The Talent

April 17, 2009 5:30 AM

Dealmaker of the Week: Robert Profusek of Jones Day

Posted by Julie Triedman

Profusek2 In early January, India's fourth-largest outsourcing company, Satyam Computer Services Ltd., teetered on the brink after its founder and former chairman admitted to falsifying financial statements on the order of $1 billion.

Three days later, the Indian government took over the Hyderabad-based company, calling its survival critical to the country's economic health. It threw out the old board, installed a new one, and set up a structure for an unprecedented government-managed auction.

On Monday, April 13, five weeks after its auction commenced, a winner emerged: Pune-based telecom IT services company Tech Mahindra (the company, India's sixth-largest software exporter, is a joint venture between British Telecom and Mumbai-based utility vehicle and farm equipment conglomerate Mahindra & Mahindra). It would pay roughly $351 million up front for a 31 percent stake in Satyam, and has committed to a tender offer for an additional 20 percent of the company's shares on the open market. The deal, whose estimated value is about $600 million, will enable investors to sell their shares and provide Satyam a necessary cash infusion.

Tech Mahindra owes much of its success to Jones Day M&A chair Robert Profusek, who was tapped to coordinate the company's involvement in the auction process early this year. (The deal is Profusek's and Jones Day's first representation for Tech Mahindra, thanks largely to the firm's long-standing relationship with New Delhi-based P&A Law Offices, Tech Mahindra's Indian counsel on the deal.)

Juggling global due diligence and regulatory teams is nothing new to Profusek, a 30-year deals veteran. But this deal presented several unique challenges given Satyam's financial and legal troubles and the Indian government's unusually strict auction process. Satyam "doesn't have [reliable] financial statements," says Profusek. Despite a lack of financial transparency at the outsourcing company, Profusek's team managed to gain regulatory approvals in the three countries--the United States, the Netherlands, and India, where Satyam is listed.

Evaluating the potential risks for Tech Mahindra also was difficult. Admissions of fraud by Satyam's former chairman set off a wave of shareholder class actions in the United States, as well as proceedings in other jurisdictions. The government-installed board did not offer up indemnification, so each bidder had to perform its own due diligence on potential exposure. Profusek looked to fellow New York partner Jayant Tambe, cohead of Jones Day's financial institutions litigation group, to provide that analysis.

Also, the auction was so tightly regulated by the Indian government that there was little room for actual negotiation. In most auctions, a structured bidding process is followed by back-and-forth, intensive negotiations between the seller and each bidder. With Satyam, bidders submitted requests for amendments, and, to the extent that Satyam amended its terms, all the bidders benefited equally. "At the end of the day, the government said, 'this is the deal, put in your final bid, and we're not negotiating this thing," Profusek explains. "For an M&A lawyer, that clarifies your thinking."

He likens the process to "bidding on a piece of artwork at Sotheby's" and says it was hard not to admire the efficiency and transparency of the government's approach. "I don't know how they could have run a more transparent process," he says. "And it's really pretty extraordinary for a government to say, 'this is a critical company,' and then rather than putting money into it, to take it over and run a highly structured and finite process like this, with the idea of pulling right out."

Dealmaker of the Week is published Fridays in The Am Law Daily.

Recent Profiles

Robert Verigan of Sidley Austin, 4/10/09

Kevin O'Shea of Allen & Overy, 4/3/09

Brock Gibson, Blake Cassels, 3/27/09

Richard Climan of Cooley Godward and David Shine of Fried, Frank, 3/20/09

Gary Sellers of Simpson Thacher, 2/20/09

PLUS: In the current issue of The American Lawyer - 2008 Dealmakers of the Year

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