a seamless service. For example, we have been working on some of the highest profile M&A deals in the country in recent years (e.g. the joint-venture with Cargill to build a grain terminal in Yuzhniy port, P&O Maritimes entry to Ukraine for the first time, the sale by Horizon Capital of Ciklum to George Soros Ukrainian Redevelopment Fund, etc) and we have carried out the entirety of that work from on the ground in Kiev. Having an English-qualified partner involved right from the beginning all the way through to the end (as opposed to just sending an SPA for a cursory English-law review at the final stages of the transaction when it is anyway too late to add any real value) really helps to ensure that seamless high-quality service.

What M&A trends in the emerging markets do you see right now? Can you predict any of them appearing in Ukraine in the near future?

G. C.: The use of locked-box accounts is becoming increasing popular, as is the use of warranty & indemnity insurance on M&A deals (with warranty & indemnity insurance, sellers can exit with a maximum liability as low as just one Euro with an underwriter stepping in to provide the buyer with any coverage in excess of this amount). There is some use of locked-box structures on deals in Ukraine, but very little so far with respect to warranty & indemnity insurance. In the West, existing private equity funds also do not typically provide commercial representations and warranties these are provided by management, again often with the use of W&I insurance. Other CEE countries have slowly started to follow this approach too in recent years but I suspect it will still be some time before this is commonplace in Ukraine.

How do you see the activities of private equity funds in Eastern Europe? Do you expect them to expand to Ukraine?

G. C.: I co-head the private equity team across the entirety of Central and Eastern Europe, and I see through (and also through our recent Emerging Europe M&A Report1) that activity levels are healthy, with a lot going on. There are of course private equity funds which are already active in Ukraine, and others who will look at opportunities in Ukraine from time to time.
The general consensus amongst my private equity clients however is that Ukraine needs at least a couple of years of stability and good-news stories before most funds (not already based in Ukraine) will start to look seriously at Ukraine again. We all hope and trust therefore that the investment environment in Ukraine will go in the right direction, as there is so much potential here just waiting to be untapped.

You have a Masters in Finance from the London Business School. Would you recommend that to other lawyers?

G. C.: I studied at LBS between 2011 and 2013 whilst working full time at CMS in Ukraine. It was really very difficult trying to manage my LBS study workload and exam commitments, travelling back and forth between Kiev and London, whilst at the same time trying to manage my client transactional commitments. Overall however it was worthwhile. Before studying at LBS, I had a pretty decent understanding of most M&A valuation concepts, however some things were a little blurred (in particular when it came to complex valuation issues). Now though I have the same finance training as investment bankers and private equity professionals, and my vision is crystal clear. Clients appreciate that, as it means being able to get deals done in a pragmatic, cost and time-efficient manner.

We often see in public announcements of deals that the Kiev office of CMS Cameron McKenna Nabarro Olswang handles transactions in other jurisdictions. Is this a common practice? Do you hire local advisers to cover specific local issues?

G. C.: I have always had a regional role, even whilst in Kiev, and in my career to-date I have advised on transactions in 39 different countries around the world. If we are doing a deal in a country where CMS does not have an office, then we will of course sub-contract the work to another law firm with our team being in overall charge from a transaction implementation and negotiation perspective. In the past 2 years, I have also acted on a number of high profile deals in Western Europe (including in the UK), acting for CEE/CIS-based clients looking to expand into such countries. I always try to get our colleagues in Kiev involved in these deals wherever I can, as I believe it is good for their career development to build up their English-law and general M&A transaction-implementation skills.

It is no secret that the majority of cross-border deals involving Ukraine are governed by foreign law. What kind of protection does it provide? What do clients usually request from their legal counsels within their corporate and M&A transactions?

G. C.: I have done deals in most countries throughout Central Eastern Europe and the Former Soviet Union, and actually the laws in Ukraine are not all that bad by comparison. The principal issue is enforceability however the Ukrainian courts do not yet (unfortunately) have the trust of the international investment community to deliver the right and fair result in the event of a dispute, and hence why many cross-border deals are governed by English law. A large part of my job therefore is helping foreign clients to mitigate country risk.

Does the increasing importance of compliance push your clients to conduct compliance due diligence?

G. C.: Increasingly so, yes. Foreign-investors are particularly sensitive when it comes to this topic, and we feel this in different ways. For example, clients may ask us to pay extra attention to compliance issues during the due diligence phase, to assist them with carrying out their KYC checks against transaction counter-parties, and in many cases we are asked to build into the transaction documents stricter compliance/anti-bribery clauses, along with appropriate representation & warranty protection.

What is your opinion on the recent changes made to Ukrainian corporate legislation? How do you see them in practice?

G. C.: Its a positive start, with some many helpful and long-overdue changes. However, there is still work to be done to bring Ukrainian laws into line with that of other countries around. For example, in other countries it is usually possible to issue different classes of shares with different rights attached to them (e.g. preferred shares with preferred rights of return, or other shares which start to pay out only after a certain level of profitability has been reached) and these can be really useful in the context of (e.g.) private equity/venture capital transactions, and/or when it comes to implementing management incentive schemes.

How does the global combination that took place in the past year in your firm affect the Kiev office? Do you receive more work from your strong international network as a result?

G. C.: The merger with CMS, Nabarro and Olswang was the largest ever merger in UK legal history, and it created a new London powerhouse and the 6th largest law firm in the world by headcount. It brought to us increased sector strength in certain areas (e.g. real estate, and technology, media and telecommunications). There was however no overlap between these three firms in Central and Eastern Europe, and hence the work that Nabarro and Olswang was previously sending to competitors of ours in CEE is now flowing our way.

Please tell us about the most challenging deal you have led in the last few years.

G. C.: I enjoy a challenge, and there have been many! But a particular favorite of mine includes acting for Advent International when they bought PPF (a transaction across 7 countries and involving over 130 CMS lawyers), and then sold it again for EUR 315 million to Pamplona.



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