Editor: We understand you were appointed managing partner of the firm’s Boston office in September 2011. Please talk about areas of expertise within the Boston office, including your own, and how your attorneys interface with the firm’s global capabilities.
Basile: The lawyers who sit physically in Weil’s Boston office practice in two principal areas: corporate and litigation. On the corporate side, we have one of the leading private equity practices in the city, advising private equity clients on deal execution as well as helping them with fund formation matters. In addition, we have a very active practice representing corporations in strategic mergers and acquisitions, helping them buy companies that are intrinsic to their operations. On the litigation side, our lawyers handle “bet-the-company” cases in the areas of complex commercial litigation, intellectual property, trade secrecy, white collar crime and securities law. However, it is important to emphasize that any client that works with our Boston office has full access to the entire Weil firm with its 1,200 lawyers sitting in 20 offices worldwide, with market-leading practices in financial restructuring, private equity, M&A, intellectual property and high-stakes litigation. It is rare for us to be working on a matter in Boston that doesn’t call upon resources throughout the firm.
Editor: Have the M&A and private equity markets picked up in the Boston area?
Basile: Boston is a microcosm of the overall private equity and M&A markets, which have been very uneven. The entire year has been marked by periods of intense activity and then some quieter periods. There were some very high-profile deals in the Boston area last year -- probably the biggest was Sanofi’s acquisition of Genzyme, a landmark deal in which we acted on behalf of Sanofi. In our office, 2011 ended with a lot of activity, and that has continued through the beginning of 2012.
Editor: Are you seeing many deals involving distressed companies?
Basile: We are. I worked recently on a very large strategic acquisition by a pharmaceutical company that bought another pharmaceutical company out of bankruptcy, and I have several such matters currently that are active. Historically, distressed asset investors tended to be financial buyers, seeking only a favorable return on their investments, but today we’re increasingly seeing strategic buyers entering that market for opportunities as well. Some of them are coming away with some very good bargains.
Editor: Please talk about your work in the area of cross-border mergers, acquisitions and joint ventures. Has increased globalization changed this aspect for your practice? In which countries do you see the greatest potential for U.S. investments?
Basile: Virtually every deal I work on involves some cross-border aspect. It is really striking how international our firm’s practice has become, and this is the case for almost every lawyer in our office. Our firm has very deep coverage internationally. Nearly 30 percent of our lawyers are located outside of the United States, and so we act on a wide range of matters that involve either foreign investors investing in the United States or U.S. companies investing overseas. While the uncertainty about Europe makes investment there a bit tricky, Europe presents some very interesting current opportunities because banks and governments hold large portfolios of distressed assets that need to be sold. South America has been very hot, in particular Brazil. We are also seeing increased interest in the Middle East, which has historically been a slow M&A market but is now heating up, particularly on the part of companies in the aerospace and defense sectors.
Editor: Please comment on recent trends you have seen in hostile takeover activity and stockholder activism.
Basile: Both hostile takeover activity and stockholder activism are on the increase. In terms of hostile takeovers, we’ve seen considerable action in the local market involving financial buyers making uninvited overtures to substantial local companies; BJ’s Wholesale, for example, was sold last year to a private investment fund, and Talbots is currently in conversation with a financial buyer that invited itself into those discussions. We’re also seeing strategic buyers, who traditionally avoided hostile takeover situations but are becoming less uncomfortable about starting an offer for a company without the target board’s recommending the offer. On the stockholder activism side, there is also very significant activity both across the country and locally, where Iron Mountain and ModusLink have gone through either threatened or actual proxy contests during the past year. All of this activity is on the upswing, becoming a permanent feature of corporate life. CEOs and general counsels need to be prepared for this with advanced proactive planning with their advisors. They cannot assume that they can react appropriately to an uninvited takeover bid or an activist if they begin thinking about the issue only after the approach has been made.
Editor: You have spoken with us about the cyclical nature in the Massachusetts business environment. Please talk about where things currently stand in this cycle and whether the fledgling economic recovery has had any real impact to date.
Basile: Although Massachusetts has not been unaffected by the recession, the recession has been somewhat milder and employment has suffered a bit less here than in other states. In addition, employment recovery is occurring more rapidly here than in other parts of the country. That’s probably because Massachusetts has a very strong entrepreneurial tradition, with a long history of start-up companies, many of which are spun off from our universities. Despite the focus that many pundits put on large employers, a great deal of employment is in fact created by start-up companies and smaller businesses. I think that our entrepreneurial tradition has helped Massachusetts weather the recession better than some of our counterparts in other states.
Editor: Have entrepreneurs been able to get the kind of financing they need? Are venture and growth equity investors making funds available?
