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Inside Out: Wordline’s Acquisition of GoPay

Inside Out: Wordline’s Acquisition of GoPay

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On September 24, 2020, CEE Legal Matters reported that Baker McKenzie’s Prague office had advised Worldline SA/NV on its acquisition of a 53% of stake in GoPay. JSK and Urban & Hejduk advised the sellers on the deal, Pavel Schwarz Jr. and BUDEX Direct.

The Players:

Counsel for Worldline SA/NV: Libor Basl, Partner, Baker McKenzie

Counsel for Pavel Schwarz Jr. and BUDEX Direct: Katerina Mala, Partner, Urban & Hejduk; and Tomas Dolezil, Partner, JSK

CEELM: Libor, how did you and Baker McKenzie become involved in this matter? Why and when were you selected by Worldline as external counsel initially?

Libor: Worldline is a subsidiary of Atos, which is a global leader in digital services. Atos is one of our valued clients, and we have assisted them on a number of transactions over the last few years, including the merchant-acquiring alliance between Worldline and Komercni Banka in 2016. Within the Atos group, Worldline is responsible for the delivery of technologically advanced payment services. So when Worldline was searching for legal representation in the Czech Republic for this transaction at the beginning of 2019, they selected us, in no small part due to our experience with M&A in the payment services industry.

CEELM: Katerina, what about you? How did Urban & Hejduk get involved?

Katerina: Urban & Hejduk represented both sellers – Pavel Schwarz Jr. (holding a 55% share in GoPay) and BUDEX Direct (a company owned by the Schwarz family, holding a 45% share in GoPay). We were originally contacted by Pavel Schwarz Sr., the father of Pavel Schwarz, the founder of the company. Mr. Schwarz Sr. was on the sell-side in a previous acquisition, where our law firm represented the buyer. When looking for legal counsel for this deal, Mr. Schwarz Sr., decided to contact us since he liked the manner in which we handled the negotiations on that previous deal, even though we were standing on the opposite side.      

CEELM: And Tomas, what about you and JSK?

Tomas: We jumped in in the middle of the negotiations based on a recommendation from Radek Musil of Vienna Capital Partners (now Raiffeisenbank). Radek was also new in the process and because we work with him regularly, he believed that we all – including the original legal counsel, Urban & Hejduk – would have a better chance of moving the deal ahead and completing it. My understanding was that the discussions with the potential bidders at that time were not progressing well for various reasons and that a new impulse was needed.

CEELM: What, exactly, was the initial mandate when you were each retained for this project, at the very beginning?

Libor: We initially focused on in-depth legal due diligence of GoPay, the Czech payment solutions provider which Worldline sought to acquire. We looked into various issues ranging from existing contracts, IP rights, financial regulatory approvals, HR, corporate matters, outsourcing and data protection. We were also involved in the structuring of the transaction and helped negotiate the terms of the transaction with the counterparty. This may sound simple, but GoPay is a heavily regulated Czech issuer of electronic money with very technical aspects to its business, so the legal advice involved some rather complex legal issues.

Katerina: We were engaged to provide legal advice to both sellers. Vienna Capital Partners as the transaction advisor has historically cooperated closely with JSK, who thus became responsible for the regulatory part of the deal.

Tomas: This is a good question. We were hired by the seller as the second legal counsel to support Urban & Hejduk and Radek Musil to help find solutions, overcome showstoppers, consult legal and business issues, and increase bargaining power. The lawyers at Urban & Hejduk were in charge of the actual execution from start to finish. Over time we obviously become more involved, in particular on the regulatory side, including notifications to the Czech National Bank.

As we are known for our constructive, pragmatic and commercial approach, this was not the first time we were invited by a party or advisor to a transaction to help reach an agreement. In particular, M&A advisors know that we can greatly help them with their deals, offer outside-the-box solutions and get along well with the other parties and advisors.

But please do not get the impression that we were the lead counsel on the sell-side. We had a great collaboration with Urban & Hejduk; each of us had a slightly different role, and Urban & Hejduk deserves full credit.

CEELM: Who were the members of your teams, and what were their individual responsibilities?

Libor: I was responsible for overseeing the legal advice provided to Worldline while the day-to-day management of the legal advice vested in Baker McKenzie Prague Partner Pavel Fekar, and subsequently Associate Dusan Hlavaty. Apart from managing the transaction, Dusan Hlavaty was also responsible for commercial, IP/IT, and data protection aspects of the deal.

