GSK, Novartis and Crédit Suisse put Switzerland on a high

Swiss firms have bagged major business from global brands such as GSK, Novartis and Crédit Suisse this year, while their Asia ventures have come good.

The legal minds behind the Glaxo-SmithKline and Novartis asset swap, global banking investigations, Schaeffler’s €2bn high yield bond issuance and Dufry’s £1.05bn takeover of Nuance Group are cashing in on international attention and are sharpening up their offering with key strategic moves.

The deals, which were provided as part of submissions to The Lawyer European Awards 2015 and are detailed in this report, have played an important part in the strategic development of Swiss firms in 2015.

The four major trends for this year and 2016 include increasing corporate and M&A capability, targeting inbound and outbound investment by Asian investors, growing life sciences and tapping into the consolidation expected in the banking and finance sector.

Although the major deals in this report have involved international entities rather than Asia-based investors, external investment from China, Singapore, South Korea and Japan has been a noted trend in the legal market.

Schellenberg Wittmer is one of the firms at the forefront of the trend to cash in on inbound and outbound investment from Asia. Its Singapore base, which was launched in 2013, marked its first international office outside of Switzerland.

Now in its second year, the office’s biggest asset is the prominence it grants the firm in Asia.

“We have a feeling that we increased our visibility through what we have there. It’s rewarding,” Schellenberg Wittmer managing partner Benjamin Bordosi says. “We thought that in the first three years we were going to lose money, but after two years I’d say we are making a small profit.”

The Singapore office tends to deal with clients from the financial sector, although the firm has seen an uptick in derivatives and arbitration.

“We would like to increase our arbitration in Singapore as it becomes one of the increasingly important places to be,” Bordosi explains. “The Singapore office is also a selling point to recruit and hire new associates and trainees. They think that if the office does develop there might be opportunities to go there. But the fact that we were the first firm to be bold about it and make the move is the spirit they think about.”

Bordosi believes his firm has the market advantage because of its existing operations in the region.

“When we look at new mandates that come from Asia, the description shows that they are interested in us having a presence in Singapore and having someone on the same schedule,” he says. “That has also impacted the inbound work.”

Behind the deal: Schaeffler’s €2bn high-yield bond issuance

Germany-based automotive company Schaeffler issued a €2bn public placement of high-yield bonds in 2014.

The bond issuance followed a €8bn refinancing package in 2012 which Schaeffler concluded with its banks, allowing the company to implement its refinancing package more quickly than anticipated.

Walder Wyss partner Luc Defferrard and banking and finance partner Markus Pfenninger led the team providing Swiss advice.

Allen & Overy represented Schaeffler on international advice.

“This is part of the whole refinancing of Schaeffler,” says Defferrard. “We were responsible for the Swiss part of the transaction and the high yield part of the programme. We reviewed the documentation and helped to make the cross-pitches.”

The transaction began three years ago, and a refinancing takes place every year through a high yield bond issuance and financing. “This makes the transaction very international, not just about Switzerland and Germany, but all the countries in the world,” Defferrard says.

“First you have to understand the transaction, you have to review on behalf of the companies, the corporate aspects and you review that and afterwards you have to communicate the transaction.”

The most difficult aspect about the deal, Defferrard comments, is the link between high yield and credit facilities, for which “you have to have the relationship with the banks so that the bonds are in a group at the right level and the interaction between those two financing elements work”.

Walder Wyss remains committed to expanding its M&A and corporate capabilities, while maintaining a strong pharma practice. However, the firm’s top-line priority is confirming its plans to open offices in Geneva and Lausanne. These office openings would make the firm the largest in Switzerland, Bürgi says, in terms of headcount.

“We have successfully integrated lateral hires in the firm in the offices in the new locations,” Bürgi says. “These teams work extremely well and are highly motivated. It’s a pleasure to see how they develop on our platform. It’s a success story and we are proud of it.”

Growth areas confirmed at the time of print were the regulatory and M&A practices.

Asia focus

Another Swiss firm with a stake in the Asian market is Froriep , with a strategy that has focused on the Asia market for a year already.

Managing partner Catrina Luchsinger Gähwiler says that the firm’s partners are in Asia “four or five times a year”, building up its networks in eastern Asia in particular.

“This is something we started a good one and a half years ago,” Gähwiler says. “We used to have a cooperation there, we are now creating a strong best friend network and four of our partners regularly go to Asia. We’re getting to know all the different people in the market: investment bankers, lawyers and hedge funds.”

She says the firm is working on strengthening its visibility in Asia.

“My feeling is that we will continue to see inbound M&A work with a special focus on Asian investment especially from China and Japan. Our tech and life sciences companies in Switzerland are of interest for investors in both countries.”

