A MSTERDAM-HEADQUARTERED Boekel De Nerée is a Dutch firm with a strong international focus; indeed nearly three-quarters of its corporate work flows from US-based clients. Its experience in advising international clients on Dutch law has seen it become a specialist in explaining the idiosyncrasies of the country’s corporate culture to foreign clients. In particular, the firm has made it a priority to explain the tough, negotiations-driven style of the Dutch corporate market to US clients unfamiliar with such direct methods of conducting business. Here Ferdinand Mason, head of Boekel’s M&A and Capital Markets team takes the time to explain exactly why US investors should be cautious when investing in the Netherlands.
WHAT ARE CURRENTLY THE MOST ACTIVE BUSINESS AREAS FOR US-BASED INVESTORS INTO THE NETHERLANDS?
Private equity continues to be a strong area of activity in terms of foreign clients. We see many investors interested in exploiting the financial potential of the disposals of large Dutch corporates.
Technology is another key area for US-based clients and we do corporate structuring for technology companies.
We also see a lot of strategic movement into the Netherlands; US companies tend to use the Netherlands as a hub for their European and Asian operations.
Overall, approximately 60-70% of our M&A and Capital Market work originates from US-based clients and a small sample of representative names includes healthcare giant Merck, investment firm Yucaipa, JP Morgan and Iron Mountain.
INITIALLY, HOW PREPARED ARE YOUR US CLIENTS TO MEET THE CHALLENGES OF A DEAL?
US clients are typically very aware of the main legal differences between international jurisdictions and therefore their understanding of the investment regime in the Netherlands is usually very informed. However, they are sometimes misled in terms of culture. The Netherlands is a very business-driven jurisdiction, negotiations are usually tough and put substantial pressure on the client, and we notice that US parties are often enticed into paying far too much for an investment.
Boekel’s strong experience in advising US clients ensures that we understand that angle. So not only are we able to highlight the legal risks and solutions but we can assist our client from a commercial side too and frame the deal from a US perspective. Our role is to ensure that pricing and contractual protection is done the way that it should be done.
WHAT ARE THE MOST IMPORTANT CONSIDERATIONS INTERNATIONAL CLIENTS SHOULD BE MADE AWARE OF BEFORE CONDUCTING THEIR FIRST DEAL IN THE NETHERLANDS?
We usually call the client first to talk them through the Dutch cultural risks before they get involved in negotiations. Often the client team is dazzled by our forewarning; in the past they may have paid over the odds for an investment and only now do they realise why. There are three main tips that we offer the client.
Firstly, never negotiate without a jurisdiction that recognizes non-binding contractual relationships like New York law to the negotiations. In the Netherlands you could be potentially bound to a deal within one or two meetings.
Secondly, expect that disclosure may be poor or driven by unpleasant discussions. Thirdly, don’t overestimate the other side’s capability in the English language, particularly in writing.
The most important thing is not to be influenced by deal pressure. Companies in the Netherlands take a very direct – some international clients might say rude – approach to negotiations. This can create undue pressure and lead the client into over-paying in a deal.
WHY IS IT IMPORTANT THAT A US-INVESTOR INSTRUCT A FULL-SERVICE DUTCH FIRM LIKE BOEKEL DE NERÉE IN RELATION TO THEIR NETHERLANDS INVESTMENTS?
You need a firm with international experience and a firm that is relevant in the local market. We are a leading Netherlands firm and we can provide clients with local advice framed from an international business perspective. Dutch law firms maintain a very strong position in the market.
ARE THERE ANY INDUSTRY SECTORS WHERE THE BUSINESS RISKS ARE PARTICULARLY PROMINENT?
I think the technology sector is an area where you have to be more cautious. It is a very competitive sector, over 60% of Fortune 500 companies have a Dutch holding and this is especially obvious in technology.
COMPLIANCE HAS LEAPT UP TO THE TOP OF THE CORPORATE AGENDA OVER THE PAST COUPLE OF YEARS, IS THAT TREND EVIDENT IN THE NETHERLANDS?
Compliance is an area that has become increasingly important in recent years. Regulatory law is a specialism of ours; it is in our DNA. We act for Dutch regulators so we have excellent knowledge of the key trends driving that area. There is a continual battle to retain a balance between maintaining robust regulatory standards and over-regulating to the extent that it can endanger the commercial momentum of your business.
Our regulatory specialists field vast experience across the full range of compliance issues including corporate control structures, liability exposure, legislation compliance and securities regulation. We regularly assist clients in developing corporate compliance programmes, corporate protocols concerning the delegation of authority and corporate governance policies. We have also established a Reporting Compliance Programme, which enables us to identify and address accounting law breaches concerning group liability, filing requirements and consolidation requirements. This is a tool that we provide to numerous foreign and Dutch-listed companies for the purpose of securing compliance with recent legislation such as SOX and the Tabaksblat Code.
IF A BUSINESS RELATIONSHIP DOES TURN SOUR, HOW STRAIGHTFORWARD IS IT FOR AN INTERNATIONAL CLIENT TO INITIATE LITIGATION IN THE NETHERLANDS?
We have a very large litigation team with strong experience in alternative dispute resolution practices; Boekel handles global arbitration cases on a regular basis. We exclusively act for corporates and Boekel has a particularly strong defence practice. Our contentious coverage is broad and comprises commercial litigation and antitrust and is always provided with strong business awareness.
TO WHAT EXTENT DO THE BENEFITS OF CONDUCTING BUSINESS IN THE NETHERLANDS FAR OUTWEIGH THE RISKS?
There is no doubt that US clients view the Netherlands as one of the most attractive jurisdictions for their investments; indeed 60% of Fortune 500 companies have a Dutch holding so it clearly is a primary market. Many clients see the Netherlands as an entry point into the continent and while there are distinct differences in business culture, I think that the Netherlands’ success in attracting US foreign direct investment illustrates that American companies recognise that strong similarities exist too; the US and the Netherlands share historically close relationship after all.
It is also important to note that the Netherlands is the third largest investor into the US and it remains a very easy country to invest in. Indeed, its success at attracting FDI and establishing strong geopolitical relationships ensures that it is regularly included in the G20 summits, despite its geographic size.
Author:
Ferdinand Mason, head of Boekel’s M&A/
Capital Markets Team
T +44 207 337 25 07
M +44 778 983 85 78
ferdinand.mason@boekel.com
Boekel De Nerée
Gustav Mahlerplein 2
1082 MA Amsterdam
The Netherlands
PO Box 75510
1070 AM Amsterdam
The Netherlands
T +31 20 795 31 93
F +31 20 795 39 00
www.boekel.com
LONDON
36-38 Cornhill, 6th Floor
London EC3V 3ND
United Kingdom
