As a lawyer, you can’t get to a higher position in the Czech Republic. On the sixth floor of the famous building in Dejvice where PPF Group settled a few years ago, I meet a man who has always avoided the media but has now given his most extensive interview to date. A well-groomed man in a well fitted blue suit, he speaks calmly and diplomatically, never saying more or less than he means to.
Lubomír Král has been sitting in the chair as PPF’s chief lawyer for almost twenty-five years. He joined PPF in 1999 to help build the foundation for Home Credit’s financing. At the time, 27-year-old Král was the first person the company had ever hired. Established in 1991 as First Privatisation Fund Administration and later transformed into a joint-stock company, PPF surprisingly worked without its own in-house lawyers for the first eight years of its operation. When it needed someone, it hired a lawyer from outside.
Until then, Král had been working for less than two years at the Prague Stock Exchange’s settlement centre, where he had started his career after studying law at Charles University, Prague. The decision to join PPF was the result of a coincidence – at the time, PPF had advertised for a lawyer, and the young lawyer was looking for a change. Petr Kellner was so impressed with Král at a personal interview that he made him one of his closest associates. Král, now aged 50, sums it up briefly: “I answered the advert and got lucky.” This modesty, by the way, weaves itself throughout the interview. We talk about purchasing what is now the largest mobile phone operator on the market, the extremely complex structure of PPF’s merger of assets with Moneta, and the recent half-billion-euro bond issue by Cetin.
Král seems calm, and it is clear as he narrates his story that he is extremely knowledgeable in his field. Yet occasionally he pauses, wondering how much detail he can go into in this or that transaction and whether he is accurate about even the smallest details. He can also recall in detail an abundance of cases which happened during his time at PPF.
When he joined PPF, few people even knew it after eight years on the market. “People at the stock exchange didn’t understand it much when I announced I was leaving to join PPF. Back then, the company wasn’t what it is today,” Král recalls with a smile. He has been the lawyer behind all of PPF Group’s major transactions for the last quarter of a century. He speaks calmly and with poise, only occasionally seeming to forget himself, raising his voice slightly and describing with energy the transaction structures he often helped create. In these moments, his passion for law and what he does shines through.
But he speaks all the more so with discretion, weighing his words carefully, answering concisely. This isn’t a sign of calculation. Král describes himself as an introvert, and he adds deep business insight and expertise to his eloquence. Today he has eleven lawyers working under him, and there are hundreds of others that work across the group, but when he joined the company in the late 1990s, he was on his own. He now understands the group’s every nook and cranny and helps to buy or build most of its businesses. As well as being a lawyer, he is a member of the board of directors of PPF a.s. and the group’s top management.
Being the company’s top lawyer is one of the highest standards one can achieve in the industry, but it entails being constantly alert and aware of everything going on in the group. And a lot does happen – in mid-2022 alone, PPF owned assets worth 40.1 billion euros, or just under a trillion Czech crowns.
Is it the character of lawyers to not be seen so much?
I’m naturally like that. I’m fundamentally an introvert, and even my colleagues were surprised that I gave you the nod for an interview (laughs).
I would like to introduce you as the chief lawyer for PPF Group. How would you describe your role?
My job is all about determining risks. That’s why I often say I’m mainly a risk manager. It doesn’t matter whether it’s a specific transaction or the Group’s day-to-day running, my job is to identify, name and address risks. Risks are often fundamental in business.
Given everything that is happening today, where do you see PPF’s current biggest risks?
Generally, I would say that the last two years have seen much more pressure on compliance everywhere. We are increasingly under the scrutiny of auditors, regulators and potential third-party financiers. They are all looking at us closely and doing so because the environment today is simply fraught with risk. They all want to see that we’re monitoring the risks correctly, evaluating them correctly or addressing them correctly.
Why did you want to work at the Group?
I wouldn’t say I wanted to. Those were different times and PPF wasn’t what it is today. It wasn’t as well known in the public, and it was one of the many companies which grew out of coupon privatisation. We’re in a different place today. When I announced my departure for PPF at the Stock Exchange, I didn’t get many congratulatory glances.