Niederer Kraft & Frey has a long-established relationship within the Japanese market, and has done several transactions in China on the buyer side, although partner Philipp Haas says that the firm has no plans to open offices there.

“I know one or two Swiss firms have opened offices in Shanghai,” says Haas. “The challenge for us top firms is that we’re not only competing with Swiss firms, but also international firms. We will actively pursue going abroad in the next few years.

“What you try and do is play the M&A outbound focus from Switzerland.”

“This transaction is very international, it’s not just about Switzerland and Germany, but all the countries in the world” – Luc Defferrard

Others, like Walder Wyss , have opted against setting roots down in Asia.

“Our strategy is not to grow abroad, the firms that did so in reality did it for opportunistic reasons,” partner Johannes Bürgi says. “We doubt that there is a new strategy to be honest. We work for many clients in Asia and the Middle East. In order to do so we don’t have to be present with an office.”

Partner Luc Defferrard agrees. “We tried to have a Russia desk and China desk and an India desk but in the end we realised that the profitability isn’t worth it,” he says.

The firm is seeing a majority influx of M&A work from Asia-based investors, who are asking for local legal help with acquisitions and transactions in the Swiss market.

Switzerland is a likely candidate to become a renminbi hub in the future, some lawyers claim.

“We’re a bit more sceptical,” says Bürgi, “because clients realise that it’s much more efficient to have a relationship with international firms abroad rather than independent Swiss firms.

“You have to be careful not to be in competition with the firms that give work to you.”

Gähwiler disagrees: “This all fits together. Switzerland is setting up to be one of the big renminbi hubs. I think the banking practice will be in further consolidation in the market, and banks being liquidated.”

Froriep is strengthening its banking and finance practice as a result of this trend, which Gähwiler believes “will require staffing in the next few years”.

“We are also strengthening our arbitration and litigation practice,” she claims.

Behind the deal: US Department of Justice’s investigation into Swiss banks

Since the onset of the financial crisis, investigations into banks around the world have been a frequent occurrence. In Switzerland, the US Department of Justice’s programme for non-prosecution agreements or non-target letters triggered an onslaught of legal advice to banks that were considering whether to comply.

For Schellenberg Wittmer this involved advising a raft of banks during the last four years, coordinating the work and dealing with Swiss law aspects.

The most notable example was Crédit Suisse, which was the firm’s “biggest assignment” and remains ongoing.

These were all significant mandates for Schellenberg Wittmer, with key decisions to be taken by top management of the Swiss banks. The amounts at stake and the pressure were both very high.

Partners Peter Burckhardt and Michael Nordin were involved in the project full time.

“It’s slowly coming to an end,” says Schellenberg Wittmer managing partner Benjamin Bordosi, although at some points during the period he claims that half of the firm was involved in the project. The firm decided to focus on high-value advice and coordination work with other service providers, which allowed the firm to “successfully manage clients’ expectations in terms of quality and timing at more reasonable costs”.

In parallel, the firm was working on similar work in Zurich, albeit on a smaller scale, led by partner Jean-Yves De Both.

“Those projects fall a bit between banking and tax and litigation,” Bordosi explains, adding that because of the level of work incurred, the firm “created a sub-group for investigations, which is very labour-intensive and very lucrative”.

The banks that were provided advice were ongoing clients, Bordosi says, but the firm “had never seen anything of this magnitude before” from Crédit Suisse. He says that most of the firms in Switzerland saw very big mandates.

Banks opted for magic circle firms or up-and-coming litigation boutiques, Bordosi explains, and his firm worked mostly with Cravath Swaine & Moore , Quinn Emanuel Urquhart & Sullivan and Allen & Overy .

Tax changes and open secrets

Changes in tax regulation, which will see the country’s corporate tax regime become more stringent and requires foreigners with Swiss bank accounts to disclose the fact, may affect some Swiss firms depending on their client base.

“We’ve been strengthening our tax team in the last year,” Gähwiler says. “We’re expecting some work to come from the automatic information exchange and it’s one of the core focus areas of our tax team.”

Schellenberg Wittmer’s Bordosi, whose firm added four partners to the management committee to become more “dynamic”, claims that the firm is benefitting from the tax changes.

“We have substantial mandates further to the attacks of the US and other jurisdictions on banking secrecy,” he comments. “It’s clear the landscape is changing, we have to adapt and advise clients on the situation. Our policy is to advise clients to benefit from the voluntary disclosure programme.”

So how should firms go about attracting these new clients?

“I think clients now want solution-oriented lawyers,” Bordosi says. “They want you to pick up the phone and say ‘this is what we do and this is what we propose you to do’. We try to be as innovative as possible.

“It’s always difficult to mark the difference and find out why the client at the end of the day comes to you. We go through a selective process and it is subjective.”

