Tarek Houdrouge (Schellenberg Wittmer): “Acquisitions of companies abroad by Swiss businesses should remain attractive”
A young and dynamic partner at Schellenberg Wittmer, Tarek Houdrouge has a strong expertise in a banking & finance and M&A practice, which is unique in the Swiss market. Geneva-based, he is building up a client base in the French speaking part of Africa. Here he reflects on the present and future of his profession and practice.
Leaders League. What are the latest key trends in the M&A market in Switzerland?
Tarek Houdrouge. According to studies, 2017 M&A activity is relatively high and stable, dominated by Chinese buyers and private equity investors. Overall, the outlook remains positive for the Swiss economy.
The low interest rates should facilitate the funding of M&A activities, benefiting in particular private equity investors using high leverage. Acquisitions of companies abroad by Swiss businesses should also remain attractive due to the strength of the Swiss franc.
So far, one major M&A transaction has occurred in 2017: namely the acquisition by US pharmaceutical and consumer goods manufacturer Johnson & Johnson of the Swiss biotech company Actelion for approximately $30 billion. After the Syngenta acquisition in 2016 by the China National Chemical Corporation for around $45 billion, this is one of the largest transactions ever to have been made in Switzerland.
Moreover, because ongoing uncertainties over fiscal policy (rejection by popular vote of the reform of the corporate tax system) and geopolitical international instability making potential buyers more reluctant to make acquisitions, I do not expect a strong boom in transactions in the very near future. In the banking industry, there is an ongoing trend of consolidation due in particular to the increase of regulations, compliance and costs.
This has resulted in significant activity in banking M&A, including in particular the restructuring of financial institutions, divestiture of businesses and strategic acquisitions of banking portfolios. I believe that this period of consolidation should last for a while.
You have a unique practice in the market, how do you create bridges between your banking and finance expertise and your M&A practice?
As a lawyer active in M&A and corporate governance for financial institutions, a regulatory background is absolutely indispensable, in particular in the highly complex regulatory environment of today’s banking industry. My profile, which includes traditional M&A practice combined with regulatory expertise, allows me to lead such projects.
Good examples of cases mixing the two include corporate governance in financial institutions and banking M&A transactions, such as the acquisition of clients’ banking portfolios, the merger of regulated entities, the restructuring of international financial groups and the acquisition of shareholdings in financial institutions, as well as post-closing disputes when there are breaches of transactional documents. In all such cases, you have to assist and advise on regulatory matters, in particular banking secrecy, client consent and communication with the Swiss Financial Market Supervisory Authority (FINMA).
Schellenberg Wittmer is a fully integrated law firm. For example, our transaction team traditionally works with other teams in tax, IP/IT or antitrust due diligence reviews. Moreover, we are collaborating more closely and at an earlier stage with some of our dispute resolution lawyers in the framework of transactional deals in order to add a different perspective, which provides us with a strategic advantage in case of potential disputes.
You have built up a client base in French speaking Africa, which is quite uncommon in Switzerland. Why did you choose to do business in Africa?
I, personally, have an international background: half Swiss, half Lebanese, and born in Senegal! I have family living in Switzerland and in Senegal, but also in other African countries such as Tunisia, Ivory Coast, DRC and Gabon. Traditionally, Lebanese descendants living in Africa, while very attached to their country of adoption, have embraced the local way of living and often speak the local dialect. Therefore, the African continent is for me a natural choice as a place for business and I have always tried to develop special bonds between Switzerland and Africa. In some fields, for example in commodities trading, the links between Africa and Switzerland are obvious since Geneva is a major hub, but other fields could also be developed.
What are the challenges and opportunities of these markets?
Africa offers unique business and project development opportunities in various fields such as real estate, infrastructure, logistics, agribusiness and telecommunications. The continent is constantly growing and developing, in particular thanks to massive investment from China. Our strong experience and expertise in transactions as a leading law firm in Switzerland allows us to assist clients in acquisitions, investments or other projects in Africa. We can offer our extensive know-how in terms of process, due diligence of target companies, review of corporate documents, negotiations, drafting of agreements, etc.
One challenge that we might face in these markets is the fact that other French speaking countries (France or Belgium) are traditionally seen as being closer to Africa than Switzerland is. However, I am convinced that Switzerland has great advantages and should be considered more frequently, for example, to establish a Swiss holding group company or as the applicable law of distribution agreements in the implementation of a distribution network. Indeed, Swiss law is characterized by its great flexibility, in particular in contractual relationships where the freedom of the parties prevails, but also in Swiss corporate governance for groups of companies.
What challenges may you face by operating from the Geneva office?
In the case of contractual relationships, a good solution to reduce risks due to the absence of local presence is to agree on an arbitration clause in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution with an arbitration seat in Geneva. Switzerland is indeed a leader in arbitration and offers a quick, neutral and confidential dispute resolution process. We recently had different cases of arbitration involving African countries where the parties had rejected the application of French law and Paris as arbitration seat. I believe that the current tendency to opt for Swiss law and an arbitration seat in Geneva will continue to increase in the future.
You are a good example of the rise of the “next generation lawyer.” What differentiates your generation from baby-boom lawyers?
Our profession has become more complex and challenging, in particular due to the ever-increasing level of competition.
I believe that my generation has entered the legal profession with a totally different work culture than the baby-boom lawyers. Both generations are ambitious and hardworking, but the baby boomers showed a stronger commitment to the workplace and, in their relationship with the clients, placed more value in face-to-face meetings at the office. We, the next generation, dislike rigid work environments and place more value in freedom, creativity and flexibility, which are necessary to develop a strong entrepreneurial spirit.
We are always ready to challenge the “established” practices in order to create a dynamic and flexible work environment, favoring creativity, innovation and the pursuit of excellence.
C.G. & E.S.
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