A number of other Baker McKenzie Prague lawyers and specialists were involved, including Associate Slavomir Slavik, who was responsible for the corporate issues, and Associate Jan Kolar, who focused on financial regulatory issues and the Czech National Bank clearance.

Katerina: Our team consisted of me, Partner Jan Urban, Senior Associate Michala Kedzior, and Junior Associate Vojtech Jirasky. The negotiations were led by the senior members of the team and Michala, with Vojtech providing support in terms of documentation drafting.

Tomas: I was primarily involved in the negotiations and discussions. My colleagues Helena Hailichova and Sebastian Speta supported me the whole time and became more engaged when the regulatory aspects started playing an important role.

CEELM: Please describe the deal in as much detail as possible, including your (and your firms’) role in helping make it happen.

Libor: The final deal was the purchase of a 53% majority share in GoPay by Worldline in 2020, with a subsequent purchase of the remaining 47% minority share in GoPay in 2022 from Pavel Schwarz, the founder of GoPay. Pavel Schwarz retained a minority share in GoPay for an interim period and agreed to participate in business operations of GoPay until at least 2022.

So we had a fairly complex transaction in which we needed to legally underpin not only the terms for the purchase of GoPay by Worldline, but also the conditions of the future cooperation of the majority and minority shareholder of GoPay, including the parameters for the operation of GoPay during their joint venture. Our role was to make sure that all the legal challenges were addressed and that the business cooperation had a solid and working legal basis in the relevant documents.

Katerina: The deal was negotiated between our client and Worldline for quite a long time. Our role was to reflect the business terms into documents and make sure that the cooperation between the shareholders works smoothly until the final exit of the sellers. Taking into account the significance of the deal and the extraordinary circumstances of year 2020, we tried to be as cooperative as possible, while ensuring the interests and position of our client at the same time.   

CEELM: What’s the current status of the deal?

Libor: The acquisition of the 53% majority share in GoPay by Worldline successfully closed in September 2020 and Gopay is currently being integrated into the Worldline group, including Worldline Czech Republic, the Czech provider of merchant acquiring, with a view to looking for synergies. The current management of GoPay continues to be responsible for the company’s operations in cooperation with Worldline’s management. Pavel Schwarz is closely involved in shaping the strategy of GOP GoPay AY for the upcoming years as well as developing new GoPay products in the context of the Worldline product portfolio.

The deal will be continued in 2022 when Worldline is supposed to purchase the remaining 47% minority share in GoPay, thus allowing Pavel Schwarz to fully exit from the company.

Katerina: The transaction closed on September 4, 2020, with Worldline becoming a majority (53%) shareholder of GoPay. Mr. Schwarz Jr. remained in the company as its CEO, responsible for daily operations. Worldline has a right to purchase the remaining shares in year 2022.

CEELM: What was the most challenging or frustrating part of the process?

Libor: Many parts of this deal were challenging as we needed to move the transaction forward. Surprises and unexpected situations came up quite regularly.

In particular, it was quite challenging to clear the joint venture structure with the Czech National Bank and address all its requirements. However, our previous extensive experience with clearing such transactions with regulators and effective cooperation from Worldline and GoPay made the process quite smooth. In the end, we were happy to see that the Czech National Bank demonstrated a very rational and flexible approach to the clearance process, allowing us to meet our internal deadlines for the transaction.

Furthermore, we had to make sure that the terms and conditions of the joint venture between Worldline and Pavel Schwarz worked, both legally and from a business perspective. As you can imagine, especially given the different and sometimes completely opposite business drivers of your counterparty, this is not always that easy to combine. However, as the whole transaction team was constantly discussing all aspects of the deal, we were able to brainstorm and come up with a workable solution very quickly.

Katerina: The most challenging part was definitely the pre-signing phase, which took place in the middle of the worldwide COVID-19 pandemic and the full lockdown in the Czech Republic. All the final negotiations had to be done online, and the contract was signed on April 8, 2020 without the personal presence of the contractual parties. 

Tomas: The details regarding the calculation of the purchase price, in particular in respect of the second phase of the transaction, are really complex. This is due to the nature of the GoPay business as a payment institution and the expected regulatory and technical development. We all spent a lot of time to get it right.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth or easy?

