Danone interview: Learning from M&A

How has Danone's presence in China developed since it first entered the market What plans does it have to expand in China

Danone was one of the first foreign companies to enter China in the country's early stages of international investment. The first JV was established in the 1980s, and since then we have increased both our investment and range of business in China. Now, all four lines of Danone's business, namely dairy, water, early life nutrition and medical nutrition, have deep-rooted investments in China. Danone will continue to expand its investment and operation as China already has become an important market for the Group.

What is the structure of your legal team and who do you report to

Danone is a French-based international company. Compared with that of US companies, its legal team is comparatively small. In China we have about 10 in-house counsels and also have relevant regulatory staff to deal with quite complex technical and quality compliance formalities. The group's administrative structure consists of the headquarters in Paris, regions such as Americas, Europe and Asia Pacific, etc., then country level and company level. As the general counsel of China, my direct reporting is to the China Chairman, and functional reporting is to the regional general counsel.

Food safety in China has received much global attention and quality standards are getting more stringent. How does this affect your work

This is by far the most important work for us as a food manufacturer. Food safety is an absolutely vital principle for every member of staff in the company, whether in manufacturing, the supply chain and logistics or marketing and sales. We devote a lot of effort and work into this. We have relatively large R&D centres where many engineers work to improve quality. Partners are often invited to visit our R&D centres to have a better understanding of our strict quality control system.

What were the specific challenges of the recent Mengniu deal What has Danone's M&A experience in China been like and how do you see the M&A market developing

As a matter of fact, Danone and Mengniu tried to cooperate a few years ago, that was only suspended due to certain circumstances then. Both Mengniu and Danone realised that each has respective advantages and strong points, which united in the JV can benefit both parties.

Danone has done a lot of M&A since it entered China. We have been quite successful due to good strategy, clear targets and purpose, flexible handling and recognition of partners' key interests. We respect our partners' values, cultures and internal systems. This is important for the success of the deal.

Many years ago, local companies paid more attention to obtaining capital and developing quickly but now they are much more mature with their own experience and advantages. But also, with rapid economic growth comes modification of policies and regulations, and so the law is not always clear. Policies, rules and regulations often contradict each other and are difficult to anticipate. What is more, the interpretation at different administrative levels and locations is also inconsistent, which makes it more difficult for businesses.

What work do you send to outside counsel and how do you select them Do you use international firms for some work and domestic for other

Given our small in-house team size we use a lot of external firms, both domestic and international. A firm may be strong and harbour a good reputation; however, you still need to work with a certain expert partner.

Whether we engage domestic or international firms depends on what the work is, as they each have their own advantages. For example, for due diligence for big local companies with complex internal systems, local firms may have a deeper understanding of the unique Chinese structure and better relations with government, while for commercial contracts international firms are more experienced.

In terms of costs, we control the budget and work progressively with external firms, to be careful in not going too far. We let them understand that we all work together during the process so as to balance costs, efficiency and timing.

What achievement are you most proud of during your time as Danone GC

I have been in this position for 15 years. Every day we have to carefully deal with all kinds of issues and problems. During the past 15 years, I have personally witnessed every development of the Company in China as well as the manufacturing and provision to Chinese consumers of more and better healthy products; I have been involved in every M&A project either for acquiring or disposing, and have participated in all the disputes and settlements, both minor and high profile. In a word, I myself developed together with Danone in China during all these years, enjoying French company culture with openness, humanism, flexibility, passion and imagination.

Are you also responsible for anti-bribery/FCPA work within Danone How have recent developments such as the GSK case caused you to change your internal policies

Yes. The GSK case reminds us that anti-bribery/FCPA can never be neglected. Our Group pays much attention to this and have organised independent third parties to conduct an audit on selected companies in certain countries. China is one of the selected countries, and I am personally involved in that. Stricter precaution measures have been built internally to formulate our business activities, and we widely educate all our staff.

What do you believe is the fundamental duty of in-house counsel

For an in-house counsel, regardless of a big or small company, it shall always remain clear that legal duty is for the protection and safeguarding of the company's business development. As a key function of the company, we need to effectively manage both internal and external issues. Learning new things every day and enjoying your work in the ever-changing business environment is what keeps me going.