Adapting to the Role

September 1, 1999 Published Work
When Pharmacia & Upjohn divested its worldwide intravenous nutrition and fluids business, external counsel James F. FARRINGTON Jr. went temporarily in-house to head the legal team. He explains the advantage of this change in status

Pharmacia & Upjohn's (P&U) divestiture of its intravenous solutions business division to Fresenius AG was a complex process involving:

  • The sale of 10 production plants and assets, including more than 3,000 employees in more than 50 countries.

  • The negotiations of nearly 200 transaction documents over a period of two months, with completion six months later in December 1998.

  • Obtaining clearances from the competition law authorizes in more than 15 jurisdictions (the transaction was not eligible for an EU filing) and obtaining consents from several third parties.

  • Complicated carve-out arrangements. Dedicated subsidiaries existed in only Ireland and China and more than 60 agreements were therefore required for the on-going relationship between the business that was sold and P&U entities, for matters such as contract manufacturing, transitional and long term services, shared utilities, leases of facilities, and global IT services.

P&U's European general counsel, Fredrik Berg, wanted to apply the best available legal resources to this US$500 million (EUR471.8 million) divestment. As a private practitioner, I had represented P&U and this business unit for more than 15 years - longer than any of the managers of the unit - and was therefore asked to lead the legal team.

The move in-house

The usual scenario is for lead outside counsel to work within a firm away from the business and to use an international network of outside counsel. However, after a few trips to Stockholm to assist P&U and the investment bankers with the information memorandum and assessment of the potential legal issues, it quickly became obvious that I could not coordinate this task by weekly commutes from by base at Wiggin & Dana in Stamford, Connecticut US. Both P&U and my family would have suffered. My family and I therefore moved to Stockholm for what we thought would have been a couple of months, but turned into more than 18 months.

The advantages

Moving to a base within P&U had a number of advantages:

  • I was better able to interact with the business people in Sweden and in Europe, where more than 80% of the business was concentrated.

  • I had ready access to the many P&U personnel involved in this transaction, including the managers of the divested business and the in-house advisors in such areas as corporate tax, risk management, human resources and intellectual property.

  • I was connected directly to P&U's internal e-mail and intranet systems to facilitate communications with P&U personnel involved in this transaction from around the world.

  • Because of my on-site presence and integration within P&U, I was viewed by P&U more as a company counsel than outside counsel. This status greatly improved communications and acces to essential sources of information.

  • As I retained my legal status as a private practitioner, the temporary physical relocation did not affect any attorney-client privilege rights. While in practice I may have been viewed as working in-house, I was clearly designated as a consultant and not as an employee.

  • We were able to take advantage of the time differences between Sweden and the US by having documents prepared in the US overnight and then transmitted electronically for review and editing in Europe the next morning. Wiggin & Dana attorneys, working either in the US or on site in Europe, coordinated or drafted most of the agreements for P&U.

Fees

Normal fee arrangements applied - hourly rates for services and reimbursement of certain out of pocket costs. Despite some additional costs for temporary living arrangements in Stockholm, P&U found this arrangement very cost effective for several reasons:

  • the normal billing rates for our Connecticut-based attorneys are substantially lower than those charged by firms located in Sweden or the major financial centres, such as New York or London.

  • More importantly, my knowledge of the divested business and P&U generally allowed me and my firm to work more efficiently without incurring substantial time learning about the business.