5 Tips For Executing Major M&A Transactions

Advice for in-house counsel on how to handle some of the most important events in a company's existence.

merger law firm mergerThe Biglaw pay raises and bonuses of recent years are due in no significant part to a boom in M&A work, which accounts for a large chunk of revenue for the major New York law firms that tend to lead the market on compensation. Last year, global M&A activity reached a record high of $5 trillion (with one firm, Skadden Arps, advising on $1 trillion worth of deals).

So M&A work is critically important to law firms — and to in-house lawyers as well, whose employers can be dramatically transformed by a major transaction. If deals are going to be done, they need to be done right.

At the 2016 Annual Meeting of the Association of Corporate Counsel (ACC), taking place right now in San Francisco, I attended a great session called “Lessons Learned From Major M&A Transactions.” It featured the following panelists:

  • Amar Sarwal (moderator), ice President & Chief Legal Strategist, Association of Corporate Counsel
  • Michael Boxer, EVP, General Counsel & Secretary, Luxottica Group S.p.A.
  • Deborah L. Feinstein, Director, Bureau of Competition, Federal Trade Commission
  • Augusto Lima, Global Legal Director, M&A, Anheuser-Busch InBev
  • Mark Van De Voorde, Chief Legal and Administrative Officer, Victaulic Company
  • Janet Wright, SVP, Corporate Legal, Dell Inc.

Here are some takeaways from the conversation:

1. Have an M&A team at the ready, even before you’re working on a deal.

Transaction timetables can be tight, so in-house lawyers should think in advance about who should be on their teams, both internal and external, and put those specialists “on call.” The external team might include outside counsel, communications or PR professionals, firms that work on proxy fights (for public companies), and alternative legal services providers (who can help reduce cost). And as companies and transactions become more global, in-house lawyers need to consider developing relationships with advisors in other jurisdictions too.

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The internal team might include colleagues in human resources, information technology, finance, and accounting. It’s important to have a wide range of expertise on your team — and to have “clean” teams, so that information isn’t shared with people inappropriately.

2. Pay careful attention to regulatory issues.

Very few deals are challenged on regulatory grounds, but when it does happen, it can create major challenges. Don’t make the mistake of treating regulatory issues as an afterthought or saving communication with regulators for the last minute. If you reach out to regulators early enough and explain any specific issues or concerns you might have (including ones regarding timing), they are often happy to work with you.

In-house lawyers need to make sure that other team members don’t take actions that create regulatory problems — for example, investment bankers who brag in an offering memo for a company about the industry’s high barrier to entry, which can create antitrust issues. In-house attorneys must coordinate communications with different regulators, both within the United States and abroad, to ensure consistency (because regulators do talk to each other). And in-house lawyers must watch out for “gun jumping”; two companies can’t start acting like one entity until they’ve gone through the government’s antitrust review.

3. Have an integration team that plans for the post-closing environment.

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While “gun jumping” is a no-no, companies must at the same time think ahead to day one of operating as a combined entity. An integration team should focus on which functions or divisions will get combined post-closing and which ones will continue to operate separately. A smooth integration process is crucial to making sure that a deal’s value is fully realized.

4. Don’t be afraid to walk away.

M&A deals are like marriages — they are transformative, and they shouldn’t be entered into lightly. Too many transactions are actually value-destroying instead of value-creating. When it comes to a contemplated M&A deal, in-house lawyers must always keep in mind: what are we doing, and why are we doing it?

People at a company can get so focused on closing a deal that they lose sight of why they’re doing the deal or whether it’s a good idea. Lawyers (and businesspeople too) can get so set on a deal that they ignore warning signs that emerge during due diligence that should have led the transaction to be called off. Sometimes issues that emerge during diligence can be addressed through tweaks to the deal terms or merger documents, but sometimes it’s best to just walk away.

5. Learn from each transaction that you complete.

Companies that do a fair amount of M&A can and should get better at the process each time. After each deal, in-house lawyers should hold debriefing sessions to review what went well and what didn’t. These debriefs can be used to create checklists of unanticipated issues, so those issues can be addressed more effectively when the next deal comes around. These checklists can in turn be used to create a playbook for use in future transactions.

Major M&A deals can be intimidating, given their many moving parts, as well as the thousands of jobs and billions of dollars at stake. But at the end of the day, M&A is a lot like so many other processes: practice makes perfect.

2016 ACC Annual Meeting [Association of Corporate Counsel]


David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.