Harnessing innovation to take advantage of new opportunities requires rethinking business models. Many innovations have been created totally outside traditional business categories, transforming existing companies along the way. Although these significant changes in business architecture are not without their challenges for boards and regulators, they do offer a tremendous upside as well—boosting productivity and offering new insights on how to do business better, faster, or more efficiently. For some companies, innovation involves looking up, and out, from their current and target markets. This requires a realistic reassessment of the way the business positions itself, its products, and its people in an increasingly demanding and internationally fluid marketplace.
What innovative capital flows do you foresee clients pursuing this year?
2015 will likely see the U.S. Federal Reserve move on interest rates. Many clients are likely to recalibrate their lending options, but those rate expectations have largely been priced into the current market. We are seeing growing interest in specialty and alternative lending. This market is moving steadily upstream, while continuing to partner with banks to round out the capital structure. Banks are looking for alternative growth opportunities while they continue to expand globally and focus on underutilized asset classes.
What do you see as the biggest opportunity for innovation as TMT companies pursue M&A transactions in the year ahead?
Technology is changing the content-creation/ad-delivery matrix. To monetize these changes, M&A will be key. Look for content acquisitions that expand audience reach and drive traffic, ad tech deals that bring new efficiencies to legacy advertising models, and innovative transactions that will harness analytics to match audience and advertising in new ways.
The introduction of the FIBRA created significant opportunities in Latin American markets. What do you see as the next step in this innovative investment vehicle’s evolution?
The FIBRA, or Mexican real estate investment trust, created a modern financing instrument attractive to international investors seeking high yield. It consolidated real estate ownership in a transparent, tax-efficient, and liquid investment vehicle. Fibra Uno, the first FIBRA, became one of the world’s 10 largest real estate companies in three years. The FIBRA model has expanded to include high yield debt issuance and the creation of mortgage FIBRAs. We expect it to continue to expand in scope and be adopted in other emerging markets.
The Financial Times’ Innovative Lawyers North America report—three years in a row
What is the biggest risk companies face by using Bring Your Own Device (BYOD) and other innovative workplace practices to increase efficiency—and how can they manage that risk effectively?
The greatest risk, hands down, is data security. Employers can manage that risk by implementing and enforcing strong BYOD policies. For example, there should be mandatory password protection of all devices used by employees to access company information and employers must be able to confirm this. Employees should be notified that they are required to have the device physically available for inspection upon request and be made aware that it could be wiped clean at termination.
What trend will have the biggest impact on electronic payments in 2015?
User adoption is a constant challenge for new payment methods and related technology—an issue further exacerbated by the flood of new entrants into an already crowded field. Hence, providers will intensify their focus on creating “carrots” sufficient to attract consumers, whether by solving consumers’ problems (convenience, security) in a meaningful way, providing benefits (lower costs, rewards) compelling enough for the average consumer to switch from more traditional options, or both.
Partner Michael Fitzgerald named Dealmaker of the Year by The American Lawyer for his work representing FHipo in its groundbreaking IPO and his continued efforts to transform the Mexican real estate industry.
We represented Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding, Inc., and UBS Securities LLC as joint lead arrangers in the financing for the US$1.3B acquisition by Apollo Global Management of CEC Entertainment, Inc., which operates 577 Chuck E. Cheese’s restaurants. The innovative use of bridge financing in this transaction is likely to serve as a model for encouraging future tender offers in LBOs.
We have represented Coinbase, one of the world’s most successful and innovative bitcoin companies, since its inception. Our lawyers advise Coinbase on a wide range of global regulatory compliance and transactional matters, including issues related to the recent launch of its bitcoin exchange. We are working closely with our client to help shape the future regulatory landscape for virtual currencies.
When the California Labor Commissioner conducted on-site investigations at a major Chinese company starting up its U.S. operations in Los Angeles, the agency issued citations based in part on the inaccurate allegation that the company had not paid California’s minimum wage to five China-based employees who worked in the U.S. temporarily. Within days, The New York Times reported the story and a media campaign against the company ensued in the U.S. and China. The company engaged Paul Hastings to defend against the citations and implement innovative employment law strategies to help defuse the situation. Our Los Angeles and Shanghai lawyers worked together to prove that the company had paid the employees in excess of California’s minimum wage. In a major concession, the agency dismissed the minimum wage assessments prior to the scheduled appeal hearing. We then persuaded The New York Times to report the agency’s reversal, and other news outlets followed. This successful resolution set the stage for the company’s successful launch in California of its first electric bus factory in the U.S.
As the FIBRA continues to transform the Mexican real estate market, we continue to lead the way in helping our clients take advantage of the unique opportunities this investment vehicle presents.
Most recently, we represented Fideicomiso Hipotecario (FHipo) in its IPO, which raised more than US$633M. FHipo is the first Mexican mortgage real estate investment trust (REIT) and the first mortgage REIT ever sold internationally in Latin America. This groundbreaking transaction marks the next major step in the ongoing development of the FIBRA. It not only resulted in a new asset class, but also established an international secondary market for Latin American mortgages.
We continued our long legacy of “firsts” by being the first international law firm to advise on FIBRAs when a comprehensive legal overhaul in Mexico created this industry-changing real estate investment structure. Our lawyers represented the initial purchasers in Fibra Uno’s historic IPO in 2011, its initial follow-on offering in 2012, a subsequent follow-on offering in 2013, and its first international debt offering. Fibra Uno became the first REIT to IPO in Latin America and is now one of the 10 largest REITs in the world.
As other Mexican real estate companies sought to repackage their real estate holdings into newly- created FIBRAs, our lawyers were there, working on almost all of the international FIBRA transactions to date. Additional highlights of our leadership in this fast-growing area include our work on Fibra Danhos’ US$400M international IPO representing Goldman Sachs, FibraHotel’s US $330M international offering representing Credit Suisse, and Fibra Shop’s US$250M international IPO representing the issuer. These groundbreaking client successes are further examples of our commitment to innovation.