But the combination of finance and law has always attracted you?
Actually, when I was a university student in the early 1990s and coupon privatisation was in full swing, securities were sexy. There were more of us who were drawn to that direction. To be in securities back then was to be in the thick of things.
Do you remember the first case you handled at PPF?
I was hired by the company to help it with its first ever bond issue, which financed the start of Home Credit to the tune of around two billion Czech crowns. From today’s point of view, it was a rather primitive transaction; it wouldn’t pass muster here today.
Why do you think that?
From the perspective of today’s bond issues, the bond transaction’s size back then isn’t comparable. Not just in volume, but how it looked. Now, you would write a prospectus two or three hundred pages long. Back then, I wrote the bond issue’s terms in thirty pages, and that was it. If I showed them to somebody today with the intention of buying these warrants, they would probably throw me out along with them.
Weren’t those just simpler times?
Of course, the world is a more complex place today in many ways.
What do you enjoy about being a lawyer at PPF?
Actually, I couldn’t say whether I would enjoy it anywhere else. Working at PPF is very specific, I always say that we are like a small law firm within another company. We work for the Group’s companies and cover a huge range of work. A lot of transactions, so sales and acquisitions of companies... But I’ve also written a contract for purchasing a horse, helped set up an eight-grade grammar school and been involved in purchasing instruments to lend to the Czech Philharmonic. That’s the kind of thing not every corporate lawyer would touch. And combined with the kind of people I do it with, that’s what I enjoy.
But you’re not just the Group’s lawyer.
That’s my most important role. And of course, there are other roles in different companies. The Group fills them with people it trusts and has relationships with.
How many positions have you earned that trust?
I sit on the board for PPF a.s. here in the Czech Republic, also on the board of PPF Financial Holdings a.s., which is the company that represents the Group’s financial assets. I’m also the chairman of the supervisory board for O2 in the Czech Republic and on the supervisory board for the operator of O2 arena... But there is nothing fundamentally linked to that except responsibility.
So you’re still more of a lawyer than a manager?
Definitely. It has to do with identifying risk. I’m in these positions to identify them.
What about the Group’s financial holdings?
No. If you mean whether I hold a stake in PPF as far as some of its companies are concerned, no, I don’t.
You mentioned that people get positions through trust. How did you gain the company’s trust?
You’d have to ask the Group’s management. But you can only earn it here through your actions, long-term loyalty and work performance. I’ve worked here a long time, and I probably haven’t made that many mistakes.
That sounds modest. What distinguishes a good business lawyer?
In my experience, expertise. I have a lot of good people on my team, and they’re bigger experts than I am on many things, and I rely on them implicitly. Plus, here at the company, you have to be flexible. We try to look for novel solutions, and sometimes we’re able to rotate through several solutions during a transaction, which in practice means that things and assignments change from day to day. I would say this is in the Group’s DNA.
Does that mean you have to be available all the time?
In theory, yes.
And are you?
It’s better now, I used to work more. Obviously, there’s an extra workload required, but it’s not the purpose of the job to oppress anyone. I think my colleagues in law firms have that commitment somewhere else. When we do a transaction, those are really very intense months, and it’s a twenty-four-hour, seven-day-a-week job. But then there are periods when there aren’t any transactions and it’s not that demanding. Those transactions, by the way, reflect another quality of a good lawyer – getting into the business itself.
When I joined PPF in 1999, its main asset was Czech Insurance Company (Česká pojišťovna). In the first few years, I mainly learned what the insurance business looks like. When we bought O2 in 2013, I learned how a mobile operator works, and when we bought CME, I learned how television and advertising work. When you negotiate a deal, you have to at least understand what it says and what everyone is talking about. That’s what’s so much fun about it. I know I’ll never understand the business the way its people do, but I have to understand it at least enough to be able to set up the deal properly.
