Transcript Creating and Protecting Value

RECRUITMENT INTERNATIONAL - FINANCE DIRECTORS FORUM
THURSDAY 2 MAY 2013
“Creating and Protecting
Value”
by Andrew Rimmington &
Hugo Plowman
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©MISHCON DE REYA 2013
Who are Mishcon de Reya?
 Established in 1937
 88 partners and 271 lawyers
 Core areas:
• Dispute Resolution
• Corporate
• Real Estate
• Mishcon Private
• Employment
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Recruitment Services Group
 Mishcon de Reya has a dedicated Recruitment Services Group, made up
of recruitment specialists from our employment, fraud litigation and
corporate practices.
 We have significant experience working for recruitment companies of all
sizes, from start-ups to large global players.
 Our recruitment expertise encompasses all aspects of law, including
corporate and commercial advice; data theft; team moves and restrictive
covenants; employment; trademark and IP; outsourcing; IT; and debt
recovery
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Our Approach
It’s Business…but It’s Personal
Andrew Rimmington
Partner - Corporate
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Making Deals Work…
“…You must never try to make all the money that’s in a deal.
…Let the other fellow make some money too, because if you have a
reputation for always making all the money, you won’t have many
deals…”
Getty, J. Paul.
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Creating Value
 Theory of Consistency and Credibility
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You live up to what you write down…
Letter of Intent / Heads of Terms
99% Perspiration…1% Inspiration
Preparation is key
Retaining key rainmakers
When the ink is dry, the hard work starts
The 100-day plan – integration and managing expectations
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It’s Business…but It’s Personal…
 Minimum Time Commitment?
 Apportionment of Responsibilities
 The Business Plan
 Dividend Policy (money out)
 Incentivising Key Members of the Management Team
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Ownership Structure
 Limited Company or LLP?
• Staff turnover and in particular the loss of staff relationships with
clients and candidates is a key issue for all staffing businesses.
• Traditionally efforts have been made to retain staff through
commission and other bonus schemes and sometimes through the
use of option structures or other share schemes.
• The introduction of limited liability partnerships (LLPs) gives
companies the chance to address some of these issues, in particular
because of the different tax treatment of LLPs.
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LLPs – Key Benefits
 Key Benefits:
• Members of LLPs treated as self-employed is that no employer's
national insurance is payable on their remuneration.
• This creates a saving of 13.8% of their salary and bonus which can be
used to increase their pay to more competitive levels, to increase
overall "post-pay" profitability or a combination of the two.
• The impact of this significant saving on profits and the motivation of
staff can be significant.
• Changes proposed by Government – recommend caution until
position clarified
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Shares for Rights Proposals
 Key Issues:
• Under the proposals a new owner-employee contract could be
offered by employers to staff, giving them shares worth between
£2,000 and £50,000.
• In return they would lose rights including unfair dismissal, redundancy,
training rights and the right to flexible working.
• Any capital gains on the shares will be exempt from capital gains tax
when sold.
• Companies will have to arrange for employees to be given free
independent legal advice.
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Shares for Rights Proposals
 Key Issues:
• Valuation of shares
• Compulsory transfer of shares – when an employee leaves
• Cost of implementing and managing a Shares for Rights Scheme
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Protecting Value
 Compulsory Transfer of Shares on Exit
 Pre-emption Rights on any Sale of Shares
 Planned Exit (Tag Along/Drag Along)?
 Earn Outs – Good News or Bad?
 Restrictive Covenants and Data Theft
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Protecting Value
By Hugo Plowman
 The database is the cornerstone of the recruitment business
 The people are its lifeblood
 It’s Business but it’s Personal
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The Problem
 Data Theft and Unfair Competition
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cannot be ignored
afflicts most recruitment companies
will hit your bottom line
will lead to the loss of key staff, clients and candidates
will damage your reputation and staff morale
 The rise of LinkedIn
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What is “Unfair Competition”?
 It may take many guises:
• stealing data
• diverting vacancies
• selling data to competitors
• hacking
• poaching staff and team moves
• tapping up clients and candidates in breach of covenant
• “Linking In” to clients and candidates?
• spreading false market rumours about your solvency
 It devalues the business and jeopardises revenue
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The Solution
PROTECTION
COMPLETION
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INVESTIGATION
ACTION
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Stage 1: Protection
 Employment contracts
• Confidentiality
• Enforceable restrictive covenants
• Right of search
• Email, internet and social networking policies
 Operational steps
• IT security and technical measures
• Monitoring
 Publish the steps you have taken to protect the business
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Stage 2: Investigation
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Stage 3: Action
 Objectives:
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recover your confidential data
protect client’s and candidate’s data
enforce covenants
recover costs and damages (or an account of profits)
send out message (internally and externally)
protect the value of the business
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Action
Continued
 Numerous options available
 Choice depends on what comes out of the investigation stage
 All involve pressure
 Create the right atmosphere for settlement
 Focus on ROI
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Constantly improve the box of tricks
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Confuse – Destabilise – Negotiate
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Stage 4: Completion & Policing
 Sweep Up
 Make Up
 Lock Up
 Speak Up
 Build Up
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Thank you
Hugo Plowman
Partner
E: [email protected]
T: +44 20 7440 7149
Andrew Rimmington
Partner
E: [email protected]
T: +44 207 406 6063
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©MISHCON DE REYA 2013