- Posted by jbehrendt on June 29, 2009
The last weeks passed pretty fast. After having informed the supervisory board about the intended carve-outs, the project office is bombed with requests for reviewing certain carve-out documents, with answering special questions the project team never thought about, and with requests for additional meetings in which the project should be presented in some more detail. In these requests, it is easy to distinguish the members of the supervisory board elected by the general assemblies from the ones being elected from employees and workers councils - the areas of interest are quite different.
The last two weeks, I had the pleasure of presenting our ideas to several shareholder groups. The shareholder structure of our client consists mainly of regional cooperatives, each of them represented by their own board and supervisory board, and each of them having the right to elect members of the supervisory board of the two relevant holding companies. Based on historic developments, the weight of each regional cooperative in the two holdings is different, which makes it very tricky to come up with a solution that satisfies all relevant shareholders. This situation requires high attention, since getting the approval from the shareholders of both relevant companies, as well as from the relevant supervisory boards, is on of the few remaining "critical paths" in the project that can finally stop the project from being realized. This even justifies significant efforts on our side to keep the shareholders well informed, and to convince them that finally approving and executing the new structure after the two carve-outs is not only in the interest of the group, but in their ultimate own interest as well.
Having said that, knowing that efforts are justified is not the same as actually spending them. I found myself in a very early plane from Istanbul to Frankfurt, which, after pushing me out of my bed so early, waited one hour on the airport before starting, suddenly making the planned timetable in Germany very ambitious. I had to run to the car rental offices (which are always as far away as possible from the arrival area), to beg for a fast car (with a navigation system, which is a must), and to run again to find this car. Well - it was a sparkling, big and new Mercedes, which was pretty nice, except of the fact that I had to spend another 10 minutes to understand the easy part of how to drive it, and how to use the sophisticated on-board computer. In turn, I could make up for the lost time afterwards by flying with nearly 200 km / h over the German Autobahn - a real German experience anyone should have in his life. The most fascinating part of it is, driving very, very fast, you suddenly find another car behind you, flashing at you to give way for it - all the nice Porsches and other sports cars need to run from time to time at high speed in order to keep the motor going, like it is the case with these similarily nice-looking Husky dogs.
Anyway, when arriving in a little remote town somewhere in the middle of Germany, in a place I even had not heard of before, the speed rush slowly gave place to the more serious consultant thinking of what to say, how to present, and how to answer some tricky questions of the boardmembers. At least I just arrived in time - only a couple of minutes before my agenda topic was due.
The meeting turned out to be very friendly and relaxed, our previous "PR efforts" seemed to have helped to clarify a lot of open questions already. Not surprisingly, the discussion centered around only two main questions - how to maintain the current influence in the new unit (this cooperative was mainly represented in the smaller company), and how to make sure that dividends could be earned and paid out as before. However, thanks to the meaningful suggestions of the company lawyers, concerns could be overcome rather easily. The redrawn articles of association of the new company were set up in a way that all relevant decisions, like investment decisions exceeding a certain size, which were currently handled by the supervisory boards of the two companies, would, in the future, be handled by the general assembly of the new company - with other words: All relevant decisions would need to be presented to the general assembly of the new company, which would require the legal representatives of the two relevant companies to vote on it, which, in turn, would require them to present exactly the same topic to their respective supervisory board, and to get their respective approval before voting accordingly in the general assembly of the new company. The trick for convincing the shareholders of the smaller unit was to link some of these decisions, the most critical ones, to the approval of both representatives in the general assembly. This, in effect, means the smaller company would have a kind of a veto right in the most critical decisions, which for sure made it much easier for them to agree to the new structure. A similar system was chosen for the crucial dividend question: The new articles of association contains a clause according to which, by default, all earnings are to be distributed to the shareholders. Only by an unanimous vote of all (both) shareholders in the general assembly, all or part of the earnings can be retained - which means again kind of a veto right of the smaller of the two companies for retaining earnings.
In the end, the same evening (and another speed rush) later I could return much more relaxed to Istanbul. In the meantime, a second meeting with another regional cooperative took place, with similar results. So it looks as if one of the big challenges left, getting the approval from the shareholders and their representatives in the board, can be mastered. But this is only one of the challenges... Next time I will give you some more details about the perceptions of the other relevant group, the representatives of employees and workers councils.