Král speaks with humility and modesty, even as he describes his work on cases involving billions. The acquisition of Central European Media Enterprises (CME) alone was worth 2.1 billion dollars. Purchasing the media business, which now operates television stations in six European countries, namely Bulgaria, Czechia, Romania, Slovakia, Croatia and Slovenia, was the largest transaction in the domestic market in 2020. Král’s team worked on it together with the law firm White & Case.
With the purchase, PPF Group wanted to strengthen its existing telecommunications business in Central and Eastern Europe. “We want to take advantage of the synergies between media content creation and distribution. CME is a well-functioning company, and we aren’t planning to intervene suddenly in its operations after takeover,” said Petr Kellner at the time, describing the motivation behind the purchase. In Czechia, TV Nova’s owner wanted to create the most successful domestic commercial television station and be a direct competitor to the public channels.
Betting on the media has been the right choice so far. PPF’s telecom and media divisions, which include O2, Yettel and Cetin in addition to media holding CME, were the assets which generated profit for the Group in the first half of last year – a period when costs linked to exiting the Russian banking market put PPF as a whole into the red.
Are there any transactions that stick in your mind?
I would like to say all of them. The first really big one that I like to recall was definitely in 2007–2008. That was around when we sold our insurance assets, mainly Czech Insurance Company, to Generali Group in Italy. Today it is Generali Česká pojišt’ovna. It was a major international transaction, not just for me but for PPF as a whole.
Why for you?
It had a special flavour in that I had lived and worked in Italy for some time. I knew the language, and I also knew what Generali was, what Italian national gold was, what its sound was like in the country. Suddenly, I was sitting at the same table with them, and we talked about how we would do the transaction. For me, that was a powerful experience, and that’s why the transaction is so prominent in my mind.
Was it significant on the legal side as well?
It was, because we were combining their entire Central European business and our own Central and Eastern European business into a joint venture. So it involved a lot of approvals from different regulators in different jurisdictions, and even collapsing the assets together wasn’t a trivial process. Just settling the transaction itself, in simple terms the moment when you sign the documents, took two days. We spent the whole time in our Amsterdam offices, not sleeping and preparing all the documentation overnight.
That transaction marked the beginning of PPF’s multi-year journey with the Italian insurance group. The joint venture, Generali PPF Holding, was established in 2008 and formed one of the largest insurance groups in the region and represented one of PPF Group’s two core businesses. The Group’s 2007 profile reads: “The first pillar remains the insurance business, led by our flagship company – Česká pojišt’ovna. Today, we’re forming a joint venture with Generali Group, Europe’s third largest insurer, with the aim of becoming the CEE’s leading insurance services provider.” That second pillar was consumer finance under the umbrella of Home Credit Group.
As the market changed, however, the Group started exiting the industry. It gradually sold its original 49% stake back to the Italians, raising 2.54 billion euros. In 2015, a significant part of PPF’s involvement in the insurance sector came to an end after almost 20 years.
The last three years have also marked the end of another stage for the company. The circumstances around Russia, negotiated transactions, and most of all, Petr Kellner’s tragic death, have changed everything, including the job description for the company’s lawyer. “Not only mine, but also everyone who worked at the company. We had to learn things we never wanted to learn and deal with things we never wanted to deal with. In retrospect, the Group stood its ground,” says Král, but he doesn’t want to go into greater detail. It is clear from his voice that he and the Group’s founder, who once interviewed him to work for the company, were very close through years of cooperation.
PPF’s business was also disrupted by the war in Ukraine, which forced the group to sell off its Russian assets. However, the group’s CEO Jiří Šmejc assured that in this context it was a statement of good morals, not the Group’s failure. The cost associated with exiting caused the group a loss of 318 million euros in the first half of last year. “However, through our managers’ efforts and expertise, the other sectors we operate in achieved excellent results and reduced PPF’s overall loss to as low a level as possible,” said Šmejc at the time.