Libor: Given the complexity of the deal, I wouldn’t say that any part was unusually or unexpectedly smooth or easy. However, excellent cooperation with Worldline and a rational approach from the counterparty allowed us to find solutions to the various issues we faced quite effectively.

Katerina: The transaction was very complex and went on in a standard manner.

Tomas: Not really. But it seems that the pandemic helped finalize the deal as the buyer was eager to present positive news to its investors.

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

Libor: The basic parameters of the transaction which were outlined at the very beginning did not change. Obviously there were many more or less important matters which had to be negotiated along the way, especially with respect to the joint venture element of the transaction.

Katerina: Our mandate was to provide legal assistance, which did not change, except for excluding the regulatory part of the deal under the responsibility of JSK.

Tomas: Yes and no. Yes, in respect of our role regarding the consultancy of the key aspects of the transaction, and no in respect of the regulatory work which we assumed as we went along.

CEELM: Libor, what specific individuals at Worldline instructed you, and how did you interact with them?

Libor: We were involved with a lot of colleagues from Worldline. Given our attorney confidentiality, we would prefer not to mention any names here. However, we can definitely say that it’s been a real pleasure working with them. And we hope the client enjoyed our cooperation, too.

We organized weekly conference calls and were in daily separate communication flows with all the involved parties to address the issues. We all had relatively small teams involved in the transaction from each party, which allowed us to be very efficient.

CEELM: What about you, Katerina and Tomas? Which specific individuals instructed your firms, and how did you interact with them?

Katerina: Pavel Schwarz, Jr. was engaged in most of the negotiations. We were instructed mainly by him, or by Vienna Capital Partners as the transaction advisor. We were in close contact with the sellers, and the strategic points were always discussed in person.

Tomas: We were ultimately instructed by the owner and seller, Pavel Schwarz. We cooperated intensively with the whole transaction team, including the key managers of the target company. Regular meetings, calls, and exchanges of ideas happened as in most other transactions.

CEELM: How would you describe the working relationship with the other firms on the deal?

Libor: In short, professional and productive. Both parties were driven to find reasonable compromise for the purchase terms and in their efforts to lay the groundwork for their cooperation during the interim period, until Worldline fully takes over GoPay in 2022. We were happy to see that legal negotiations with Urban & Hejduk and JSK were more flexible than is normally seen in straightforward acquisitions.

Just like us, our colleagues from Urban & Hejduk and JSK were commercially driven and I believe that no party felt any need to start any major legal battles. Of course, we had some situations of disagreement but we were all able to come up with workable compromises fairly quickly.

Katerina: The due diligence process was handled by the client internally and we stepped into the negotiations when the commercial points of the deal started to be discussed. At all times, the cooperation with other advisors were very professional and business-oriented. The final stage prior to closing was influenced by the COVID-19 outbreak and related limitations imposed in most of the European countries. This required an extreme effort on both sides as it was impossible to travel across the borders or obtain certain documents from public authorities. Unlike usual transactions, all the final negotiations had to be done via telephone or email, but all the participants were very reasonable and willing to close the deal even under such unprecedented circumstances.       

Tomas: The finalization of the transaction was already affected by the pandemic and the signing occurred remotely. Before that, it was a standard process, taking into account that Worldline is a foreign entity.

CEELM: How would you describe the significance of the deal?

Libor: We believe that the transaction was significant not only for Worldline and Pavel Schwarz, but also from the perspective of the fast-growing online payment market, where GoPay holds a unique position due to both its market share as well as the depth of its offering. The entry of Worldline will expand its online payment capabilities in this market, while GoPay will grow through synergies with Worldline.

Worldline is growing organically and through acquisitions not only in our region. With the successful completion of its recent acquisition of Ingenico Group, Worldline will become one of the five largest companies in this market segment in the world. We are very happy that we could contribute to Worldline’s success and we very much look forward to future cooperation with them.

Katerina: The acquisition of GoPay by Worldline was our largest transaction that closed in 2020. It was exciting for the team to see the story of the success of an extremely talented person who started his business by introducing a unique idea to investors in a TV show and ended up by selling this system to the European leader in the area of payment services.

Tomas: I think the deal has attracted attention in the market for two reasons: as one of the few deals executed during the pandemic, and because the sector is exciting. These are the types of deals we like at JSK, ones that are notable, challenging, and enjoyable.

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.