Sofinnova: General counsels need to get dealmakers on side

Three months after Armance Bordes was appointed as French venture firm Sofinnova’s first general counsel, pfm talked to her about the need for general counsels to get dealmakers on side and the emergence of “harsher” LP demands.

Q. What has been your first priority in the job?

My first priority has been of course to meet all the people in the firm to discuss their expectations and their use of legal services. I also needed to get a sense of the culture here at Sofinnova. Every firm has its corporate identity with its own culture, and it is important for a general counsel to embody this culture, to know how the firm negotiates its deals, the clauses that it will never be willing to accept, its core values.

Q. And what were people expecting?

From the partners’ point of view, maybe what they were expecting is to be more focused on their own expertise and competencies and to be able to rely on an expert for all the legal issues. Before I arrived, the partners would participate in all lawyers’ calls when negotiating term sheets and even the whole documentation of a deal. This was certainly not the best way for them to allocate their time. Even though partners are familiar with deal clauses because they have done a lot of deals, they do not always have an acute sense of all legal terms and their impacts.

Q. What was the overall firm expectation?

I think the overall expectation was to have a little bit more process and make sure no document signed by the firm would be sent without a prior legal review.

Q. Are you implementing any other new measures?

We are preparing formal written procedures internally regarding all steps of the investment process from the due diligence request lists to the final signature of the whole documentation.

Q. What do you see as the key function of a general counsel?

The challenge for every general counsel is to get the dealmakers on side to make sure they see you as someone who can facilitate deals, who can help them find solutions and close deals.

Q. What is driving the trend for private funds to hire general counsels?

Firms want to free up time for the dealmakers to focus on what they do best and not on the legal side of the deals. They also want to make sure all the documentation on each deal is homogeneous and has been negotiated in the same way with, as much as possible, the same rights and obligations.

Q. How have LP demands changed since you started your career?

LP demands have changed, but the change has been a progressive one, not a sudden one. LPs are now harsher when negotiating the management fees and the GP commitment and they are very strict on looking at how potential conflicts of interest are dealt with. They are also more demanding on due diligence. Sometimes due diligence becomes too orientated towards risk management rather than business. In addition, many LPs now request tailor-made reporting – some even send you tables in to fill in.

Q. What has caused these changes?

LPs have more opportunities, more choice, so they can afford to be more demanding with their GPs. The information they request is risk-orientated, and this has also changed as regulation has evolved.

Q. What is your perspective of European regulation?

European regulation like AIFMD has been prepared and implemented for all asset managers when the reality is very different from a private equity to a venture capital fund. Of course we need standards, but those standards need to be adapted for each specific activity.

Q. Will your appointment change Sofinnova’s use of lawyers?

We will still use lawyers but probably not on every deal, especially not where it is not time consuming or complex. For example we recently subscribed for a capital increase in a public company and we didn’t use a lawyer. However, we also do a lot of deals across the world, in the US, across Europe, the UK. Not just in France. And just for this reason we will always need lawyers, as no one can be an expert in all jurisdictions.