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Inside Out: Advent International Invests in Integer.pl

Guest Editorial: Poland – The Silicon Valley of Europe?

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The Deal: In February 2017, CEE Legal Matters reported that CMS had advised Integer.pl S.A. on the investment made into the company by private equity fund Advent International. Clifford Chance advised Advent International on the deal.

The Players:

• For Integer.pl: Rafal Wozniak, Counsel, CMS

• For Advent International: Slawomir Czerwinski, Counsel, Clifford Chance

CEELM: How did you and your firms become involved with Integer.pl and Advent International on this matter? Why and when were you selected as external counsel initially? 

CMS: In August 2016 Integer announced its decision to seek an investor who could support its growth and development. CMS was engaged shortly afterwards. We were chosen not only because our offer was acceptable for Integer but mostly because of our deep expertise in M&A and ECM transactions. As Integer is listed on the Warsaw Stock Exchange we had to offer complex services related to typical M&A advisory and also show our great experience in the ECM market.

CC: I think that the first time we discussed this project with Advent was late summer last year. It was one of those meeting we have with them from time to time to discuss current business opportunities. We worked with Advent on a number of projects in Poland prior to this one and my impression was that once they made the decision to pursue this transaction they also decided to go with us.  

CEELM: What, exactly, was the initial mandate when you were retained for this project, Rafal?

CMS: We were engaged to support Integer during the process of obtaining a new investor, but I cannot comment on the exact scope. 

CEELM: Were you engaged to help them find the new investor, or had that process already been completed by the time you got involved? 

CMS: Our scope of engagement related only to legal matters. We were not supporting process of finding investor.

CEELM: And what about you, Slawomir? What was the initial mandate when you were retained by Advent?

CC: Our mandate covered the whole transaction, from the due diligence of the asset, through advice on the structure, merger control and negotiations of the relevant documentation, to certain post-completion restructuring of the group. By the time we got involved by Advent, I think they were pretty close on the investment concept and decided to launch the formal part of the process.

CEELM: Who were the members of your teams, and what were their individual responsibilities?

CMS: Our team consisted of many lawyers from different practices. I was the leading lawyer, and I was supported by Senior Associate Zuzanna Jurga from the corporate team. The team also included also such corporate lawyers as Partner Dariusz Greszta, Senior Associate Rafal Kluziak, Associate Magdalena Trzepizur, and Lawyer Jakub Szczygiel responsible for corporate law advisory. In addition, Senior Associate Agnieszka Ziolek – the head of our restructuring practice – was involved on restructuring and banking matters. In addition, Partner Graham Conlon and London-based Senior Associate Valentina Santambrogio from the International Private Equity practice at CMS were involved in the deal.

CC: I led the Clifford Chance team. The core corporate team consisted of Senior Associate Jaroslaw Gajda, Counsel Jaroslaw Lorenc, and Of Counsel Nick Fletcher. They were supported by Senior Associates Mateusz Stepien, Kamil Sarnecki and Aleksandra Lis-Rychlinska, and Associates Antoni Wandzilak, Joanna Pominkiewicz, and Katarzyna Aleksandrowicz. Associates Marta Michalek-Gervais and Associate Marta Matynia assisted with merger control aspects, while Associate Pawel Dlugoborski from the banking team assisted with issues on the financing aspects of the transaction.

CEELM: As we reported in our original story, as part of the agreement signed on February 23, the parties agreed to announce tender offers to subscribe for shares in Integer.pl and its subsidiary InPost and to delist the shares of both companies from the Warsaw Stock Exchange. The transaction was financed solely by Advent International through its subsidiary AI Prime Luxembourg, which would allocate approximately PLN 170 million for debt refinancing. The fund would also provide an additional approximately PLN 500 million for the purposes of financing future funding needs. Can you add any details to that original summary?

CMS: [declined to answer].

CC:  There were two agreements governing the transaction: The investment agreement and shareholders’ agreement.

The investment agreement described the investment process and provided for different scenarios which would allow acquisition and de-listing of target companies, depending on the ultimate result of each of the tender offers. The transaction also involved arrangements with a number of current institutional investors of the Integer Group and with Mr. Rafal Brzoska who agreed to re-invest in the Integer Group’s new holding company. This will be carried out as a roll-over of the investors’ current investment in Easypack (one of the Integer Group’s main operational companies) into a holding company in Luxembourg and a swap of Mr. Brzoska’s shares in Integer.pl for new shares in the same holding company.

The shareholders’ agreement governs shareholders’ relations in the Integer Group.

CEELM: What’s the current status of the deal?

CC: The tender offers were successfully settled in April 2017 and the so-called squeeze-out procedures in both Integer and in InPost, aimed at the acquisition of all of the shares in both companies held by the minority shareholders who did not disposed their shares through the tender offers, were finalized on May 29, 2017.

CEELM: What was the most challenging or frustrating part of the process?

CMS: As always with public M&As you never know whether minority investors will respond to the tender offer and whether the transaction will close. I think that execution risk is most challenging aspect of these processes.

