4 August 2003
When talking to Hewlett-Packard's (HP) UK legal head Gareth John, it is impossible to avoid talking about the company's merger with Compaq, the largest technology merger in history. Worldwide, it involved 1,193 sites, 160 countries, 145,000 staff and one billion customers. The merger has consumed John for more than a year and it is only now that things are falling into place following local closure in February.
When the merger was announced, John took it upon himself to manage the UK and Irish ends of the deal. This allowed his team to concentrate on the commercial transactions that keep the business ticking over, so while the boss has had his mind on integration, the team has closed deals with P&O, Bank of Ireland, Unilever and 3. The vast majority of these have been completed in-house.
Post-merger, HP split itself into four business divisions: HP services, the enterprise systems group, the imaging and printing group and the personal systems group. "HP Services is the division that is most hungry for legal services," says John. Legal services are most required for outsourcing deals. The legal team's core skill sets are IT and commercial law and these deals are their bread and butter.
"As a matter of policy, I decided a long time ago that all non-core activities, such as employment, real estate and litigation, should be outsourced to law firms," says John. He has just completed a post-merger streamlining of his law firms. Lewis Silkin is the preferred firm for real estate. Eversheds fought off competition from Olswang to be chosen as employment adviser, while Baker & McKenzie and Clyde & Co were chosen as litigators.
While John likes to keep as much work in-house as possible, Harry Small's IT team at Baker & McKenzie also advises on some IT deals, as does the firm's key corporate adviser Freshfields Bruckhaus Deringer. Small's relationship with HP has been helped rather than hindered by acquisitions - Small's original client was Digital, which was acquired by Compaq.
It was Freshfields that helped share the merger and integration burden with John. He has nothing but praise for corporate partner Claire Wills and her team. With more than 24 legal entities in the UK and Ireland, the corporate restructuring was complex, raising a whole heap of tax issues. John was legal adviser to the HP integration team and the boards of directors and, as company secretary, he coordinated all board meetings.
As with all mega-mergers, employment issues came to the fore, with 10,000 jobs lost worldwide, and although the rationalisation of the merged company's property portfolios was less of an emotional issue, it was no less complex. "It's been a tough year," understates John.
On top of the integration of two of the biggest technology companies in the world, John has had to integrate Compaq's legal team of three and has chosen to integrate the commercial team with the legal team. "That is Gareth John's big achievement," says one of his outside advisers.
The commercial negotiators have been integrated into the legal team, boosting John's department from 10 to 30 people. The move brings the legal team closer to the business. It is an innovative move, which should make deals slicker. The new merged team provides a model for others to follow and it was this innovation which saw John and his team figure prominently at this year's The Lawyer Awards, coming runner-up in two categories, In-House Lawyer and In-House Team of the Year.
Proximity to the business is a mantra that John repeats time and again when talking about most aspects of his team's work, be it dealmaking, the merger, or the structure of the team. In keeping with this strategy, an in-house lawyer was relocated to Ireland post-merger, when John realised that the combined forces of both companies demanded legal support. In addition, Irish firm Matheson Ormsby Prentice assists with corporate and employment issues.
As well as John's legal and commercial team, Denise Kilgannon heads Europe's intellectual property (IP) team in Bristol. Kilgannon's team covers all non-trademark related IP issues for Europe, the Middle East and Africa (EMEA). Trademark issues are handled centrally from the company's Palo Alto headquarters.
Kilgannon heads a team of 20 people, 13 of which are attorneys, spread across sites in Bristol, Barcelona and Grenoble. These are HP's key research and development (R&D) sites in the EMEA region. "Our main responsibility is the protection of the innovation of our R&D," says Kilgannon.
The largest part of R&D is patent work. The IP team handles most of the IP support on transactions, advises on general IP issues and manages IP disputes. Kilgannon uses about 20 firms across Europe to advise on patent drafting and prosecution. Most of the transaction support work is kept in-house.
Kilgannon reports directly to senior managing counsel for IP Alan Haggard in Palo Alto, while John reports to EMEA general counsel Eric Heerkens, who in turn reports to HP general counsel Ann Baskins. "We are a global legal function and we like to ensure a consistent level of legal support worldwide," says John.
While day-to-day issues are handled by the UK and Ireland team, the global legal team liaise closely on corporate policies and competition law. "We liaise very closely to manage the risks associated with the Sarbanes-Oxley Act and standards of business conduct where consistency is so important," John explains.
Heerkens holds quarterly meetings for the management team of the EMEA region. In addition to John, this includes representatives from France, Germany, Iberia, Italy, Northern Europe (Belgium, the Netherlands, Sweden, Norway, Finland and Denmark) and the Middle East.
Prior to joining HP, John was an IT/ commercial lawyer at Frere Cholmeley Bischoff. Now, after six years, he seems fully converted to HP's truly global and truly ambitious ideology. Let's hope the future for HP is brighter than that of Frere Cholmeley Bischoff.
Legal counsel and company secretary
|Turnover (UK and Ireland)||$4bn (£2.47bn)|
|Employees (UK and Ireland)||9,200|
|Legal capability||Seven lawyers, 20 contract managers and an intellectual property group|
|Legal counsel and company secretary||Gareth John|
|Reporting to||Europe, the Middle East and Africa general counsel Eric Heerkens|
|Main law firms||Freshfields Bruckhaus Deringer, Baker & McKenzie, Lewis Silkin, Eversheds, Clyde & Co|