Ask most in-house lawyers why they left private practice and the term “lifestyle” will usually crop up. Not, however, for Tatjana May, assistant general counsel at AstraZeneca. When she joined from Slaughter and May in 1995 she found herself, along with fellow assistant general counsel Shaun Grady, at not only one of the busiest FTSE 100 companies around, but also in the middle of a maelstrom that was to last until December 2000.
In her five years at the company, May has worked on a raft of deals, including the most recent, the creation of Syngenta. Hugely complex, taking 18 months to complete and costing $150m (£101m) in adviser fees, it involved spinning out part of the business, merging it with another company and then listing the newco on four stock exchanges: New York, London, Sweden and Switzerland.
The phrase “out of the frying pan and into the fire” seems rather more apt than “lifestyle option”.
But then, AstraZeneca has always liked the big deals. Just look at its creation. In the early 1990s, under failing investor interest, ICI decided to demerge its chemical division, the upshot of which was the formation of Zeneca in 1993.
Zeneca comprised three core units – pharmaceutical, agricultural chemicals (agrochemicals) and speciality chemicals. But the board moved quickly to reorganise the business. The first step was to sell the speciality chemicals arm. But evidently not one for the simple life, Zeneca began merger talks with Swedish pharmaceutical giant Astra at the same time. Grady, who has been with the company throughout its various guises for 15 years, says: “That was one of the most tiring times. We had to leave the speciality deal in the end to move full time onto the Astra deal.”
The Swedish merger was announced in September 1998 and was completed in April 1999. The speciality chemicals arm was bought by Cinven and Investcorp for $21.1bn (£14.3bn) in May 1999. The tight time frame was deliberate – in a rapidly consolidating industry, no one wanted to suffer the consequences of tardiness. “The idea of someone coming around the corner with a hostile bid was quite real,” says Grady.
Next on the agenda was Zeneca Agrochemicals. A detailed strategy review was ordered in May 1999 to determine its future. May was involved from day one. “It was perceived as valuable to have a lawyer on the team. It was also helpful to understand where the business decisions were coming from and how to effectively lawyer that,” she says.
The Syngenta deal, although global, was run from AstraZeneca’s small London headquarters. Grady and May are two of three London-based corporate lawyers; company secretary and group solicitor Graeme Musker is the third. The main in-house team is in Cheshire and deals with matters more traditionally associated with a pharmaceutical company: patent licensing, medical negligence and so forth. Indeed, although the company has more than 65 in-house counsel spread around the world, nearly all of them focus on commercial issues.
Although the investment banks may disagree, Grady and May viewed themselves as Syngenta’s project managers. May explains: “The investment bankers often like to think they [project manage], but they don’t, and it falls to the lawyers. Freshfields was very good, but ultimately it falls to the in-house lawyers.”
Her justification for this is simple. “There are so many areas that may not be strictly relevant but still need to be coordinated by the same people,” she says. “Otherwise the left hand doesn’t know what the right hand is doing.”
Grady’s view, however, is coloured somewhat by hindsight. As he puts it: “It was a global exercise and we coordinated it all from here. It was quite enjoyable, but after the merger we said never again.”
Although outside counsel were heavily relied on (two Freshfields assistants, for example, were seconded to AstraZeneca), the decision to take on the project architecture doubled Grady and May’s workload.
Grady, though, believes it is imperative to keep up with the external advisers. “I slept at Freshfields, the printers… and sometimes not at all. But these guys are putting in the hours, and if you can’t do th
at then you don’t have a voice,” he says.
Initially, there were talks with a range of potential suitors for agrochemicals – at one point, three different parties were all in individual talks with AstraZeneca. Eventually, however, it was agreed to pursue a merger with Novartis, the leading Swiss pharmaceutical company and manufacturer of Ovaltine.