Basile: Certainly venture capital and growth equity investors have been much more careful in selecting the companies in which they invest, and lenders have been somewhat slower to advance funds to start-up companies, but investment has not stopped. We’re still seeing venture capital and growth equity investments being made in start-ups and in “later early” stage companies. Interestingly, in addition to venture capital and private equity funds we’re seeing major corporations, particularly in the biotech sector, acting as a source of start-up money for younger companies. Investment by biotech and pharmaceutical companies in start-ups is not a brand new phenomenon, but it is occurring more frequently as a way for mature companies to replenish their pipelines for new devices and new drugs. In fact, our office has recently been involved in some very interesting deals of that type.
Editor: What are the major factors that create business challenges for U.S. corporations you advise?
Basile: Uncertainty, uncertainty and uncertainty! We’ve all been around long enough to know that nothing is certain in life, but I can’t remember in my career a time when there have been more variables. On the international front, the eurozone crisis has created a whole range of unknowns that seem to change every week; in the Middle East, the unrest that has been the outcrop of last year’s Arab Spring has really changed the landscape; the issues that people are trying to sort out relating to Iran and what that might mean in terms of international oil markets and energy prices create additional uncertainty. Domestically, we continue to have legislative gridlock, with Congress seemingly unable to act on any legislation that has a long-term horizon. It’s difficult to imagine that much will happen in Washington for the rest of this year other than people running for office, which really means that lawmaking gets shifted to the regulatory agencies. As you know, Dodd-Frank left a great deal of work to be done by the SEC and other rulemaking bodies, and many of those rules will be rolled out during 2012. Not knowing what those rules will be creates another level of uncertainty for business leaders. The constellation of variables that are out there now makes it very challenging for businesses to make long-term plans or commitments.
Editor: Has the proliferation of technology and unbridled access to information affected fundamental corporate governance strategies?
Basile: Yes, it has. There is a whole new subset of corporate governance issues that has sprung up that some refer to as “IT governance.” There are several components of it: one is information security, i.e., making sure that a corporation is taking proper steps to secure access to its own confidential information and maintaining the security of information provided by the corporation’s customers and other parties with whom the corporation deals, as well as making sure that employees don’t get improper access to the information of others. The other aspect of IT governance is assuring the corporation’s own IT performance and capacity - making sure that the corporation itself can maximize commercial advantage from its own information by being able to access it and manipulate it in the right ways. These are new areas of risk and responsibility that fall to the board of directors, which must make sure that management has in place proper procedures and strategies and is executing those strategies to assure information security, performance and capacity. We have seen a number of high-profile examples of major companies, including some in the Boston area, having to deal publicly with apparent breakdowns in this area. Paying attention to these risks and responsibilities is a significant element of contemporary corporate governance.
Editor: As an educational hub, Boston attracts the best and brightest students. With business becoming increasingly global and non-location-specific, what steps are being taken to keep these future leaders in our workforce? Does the firm interact with local institutions of higher education?
Basile: This will sound very simplistic, but the only way to keep future corporate leaders in our workforce is to make sure they get hired. I know that sounds like a tautology, but it bears some thinking. It implies that both educational institutions and businesses must engage in conversation with each other to make sure that students are graduating with the skills needed by U.S. employers. I’m a member of the board of directors of the Massachusetts Business Roundtable, and I can tell you that the need for educational institutions to assure that they are emphasizing science, mathematics, and other aspects of technology that are important skills for employment in the U.S. workforce is a high-priority issue for the business community. The other aspect of this is we need to take a look at our immigration policy. Statistically one of the highest rates of immigration to the United States is by people from foreign countries who are very intelligent and have high educational aspirations. They come to the United States because of our educational opportunities, we admit them so that they can access those opportunities, we educate them and then we make it very difficult for them to stay. I’m interested in hearing about why that makes sense.
As to the second part of your question, our firm is deeply involved with area law schools in many ways. We actively recruit law students every year, both for our summer program and for permanent employment. In addition to our formal hiring program, our lawyers serve as mentors to law students, we participate in law school panels on legal careers, we help with résumé preparation and interview strategy coaching, and some of our lawyers teach classes at local law schools, so we very mindfully and purposefully engage closely with local institutions of higher education in a variety of ways.
Editor: We understand that Weil’s Boston office embraces pro bono work. Please discuss some of your activities in this area.
Basile: Pro bono service is a very important part of Weil’s culture, not only in our Boston office but throughout the firm. For us, public service is really what it means to be a lawyer. Pro bono work has a long tradition here in Boston, going back to John Adams in his defense of the British soldiers at the time of the Boston Massacre. In terms of my own service, I’ve been active with several New England-based conservation and wilderness preservation organizations in helping them with their legal issues. I am also very interested in urban education, which is really at a crisis point not only in Boston but around the country. I’m currently working with a partnership school that Boston College and Saint Columbkille parish in the Brighton section of Boston have organized, a unique model in terms of urban education, to help with some of their legal challenges.