Jonathan de Lance-Holmes is a self-confessed “sucker” for a “cool” gig. And few gigs come cooler than the one that crossed his desk at Linklaters in London last year.
SoftBank, the phenomenally acquisitive Japanese technology company, wanted to launch a $100bn fund that would attract private money to make substantial investments in the emerging generation of innovators — the next Apples and Ubers — that will shape a new era of technological innovation.
“We only live once, so I want to think big. I have no intention of making small bets,” Masayoshi Son, SoftBank’s chief executive, told investors in May. “My life really starts from here.”
Mr de Lance-Holmes, a partner and funds specialist at Linklaters, learnt of SoftBank’s plans for the Vision Fund on a Thursday morning. Five days later, he was in Tokyo pitching to SoftBank’s chief executive. He left that meeting with a mandate to develop a document of planned terms and conditions, and so began a frenetic eight months for him and an army of colleagues.
Their output? The launch of a technology fund whose unprecedented size promises to affect Silicon Valley ‘s investment landscape dramatically, not to mention SoftBank’s own business, which co-invests with the fund and reaps profits above a certain threshold.
While the stakes of the SoftBank transaction are unparalleled, there are plenty of other examples of lawyers taking a central role in transformational business deals over the past year.
For instance, in Italy, nifty legal work by two in-house teams and their law firms led to the European Commission allowing the €21.8bn merger of the country’s third and fourth-largest telecoms companies, Wind and 3 Italia, even though it had blocked similar consolidation in Denmark and the UK.
In the UK, lawyers found a novel way to help payments specialist Vocalink sell its entire business to MasterCard, overcoming the UK competition commission’s strong concerns about the deal.
For Mr de Lance-Holmes at Linklaters, the sheer scale of SoftBank’s scheme was the initial draw, along with the chance to create a fund from scratch, with “a blank sheet of paper”.
SoftBank was used to doing enormous deals very fast
There was also the prospect of some unique challenges. First, funds are usually set up in an attempt to minimise conflicts of interest between investors and fund managers. In SoftBank’s case, certain conflicts were fundamental and unavoidable — SoftBank’s strategy of investing in technology companies itself would have to coexist with the fund’s strategy to also invest in technology companies.
SoftBank was “used to doing enormous deals very fast”, says Mr de Lance-Holmes, and initially wanted to have a fund closed by the start of 2017. The eventual date was May 2017.
To pull this off within eight months, Mr de Lance-Holmes and his team had to find a novel construct of offshore vehicles and onshore exemptions that would allow the fund to be launched before regulatory approval by the Financial Conduct Authority had been granted.
As the project progressed, Linklaters, which previously had a limited relationship with SoftBank, became involved in aspects ranging from employment law to tax structuring for the new venture. Other companies may want to follow in SoftBank’s footsteps, but Mr de Lance-Holmes foresees this will be a small group. “You have to be very good at doing something in a way that you can show that it produces measurable financial gain,” he says. On top of that, companies have “to be prepared to live with the consequences” and accept that they are binding themselves to things they can and can’t do “for an extended period of time”.
In Italy, the legal teams working round the clock on the Wind and 3 Italia merger would have been happy with an “extended period of time”, if only the European Commission would let them. Antonio Bavasso and his team at Allen & Overy were trying to create Italy’s biggest mobile phone company by winning approval for the merger of 3 Italia, owned by CK Hutchison, and Wind, controlled by Veon.
“This is a transaction that came at a very delicate moment of European consolidation,” says Mr Bavasso, who advised Veon (formerly VimpelCom). Margrethe Vestager, the European competition commissioner had blocked a similar deal involving TeliaSonera and Telenor in Denmark and the £10.5bn takeover of operator O2 by Three in the UK.
The critical moment came when the commission opened an investigation in March 2016. Veon and 3 Italia’s owner CK Hutchison, advised by Freshfields, opted for a “fix it first” remedy, in which they offered to sell some of the merged entity’s assets to promote competition.
Scott Dresser, group general counsel at Veon, says Allen & Overy’s combined government relations expertise and strategic focus was a key strength. “[Mr Bavasso] has an ability to read where the sensitivities lie, to work with the commission,” he says.
The team at Freshfields also had extensive experience of the issues involved because they had previously advised Hutchison on the acquisition of Orange in Austria and Telefónica O2 in Ireland. Natasha Good, a partner at Freshfields, credits that “unique insight” with helping get a deal over the line, which “shows that large-scale consolidation in the mobile market is still possible”.
Mr Dresser’s point about finding ways to navigate competition challenges is echoed by Jackie Holland, a special adviser at Slaughter and May, who says the lawyers’ achievement on the £700m Vocalink deal will reassure others that competition challenges are surmountable.
Ms Holland began working with Vocalink when its owners — a group of 18 leading UK banks and building societies — faced being forced into a sale by the UK’s payment services regulator.
MasterCard emerged as the preferred buyer for Vocalink, which processed more than half of all payments made in the UK in 2015. Then the banks hit a new competition hurdle, when the Competition and Markets Authority (CMA) said MasterCard and Vocalink were two of the three most likely bidders for a contract to service the Link network, which executes payments through the UK’s cash machines.
“The standard remedy a competition agency would go for is a divestment,” Ms Holland says. “This wasn’t an attractive option for the Vocalink team because the cables and IT that were used for the Link network included some parts that were also used for other [Vocalink] services.”
Slaughter and May and Vocalink’s in-house team together came up with a “network access remedy” that undertook to allow third parties to piggyback off Vocalink’s infrastructure the next time the Link contract came up.
Ms Holland says the outcome does not imply that the CMA will approve “network access” remedies in all cases of competition issues, but it shows that in some “it is worth considering other remedies that may solve the competition issue, rather than viewing divestment as the only option”.
Novel solutions to competition challenges will be in even greater demand in the future — with financing still cheap and organic growth hard to come by, companies are especially motivated to make sure that the M&A deals or other expansions they plot make it over the finishing line.
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