Lawyers as Part of M&A Deals - dummies

By Bill Snow

Legal issues are always at the forefront of M&A deals. The lawyer is a very important advisor to both Seller and Buyer. Similar to the intermediary, each side has its own lawyer. The lawyer should be someone who is well versed in M&A; only use an attorney who has actually engaged in M&A transactions.

The lawyers for both sides work together and craft the details of the purchase agreement. These agreements are very complex and often utilize arcane terms and phrases, so the best thing you can do is to let the lawyers do their lawyerly alchemy and craft a document they think makes sense. Stay out of their way, but always stay abreast of the situation.

Here’s why you want to stay on top of what the lawyers are doing: Many law firms turn over the mind-numbing exercise of negotiating the myriad legal points to junior associates. These associates often can be sweet, caring, and utterly passive creatures. As a result, one lawyer will mark up the purchase agreement (called a redline”) and e-mail it over to the other side.

Redline refers to an edited document that retains the edited text. Edited text is crossed out and the new text is easily identifiable because it’s blue, green, or, surprise surprise, red!

The other side’s junior associates, also sweet, caring, and utterly passive creatures, undo the changes and revert back to the original text. This passive e-mailing can continue ad infinitum because these passive creatures often prefer the easier e-mail route to having a conversation. Coincidently or not, this back-and-forth also results in running up the legal fees of Buyer and Seller.

Of all the advisors, lawyers are prone to try to take over the process. Keep your lawyer focused on negotiating the legal terms of the purchase agreement, and leave the negotiating on business terms to your investment banker. You’re paying the lawyer, so don’t be afraid the tell her to stand down.