Full of spirit
9 June 2003
Since Allied Domecq's general counsel and company secretary Len Quaranto joined the group in August 2001, the international spirits, wine and fast food restaurant business has been on an acquisitive rampage. But as consolidation continues to shape the beverages sector, Allied Domecq has itself become a more manageable target for acquisitive rivals. Speculation has centred on a potential offer from venture capitalist Hugh Osmond, with Barcadi, the privately owned rum maker, and France-based spirits group Pernod Ricard also rumoured to be interested in the group. Quaranto strongly denies there is any truth in the possibility of an offer for Allied Domecq and labels such a deal as pure speculation.
After Punch Tavern's successful bid to acquire Allied Domecq's pub retail arm for £2.7bn in 1999, there was a period of intense change at the group. Allied Domecq shifted its focus to spirits, wines and fast food chains. The company, which is behind Beefeater gin and Perrier Jouet champagne, has added a number of new brands to its wines and spirits portfolio. Last year, it bought Malibu rum and Mumm Cuvée Napa, a Californian sparkling wine, from rival Diageo for £587.5m.
In September 2001 the group bought Kuemmerling, Germany's fourth largest spirits brand and the second largest in the bitters market. In the same year it also took over the entire share capital of leading Spanish wine producer Bodegas y Bebidas for E279m (£200m). Allied Domecq also won the battle to take control of Montana Group, New Zealand's premier wine maker and distributor, in 2001.
But as if a string of international acquisitions was not enough to keep Quaranto's hands full, he helped the group complete a successful New York flotation last July when the Sarbanes-Oxley Act was putting companies off the idea of a stateside listing.
Quaranto, who oversaw the Securities Exchange Commission-related filing requirements, says that Allied Domecq does not see Sarbanes-Oxley as an impediment because, from the group's point of view, the new legislation does not introduce many new burdens. "We took the view that for UK companies Sarbanes doesn't introduce many additional requirements because they have already been through this," he says.
The purpose of listing Allied Domecq's shares in the US was to increase the group's visibility across the Atlantic, where a very large portion of the group's profit and turnover is generated. "We wanted to align the group much closer with its markets - the US is a major market," Quaranto adds.
Quaranto chose Clifford Chance to handle the New York listing because, as a result of its tie-up with Rogers & Wells, the firm has a greater presence in the US than Linklaters, the company's principal external law firm. Quaranto also has a personal relationship with one of the partners at the firm. He now retains Latham & Watkins to advise on US securities-related matters because the firm offers national coverage in the US.
"Although Clifford Chance did an excellent job, I still wanted a firm that has US securities law coverage, while at the same time can offer national coverage," he says.
Quaranto says that when he joined Allied Domecq after 16 years at personal hygiene group Kimberley Clarke, he did not come with any preconceived ideas regarding the future direction of the group's legal function. Nonetheless, he wanted his new position to be more strategic and expected to provide legal input at an earlier stage of a deal. He says: "I discovered pretty quickly that the legal department wasn't heavily involved at the start and during a deal. Most of the legal input was coming from Linklaters [the group's principal external legal adviser]."
Allied Domecq has relationships with a number of English and foreign law firms, but Linklaters and more recently Latham & Watkins get the lion's share of the work as the firms are the group's UK and US corporate lawyers respectively. The relationship with Linklaters spans several years and was born out of a relationship between David Cheyne, the head of the magic circle firm's corporate department, and one of Allied Domecq's directors. On many occasions, the board has gone directly to Cheyne on strategic matters, but although Quaranto thinks Linklaters provides an excellent service, he now expects the directors to consult him on strategic issues more often.
Allied Domecq's legal department operates globally, with lawyers based in the UK (principally Bristol), France, Spain and the US. The UK legal function comprises 11 lawyers with expertise including corporate commercial, competition, intellectual property and tax. Quaranto says that he is very lucky because he inherited a very able team of lawyers. "I had very good people but they weren't all as close to the business as I wanted," he says.
Quaranto says that it is impossible to say exactly how much legal work is outsourced and typically it is handled on a case-by-case basis. Since he took over the general counsel's role, the group has been doing more and more work in-house. Prior to Quaranto's arrival, the legal department rarely got involved in transactions, but now the group's lawyers will get involved in due diligence and, where appropriate, advise the senior management on the legal aspects of the deal.
In addition to Linklaters, Latham & Watkins and Clifford Chance, Allied Domecq also has relationships with Osborne Clarke, Maclay Murray & Spens, Ashurst Morris Crisp and Bevan Ashford. The group outsources commercial and employment work to Osborne Clarke, while Maclays advises on supplier matters and health and safety issues in connection with its Scotch whisky distillery in Scotland. However, Quaranto says that he is using both Ashursts, on French transactional work, and Bevan Ashford, for property law, less and less.
Allied Domecq instructs a number of overseas firms in Australia, New Zealand, Japan, Spain and South Korea. On the Bodegas y Bebidas takeover the group instructed Spanish firm Uría & Menéndez, while on a fairly recent South Korean deal it appointed Seoul-based firm Kim & Lang.
Given Allied Domecq's recent swathe of activity it is hardly surprising to hear that firms are constantly knocking on the door canvassing for business. Quaranto says that he has got a number of firms on the prowl and blames it on the lack of M&A activity. But perhaps it is also because firms want to be in pole position if the much talked about acquisition of Allied Domecq turns into reality. "There's certainly consolidation to come in this industry and I envisage Allied Domecq will be involved in that consolidation. I also expect that the legal department will be engaged on those transactions," he says.
General Counsel and Company Secretary
|Sector||Drinks and fast food|
|Pre tax profits for year ending 31 August 2002||£480m|
|Employees worldwide||21,113 at 31 August 2002|
|Legal capability||41 lawyers globally|
|General counsel and company secretary||Len Quaranto|
|Reporting to||Chief executive officer Philip Bowman|
|Main law firms||Ashurst Morris Crisp, Bevan Ashford, Clifford Chance, Latham & Watkins, Linklaters, Maclay Murray & Spens and Osborne Clarke|
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