On August 5, 2015, CEE Legal Matters reported that RTPR Allen & Overy had advised the Advent International Corporation on the sale of its majority stake in Centrul Medical Unirea S.R.L. – the healthcare services provider conducting its business under the brand name “Regina Maria” – to the private equity fund Mid Europa Partners. The Enayati family sold their minority share in Centrul Medical Unirea as well, and were advised by NNDKP. Mid Europa Partners was advised by White & Case and Bondoc & Asociatii, with CMS advising Erste Bank – acting as the sole underwriter of the acquisition facility – on debt financing provided to Mid Europa Partners. The transaction, which remains subject to approval by the Romanian competition authority, is expected to close before the end of the year. We asked Costin Taracila, the “T” in RTPR Allen & Overy, some questions about this major deal.
How did RTPR Allen & Overy become involved in the deal? In other words, why did Advent International select the firm – and you, as external counsel – for this particular deal?
C.T.: We have a long-standing relationship, Advent International being one of our very active private equity clients for some years. We advised them on several transactions in Romania, just to mention only the last one, the exit from Ceramica Iasi which was concluded last summer. Historically we acted for Advent on the acquisition of Centrul Medical Unirea back in 2010 and the further add-on of Euroclinic, and we were best placed to act for them on the exit from the same business. It’s a strong relationship based on trust.
What, exactly, was your mandate when you were retained?
C.T.: We were retained to advise on the entire process, from NDAs, vendor due diligence, data room guidance, SPA negotiations, signing, conditions precedent, and closing. The final result was not too different from the initially agreed scope of work in terms of the key areas. We were pleased to be retained for the full process, and Advent and its local team are transaction driven, so there were no surprises for either of us in terms of our expectations and how the process was eventually organized.
Who were the members of your team, and what were their individual responsibilities?
C.T.: The RTPR Allen & Overy team was led by me, and I was assisted by Alina Stavaru (Counsel) on negotiations and Roxana Ionescu (Senior Associate) on due diligence and transaction structuring. Other members of the team were Ana Eremia, Diana Dimitriu, Andrei Mihul, Laurentiu Tisescu, Raluca Deaconu, Adrian Cristea, and Monica Marian (Associates). On the international team, Hugh Owen from Allen & Overy Budapest advised on the English law aspects of the transaction, supported by Esther Lemmon in A&O London on the tax covenant.
What were the English elements Hugh Owen worked on, in particular?
C.T.: Hugh worked mainly on the share sale and purchase agreement, which was governed by English law and which contained provisions which, although typical for this kind of secondary buy-out, are still quite private-equity specific. He and I led the negotiations together on this. He also worked on the Warranty and Indemnity Insurance policy, which is an important element of more and more M&A transactions – it is a very specific document where prior experience is essential. There were other complex private-equity-specific elements which, for confidentiality reasons, we can’t mention here.
What does the final deal look like, how is it structured, and how did you help it get there?
C.T.: The deal involved Advent selling approximately 80%, and the Enayati family selling approximately 20%, of the shares in Centrul Medical Unirea SRL. There was a partial rollover of management’s shares. The deal was a locked-box deal with regulatory conditions only.
We walked hand in hand with our client from the inception of the exit until a successful signing and beyond. Given that we were involved in every single step of the process, this allowed us to have a complete overview and to be able to offer tailor-made advice combining the pure legal advice with all relevant business considerations. We like to think that we were more than a legal adviser; we were what we like to call “the trusted adviser” for our client. This was a competitive sale where all the advantages and disadvantages of different bids and bidders had to be taken into consideration before getting into negotiations. Proper vendor due diligence and preparation were key for the success of the deal, then once things heated up we brought all the key ingredients to the table: the due diligence team, the competition team, the Romanian and English law M&A team, and the English tax team. All for the benefit of a hands-on and very business-oriented client.
What can you tell us about the application for competition authority approval?
C.T.: The application for competition approval involves sections related to the purchaser and its group (this part was handled by Mid Europa’s legal advisors) and others with information about the target group, its services, and markets (handled by our team). In a competitive process such as this one, the part of the application that relates to the target group and which is the most consistent is prepared in parallel with the negotiations in order to smooth the application process. We think the approval by Romanian competition authority will be granted in the coming days, and we do not see any reasons for a delay, with the closing of the deal immediately after.
