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Guest Editorial: M&A and Legal Consultancy Trends in CEE

Guest Editorial: M&A and Legal Consultancy Trends in CEE

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The latest trend in M&A advisory, in Croatia and the region, is to offer to both sellers and buyers of CEE targets a special type of M&A insurance policy – a Warranty Insurance Policy (WIP).

A WIP is intended to ensure that both buyers and sellers can enjoy the ease of mind in their M&A deals of having an insurance policy covering their liability for the deal. While WIP was viewed historically as a product of limited application in Croatia and the region, in recent years we have seen a significant expansion of the use and importance of these policies.

Today, WIP in the region is generally viewed as an attractive product when deployed in the right circumstances, often providing for a longer period of coverage and higher limits than would be available in a customary seller indemnification arrangement. On the one hand, for sellers, it is easier since they are no longer liable for years even after they close a deal and, for the buyers, it is easier since they no longer need to worry about compensating for potential damages – they know that the insurance policy will be enforceable and that they will get their money back in a worst-case scenario.

Although WIP for corporate transactions has existed for approximately two decades in the UK and the US, it has only recently become a common practice in Croatian and regional deals. In fact, in Croatia in particular, this kind of policy is not yet offered by local insurers, but by those in the UK and other European insurance providers.

And this trend comes at a good time, as we see that there is a very high level of activity in M&A in both the Croatian, regional, and CEE markets. This is especially the case in the ICT, media, and manufacturing sectors. At a general level, it appears that a number of Croatian companies have now reached the point where they are becoming attractive for strategic partners, or private equity investors, as they are generating profit. It has taken them 10-30 years to reach this level of maturity, but now they are seeking strategic or financial investors in order to properly structure themselves, properly implement ESOP programs, and then go public. Notably, these IPOs will not be made in Croatia, but in London or New York.

M&A transactions have kept at a high rate despite the pandemic because many of the banks have quite a lot of funds available to invest, and interest rates remain low. One other reason for this increase in M&A activity is that, during this pandemic period, buyers found themselves in a good negotiating position – so, for those able to invest, and to buy targets, there are some excellent opportunities available.

Another trend worth highlighting is that of offering and providing a bundled legal and consulting service, such as an LMC (Legal Management Consulting), usually developed by lawyers in collaboration with experts in practice areas such as mainstream management consultancy, risk advisory, and tax management consulting – which in essence represents a collection of models, frameworks, and systems designed to help in-house lawyers run their departments more efficiently, and meet their business needs. The demand for these premium and sophisticated services shows a high level of professionalism regarding compliance in our client’s corporate legal departments, across various industries.

I believe it also shows their interest in using the latest technologies to improve their legal policies and legal departments’ functionality. And this trend is certainly coming to the region as well. For example, several local, Croatian-based clients active globally in the ICT, telecommunications, and automotive sectors are interested in these types of bundled services, which shows a maturing market when it comes to approaching legal services.

By Tarja Krehic, Managing Partner, Krehic & Partners in Cooperation with Deloitte Legal

This Article was originally published in Issue 9.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Deloitte Legal Law Firm at a Glance

Deloitte Legal Adriatic is a unique law firm consisting of teams of highly specialized lawyers, providing a vast range of legal services, and part of the commercially integrated Deloitte Legal Group. Deloitte Legal Adriatic has a team of 50 legal professionals, qualified in their jurisdictions, at offices across 8 countries: Albania, Bosnia, Croatia, Kosovo, Montenegro, North Macedonia, Serbia and Slovenia. Across the Adriatic region, our offices assist clients in this interlinked, highly complex, and dynamically developing region. We are among the largest law firms in our jurisdictions and have offices in each of the most important business centers. With a multi-lingual international team, all of whom are fluent in English, we can assist clients through our dedicated language desks including in Chinese, German, French, Russian, and many other languages, including all the Balkan languages.

Deloitte Legal Adriatic’s bundled, technology-enhanced, cross-border capable service array is a step ahead in providing clients with effective business solutions, and in these challenging times is even more important than ever before in our Adriatic Region. Our team has a collaborative orientation as well as the country specific and international legal and business savvy your business needs. Like our clients, we also know that sure success, in addition to everything else, usually requires winners to simply work both harder and smarter. We are here for our clients to do just that.

Across the Adriatic, we offer a full scope of legal services in the main commercial practice areas, including: 

  1. Banking & Finance – regulatory, real estate, syndicated projects, securitization, NPLs, restructuring, and insolvencies
  2. Business Integrity – investigations, compliance, privacy, GDPR, anti-trust, and competition
  3. Corporate – day-to-day operational, governance, and family protocols
  4. Digital – technology, media, and communications
  5. Employment – full spectrum services including mobility services
  6. Environmental – internal/external due diligence, and compliance advice
  7. GDPR – privacy issues, cyber-attacks, AI, legal, technical and organizational aspect of GDPR compliance
  8. Litigation – including tax, white collar, and discovery support services
  9. M&A – including due diligence, JVs/alliances, and post-transaction restructuring
  10. Real Estate & Construction – transactions of all types as well as development & planning
  11. Commercial – including full coverage supply-chain and distribution contractual coverage

Besides traditional legal fields, we are building prominence in growing fields such as Business Integrity, Legal Management Services, Tax Litigation & Controversy, E-commerce, and Fintech. We take pride in being able to pioneer in industries and practices ahead of many other law firms. We have the benefit of accessing cutting-edge data, technical aspects, and operational realities of various industries through our internal Deloitte collaboration with various service lines (Consulting, Financial Advisory, Tax, and others). This market intelligence is again unparalleled among  our competition and presents a wealth of opportunities for genuine insights to evolving trends.

Our client service resonates with an individual approach, genuine relationship building, dedication, availability, efficiency, and high-quality communication, on top of understanding our clients’ commercial, financial and tax needs and the requirements of the market.

Authentic synergies with our financial and tax teams, as well as our colleagues’ professional experience and education, make our firm one of the most experienced, effective and efficient firms in the Adriatic region, with expertise in a wide variety of legal fields. Our positioning on the legal markets has been noticed and recognized by both mainstream international attorneys-ranking agencies – Chambers & Partners, IFLR and the Legal 500, which distinguishes us across all significant legal areas and functions.

Local contacts:

1. Albania and Kosovo

Deloitte Legal Sh.p.k

Sabina Lalaj, Attorney-at-Law, Managing Partner

slalaj@deloitteCE.com

2. Bosnia and Herzegovina

Advokatsko društvo “Legal Partners” d.o.o.

Aida Hamur, Attorney-at-Law 

ahamur@deloittece.com

3. Croatia

Krehić & Partners in cooperation with Deloitte Legal

Tarja Krehić, LL.M. (DUKE)

Attorney-at-Law, Managing Partner

tkrehic@kip-legal.hr

4. Serbia, Montenegro and North Macedonia

Law Office Antonić

Stefan Antonić, independent attorney at law in cooperation with Deloitte Legal

santonic@deloittece.com