On October 25, 2017, CEE Legal Matters reported that Cobalt had advised the Otravo Group — a subsidiary of Waterland Private Equity Investment — on its acquisition of 100% shares in Interneto Partneris, an online ticket seller in the Baltics. The transaction was led on the buyer side by Waterland's Senior Investment Manager William Ford, who spoke with us about the deal.
CEELM: Cobalt Partner Elijus Burgis told us that “the transaction was led by the acquisition team from Waterland (Otravo’s parent). There were no lawyers on their team.” But your company’s website seems to suggest you do have an in-house team. Why were they not involved in the process?
W.F: A three-person Waterland deal team indeed led the transaction. As a private equity firm, we seek to add real value to our portfolio companies by helping them to execute international buy & build strategies. With such a strategy, we are able to grow our portfolio companies rapidly through a number of add-on or bolt-on acquisitions during our investment period of on average five years. The acquisition of Interneto Partneris by our portfolio company Otravo is a clear example of such an add-on acquisition. In practice, our investment strategy means that we drive the execution of transaction processes (i.e. target identification, first meetings, due diligence, negotiations, financing, closing) while the management team of the portfolio company can focus on managing the business. We make sure to involve key management team members at the right stage of the transaction process to obtain their feedback and to enable them to take responsibility for the integration process after a transaction.
The legal aspects of a transaction are primarily the responsibility of the deal team, who have significant experience with negotiating transaction documents and may even have a legal degree. Generally speaking, our deal teams rely heavily on external legal advice and are used to working in close cooperation with M&A lawyers during a transaction process. We do have an in-house legal department at our Dutch office, but the three legal professionals who make up this department typically focus on the legal aspects at the investment funds level and not at the level of individual portfolio companies. Hence, they checked all the documents in the Interneto Partneris deal that had to be signed by Waterland as the majority shareholder of Otravo but left the documents to be signed by Otravo to the deal team and external advisors. For these three legal experts, it is impossible to be involved on a day-to-day basis in all of the circa 40 transactions globally (but mainly in Europe), that we complete per year. In addition, this model provides the deal team with the flexibility to select the best external legal advisor for each transaction.
CEELM: Who was responsible for selecting external counsel for the deal, and what did that process look like? What was it about Cobalt that led you to select them for this matter?
W.F: The deal team — consisting of three Waterland investment professionals (in this case a principal, a senior investment manager, and an investment associate) — was responsible for the selection of external counsel. We contacted our regular Dutch lawyers for a list of reputable law firms in Lithuania. In addition, we spoke with a former Waterland colleague who was involved in a transaction process in the Baltics in 2016. Unfortunately, this transaction process did not result in a deal, but it did provide my colleague with the opportunity to work directly with Cobalt on legal due diligence and legal transaction documents. This colleague was quite positive about the quality of the services offered by Cobalt, their knowledge about Lithuanian law and their relevant transaction experience. Based on this positive reference, we decided to ask Cobalt for a proposal for a scope and quote. On the basis of their proposal, we selected them to support us with this transaction.
CEELM: According to Cobalt, “this transaction will enable Otravo to expand its activities in the Baltics." Does that mean that this is the first Waterland deal in the Baltics? What are your thoughts on the applicable regulatory and legislative regime in the market?
W.F.: I think this was indeed the first transaction by a portfolio company of Waterland in the Baltics, although I cannot exclude that the more than 400 transactions completed by us and our portfolio companies in the past 18 years includes another transaction in the Baltics. We did look at a number of deal opportunities in the Baltics in the past few years which did not lead to a transaction. Overall, we are impressed by the quality of the regulatory and legislative regime. More than that, the responsiveness and service mentality of the local advisors we have had the pleasure of working with during the Interneto Partneris process and other transaction processes in the Baltics has been consistently very high. I expect that we will be more active in the Baltics in the years to come, probably covering the market out of our offices in Poland and Denmark.
CEELM: You mention having completed some 400 transactions in the last 18 years; that’s more than 20 a year! But it appears you don’t have a panel of preferred law firms. Have you thought about creating one? What’s the thinking behind your strategy?
W.F: We indeed do not have a formal panel of preferred law firms and decide on the most suitable law firm per country, per deal team, and per transaction. However, in practice, we tend to stick with the law firms we have worked with effectively and successfully in the past for similar deals. A previous positive experience was also an important factor in our selection of Cobalt as the law firm to support us with the Interneto Partneris transaction. Given the success of the cooperation on this transaction, we are very likely to invite them for similar transaction opportunities in the future. However, creating a formal panel of law firms would limit the flexibility of a deal team to select the best law firm for each specific jurisdiction and transaction. Hence, this is not very likely to happen at Waterland.
CEELM: Now that Otravo has acquired Interneto Partneris, how will you integrate the company into your portfolio and do you have any changes to the company planned?
W.F: The management teams of Otravo and Interneto Partneris are already very busy with the integration process. From my experience, it is key to start this process as soon as possible after a deal has been closed, and preferably to prepare the integration plan during the due diligence process. The Otravo team obtained a lot of integration experience with the acquisition of Swedish online airline travel agency Flygstolen in July 2016 and the acquisition of Dutch online travel packages agency Vakantiediscounter in February 2017. This experience should help them to ensure a smooth integration process for Interneto Partneris and to welcome the Interneto Partneris team within the Otravo group.
I had the pleasure of meeting the whole Interneto Partneris team after the closing of the transaction, and they seemed to be very enthusiastic about teaming up with Otravo. The idea is to further grow and expand the operations of Interneto Partneris, both within and outside the Baltic states, in the coming years. In addition, its skilled and experienced employees are a very valuable addition to the Otravo group when it comes to improving the operations, systems and success of the business elsewhere. The employees of both companies have already started interacting on a regular basis, and a number of workshops to exchange experiences, thoughts and ideas involving Lithuanian, Dutch, and Swedish employees have already been held in multiple locations.