Recovery: A Cycle Of Acquisition And Rejuvenation

Monday, February 28, 2011 - 01:00

Editor: Tell us about the Boston office's major practice areas. Has it expanded the number of practice areas since the inception of the office?

Basile: The Weil lawyers who physically sit in Boston practice in two major areas. The first is corporate. We are very strong in private equity and represent many of the leading private equity funds in Boston and nationally. That work includes both deal execution, in other words, helping those funds make their investments, and fund formation.

We also have a very strong practice in Boston representing corporations that are engaging in strategic transactions. For example, we are currently advising Sanofi-Aventis in its bid for Genzyme.

The other major area of our Boston practice is litigation. We have lawyers who are working on major matters in the area of complex civil litigation, white collar defense and investigations.

However, when a client picks up the phone to call Weil's Boston office, the client is really engaging the entire firm. Every client of the Boston office has at its disposal the resources of the entire 1200-lawyer firm in our 20 offices globally.

Although we have not since our inception in Boston added major new practice areas, we have significantly broadened our practice by adding lawyers, clients and scope.

Editor: Boston has long been the home of much venture capital and private equity activity. To what do you ascribe this?

Basile: Boston has a long tradition of being a place where money managers have thrived. We have venerable firms that have advised mutual funds and private investment funds in the city for many years. I like to think romantically that maybe it had something to do with the tradition in New England of the whaling captains going out to sea and having to rely on professional managers back home to manage their accumulating wealth. I don't know if that is historically accurate, but it certainly sounds good.

Editor: Your M&A practice also includes finding a home for financially distressed companies. Please describe the kinds of deals you have shepherded through.

Basile: One of the more high-profile distressed company deals involved Simmons Bedding Company, an American icon that dates back to 1870. The company ran into a problem with a technical default under its loan agreements. Even though the company had positive cash flow, it was faced with having to refinance or restructure its debt.

Unfortunately, all of this took place during the period of the 2008 financial crisis, so refinancing was very difficult to even contemplate. The company was sold to new owners, Ares Capital and Ontario Teachers Pension Fund, as part of a restructuring plan under Chapter 11. It was a great experience to help this still great company survive.

I have also done a significant amount of work for corporations making strategic investments in financially distressed companies. Distressed M&A has typically been an area where financial buyers have looked for bargains. Increasingly clients of the firm are including corporations that are seeking strategic acquisitions, and they are finding opportunities to do so at a discount in Chapter 11 and in out-of-court financial restructuring situations.

Editor: Tell us about the deals in Latin America in which you have been involved. What complexities are involved in closing a deal?

Basile: I have worked on deals in Mexico, Columbia, Brazil and Argentina. They have involved the representation not only of financial buyers but also of corporations that are making strategic acquisitions of financially distressed operating companies. These transactions have involved the aerospace, telecommunications, energy, and utilities sectors (including electrical generation and water distribution companies).

If a country operates under a civil law tradition, as is typical in Latin America, you don't have a deep body of case law to look at to predict how courts will decide issues that may arise. That legal environment requires a significant mindset shift for an American lawyer.

Another complexity involves dealing with local counsel outside of the United States, and this is not unique to Latin America. In the United States, when a corporation engages counsel to work on a deal, the lawyer is frequently the quarterback and is called upon to put the entire team together, to anticipate issues, and to help the client to get the deal done.

In many non-U.S. jurisdictions the legal role is more limited. Lawyers outside of the United States frequently view themselves as strictly legal advisors. You need to find local counsel who are more proactive in their thinking than may be typical in the region or you will have to adjust your own mindset to realize that you are not necessarily going to get the same kind of input from local counsel that you are accustomed to getting from an American lawyer.

Editor: Recent surveys of corporate general counsel have indicated that many corporations are reducing their budgets for hiring law firms. How is your firm adjusting to these changes?

Basile: We are finding that corporations are doing two things. First, they are reducing the number of law firms that they work with. A company that in the past has worked with 800 law firms internationally may shrink that number down to 200-300. The other thing that we are finding is that legal departments are doing more work internally.

