With many years under his belt as a lawyer in the digital sector, Kemal Hawa knows a thing or two about the legal side of industry transactions. As global co-chair of US-headquartered law firm Greenberg Traurig’s digital-infrastructure practice and an honoree in this year’s Capacity Power 100 list, he gives insight into what this crucial role involves and the importance of structuring deals well from the outset.
As an honoree in this year’s Power 100, what’s driven and inspired you recently in your role at Greenberg Traurig?
When Covid hit in March 2020, I remember thinking, “Gosh, when the 2008 financial crisis hit, the world figuratively shut down as the economy came to a halt; imagine what’s going to happen now the world has literally shut down.”
Within days, it became clear that digital infrastructure was the key to sustaining not just the economy, but society in general. While the effects of the pandemic were tragic, that infrastructure enabled large segments of the economy to avoid material disruption.
Bringing it forward, 2023 is still a challenging year for many sectors, but digital infrastructure remains in the highest demand – so I’ve found it inspiring to participate in an area central to the recent fabric of society.
Also, making the Power 100 list as a lawyer is a rare thing and one that I’m quite proud of, reflecting our practice’s focus on this space.
What are your and the company’s main focuses from the legal side of the market?
I’m an M&A and transactional lawyer, so I spend much of my time representing financial sponsors including private-equity firms, infrastructure funds and real-estate investors making investments in and acquiring digital-infrastructure companies.
Recent deals in which I’ve represented companies include US-based private-equity firm Carlyle Group’s investment of up to $1 billion in tower company Tillman Infrastructure, and the sales of data-centre company EdgeCore, and Verizon devices and accessories retailer Go Wireless.
Greenberg Traurig’s wider digital-infrastructure practice handles the legal side of all aspects and types of transactions, including M&A, joint ventures, real-estate acquisitions, development projects, leases and services agreements. We also represent the full range of clients, from private-equity funds to telecoms, cloud, data-centre and submarine-cable providers.
Handling the full spectrum of transactions on a global scale is something that’s particularly rewarding and that we think is pretty unique to us compared with other law firms in the space.
Turning to some of the challenges in this area, what are the issues involved in balancing the needs of players rolling out digital infrastructure and those that fund them?
There are many aspects to the issue, exacerbated by the massive scope of many projects today. Digital infrastructure is a capital-intensive business, so raising funds is key to continued deployment for industry participants. But often when a financial sponsor invests, they will commit money in tranches and only later release it for further stages of a project.
In such arrangements, both players have the same objective of sustainable growth for the company. However, in an industry where companies have to move fast, there can be tension if there’s been an economic downturn or the company is not meeting its objectives.
It therefore takes a lot of sophistication and industry knowledge, not to mention trust and various contractual protections, to make sure that when you’re doing a transaction, the company has access to the capital it needs while also giving the financial sponsor comfort that it will be deployed wisely.
What methods can be used to ensure that both parties are happy in such situations?
Structuring the relationship correctly from the beginning is key. That’s why we spend so much of our time helping clients do this in a way that works for all parties.
One thing we’re commonly seeing is joint-venture arrangements, whereby a joint-venture vehicle enables the digital-infrastructure company and financial sponsor to run operations and supply funding within well-defined parameters.
Project finance is also becoming more common as a way for companies to raise capital geared towards a specific initiative or market, while maintaining their independence outside the project. Furthermore, structures can be built into contracts around the ability to raise third-party capital.
Ultimately, there are many protections that can be considered to ensure that any capital raise meets the interests of all involved. But there’s no one-size-fits-all approach and, as mentioned, the key is to structure the relationship effectively up front.
Why is achieving this balance important in the current digital climate and how do you see the market going forward?
Digital infrastructure has always been a capital-intensive sector, but the sheer magnitude of deals today has brought this even more to the fore. With AI’s advent and the demand for services like the cloud and 5G, the demand for data-centre and telecoms capacity is proliferating globally – meaning that so is the need for capital. Coupled with the legacy of Covid, governments are also recognising that they need to invest more heavily in this space.
With these trends, alongside limitations on power availability in many major markets, I expect to see significantly more investments in second- and third-tier markets going forward. Greenberg Traurig’s digital-infrastructure practice is truly global in scope, and one of our stated goals is to grow with our clients by significantly expanding our capabilities in such markets over the next five years.
This includes locations in Europe, but also others in the Middle East, Africa and Asia where there hasn’t been lots of investment to date, but where we’re now seeing increasing activity. We want to be at the forefront of that.