Were there any unexpected challenges involved in the process?
C.T.: There were challenges, of course, as in any deal of this type. For example, we ended up with the actual sale transaction being negotiated in parallel with a sophisticated management incentives plan which had to be agreed by the purchaser with the management of the target. We had to combine the experience of the Luxembourg, English, and Romanian teams in order to be able to advise the management of Regina Maria in parallel with the sale process. Other than that, the biggest challenge was to be able to negotiate and to deliver a ‘Rolls Royce’ service to our client for over 30 hours in a marathon, sleepless, negotiation session in Bucharest.
Similarly, looking back, what elements are you proudest of?
C.T.: The ability to keep all the balls in the air throughout the various jurisdictions and work streams involved under time pressure, while at the same time keeping that level of mutual instant understanding and trust with our client which made those “May I have a separate word with my client” moments very rare. Also, we are very proud of the teamwork between our Romanian and international teams. We have known each other and worked together for many years now, and there is a mutual respect and understanding that enables us to work together very effectively. We also felt that we had a very good understanding of what the buyer was going through on their side, too. So (since we have done it ourselves countless times) we understood what they had to do, for example with the financing banks and the warranty and indemnity insurer, and because we understood these elements perfectly ourselves, it enabled us to ensure that our approach in negotiations was one that they could accept. We knew what issues they were facing as a private equity buyer, and we knew what they could and could not accept.
How did the negotiations work for this deal? With so many players and law firms involved, it must have been complicated logistically, no?
C.T.: The negotiations took place at our premises in Bucharest. Mid Europa was effectively given 24 hours’ exclusivity to get the deal signed, and after the deal team flew into Bucharest on Sunday, 2 August, the customary 30+ hour meeting ensued, with a signing on the Tuesday afternoon, 4 August. All the key players were in the room.
How would you describe the working relationship with Advent International?
C.T.: We could not detail the relationship with Advent International on this deal without giving special praise to Emma Popa Radu and Raluca Nita (the Managing Director and a Director of Advent’s office in Romania, respectively), who were in charge of supervising this investment in Regina Maria as all as with the exit process, along with their Luxembourg and Boston teams, which offered all the needed support almost around the clock during the intense negotiations. Besides the in-depth and unique mix of strategic vision and understanding of legal, financial, and tax implications of all matters involved, they were always able to quickly turn around clear instructions focusing on the really important open points throughout the negotiations. And the ability to make business decisions almost on the spot made all the difference and allowed the negotiations of this deal to end with a successful signing within a short timeframe.
How would you describe the working relationship with your counterparts at CMS, NNDKP, White & Case, and Bondoc & Asociatii on the deal?
C.T.: It was definitely a deal between professionals. It is of paramount importance to have all teams “speaking the same language” when it comes to sophisticated matters requiring top law firms around the table. And this was certainly the case – it was good that all of us, as the top private equity law firms in the CEE region, were involved in this deal, enabling us to deal with complex and specific issues that firms without PE experience would have found difficult to get over the line in the same time frame.
Does the deal have any greater significance in Romania, or in the region?
C.T.: This is the largest Romanian transaction in healthcare in the last few years on the Romanian M&A market. This gives a very positive signal about the fact that in Romania there are very good businesses, and we encourage investors to look closer at Romania as an attractive market. Romania is a large market with enormous potential and still great opportunities for exceptional returns. We are committed to Romania, and we are pleased to see continued interest in the country from important investors like Mid Europa.
We look forward to taking part in many more M&A opportunities like this in the near future.
This Article was originally published in Issue 2.5. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
- Linklaters, White & Case, Slaughter & May and GSI Advise on beIN Acquisition of Digiturk
- BASEAK and White & Case Advise on EBRD Investment in Burger King Master Franchisee
- Allen & Overy Advises Poland on Issuance of First European Sovereign Panda Bond
- The Buzz in Russia: Interview with Leonid Zubarev of CMS
- Dentons, White & Case, and Clifford Chance Advise on Mezzanine Capital Loans to Medicon Group and Nolloth