The downside of two giants hooking up in an already consolidated sector, of course, was antitrust. (It was also addressed late in the process, as shareholder approval for the deal was needed before resources could be allocated.) Assessments were made on 150 markets: did filings need to be made and what would happen if they did not file? In the US, they had to divest a company prior to completion, and in Europe they had six months to offload 13 parts of the company in order to comply with European Commission regulations.
May oversaw the antitrust work. Freshfields competition partners Nick Spearing and Rachel Brandenburger were both used, as was New York-based antitrust partner Ronan Harty from Davis Polk & Wardwell.
Yet this was an area that neither Grady nor May felt could be handled efficiently if tackled only by external counsel. “They were hugely hardworking,” says Grady, “but they don’t know the market, so you feel that you’re doing it on your own half the time.”
May adds: “Syngenta was a very difficult antitrust deal, but we got it through, and full credit to the advisers on that. But ultimately the real knowledge of the business is not going to be with the external advisers.”
This is something of a moot point for firms when doing big ticket M&A, and one of the reasons Grady and May are exponents of internal project management. While no one may be able to fault a partner’s corporate skills, knowing the client’s market inside out is something that can only come from years of vertical specialisations. Which, of course, is where in-house counsel get the upper hand.
Coupled with the antitrust issues were the logistical pitfalls of Syngenta’s initial public offering. May concedes that coordinating the four listings was something of a juggling act. Prospectuses had to be translated into Swiss and Swedish and last-minute changes were not easy, as each country’s prospectus had to be changed extremely quickly to avoid the nightmare scenario of differing publications.
However, the quadruple listing was more tax efficient. Grady says there were times when he felt that the full implications of the workload had not been taken into account, but ultimately he believes it was worth it for tax reasons, as well as massively reducing potential employment complications.
In fact, the driving force for structuring the entire deal in this manner was making sure that money that was spent and made efficiently. May explains: “The AstraZeneca merger completed in April. Then, as an inevitable consequence, there was a reorganisation. Bolted on to that was the need to structure the agrochemical arm in a way that meant we had the option to divest it in a tax-efficient way if necessary.”
The advisers in the Syngenta deal were paid $150m (£101m). The investment banks took their traditional dominant share, but the firms had around $10m (£6.8m) between them for their trouble.
But a bit of peace and quiet is now giving Grady and May a chance to take a closer look at exactly which firms they are using for what. Although the company does not have a panel, it does have a preferred set of advisers, and Grady is set to review the line-up. The company, for example, inherited Reynolds Porter Chamberlain through Astra, and this relationship will be one of the first things that Grady looks at.
“There’s an exercise going on,” he explains, “where we’re going to talk to people to make sure they understand what we’re about. We need to make sure we give enough work to the people we want to remain close to. It’s just a matter of keeping things under constant review. We’ve been so busy that these sort of things become secondary.”
Some of the processes that were adopted because of the deal, though, will stay. For example, lawyers were allotted to keep an eye on relevant jurisdictions, and that structure will be maintained, with one in-house counsel having responsibility for one particular region.
Grady is also particularly pleased that all the relevant parties – AstraZeneca, Novartis and Syngenta – are all very much on speaking terms. Yet, as he proudly concedes, there were times that they most definitely were not. A sure sign, in his eyes at least, of a deal well done.
May, T and Musker, G
Assistant general counsels
|FTSE 100 rating||6|
|Employees||Ove 50,000 worldwide|
|Legal capability||65 lawyers based in Cheshire, London, Sweden, France, Italy, Delaware, Los Angeles, Brazil and Mexico|
|Head of legal||Graeme Musker, company secretary and group solicitor in London, and Goran Lerenius, general counsel healthcare in Sweden|
|Reporting to||Tom McKillop, chief executive officer|
|Main location for lawyers||The US, the UK and Sweden|
|Main law firms||Addleshaw Booth & Co, Davis Polk & Wardwell (UK and US), Field Fisher Waterhouse (property), Freshfields Bruckhaus Deringer (corporate), Linklaters & Alliance (corporate), Reynolds Porter Chamberlain, Rowe & Maw|