FMCG, family businesses likely to witness merger, acquisition transactions: Levari

Firm is about to complete three major acquisition transactions by end of 2019, says Levari partner

Egypt is expected to achieve approximately 5.3% growth for the next five years, which is well above the 4% average expected for the rest of Africa. For three consecutive years, Egypt tops the list of most attractive African countries to invest in, according to South Africa's Rand Merchant Bank's 2020 investment report, due to be released next January.
"Egypt has made significant strides in changing its business environment, improving external investment into the market and growing their industries," Sherif Hefni, partner at Levari, an international law firm based in Cairo.
Daily News Egypt interviewed Hefni to learn more about the topic. Hefni is a member of the Honorable Society of the Inner Temple in the United Kingdom and the Chartered Institute of Arbitrators in London.
Can you tell us more about Levari business?
Let me begin by saying that we understand that national borders frequently apply to legal systems, but not to the client's businesses. That's why since Levari's establishment in 2012, we developed its expertise in undertaking cross-border transactions and advising across different jurisdictions. Levari is also a member of Interact Law, thus, is a part of a powerful international network of lawyers with offices in 38 countries, which enables us to offer an integrated service across the world.
Our team works for a range of clients on corporate restructuring, merges, acquisitions, fundraising, joint venture, corporate advisory, and commercial contract matters. Our client credentials are solid and we aim to build long-term relationships based on value and consistency of service.
Our team also undertakes negotiations on behalf of our clients and provides contracts in Arabic, English, and French, as well as undertaking corporate and commercial litigation on regular basis in Cairo, Dubai, and London, thus always aware of legal and proceedings updates.
The Levari team has a strong reputation for seeking and protecting our clients' rights in addition to giving sensible and cost-effective advice. Also, the team has experience in local and international arbitration and the execution of international arbitration awards in local jurisdictions.
At Levari, we classify our work according to the areas of expertise, including banking, finance, commercial, corporate mergers and acquisitions, corporate structuring and offshoring, intellectual property, traditional and renewable energy, dispute resolution, employment, real estate, IT, and telecoms.
So, there are Levari offices in other locations?
Yes, we have presence in Cairo, Dubai, and London.
How would you describe Levari's clients?
We are pleased to say we work with a wide variety of clients, which has enabled us to be highly flexible and strategic when facilitating our clients' needs and ambitions for their businesses.
Levari's clients range from international enterprises to regional and local companies. Our media and intellectual property practices have been noticeably growing through dealing with several international media clients and rights acquisitions.
Our office in Dubai is growing steadily with new corporate clients coming on board which shows confidence in Levari's strength as a regional firm. We are currently looking forward to engaging in more corporate restructuring deals in Dubai, and our litigation practices have majorly increased over the last 12 months under the leadership of Mohamed Shaban and Hamad Bin Salmeen, our partners in Dubai.
Can you tell us more about transactions Levari carried out lately?
In 2019, Levari has handled major regional transactions. Some of the most notable transactions was the Investec Asset Management's acquisition of Spinneys Egypt from the Commercial Bank of Dubai whom we represented.
We are also proud to report that Levari has recently completed the transfer of the intellectual property rights of the novel series Paranormal by Ahmed Khaled Tawfiq to Netflix whom we represented.
We further acted as a legal counsel to the software engineering recruiter Andela as it continues to innovate with its successful pan-African expansion into Egypt, and completed the latest Flat6labs cycle and investment in ten new companies.
We are also very proud to have Marwa Fayed's Toy Run Association in Cairo come on board and look forward to supporting this great organisation and the good that it does for children.
In Dubai, we are very delighted to have Commercial Bank of Dubai come on board as a corporate and litigation client.
What about Levari's potential transactions in the near future?
Well, Levari is known for being very secretive about its work and its clients, but I can say that for the upcoming period (until the end of 2019), the firm is about to complete three major acquisition transactions, two joint venture deals, and one major foreign direct investment (FDI) project. We look forward to making the announcements in the new year, but until then, we must respect our clients' confidentiality.
Are there any new sectors your office is planning to operate in?
