“It was a huge relief for me when Apollo-Cooper deal was announced. Every morning I would wake up dreading that the news may be out” – Apollo Tyres GGC

Shahana Basu Kanodia, the Group General Counsel of Apollo Tyres is looking decidedly relaxed and content at her office in Gurgaon. A week after the signing of the biggest M&A Deal of the year (Apollo Tyres’ acquisition of Cooper Tire), Shahana says that the acquisition has transformed Apollo into a truly “global” company.

The Yale Law School graduate moved back to India as an in-house counsel after working with some of the biggest law firms in the US and UK. Apart from a desire to return to India, the reason to move to an in-house position was her “love for business” and the chance to play an active role in decision-making and implementation at the management level rather than just a purely legal role.

Shahana’s shift to Apollo Tyres came at a time when the company made a conscious decision to establish a full fledged legal department and, more importantly, to integrate the legal function and business processes between different offices in Asia, Africa and Europe. In this conversation with Bar & Bench, she tells us more about the mega-deal, the legal department at Apollo, and her decision to move back to India.

So the Apollo-Cooper Deal brought you to India?

The Apollo-Cooper deal was something that was simmering for a while. Such a big deal does not happen out of the blue. And I think they wanted someone global, someone with US and international transactional experience who could help out with this complex, multi-jurisdictional megadeal.

Coming back to India, I find a lot more people like me, who have international experience and are back in India working with different MNCs as General Counsel. I think part of it is because Indian companies are now becoming global and are getting exposed to greater risk with the US FCPA, UK Bribery Act and all these kind of international legal and regulatory regimes. There is a lot of pressure on Indian CEOs to actually get people who can advise them on these matters.

From top-notch International law firms to in-house counsel

As a corporate and M&A transactional lawyer involved in varied cross border deals, I have acquired knowledge of different industries and different businesses. I have advised MNCs and Indian companies globally and have always enjoyed being close to the business. I always thought that my career in law would evolve in different stages – law firms, then as in-house counsel, maybe at some point work as an advisor to the government, and then teach. In terms of this particular opportunity with Apollo Tyres, my father was not very well last year and I had been thinking of coming back to India to spend more time with him. Most of the offers I was getting were India heads for MNCs, which seemed like a logical fit. But I was more keen to do international work out of India, not primarily do Indian legal regulatory work but use India’s springboard towards global transactions; and the Apollo Tyres opportunity came up for a Global General Counsel position, which was perfect. It was a Chief Legal Officer role for the group with manufacturing units in India, South Africa, Zimbabwe and the Netherlands; operating entities in 3 continents and exports to 118 countries and hence lots of interesting legal issues.

Growth of the legal department at Apollo

When I joined, Apollo did not have a separate legal department. They used to have a legal officer here who used to report to the compliance officer. A decision was made by our Vice Chairman & Managing Director, Neeraj Kanwar to actually have a full-fledged legal department since the company was becoming more global. So when I joined, I built up the legal team by hiring a few lawyers. We have Gauri Kumar, a senior lawyer with great IP experience in law firms like Remfry & Sagar who heads our intellectual property practice. We also have Swati Sharma, who was with Tata Capital in Mumbai, now heading our commercial contracts practice. We have 3 more people here, including Chetan Khurana and we have teams in South Africa and Netherlands with which we coordinate. So, legal work is run out of India and we review the material contracts and provide legal advisory services for our foreign subsidiaries as well.

Initial challenges faced

The tyre industry was a completely new industry for me – that was the initial challenge. But I was fortunate that my Chairman, Onkar Kanwar and Vice Chairman, Neeraj Kanwar, encouraged me to visit all the factories and the operating entities, where I got to learn the technology, the product and to really understand the business side of things.

Also, the entire legal department was new, so setting up the systems and processes for working with different business groups and understanding the industry specific legal needs was an initial challenge that we had to overcome quickly. We have done a lot of work in terms of integration to ensure that the legal team responds in a timely and practical fashion and gives clear, cogent, practical advice, which is actually useful to our business colleagues.

The Apollo-Cooper Deal – Features

There were a couple of interesting features. One, it is a much smaller company buying a much bigger company; Cooper is twice the size of Apollo. I think that is interesting in terms of size.  Second, it is a leverage buy out (LBO) deal – we are using a considerable amount of debt to fund this deal. So there were lots of financing issues that came up. Usually LBOs are done by private equity funds like the KKR – Alliance deal but it is unusual to see a strategic company like Apollo Tyres in the same industry, doing a LBO; that is what makes it different.

The other thing is it was highly secretive and there was very sensitive information about this deal. Only a small team from Apollo knew about this deal because confidentiality was a huge factor. I was actually sitting with our US counsel, Sullivan & Cromwell in New York City for 2 months working on this deal but no one knew where I was. It was a huge relief for me when this deal was announced finally. Every morning I would wake up dreading that the news was out.

In terms of the merger, it is a very standard reverse triangular merger in Delaware. I don’t think in terms of the nuances there is something very unusual. It is a very straightforward merger agreement.

