The Challenges of Cross-Border Deals

Hello M and A Friends. If you're looking to improve your in house training, we have corporate training plans provided through the M and A Science Academy. Give your team members access to the best in class courses, templates and networking opportunities in the industry. Our Academy was designed to lead practitioners with the how to of M and A practices. If you're interested in learning more about individual or team plans, go to mascience.com academy. It's also a great way to show your support for M and A science. Again, that's mascience.com academy. Onto the interview I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Hello M and A Scientists Here at M and A Science. Our goal is to continuously expand our understanding of M and A and use that knowledge to create top notch training programs and resources. By visiting mascience.com you'll find all the information you need to take your M and A skills to the next level. Get started by signing up to our free weekly newsletter to stay up to date on our latest courses, upcoming events. Next for interviews again, that's mascience. Com. I'm your host, Kisan Patel, CEO and founder of M and A Science. Joining me today is Cliff Felig, partner at maitar Law Offices, Israel's largest law firm with over 500 attorneys. Today we're going to talk about the particulars of cross border M and A with Israel as our case study. Right. Today we're live in Tel Aviv at Maitar's office. Cliff, thank you and Mehtar for hosting. Cliff, how are you doing today?

Great. Nice to be here.

Kiesen, thanks for taking a break from doing deals to teach me a few things here.

I'm sure you'll teach me just as much.

Can we kick off a bit about your background?

I'm an attorney in Israel. I've been practicing law here for about 30 years, but originally I'm from the US as you could probably tell from my English, where I grew up and went to school there and actually practiced law for about six years in New York before I moved to Israel in 1992. I started out my career, my life and my career in the US and then made the transition, which was a very interesting transition to a very different country in the Middle East. And basically what I've been doing since then is helping others make that transition for their business purposes as they do their Deals here in Israel.

So where is your whole background? M and A law? From the beginning or so I was.

Corporate law in a broader sense, not just MA Also capital markets, also banking and finance. At least back when I started in the 1980s, you didn't have to do just M and A. You could be a little bit more of a generalist. To this day, I still believe that it's best if you cast a bit of a wider net. You could be a good M and A lawyer. But if you don't know banking and finance, you won't be able to help clients who are doing leveraged M and A transactions, for example. Or if you don't have a good capital markets background, you won't be as strong on public M and A. It's good to have a broad background and to try to engage in a broad field of areas.

Good point. If I got to ask one question, that always comes up. I often get asked for referrals to attorneys, and I always give the typical try to find somebody that's got experience in the industry you're trying to do your deals in. But I want to know, since you're technically more qualified to find the right or the best attorney, what would you be your advice to somebody? Because I get a lot, especially first, second time doing an M and A deal or whatever it is.

Let's say you're CEO of a company in the US and you've gotten an interest in a company in a foreign country and you're interested in finding out more about them, maybe investing in them, maybe buying them. And so on the business side, you know your business and you know how to investigate their business and understand if it really fits with yours. If they have something to offer you, there's a commercial connection. But on the legal side, you really have no idea what it's like to do business in that foreign country. And one of the big mistakes Americans make generally is they think the whole world is America. And so if you can do things a certain way in the US I could do that, act that same way with my employees, with my investments in other parts of the world. And that's often very far from the case. So you need to get to someone who can be that interlocutor for you to help you understand the legal environment. Usually what I find clients do is they call their U.S. attorney, which is probably the smart thing to do. And they say, you've worked with me when I bought companies in the US Now I'm buying a company in Israel. Do you know a lawyer in Israel. And usually that's the best way to get to someone in that foreign country. That lawyer you're speaking to, he may not know anyone in Israel, but if he's part of a big law firm, he has a whole network available to him of his partners he can contact and say anything. Any of you do a deal in Israel recently, anyone you could recommend there. And usually that's the best way I find to get to someone who will understand how you do deals in the US but also help you do those deals the way you need to do them in the foreign country.

Leverage network.

Exactly.

No Google reviews.

So it's funny, I can remember one very large company that actually got to me because they just read there's websites that rate lawyers, chambers and legal 500. One general counsel of a large company said he just looked on the chambers global and saw which law firms were recommended, which lawyers were recommended and he gave us a call. So it was of course very nice. But that's unusual. Usually what people do is they'll ask people they know they're like I say they're US or London attorneys for recommendations and then they will go do the Google reviews before they call. They may get a couple names. They'll go start searching online, seeing what do people say about this guy, what do they say about that woman, and then see who looks best to them.

So there's a mix. You leverage your network initially and then you could cross reference with some of these directories.

Exactly, exactly. You want to cross reference your sources. That's what most people do today.

Okay.

They do the same thing when they're checking restaurants? I think so why not with attorneys?

What are the specific things to look for when hiring an attorney to do a cross border deal? Hey, can I find out that you have industry experience or any specific things that you want to look into?

