Dealmakers – Anand Desai and Raksha Kothari of DSK Legal
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Dealmakers – Anand Desai and Raksha Kothari of DSK Legal

Pallavi Saluja

Bar & Bench recognizes DSK Legal’s Anand Desai and Raksha Kothari as Dealmakers for their role in the sale of drug maker Strides Arcolab’s injectables division Agila Specialties in India and Singapore to Mylan Inc. This deal has been ranked in the top ten Asia Deals (Excluding Japan) for the first quarter of 2013 by Thomson Reuters.

We understand that the transaction was complex with multiple legal and commercial issues involving several jurisdictions with the parent seller in India. Both Desai and Kothari, apart from advising their client on the Indian aspect of the transaction, also worked with International advisors to successfully sign the sale agreements simultaneously.

The Deal

Strides Arcolab has entered into a definitive agreement for the sale of its specialties subsidiary, Agila Specialties, and simultaneously its overseas specialties subsidiary, Agila Specialties Asia, Singapore to Mylan for a total of $1.6 billion (Rs. 8,600 crore).

Other counsels on the deal were Herbert Smith Freehills led by London Partner Alan Montgomery, who acted as International Legal counsel to Strides Arcolab. Skadden, Arps, Slate, Meagher & Flom LLP, Slaughter and May, and Platinum Partners acted as legal advisors to Mylan. Skadden New York Partners Marie Gibson and Eric Cochran led the team. The Platinum Partners team was led by Partners Nihar Mody and Gautam Bhat.

You can read our news report on the deal

We spoke to Anand Desai and Raksha Kothari on the deal itself, their thoughts on the current market scenario, and the prevailing investor sentiment.

Dealmakers: An Introduction

Anand Desai is the Managing Partner of DSK Legal, a firm which was founded in 2001. He has almost 30 years of experience advising Indian and International clients in the fields of banking laws, financial services, M&A, intellectual property rights, media and entertainment, real estate, and outsourcing issues.

Raksha Kothari has vast experience in handling a variety of matters including transaction support, restructuring, strategic investments, private equity, mergers and acquisitions distressed assets and financing transactions. Raksha also has significant experience in handling a wide variety of litigation matters including civil and corporate disputes at various fora. She has been with the firm since its inception in 2001. She graduated from Government Law College, Mumbai in 1989.  

Role on the Deal

Raksha Kothari: “DSK Legal advised Strides Arcolab, as their Indian counsel in relation to this sale. We were advising on the India aspects of the transaction ranging from structuring, documentation, negotiations and execution of the agreements. We advised on all the Indian regulatory issues while Herbert Smith, being the international counsel, advised in relation to the overseas aspect of the deal. We worked closely with all the teamsand finalised various documents”.

High point of the deal

RK: “The high point was obviously when the deal got signed. There were, of course, so many ups and downs but we finally got through”.

Difficulties and challenges during the transaction

RK: “With so many jurisdictions, the main challenge was to try and understand issues in each of these jurisdictions, the different laws, and how the businesses were carried on and to ensure that everything was put in the right perspective. It was quite a big challenge legally as well as commercially. Also, with so many team members from different law firms working on the transaction, it was a challenge to ensure that there was proper co-ordination and everyone was on the same page.”

In the current market scenario, what do you think is the investor sentiment for the Indian market?

Anand Desai:Craving for activity continues to be high for good deals. Over all, the Indian investment climate seems to be far better than in many other parts of the world. The perceived demand in India for food, medicines and consumer goods is always going up.  As elsewhere, if something of value can be seen with growth prospects, there will be demand”.

RK: “I think the regulators need to be a little more clear in what they are proposing to do. They can’t keep giving mixed signals to investors. For example, two pharma companies seeking FIPB approval; while one company is granted the approval, the other is refused. In such scenario investors don’t know what to expect. So from a foreign perspective, there needs to be clarity on what is in store for them if they come to India. If there is a law on the day they invest, they will abide by it; but they need an assurance that the government will not subsequently change the law drastically, as in such cases the entire commercials pertaining to the transaction change and the reason for coming to India is question marked.  

Secondly, it has to be ensured that approvals are given easily. Every Indian lawyer while doing a transaction will tell the foreign client what the law is. However, he will always put a caveat regarding approvals. The reason is that there is always a grey area and one can never give a 100% answer.

In this transaction also, we faced the same issue. We were not representing the foreign company; but obviously they were apprehensive and because of that it was a bit more difficult negotiating the terms. Indians face more difficulties because there are more indemnities and reps and warranties in the transaction documents. It becomes more and more stringent for the Indian promoter and Indian seller because foreign companies are not sure about what is going to come out; so they want to ensure that every precaution is taken so that if anything goes wrong, they have an indemnity for the same from the Indian seller”.

This is actually one of the first billion-dollar deal of the first quarter of the year. Thoughts on future trend of cross border transactions.

AD: “The deals will continue as long as people see value. The reality is that big companies are getting bigger and many multinationals are sitting on piles of cash; so they will look for opportunities. The concern, however, is of stability – as to when it will happen,  as the price has to be determined . That has been the biggest reason for people holding on to deals because sellers like to believe that they can get a better price and buyers are uncertain about what is going to happen, so they want to pay less. So valuation mismatch, to a large extent, has caused a slowdown in the deal flow. But having said that, value buying will always continue.”

RK: “I think Investor sentiment is very positive. Lot of transactions are happening; maybe the quantum from the perspective of value may not be as high as it was in this case; but that again depends on how many businesses of this size are willing to be sold. Otherwise, definitely there is lot of interest in the market.

The other thing that we see is that closing does not happen very quickly. What used to take 2 to 3 months now takes 6 to 9 months for a closure.

Another issue is mismatch of valuation as mentioned by Mr. Desai. I think that would be the case this whole year till the elections, because people are not sure as to what would happen.”

Some of the sectors that saw the highest M&A activity last year were energy and healthcare. Which sectors do you think will see the most amount of M&A activity this year?

AD: “In India, infrastructure has got huge potential but because of various issues, it is not catching up in terms of investment. There were investments and suddenly concerns arose with companies stopping the projects, so Infrastructure I think is probably attracting less investment due to uncertainties of completion. But sectors like pharma, software, electronics etc. continue to be in high demand.

RK: “Healthcare will see a lot of activity. In the Energy sector, I feel there are lots of challenges..”

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