Role on the deal as GC

I focused on all the legal aspects, including working on the merger agreement and the financing. Of course, we had amazing advisors. We had General Pacific Capital, which did the financial analysis. We had KPMG advising on financial and tax due diligence, SGS advising on environmental issues and Bain advising on synergies. We had Sullivan & Cromwell as our lead US counsel for legal due diligence along with King & Wood in China and DLA Piper in UK looked at pension issues. There were multiple streams going on in this deal. Even from the regulatory perspective we were looking at whether Competition trust approvals would be required in US, whether they would be required in China and Europe and so on. Cooper is a public company and hence the disclosure standards are high. After closing the deal, we will delist the company and it will become a private subsidiary.

Challenges during the Deal

What was challenging was the fact that the deal involved lot of geographies, including the US, Europe, Mexico, China etc. where the due diligence was done. Also, there was so much sensitivity about things remaining confidential. Very few people from our side knew about the deal, so the bandwidth wasn’t there to stretch. It was really the top management of the two companies who were interacting. So I think that was the challenge because in general you would have many more people on both sides to help, but here there were fewer people, which meant more work.

High point of this Deal

The high point of this deal was the relief – after having worked so hard and so long. There was always a fear that it would leak or the deal won’t happen, or there is something we will discover and the deal would fall off apart. When [the deal] was announced, it was a relief for me. I slept well after a long time.

Life post-signing the Deal

The work really starts now with closing of the deal and the whole integration process. I think the integration challenge is going to be really interesting.

Apollo is now a truly global company with this acquisition.  Apollo is a promoter driven company so you have the whole concept of Apollo “one family” and our promoters, the Kanwars really mean it. The Kanwar family, to their credit, spend a lot of their personal time with the employees. Now the Apollo family is going to have Chinese, Americans, Mexicans and will truly represent a global workforce of over 30,000 employees. Integrating cultural values across the organization and creating systems and processes will be a very interesting challenge. Everybody at Apollo is quite excited about this new phase in the Company’s evolution.

It’s sinking in slowly to a lot of the people who didn’t know about the deal. So what does it mean now that suddenly we have gone from a  $2.2 billion to a $6.6 billion company and we were number 17 and now have jumped to number 7 in the list of the largest tyre manufacturers globally. It is a huge achievement.

Law firm versus in-house counsel

I think there are huge differences. Being in-house requires a completely different skill set than being in a law firm and there are contextual reasons for that. First, when you are in a law firm, you are a legal advisor. So you give legal advice and you don’t have to implement it. You are truly independent in giving advice while when you are in-house the legal analysis is just a starting point. You start with the legal analysis and then you have to understand fully the business goals and needs and the senior management expectations to factor into the risk analysis. It is extremely important for in-house counsel to advise clearly on the pros and cons of legal and regulatory risks. So decision-making is far more structured.

The second big difference is when you are an outside law firm you are not responsible for implementing your advice. So you don’t have to live with your decision. You give the best advice and whether your client takes it or not does not really matter to you. However, while working in-house you take a decision undestanding the risks involved, then you have to implement it and you have to live with your decision. If it is good, it is good and if it is bad you have to deal with the consequences.

Liberalization of the Indian legal market

I think it should be liberalized though it looks like it is not happening anytime soon. It’s really strange for me to see that a lot of the opposition comes from litigators in India. Honestly no one from abroad is going to do litigation at Tees Hazari or at the High Courts. It is mostly going to be the corporate jobs and the corporate jobs are being done in any case by lawyers flying in and out from Singapore, London and Hong Kong. So all that work is happening already. I think having the legal market liberalize will actually provide opportunities to law students with far more internships, salaries going up etc. Instead of a few people at the top of the profession making lots of money and the majority not earning that well, the entry of foreign law firms will provide a lot more opportunity, things will change. I think there will be a lot more partnership opportunities. It would also raise the standard and the level of training and practice in law firms here.

Interests other than law and business

I am a self-confessed art addict. If I had not been a lawyer I would have been an art historian. I read, research and collect a lot of contemporary Indian art, especially works of artists from the Bengal School like Jamini Roy, Nandalal Bose etc. and that has been a passion for many years.

I have recently started writing columns in India Today and UK Mail on issues relating to the Rule of Law, Governance and Social Issues. I think India inspires you to write.

Lastly, how did law happen?

Law happened to me a very round about way! I was one of these kids who love academics and I am still very much an academic at heart. I studied History Honours at Hindu College and then I got the Cambridge Nehru scholarship to go to Trinity College, Cambridge where I studied Sociology, Political Science, Economics, and Anthropology. From there, I went to University of Chicago for a PhD. in Sociology and Economics.  While I was there I attended several law school courses at the University of Chicago Law School. I was very interested in how social norms become laws. While I was taking classes my law school professor said, “Well you think like a lawyer. Have you thought of law school?”, and I was like “Not really”. Then I applied to law schools and ended up with a JD from Yale Law School.  It is ironic really, because my maternal grandfather, Sunil Kumar Dutta was a Barrister in Kolkata and served on the Kolkata High Court for many years but after that there were no other lawyers in the family.

I think the legal profession is a wonderful one because it truly touches all aspects of human society. A lot of change in our world has been led and driven by lawyers like Mahatma Gandhi, Bill Clinton, Barack Obama, Christine Lagarde etc which is truly inspiring.

This interview was conducted one week after the Apollo Tyres- Cooper Tire deal was announced.