Just a few months after the war began, Král’s team then prepared a huge (and successful) bond issue worth half a billion euros to finance Cetin. Meanwhile, negotiations were underway with lawyers and Moneta representatives in an attempt to merge with PPF’s Czech-Slovak financial assets. The transaction was eventually abandoned because of an objectively disadvantageous economic situation, according to PPF Group.
How big was your role in those deals?
It varied from transaction to transaction. The sale of Russian Home Credit was handled by the company’s legal department, which itself is robust and experienced. But the exit from Russia also involved other assets, which were many.
What about the Moneta transaction?
I prepared that with my team. Not just the transaction documentation but the huge number of required regulatory procedures.
Why was the transaction so complicated?
Because it was a plan to combine a listed bank with a bank and two non-banking companies that had one owner. These companies were subject to regulation in the Czech Republic, Slovakia and the EU. Moneta also have a very fragmented shareholder structure.
How long do you spend on transactions like that?
This particular transaction went back to be reworked, and the general meeting approved it for a second time. So we worked on it for several months, and I mean just the preparation. I believe that the last stage from a purely technical point of view was done very well. It was very sophisticated and technically excellent.
But we didn’t just come up with it on our own, it was the result of negotiations with Moneta, the counterparty and their advisors. In the end, it turned out that the objective business conditions had changed so much that it no longer made any sense to go through with it, despite having the financing in place. On top of that – a standard major acquisition always takes a few months. When I think of the O2 acquisition, we started negotiating that in autumn 2013, and it was completed in spring 2014. So unless it’s some exceptionally super-fast transaction, it’s always a matter of months.
To what extent are you responsible for the acquisition strategy?
For transactions this big, it’s always a team effort. My colleagues and I are part of the initial negotiations, and our job is to figure out the transaction’s whole structure – how we will purchase the asset while also meeting the conditions stemming from the business strategy. Finance and taxation people are involved in those negotiations to make sure we can cover the transaction so that banks will lend to us.
To what extent do you work with external lawyers?
We can’t afford not to work with them in those big deals. Many larger transactions involve multiple jurisdictions, and you need expertise in those countries as well.
How do you choose them?
We have our own shortlist of external advisors. To some extent, it’s a settled circle of firms that we know are good at this or that. But it’s true that sometimes we get into territory where we’ve never worked before, and we’re still looking for capable lawyers there. We have to be able to adapt.
How have the last few years changed the transactions you focus on?
First of all, the transactional perimeter has changed. The crisis is changing asset prices – both those being sold and those being bought. And of course the situation with Russia is unprecedented. It’s no secret that PPF had a significant portion of its assets in Russia. The Group’s management assessed that the situation wasn’t going to improve any time soon, so we decided to exit Russia completely. Of course, this had an impact on our work. The sanctions agenda has grown in an incredible way as well.
It comes back to those risks again. Sanctions are being imposed on Russia, and now, as we speak, this is the tenth sanctions package. For lawyers and compliance people, it means constantly checking who the counterparty is, whether they happen to be on the sanctions list, whether something is allowed, and so on. And of course, this doesn’t just have legal implications, it also affects PR. If we do something with someone who is on the sanctions list, it’s not just us that will be held accountable, other colleagues will also have problems with it.
The sanctions lists are also monitored by the banks.
And the whole group uses funding from a pool of about seventy mainly international banks who themselves keep an eye on things in the sanctions lists. This is the alpha and omega for all the creators of this market in terms of capital movement.
Has the willingness of banks to finance transactions generally decreased?
I’m not an expert on that, but I think it has to some extent. We’re just not in a drunken boom phase, everything is more moderate.
Does that mean that the number of your transactions will decline?
That’s a good question. I think not, because every crisis also brings opportunities, and PPF Group is an opportunistic investor. Of course we have some strategic businesses, but I’ve seen many times in the past that we can leave one strategic field behind yet enter another one.
The insurance industry, for example.
On the contrary, you’ve focused on telecommunications.
And it’s worked to our advantage. I still believe that crisis creates opportunities and that transactions will not necessarily decrease. We might still discover something very interesting.
author: Taťána Lysková