These developments stem in part from the fact that general counsel are increasingly unhappy with the old model of being billed by the hour for every consultation that they have with outside counsel. General counsel now rightfully expect outside counsel to be partners in helping them execute business strategies.

I make it a practice to be available for brainstorming with clients off-the-clock. I don't charge for every phone call when a general counsel wants to bounce an idea off me or to get my view on a matter that may be on his or her mind that day. I want to be the person that a general counsel feels comfortable calling at any time to discuss things without worrying about a bill for a phone call.

Also, we are open to alternative billing arrangements. Increasingly, we are hearing that corporations want to be billed by the project rather than by the hour. We are very willing to discuss alternative billing arrangements and consider them in the right situations.

Finally, being a valued outside lawyer to a corporation requires you to realize that corporations don't have legal problems, they have business problems. Your job as an outside lawyer is to understand those business problems and to bring to bear your legal training as a tool in helping the client deal with them.

That may sound like motherhood and apple pie talk. But, the need for that mindset is real and requires a significant shift in the way that one thinks about one's clients' needs. Clients don't want to hear about every possible legal theory or legal problem that may arise with respect to a strategy that they are trying to execute. What they really want is help in executing their strategy.

Editor: Have you seen new industries entering the market or existing industries expanding? Does Massachusetts offer inducements to attract new industry?

Basile: If you look at the top 150 public companies as reported by the Boston Business Journal, the concentration in high-tech and life sciences is really striking. Those industries are what drive economic activity in this region. We have seen a lot of inbound M&A activity by large firms such as IBM and Oracle. Our client Sanofi-Aventis has also been active in making investments in the Boston area. However, new local companies are constantly emerging to replace those that have been acquired.

We have not seen new types of industry entering this market. With so much inbound M&A activity occurring what we have seen is a cycle where small and medium-size public companies are being acquired and replaced by newly listed companies. This recurring cycle of acquisition and rejuvenation keeps our lawyers very busy.

Non-U.S. buyers are active both across the U.S. and locally. I mentioned already the Sanofi-Aventis bid for Genzyme that we are working on as one example. Sanofi is a French company. There is also increasing investment activity from Asian buyers, particularly Japanese and Chinese.

Massachusetts does offer financial inducements to companies to locate here. However, the state is becoming more strategic in the way it does this. Increasingly the state realizes that it can't simply be writing checks with no strings attached, and that it must consider how to keep companies here once they are induced to locate here.

Editor: What makes New England an attractive location for business?

Basile: The single biggest attraction is our workforce. Being active on the board of the Massachusetts Business Roundtable, I can attest to the importance executives place on their access to a sophisticated workforce. Our universities are world leaders in technology and life sciences and in training business leaders. People come here from all over the world to study at these universities - and many stay here, lured by Boston with its fantastic cultural resources and opportunities nearby to hike in the mountains or enjoy the seashore.

Editor: How much emphasis does the Boston office place on diversity?

Basile: We are at the time of this interview celebrating Diversity Week at the firm. At Weil, cultivating and respecting diversity is not something that we do for just a week once a year. We have an active firm-wide diversity committee. I sit on that committee, and I am also the Boston office diversity partner.

Our leadership at Weil recognizes that our only asset is our people and that we must treat all of them with equal dignity without regard to color, gender, ethnic background or sexual orientation. It is a huge priority for us.

Editor: Major concern is being expressed about the effect of the proliferation of regulations on business growth and job creation. Do you and your clients share this concern?

Basile: What is particularly difficult for business is the lack of predictability as to what the rules are. That can arise either because the rules change frequently and one never knows what tomorrow will bring or because the rules that are in place are vague and difficult to interpret.

The recent Dodd-Frank legislation includes many provisions that were enacted in a conceptual way leaving the specifics of what the rules will be to further rulemaking by administrative agencies. CEOs need predictability to plan for the future. Anything that can make life simpler and more predictable is good for business.

Please email the interviewee at joseph.basile@weil.com with questions about this interview.