“Legal input starts almost from the word go in most mergers and acquisitions these days,” says Alan Keep, of Bowman Gilfillan. He managed the legal team from Bowman that represented Standard Bank in the Industrial and Commercial Bank of China (ICBC) acquisition of 20% stock at the end of last year.
He explains that the process was a short one because of the nature of the banking industry’s business and regulatory atmosphere. The first discussions were held between the two groups during June last year, but the legal agreements were concluded in a period of about five weeks prior to the announcement. Bowman worked with their colleagues at Webber Wentzel Bowens who represented the Chinese bank ICBC.
Christo Els, a partner at Webber Wentzel Bowens, agrees that getting the legal teams involved from an early point in negotiations allowed for faster and easier conclusion of transactions of this magnitude, especially in the areas of taxation and regulatory requirements. He points out that permissions had to be obtained from almost 40 countries — and this in such a short space of time.
Keep explains that transactions of this nature require management of the expectations of foreign parties unfamiliar with South African legal requirements and this entails a great deal of education on the details of the South African system.
“Legal teams need to have knowledge of the finer points of cross-border jurisdictions, legal systems, business ethics and practices, as well as accounting practices, to ensure everyone has a full knowledge of the deal and its outcomes.
“Lawyers now have the role of tailoring broader commercial agreements to fit the relevant local legal requirements. Legal systems are becoming more complex over time, particularly in light of the current atmosphere of corporate governance that has become a central issue in globalisation. One of the main challenges in the transaction was dealing with the legal aspects surrounding the appointment of the two ICBC directors to the Standard Bank board.
“Another challenge was the issue of full disclosure of information as required on both sides. While gathering and presenting this information to the Registrar of Banks, at the same time we were negotiating complex agreements and cross-checking legal requirements on both sides,” said Keep.
Els, who led the Webber Wentzel Bowens team, was impressed with the accommodatory attitude from the South African regulatory bodies. He says everyone went the extra mile to facilitate the transaction within this time period.
Keep says this transaction was a slightly unusual one, as a 20% share acquisition in a national bank by an overseas bank is not something that happens often. “We were in uncharted waters at times since we could not rely on market precedents. We had to adapt many smaller points along the way.”
Els adds that, because this was not a takeover, the regulations were somewhat simpler than the Barclays Absa transaction, for instance, but nevertheless the Webber Wentzel Bowens team working on the ICBC side numbered 38 people.
“We are fortunate to be in a position to draw on an expert team of this size,” he says. “All in all, this achievement was made possible by the expertise on all sides and facilitated by the positive input from the regulatory bodies.”