How To Lawyer A Merger

Wednesday, August 25, 2004

George Shenas, Road Map For A Deal, http://

Abstracted from: Road Map For A Deal: The Role Of Lead Corporate Counsel Preparing For A Merger
By: George Shenas Shenas & Clark, San Diego, CA
Business Law Today - Vol. 13, No. 5, Pgs. 59-61

Overview:
Spells out the responsibilities that the lead attorney must shoulder when shepherding a client through a merger or acquisition.

Preparation and the sales process.
A young lawyer accepts an interesting, enjoyable, significant challenge by serving the lead counsel in a merger or asset acquisition. The transaction is immensely important to the client, the legal issues may be complex, and large sums could be at stake. Although each deal is different, experienced business attorney George Shenas suggests that the role of the lead counsel remains constant. From the outset, lead counsel must lay the foundation for moving forward with the transaction. Before the parties exchange any meaningful confidential information, the seller's attorney should draft a confidential disclosure agreement. If the seller has identified more than one possible buyer, develop a format with the investment banker by which interested bidders can make their proposals. As the negotiations move into the due diligence process, establish a data room of documents to be made available to interested parties. Provide comprehensive documentation at this stage, to guard against allegations by the successful bidder that relevant information was missing when it made its offer.

Handling the letter of intent.
Once the seller identifies a tentative buyer, the parties may want to sign a nonbinding letter of intent, crystallizing the key terms of the transaction. The process of negotiating the letter, the author points out, can uncover potential deal breakers as well as form the blueprint for drafting the purchase-and-sale agreement. Buyers will often insist on a binding no-shop provision in the letter, prohibiting the seller from seeking other prospective buyers. Because the seller loses significant leverage at that point, both the substance and the level of detail in the terms specified in the letter are critical. Counsel can also construct a timeline for the deal in the letter of intent, setting out the dates for key activities; if the parties do not meet these milestones, the no-shop provision is voided and the seller can turn to other bidders.

Assembling the team.
Another tip from the author is to assemble a team of experts to address matters beyond lead counsel's ken. The issues that typically require this type of attention include intellectual property, employment and ERISA law, environmental law, antitrust matters, tax law, and securities law. Lead counsel must monitor and orchestrate the participation of these experts so that the effects of each ancillary agreement are considered in relation to the whole transaction. In addition, make certain that the parties make progress with the ancillary agreements, lest they slow down the entire transaction.

Follow through.
Lead counsel usually prepares and negotiates the main acquisition agreement, be it an asset sale, stock sale, or merger. In this process, the buyer and seller usually must resolve the same set of issues. Lead counsel, advises the author, must be familiar with these issues, assess the client's bargaining position, and establish negotiating tactics and limitations. Most important is to keep all parties on an even keel. When the closing is imminent, lead counsel's job is to see that the parties have completed all schedules and exhibits to the agreement and are keeping them updated, as well as have met all conditions to the transaction, whether internal or involving the consent of third parties or the government. Establish the proper arrangement with the escrow agent, and make certain that all parties have complete information for wiring or otherwise delivering the sale proceeds. Coordinate with the company accountants regarding post-closing adjustments and allocations. Finally, prepare a post-closing memorandum to summarize the terms, particularly identifying the post-closing milestones that the client must either meet or monitor.

Abstracted from Business Law Today, published by American Bar Association, Section of Business Law, 321 N. Clark Street, Chicago, IL 60610

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