The MET Group is targeting EUR 1 billion in M&A deals over the next few years. Dora Szebeni, Group Head of Legal M&A, explains what it means to oversee a series of high-value transactions.
CEEIHM: Tell us a bit about the “M&A” part of your job title – Group Head of Legal M&A – and how that aligns with MET Group’s business model/strategy?
Dora: I and my team are directly involved in the acquisition or consolidation of assets and companies for the group. That means that our team handles all type of M&A activities from mergers to acquisitions, to tender offers, to the purchase of assets/companies.
In terms of MET’s business model, we have plans to expand very rapidly in Europe in the next two to three years, primarily through acquisitions. Our aim is to have around EUR 1 billion in total concluded deal value during that period. We already have a strong asset leg throughout Europe and are looking to continue buying assets and companies with the aim to complete between two and five major deals in each field of the European electricity market, excluding gas exploration and transmission systems, in the near- and mid-future.
CEEIHM: What’s the driving force behind this strategy?
Dora: As I mentioned, M&A has been in the past few years (and remains) really strong within the group, and very much in focus. Furthermore, in December 2019 Keppel Infrastructure – a unit of the Singapore-listed Keppel Corporation – bought a 20% stake in MET, increasing MET’s international footprint. Keppel Corporation and MET Group established a strategic platform to jointly explore investment opportunities focusing on European energy infrastructure assets.
CEEIHM: And how does your role fit within this strategy? Are you involved directly in identifying potential targets?
Dora: In short, since one of the major focuses of the MET Group as an integrated energy company is to expand in Europe over the next few years, my role is to actually support this effort. We have people focused on business development and deal generation and it is their main focus to identify targets. I primarily plug in to support from the legal side, providing legal advice to the business team, ensuring those deals happen in a way which will enable the group to execute its strategic objectives successfully.
That said, we work with a lot of law firms throughout the various jurisdictions. They do naturally keep us apprised of opportunities, which I am channeling through to our BD and M&A teams. They then make the choice in terms of which deal we go after.
CEEIHM: How does handling an M&A deal as an in-house counsel differs from when you used to advise on them as an external counsel?
Dora: I spent ten years at White & Case where we had high profile deals to work on, but I was on the external side. The main difference is that, as an in-house lawyer working on an M&A deal, you are much, much more involved in the business side of the deal. You need to really understand the business goals and need to spend time to align your external advisors with the business drivers. As an external advisor you tend to be much more focused on the risk and regulatory side of things. We really need to be somewhere between the external lawyers and the business.
CEEIHM: Can you give us an example of what you mean by a business consideration you would not tend to be involved in when acting as an external counsel?
Dora: I would say the main thing that an external lawyer is not being as directly involved in management discussions, particularly with the Board, with the MET Group’s CEO and CFO. As an external lawyer, you are likely to insist that the language of an SPA/SHA is absolutely market standard and balanced. From an in-house perspective, as you are involved in the business considerations and discussions and you are much more involved in the bigger picture of a deal too, you know which areas of a negotiation you can take a more flexible approach to the wording in, in order to gain the main focus points. In those cases, I am more comfortable with agreeing to wording that puts greater reasonability on us an acquirer than going back and forth on it with our counter-party – there are bigger things to focus on and I have to act as the filter to focus these legal negotiations through the lens of the business drivers. As an external lawyer, you are not sitting in meetings with management or the core deal team, having to weigh up these issues in the context of a whole range of other risks factors and commercial drivers. Rather, you have one or two contacts with your client’s side, and even where you might have strong relationships with board members or executives, you are still one step removed from the regular inner core discussions. And it makes sense – filtering discussions and focusing the deal strategy this way saves a lot of time and money.
CEEIHM: At what stage of a deal are you usually brought in as a legal counsel?
Dora: Our M&A team on the business side decides to pursue or not a target. They do their first evaluation of a deal, which usually starts with submitting a non-binding offer. This is the level where we are first involved most times, even though our input at this stage might be quite limited, such as checking whether there are any obligations or strategic points the business team might be inadvertently committing to or conceding.
Once this non-binding offer is accepted by the other party, we start the due diligence and the rest of the pre-transaction documents steps.
That said, I work very closely with our group M&A Director who manages the deals from the business side. We have weekly calls where we discuss what kind of deals are on the horizon, where we submitted offers, and so on. It is rare that I would first hear of a deal coming out of left field. By the time it actually lands on my table I am usually already aware of the headline points.
CEEIHM: What steps do you usually take to bring yourself up to speed with the specifics of the deal?
Dora: The first document I’d look at is the teaser from our business guys. t’s usually less of a legal document and more of a business one focused on the main information about what we are about to buy. We then kick-off the process with calls with the different teams: the business team spearheading the deal, the relevant energy sector experts, and the finance team members involved in putting together the offer.
