Dirk Besse, a partner in Morrison & Foerster’s Berlin office, discusses opportunities for law firms specializing in global technology M&A.
Positioned midway between major technology centers in the United States and Asia, and at the epicenter of Europe’s own tech boom, Berlin is in many ways the obvious choice for law firms dealing with global technology mergers and acquisitions (M&A). Reporter Howard Stock spoke with Dirk Besse, a partner in Morrison & Foerster’s Berlin office and head of the German Corporate/M&A Department, about challenges and opportunities in global tech M&A, and how best to cater to the fast-evolving needs of clients in this market.
How is the tech environment evolving in Europe, and where are the hot spots?
Besse: European technology companies are booming, in particular in the areas of Internet, digital media and software. Most of these developments are located in the UK and in Germany, with Berlin being one of the fastest-growing regions. One particular reason for the developments in Berlin is its rapidly growing, very successful Internet and software community; for instance, most of the successful German IPOs in 2015 were executed by companies out of Berlin.
How are these changes playing out in the M&A market?
Besse: They are playing out in two ways: On the one hand, foreign finance investors seek to invest in emerging growth companies, and strategic investors look at technology companies to acquire specific and unique technology or so-called “acqui-hires,” i.e., acquisitions focused on the employees and workforce of the company; on the other hand, booming European technology companies seek internationalization and become serious players in the international M&A market themselves, doing acquisitions in the United States, Asia or Israel.
We observe two trends in cross-border M&A into Europe: U.S. companies from California, in particular the Silicon Valley, as well as from the technology centers at the East Coast, are interested in Germany and the UK (London) as hotspots for technology companies in Europe; Asian, in particular Japanese companies, aim at expanding their regional or domestic Asian markets by acquiring market shares in established industries in Europe, again, preferably in the UK and Germany.
What are some of the unique challenges in tech M&A?
Besse: The most crucial element of advising on tech M&A deals is to have a real deep understanding of the specifics of the business of technology companies. Also, in many of these transactions, there are particular challenges arising from intellectual property (IP) rights and patents—the strategies between the target and the acquiring companies on the use of IP and patents must be aligned. Furthermore, tech M&A deals are often not limited to one jurisdiction but involve many jurisdictions, with multinational implications and issues that need to be approached from different angles.
What are some recent examples, and how did Morrison & Foerster assist?
Besse: Morrison & Foerster was involved in some of the most interesting and innovative recent tech transactions into and out of Europe, including: assisting California-based Planet Labs on the acquisition of Berlin-based satellite system provider RapidEye; Autodesk on its acquisition of Netfabb and a strategic partnership with the German Fit AG — a company in the 3D printing area; a leading U.S.-based chip maker on the acquisition of a German semiconductor company in a technology and patent-heavy deal; a leading U.S.-based Internet giant on its first ever acquisition of a German website promotion business; Fujitsu on the spin-off of their worldwide semiconductor development units, with the international headquarter being located in Germany; in the other direction we represented Axel Springer, the Berlin-based media giant, on a series of investments in U.S. digital media companies.
How important is it to have a local presence when aiding these transactions?
Besse: Local presence is a key differentiating factor and is necessary to understand and address the specific needs of the domestic markets and the industries in those markets. The key to success is, however, the combination of the two factors: the local knowledge of the industry and the law in those markets, and an international network with strong technology capacities and knowhow in the key centers of innovation in the United States, Europe and Asia. In fact, all of the deals mentioned earlier were cross-border transactions, with global players from different jurisdictions doing acquisitions in and out of Germany and Europe. Really understanding and applying the customs and the specifics of multiple jurisdictions is only possible with a global reach—which Morrison & Foerster can offer.
Which Morrison & Foerster offices are handling the most tech-related business, and why?
Besse: From our deep roots in San Francisco and Silicon Valley, we are now 1,000 lawyers in 17 offices in the major technology markets across the United States, Europe and Asia. To meet the needs of our tech clients, we created our Technology Transactions Group, with more than 60 lawyers located in the key technology centers around the world, assisting in all kinds of technology transactions, in particular on multinational issues with technology licenses, IP and patents.
What other opportunities are there for law firms working with tech companies?
Besse: Technology is the most precious resource and asset of companies in a global environment developing as fast as ours in these days. So it is a key differentiating factor for companies deciding on which law firm to choose. For example, recently, the EU/U.S. “Safe Harbor” regime was canceled by the European Court of Justice, triggering numerous follow on Issues — operational and, also, technology Wise — for multinational companies. The impact of software on our daily lives and the increasing importance of software companies in the economies around the globe are good indications of that. If the technology angle of a transaction is well covered, other areas, such as data privacy, will fall into place.
How do current regulations need to evolve in order to effectively police the tech world?
Besse: The answer in one word is: globalization. Not only does the industry need to become more global, but also regulations need to overcome national hurdles and address issues on a global level. Examples are the current discussion on the Transatlantic Trade and Investment Partnership between Europe and the United States, and the aforementioned cancellation of the EU/U.S. Safe Harbor agreement.
How does Morrison & Foerster’s practice keep pace with a sector built on constant innovation?
Besse: Morrison & Foerster is market-leading in key centers of global innovation, with decades of experience in the technology industry. Being the trusted advisor of complex and highly sensitive technology issues for clients around the world enables us to be very close to important developments and changes in this industry. We try to grow and increase our expertise together with our clients, and anticipate their business and legal needs in the coming years as early as possible. Being close to the new technology developments of our clients brings insight into the next generation of legal issues and operational challenges for our clients. To support our clients and strengthen our relationships, our lawyers regularly work on secondments with clients that we have established relationships with.
How is Morrison & Foerster positioning for the future of the tech M&A market?
Besse: Morrison & Foerster is synonymous with technology, and we aim at no less than being the world’s leading advisor for M&A transactions in the technology sector, continuing to enhance our global transactional capacity in key tech markets across the globe. The trend in transactions where technology is not only one element of many, but the core driver, will increase in the coming years. To address this, we continue to build and strengthen our Technology Transaction Group, focusing specifically on technology transactions and IP, around the globe.
Originally published in Focus Europe, January 2016 issue — a supplement to The American Lawyer and Corporate Counsel magazines.