On December 18, 2019, CEE Legal Matters reported that Scandinavia's Flugger group A/S acquired a 60% shareholding in Unicell, a paint manufacturer based in Poland. We reached out to Flugger’s Group General Counsel and Vice President, Torben Schwaner Dehlholm, for more details.
CEELM: First, can you provide some insight as to the business case behind the acquisition?
Torben: I guess it’d be useful first and foremost to understand a bit about us as a company. Flugger is an international group with a turnover of approximately DKK 2 billion and 1700 employees following the recent acquisition. The company is publicly listed in Denmark.
Flugger designs and markets a wide and coordinated assortment within decorative painting, wood protection, spackling paste, wallpaper, and high quality tools, which are sold via the retail chain Flugger Decor, which has 450+ stores in Scandinavia, Eastern Europe, and China. Flugger owns more than half of these stores. Deliveries are also made to grocery stores and DIY centers via the sales unit and exported to more than 40 countries worldwide. Flugger now has six factories in Denmark, Sweden, and Poland, which produce tools, paint, and designer wallpaper.
We have been looking to expand for some time and have been looking extensively through Poland where we could get some good synergies with our existing operations there. In that process, we identified Unicell, which we ended up acquiring. We were already present in Poland but we wanted to have a stronger presence.
Flugger acquired 60% ownership of Unicell, with the right to purchase an additional 14% of the shares at a later date. The remaining shares will remain with the founders and existing management team.
CEELM: What would you say was the most complex legal element you had to handle in relation to this deal?
Torben: Being a publicly-listed company is a considerable issue in such deals as we are facing an extensive process with many parties involved on both sides at the same time, with confidentiality required. From my point of view, dealing with smaller businesses that are not used to dealing with these rules or larger-scale M&A transactions raises additional complexity. But we retained full legal compliance and a good process with the assistance of local counsels and in close collaboration with the sell-side. Further, from a legal perspective, the matter of finalizing the new ownership structure as well as the purchase rights related to the additional 14% ownership was challenging.
CEELM: What part of the legal work did you choose to carry out in-house and what did you externalize to your outside counsel?
Torben: The external counsel ran the most of local the legal process with our in-house legal department focusing on management, participating in negotiations, and assisting with the due diligence process. Some of the sellers were Polish locals who preferred to speak in their native language so our external advisors were also helpful in negotiating without too much bottleneck on transactions. Most of the data room process and due diligence, of course, involved the firm we worked with as well.
CEELM: Why did you choose Baker McKenzie as your external counsel for this deal?
Torben: Whenever we are faced with such deals we first look at our local counsels. We were already present in Poland and there are two local law firms we use there on a regular basis. On this specific deal, we chose Baker Mckenzie based on their thorough proposal and as they have a strong international presence as well. Further, they were used to working with some of our other local non-legal advisors on this specific deal. As a publicly-listed company, there are huge sensitivities in place and it makes a difference for us if the law firm is also used to dealing with other publicly-listed companies and the relevant legislation. Further, we do not only choose a law firm – we also look for and choose the specific lawyers within a chosen firm we would like to work with. The Baker McKenzie partner in charge of our collaboration in general, and on this specific deal, Weronika Achramowicz, as well as lawyer Ewa Marcisz, and the rest of the supporting team from Baker McKenzie did a great job throughout the process and provided us with value-added support.