At Levari, we are extremely excited by the fast pace of growth in the Egyptian corporate market. As such, we consider it our priority to keep pace with implementing appropriate and constructive strategies to deal with new legal structures and corporate developments.
In 2020, we plan to expand our work in media and intellectual property, technology (Fintech), capital markets, and cross border arbitration. This may include opening more regional offices, but we reveal more about this later.
What is the role that Levari plays in merger and acquisition transactions?
We can represent both the target and the buyer. The elements of a merger or an acquisition transaction can be simply broken down into five stages: first is the transaction to undertake due diligence where we examine the various relevant aspects of the target company, the second stage is to propose a corporate structure based on the due diligence report and the requirements of both the buyer and target. The third stage is to draft the relevant legal documents and set up the structures according to the agreed corporate structuring established in phase two and the fourth stage, we complete the signing of the transactional documents, and finally, the fifth stage of the transaction is the execution and closing of the transaction.
Such transactions are carried out by our lawyers and partner financial consultants.
Are there any recent acquisition transactions in the Egyptian market that you think will have a significant effect on the local market?
Having been fully involved in this acquisition, we believe the recent acquisition of Spinneys by Investec will have a notable effect on supermarket retail business. The transaction will contribute to expansion of the supermarket retail business in Egypt, increasing market competition in this sector and inevitably creating more jobs in this industry.
Do you think that the coming period will see more mergers and acquisitions between real estate companies?
In the coming period, there will be possibly an increase in mergers and acquisitions within the real estate market. Interestingly, financial institutions and property developers are reacting towards the creation of new financial products; such as credit mortgages, registration of land, and dispute resolution in this industry. This will likely see changes in the market thus leading to possible mergers.
How do you see the new Investment Law in Egypt?
We can see that the Ministry of Investment under the auspice of Dr. Sahar Nasr has come a long way in improving the investment legislations in Egypt through a comprehensive dialogue with the private sector, implementation of new legislation and regulations.
The current investment legislation provides a good foundation for further development on the technical aspects of the investment laws and procedure which will come with time as the market gives its feedback and technical requirements. This will aid in securing investments and increase FDIs.
Levari's role will be to ensure that its clients are aware and up to date with the new investment regulations and their benefits.
In your opinion, what are the most prominent sectors in the Egyptian market which could be increasingly eligible for merger or acquisition?
I believe that there are some significant potential acquisition and/or merger transactions in Fast-Moving Consumer Goods (FMCG) and family-owned manufacturing businesses. However, there is great potential in the SME market and great opportunities and growth within this segment.
In your opinion, what are the main legal risks to be found in a merger? Could you tell us Levari's role in mitigating such risks?
The major legal risks of a merger lie in the fact that when you merge two companies, the full financial and legal liabilities of the two separate companies are now realized in the one newly created company.
The most important aspect before a merger is making sure the legal and financial due diligence is fully and thoroughly undertaken, and that funds are set aside in case of any unforeseen issues.
However, one of the major issues we sometimes see is the difficulties that employees go through in a merger; here the work culture changes, and usually the staff can feel uncomfortable during that period of change.
Nonetheless, our role as lawyers is to make sure that everyone is protected and the transitional period proceeds as smoothly as possible.
Shall we expect more FDIs in the Egyptian market in the upcoming period? What are challenges and opportunities of an increasing number of FDIs in Egyptian Market? Can you tell us some of the most promising sectors for attracting FDIs?
Yes, Egypt's current stability and economic forecast indicates a likelihood of increase in FDIs. Such FDIs would most likely take place in infrastructure projects, Oil & Gas, technology, and possibly retail.
The challenges that still remain with FDIs are the red tape, currency fluctuations, and full implementation of the new laws. However, those challenges can be easily weighed against the opportunities which Egypt currently has plenty of, whether they will be in the tourism sector – as we can see there's been a steady growth and the latest removal of the ban on direct flights from the UK to Sharm El-Sheikh or in agriculture, where there is a big drive in producing more consumables or fintech by where the Central Bank of Egypt is supporting the growth of this sector.