Bangalore-based fintech company BankBazaar in October concluded over 100 days of negotiating an investment transaction, pulling in $30m from London-based credit agency giant Experian and others, as reported by Techcrunch.

Transparency and clear communication were of foremost importance during the deal from a legal standpoint, BankBazaar general counsel (GC) Parag Mathur told Legally India.

His initial focus was on getting BankBazaar’s books, repositories and accounts in order to speed up due diligence and have a quality data room with clear links and sections for the investor’s team to understand the business and the risks associated, Mathur noted.

He commented: “It is very important that the data room access due diligence process is effectively managed with a project tracking sheet so that each stakeholder respects the timelines and works towards closure of their tasks. It is also important that the to and fro on the due diligence is structured and numbered so that the teams involved understand that no random requests for information will be entertained except in the two to three periodic windows provided.”

Managing rights

His other concern was to have not just the new investors on the same page with the company management in terms of rights and duties that exist, but also to protect the rights of existing shareholders: a daunting task.

To date, the nine-year-old financial marketplace - which bills itself as a one-stop shop for several financial services spanning credit, deposits and insurance policies - has raised $110m from investors. Its backers include Amazon, which led its $60m Series C funding in 2015, Sequoia, Eight Roads from Fidelity Growth Partners and Walden International. Experian was the main investor behind the latest Series D fundraise.

It was therefore vital to protect existing investor rights in the face of a powerful investor such as Experian, explained Mathur; initial discussion between BankBazaar’s legal team and Experian’s M&A head, business and law firm were key.

These discussions helped BankBazaar understand Experian as an investor and to sign off a broad term sheet laying down the key terms of understanding and the deal structure – an exercise that eventually set expectations, demarcated non-compromises and set out the key covenants that needed to be developed during the negotiations.

While the term sheet was signed off in June, it took until September to close off negotiations on the share subscription agreement and shareholders agreement after multiple rounds of red-lined documents, calls and negotiations with international law firms to arrive at mutually acceptable clauses. Any change impacting other existing investors needed rounds of discussions and calls with the legal advisors and counsels of each partner as well.

“As far as negotiating on clauses is concerned, the biggest challenge was towards ensuring that the new investor understands the existing governance and operating standards acceptable to the existing investors. Typically, in any such transactions, the clauses impacting board seat, access to information, reserved matters, investor’s exit rights, promoters’ indemnity and lock-ins, if any, require extra efforts for closure,” he noted.

Regulatory hurdles

Mathur said that the current regulatory framework did not pose any hurdles in the deal in terms of “grey areas in the law”, but rather the simplified rules and regulations with regards to Foreign Direct Investment (FDI) through the automatic route helped BankBazaar close the transaction within the targeted timelines.

He also added that a liberalised FDI policy was helping attract investment into India.

Deal team

BankBazaar instructs HSA Advocates, Juris Corp, Puthran & Associates and Strat IP on intellectual property filings, litigation and the occasional confirmation and endorsement of its in-house legal opinions. But the Experian investment was led entirely in-house, Mathur said.

A 1999 Meerut University LLB graduate and a 1998-qualified company secretary, Mathur led the 10-member in-house legal team on the deal including two senior in-houe legal counsel, three associates, a consultant, a company secretary, a compliance manager and a deputy manager legal.

The team would work for 15-18 hours per day on the transaction, he recounted.

Mathur commented: “It might not be an industry norm in not hiring a law firm to handle such a critical event as that of an investment round, but as I look back, I am only proud and happy to see how each one of them scaled in terms of polishing their business understanding, adjusting to tougher requirements at work, taking ownership of things and backing each other at every stage of the transaction.”

Mathur’s 19 years of work experience include stints with Modicorp, Polar Software, Bharti Airtel and ING Life before joining BankBazaar in 2015.

“Challenging the status quo, innovating in what you do even if it is to bring it better efficiency and control, being part of a change or leading an important project gets the adrenalin rushing,” he remarked, adding: “Regulations—their interpretation in large high-stake contracts keep me pepped up”.

BankBazaar expects him to set up a world-class legal and compliance team to drive governance and compliance standards in the company and to ensure that the company is IPO ready by 2020, he said.

The legal function supports business and participates in partner engagements, other than representing BankBazaar before the finance ministry, NITI Aayog, UIDAI, the financial regulators - RBI, IRDAI, SEBI and AMFI - to enable regulations for paperless and presence-less onboarding of customers for financial products.