CC: Definitely structuring and timing. As both target companies are listed on the WSE they were acquired through two tender offers launched in parallel. These offers were announced at the same time and were structured in a way that allowed Advent not to complete the transaction if one of the tenders was not successful. Advent’s investment decision was based on the assumption that the Integer Group would be taken private, so the transaction structure provided for different scenarios which would allow this goal to be achieved, depending on the ultimate result of each of the tender offers. This structure has very few precedents on the Polish market.

Moreover, the timing and dynamics of the transaction were extremely important given the dire financial situation of the Integer Group. The substantial part of its current debt financing scheme was approaching its repayment deadline and the Integer Group had to agree on amending the terms and agree on the “stand still” arrangements with the lenders in order to enable the transaction to proceed. The repayment of the debt has been postponed and will be effected with the assistance of Advent, both through equity funding and debt refinancing.

CEELM: Was there any part of the process that was unusually or unexpectedly easy?

CMS: The process itself was rather standard. However, what made it different from others was the scale of Integer’s operations and the financial condition of the Group. We had to beat the clock and only managed to be successful through the hard work of everyone involved, including Integer’s management board, [and] its key employees and advisors. 

CC: I think that both tender offers went very well. After settlement Advent and Mr. Ralal Brzoska controlled over 90% of shares in both Integer.pl S.A. and InPost S.A. so we could immediately initiate squeeze-out procedures in both companies aimed at the acquisition of all of the shares held by the minority shareholders who did not dispose their shares through the tender offers. This made our life much easier.   

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

CMS: [Declined to answer.]

CC: It was a very complex deal, but Advent had from the very beginning made up its mind to pursue this investment pretty much in the manner we actually did. There were some changes to the structure we had to introduce to take account of the status of the negotiations or address certain legal issues that arose down the road that had to be made, but nothing material in terms of the overall investment concept.

CEELM: What individuals at Integer.pl directed you, Rafal, and what individuals at Advent instructed you, Slawomir – and how did you interact with them? 

CMS: We communicated directly with the management board and key employees using all available channels: email, phone and personal meetings to make the process as smooth as possible given the time pressure.

CC: The deal team we worked with directly was led by Advent Director Peter Nachtnebel in Frankfurt, and included Vincent Bergin (Legal Counsel at Advent) and Assistant Director Lukasz Golebiewski, in Warsaw. The interaction was rather tight, as the deal team wanted to be on top of all matters in the transaction, and thus in the most intense period we worked face to face during negotiations and internal meetings. Generally, Peter conducted negotiations. However, certain issues were negotiated between the lawyers only.

CEELM: How would you describe the working relationship with each other on the deal? 

CMS: Most of our contacts were made through email and phone calls, but personal meetings were also required. As leading M&A firms we have similar standards implemented on our projects and both teams were very professional and business-oriented. I would like to make particular mention of the great work done by Slawomir Czerwinski.

CC: The relationship with CMS has been quite good. The team led by Rafal Wozniak is very professional and generally in the know regarding the company (they worked with them for quite some time). This is not the first time we worked with them on the transaction so I knew what to expect. I do not know exactly what was the proportion of emails and phones vs. in person meetings, but definitely we had a lot of interaction with them. The transaction is very complicated so we had to negotiate quite a lot of documents and at times we were almost in a constant contact with CMS.

CEELM: How would you describe the significance of the deal to Poland? 

CMS: Integer is a leading postal and APM operator. I believe that with Advent’s support it could become a global player. 

CC: I would not say that this was a mega deal in Poland. The transaction received a lot of attention due to Mr. Brzoska’s involvement and the fact that, according to rumors reported by some media, his relations with certain investors are less than perfect. Moreover, the transaction is generally rather complicated, with two tender offers in parallel and a complex restructuring of certain investors of the group to Luxembourg, so a number of major law firms with presence in Poland has been involved and therefore the deal received a lot of publicity in the legal world as well.

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

CMS at a Glance

CMS Sofia is a full-service law firm, the largest international law firm in Bulgaria and one of the largest providers of legal services in the local market as a whole. The breadth and depth of our practice means that our lawyers are specialised, with a level of specialisation that few of our competitors can match.

CMS Sofia is the Bulgarian branch of CMS, a top ten global legal and tax services provider with over 5000 lawyers in 43 countries and 78 offices across the world.

CMS entered the Bulgarian market as one of the first internationally active law firms in 2005 and is now among the most respected legal advisors in the country. We have 7 partners, 4 counsel and over 30 lawyers in our office in Sofia.

Our legal experts, who are rooted in Bulgaria’s local culture, can also draw on years of experience in foreign countries and are at home in several legal systems at once. We know the particularities of the local market just as well as the needs of our clients and combine both to achieve optimum solutions. Our lawyers are Bulgarian qualified and we also have English qualified experts – all of them regularly working on cross-border mandates.

In our work, we focus on M&A, Energy, Projects and Construction, Banking and Finance, Real Estate, Media, IP and IT law, Tax, Employment law, Competition, Procurement and any kind of Dispute resolution, including arbitration and mediation. What’s more, we also take care of the entire legal management of our clients’ projects.

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