Following its role in the GSK Novartis asset swap, Niederer has made healthcare and life sciences one of its main priorities.

“Sometimes the most interesting clients are those that are on their way up,” Haas says, naming biotech company Octillion as an interesting example. “We are also active in the capital markets and health and life sciences,” he adds.

The European M&A market is still recovering from the 2008 financial crisis, but big healthcare and retail deals like those in this report and the movement from the banks that underpin them signal an important recovery in Switzerland.

“We feel that now it is getting better and there are an increasing number of transactions and deals,” Bordosi says. “We believe that those kinds of transactions are a signal that this type of industry regards us as a serious player.

“We made up four new partners, out of them two are in the field related to transactions, finance and banking.

Behind the deal: GlaxoSmithKline and Novartis’ €25bn asset swap

Pharma giant GlaxoSmithKline (GSK) and Swiss drugmaker Novartis completed an asset swap last year that was described as a “game changer for M&A”. The deal, which involved a three-step process selling £11bn of assets, was unique because of the complexity and coordination involved.

In the deal, GSK and Novartis combined their respective consumer healthcare businesses valued at £6.5bn; GSK acquired Novartis’ global vaccine business for £2.25bn; and GSK sold its marketed £16bn oncology portfolio and related research and development activities and rights to its AKT inhibitor and aggregate cash consideration.

Niederer Kraft & Frey provided advice on Swiss law matters during the deal, which was completed in the first half of 2015. Corporate and employment partner Andreas Casutt led on the deal, alongside tax partner Markus Kronauer and real estate partner Andreas Vögeli.

Slaughter and May provided support to GSK’s internal legal team as lead adviser.

“We were chosen because historically we work for several pharma clients including GSK, so it was a pre-existing relationship,” says partner Philipp Haas says. “We also work on many matters with Slaughter and May.

“It was basically us working in tandem. I worked on most of the negotiation alongside Slaughter and May and then there was a team on the transactional, employment and pensions matters.”

According to Haas, they worked non-stop for three months until the deal was announced, and then continued working on it afterwards. In fact, the firm is still working for GSK on its post-integration matters.

“The reason the deal was so complex is that they were flipping assets to each other and creating this joint pharma venture,” Haas explains. “That was a game-changer, and it was very complex to make sure this all worked together.”

Alongside Slaughters partners Simon Nicholls and David Johnson, Haas’ team worked on a deal “that was documented and negotiated in six to seven weeks”.

“It was lightspeed,” Haas says, “people had to be very good at multi-tasking.”

“The deal was very complex because they were flipping assets to each other to create a joint pharma venture” – Philipp Haas

On the other side of the deal Bär & Karrer advised Novartis, with partners Mariel Hoch, Roland Truffer and Thomas Rohde leading the team.

Hoch says that Novartis, which is a long-time client of Bär & Karrer, was not the firm’s main point of contact for this deal. Instead, the firm interacted with Freshfields and Linklaters as part of an external adviser lineup of around 15 firms.

The deal lasted two years from start to finish, Hoch explains, with external counsel dividing the responsibilities.

“Switzerland is a very important jurisdiction because the company involved is based there,” she explains. The firm had a quite substantial corporate team, an employment team, a regulatory team and a real estate team, as well as an IP team, involved on the transaction.

“Some of the regulatory work was in-house because they have a lot of specialists in pharma regulatory, so they needed less of that type of support,” Hoch says. “Real estate was very tricky, finding all the pieces which related to Switzerland. Parts were shares and parts were assets being transferred.

“Within the asset deals there were a lot of contracts attached to Swiss entities, but might have Swiss law or other laws associated.”

Putting all the pieces together was extremely complex, Hoch explains.

“The deal has good market perception. The sheer quantity of pieces that needed to be put into these structure types made it intricate.”

The team was not aware of the level of complexity that the asset swap would demand until it had started, Hoch comments.

“We were prepared in terms of having the capacity, but it wasn’t clear on the outset what complexities and what amounts of work would be involved.”

The extra workload involved in the deal meant that the final lineup of lawyers involved in the deal grew. Aside from the three partners above, Bär & Karrer’s team included real estate partner Corrado Rampini, employment partner Thomas Stoltz, IP/IT partner Markus Wang, tax partner Raoul Stocker and life sciences partner Markus Schott.

During the two-year period of intense contractual-heavy work, the same Bär & Karrer team was involved in the sale of another of Novartis’ businesses.

“At the same time, Novartis sold its animal business to Eli Lilly [for $5.4bn] which was going on in parallel,” Hoch says. “It was part of a portfolio transformation, it was the same international team with Freshfields Bruckhaus Deringer and Linklaters.”

Freshfields partners Jennifer Bethlehem, Julian Long and Andrew Craig and Linklaters partner James Inglis led their respective teams on the deal.