CEEIHM: What do you tend to cover in-house and what do you externalize when it comes to due diligence? Why?
Dora: We usually don’t do the legal due diligence exercise in-house. Looking at the deals that we are covering here at MET Group, these are usually sizeable deals, too big to do the due diligence process in-house. Furthermore, in the majority of the cases, the target is not here in Hungary, so we turn to experts who are on the ground and have a thorough understanding of the respective legal environment and regulations. We tend to work with big international law firms who have the expertise and capabilities to carry out the process. Our role in the due diligence process, as the in-house legal function, is to coordinate and guide them and report to our board.
CEEIHM: Since we touched on the topic and given the business strategy, do you still tend to outsource M&A work to external advisors? Why and when?
Dora: We keep parts of it in-house, while partially outsourcing. When it comes to the drafting and negotiation of the transaction documents, depending on the deal size and depending on how many deals we have in parallel, the MET Group may outsource it to the same law firm that was carrying out the due diligence, but a lot of the time we draft these ourselves or at least are quite heavily involved. When we cover deals in jurisdictions outside of Hungary, even if we draft the main agreements, we still need a pair of eyes to look at it and confirm that it all works in that specific jurisdiction. That said, even when we do not draft the transaction documents in-house, we always are heavily involved in the negotiations and even the drafting phase.
CEEIHM: And, when the need to externalize legal work arises, what are the considerations based on which you pick your advisors?
Dora: I find this to be an interesting and at times challenging aspects of our role as in-house lawyer. It is easy to pick the advisors in jurisdictions where we know the legal market well. Depending on the main focus of the deal I have a good sense of firm X or Y to pick in Hungary, for instance. It’s the same, for example, in Spain and Italy because we have done a lot of deals there. What is trickier is going to a country where we have not yet done a transaction. Even in those countries we have our own sources for recommendations, but what I usually do is give a call to these trusted law firms in Hungary or Spain or Italy for recommendations.
Based on that we usually send three to four requests for proposals, then we look at their past experiences. I like to then have a call with the ones that we like expertise- and price-wise. I would say after 15 minutes I already have a good sense of who I will be working with.
CEEIHM: So what do you usually probe for in those calls?
Dora: I look out for their expertise as it relates to our specific deals. It is important to get comfortable that they offer outstanding M&A and energy expertise. Furthermore, I always make sure to ask who from their team they would assign to the given transaction. I am absolutely fine if juniors do the due diligence work – as our Group CEO Benjamin Lakatos says, young talents are our greatest business assets. However, when it comes to the heavier part of the transaction, we want to make sure that we have sufficient partner involvement from the chosen firm. It is unfortunately not uncommon for certain firms to put big partner names in their RFPs but then have much more junior members of the team actually handle the deal itself. It is interesting to see how they react to that question and see how natural it is for them that the question is asked in the first place.
I also believe that chemistry matters, so I try to keep an eye on that as well. Ultimately, we’ll be having regular calls and meetings with these people over the next two or three months (or even longer), so it’s important to make sure we will be able to work well together.
CEEIHM: From your experience, what would be the top three “must-tick” check-boxes for any GC working for a company that is looking to undertake an M&A deal?
Dora: The first I already touched upon – being able to look at the legal issues in a very business-minded way. Second, knowing the legal market in as many countries as possible. That’s important because it both helps you build your network of advisors to turn to when a deal is in the works and also, as I mentioned, because if you nurture the right relationships, they can also feed you with business opportunities. Finally, the ability to communicate with business teams by providing filtered legal reasonings in a clear and concise manner. You may not always be able to provide a simple “Yes” or “No” answer to the management/business team, but you really should aim to get as close to that as possible.
CEEIHM: If you had a re-do on any deal you’ve worked on in the past, what would you do differently?
Dora: Without going into specifics, there are some instances where you can tell relatively early in the process that a deal may not go through because of the issues involved or even sometimes due to a simple potential lack of chemistry between the parties. There were a few of such instances where it would have been better for me to have trusted my instincts and been pushier towards my business colleagues to stop pursuing the process sooner. It’s a tricky one to identify when that moment is definitely there, but I should have interfered harder internally when I felt strongly about it.
CEEIHM: In contrast, what is the one deal you’ve worked on with the MET Group that you are particularly proud of?
Dora: Within these past four years I was involved in a lot of interesting and exciting deals, so it is hard to pick. If I had to pick one, I would probably highlight the acquisition of Tigaz from ENI S.p.A.(which closed in 2019). That was an incredibly exciting and dynamic deal and one where I really felt that everyone –the lawyers, the business, financial, and sector experts, and the external advisors in all fields – all worked together well. Even the chemistry with the counterparty and its own counsels was just right. It was at times very challenging and demanding, but ultimately the deal went smoothly and all involved seemed to be truly deal-driven and focused on finalizing it.