So industry experience is of course important. I think it's more important to find people who are done the kind of work on the kinds of deals that you need to do here. And we're talking M and A. You want someone who's done cross border M and A. You could find a lawyer who's say in my case in Israel who knows Israel well as anyone else. But if he hasn't had the experience and challenge of working with a foreign client, he doesn't know how to explain all those local concepts to someone who's used to working in a different environment. And that's crucial. That's crucial.

Figure out what those key attributes are in the deal. You're working on.

And it's not even just the attributes of the deal. It's everything about doing business in the US if you want to terminate employee, you might call them and say, sorry, it's not working out. In some cases, you might send them an email and saying, sorry, it's not working out. If you send an employee an email in Israel saying it's not working out, we're going to let you go. You've bought a lawsuit because things are done differently here. And you'd have no way of knowing that unless you ask someone. And I understand why people think it's the way I do business at home, I can do business abroad, but you just can't. If you do that in France and you might get arrested, I don't know. But certainly you've got to always accept that just because things are taken for granted in the place where you normally do business, and especially in the US that it's going to be that same way elsewhere.

All right, that was my softball question for you. I've got that out of the way.

Oh, oh, okay. Now it's going to get harder.

We should also plug in that we're doing this live. So if anybody's listening to this, hopefully you find or appreciate the better fidelity of audio quality. Because I'm live in close office here in Tel Aviv, so hopefully I can get some feedback. I'm always curious to know if it's worth the effort to do this stuff in person. So thank you for hosting and our pleasure.

Our pleasure to have you here.

I wanted to ask about what generally do you see as the challenges of doing cross border deals?

There are obviously the cultural differences of how business may be done differently in other places. The simplest challenge can be language where people think they're speaking the same language and they aren't. Anyone who comes from abroad to Israel is going to do business in English. That's generally the language of international business. And anyone in Israel who's working with someone abroad knows that they won't be able to speak Hebrew, our native language to them that there are very few Hebrew speakers abroad. So they'll speak English to each other, but they may not be speaking the same language. I'll give you a very simple example. In Hebrew, the word for email is mail. They just say they took the word from English and they said, I'm going to send you a mail. They'll say that in Hebrew. When that same Israeli person is speaking in English, they don't say email, they say mail. They know that's an English word. And that's what they say. So in a meeting, the Israeli may say to the American, I'll send you that by mail. The American, what is he? He's going to go to the post office and put a package and send me by snail mail. They think they're both speaking English, but the Israeli's English isn't really English because he doesn't know that you say email in English, so someone who's sitting there can immediately turn and say he's sending you an email. And across that little bridge. But there can be lots of understandings. Just because one person who thinks he speaks English doesn't really quite speak it 100% properly. So you can get a lot of little misunderstandings along the way. Other cultural gaps are just in terms of how people do business and how direct people are. You've been in Israel a couple of days, Kisan. And Israelis are very direct. They don't hide how they feel. One thing I often point out to my Israeli friends here is that there's no word in Hebrew for subtle because the concept doesn't exist. And you see that in a negotiation, if two clients are negotiating a term sheet, the Israeli will give his views very clearly and directly what he thinks about these clauses. Let's say the American acquirer, which is usually the case. It's the American acquirer and the Israeli target. He'll come with a term sheet. And he said, these are the terms on which I want. And the Israeli will go through and tell him quite directly what he disagrees with and why he thinks these terms are unfair or whatever, they don't fit his goals. And the American, Americans are often a little more polite and reserved. And he'll sit back and listen and he'll smile and he'll nod his head as he hears each point raised by his Israeli counterpart. And he's just being polite and listening, as he should. He's of course not conceding anything, but he's smiling and nodding. And the Israelis convinced, wow. Everything I said, he agreed with. He sat there and smiled and nodded. This is going to be great. He gets the next draft of the term sheet and he sees none of his points are there. He says, what happened? I thought we agreed on everything. And he said, and I say to the client, if I'm representing the Israelis, I say, he didn't agree with anything you said. He thought you're points were ridiculous, in fact, but he was polite and he smiled and nodded. But no, you haven't made any progress. So you have to understand to look for are you really talking or are you just posturing? And different cultures posture in very different ways. In fact, the American has to understand that that Israeli who's giving his very direct points may also realize that he's not going to get everything he's demanding. But he'll say it in a way that he insists on getting these points, thinking, that's just the way we negotiate here in the Middle East. You set the bar high, you demand things more than you can get. You're going to compromise and you have to counsel your American client in that situation. Yes, he's asking for the world. And you may walk away thinking, wow, we have no deal because he's so far from me, I have to say, no, you have a deal. He's just asking for a lot, knowing that he'll get a lot less and you would just have to come back to him and you have to bargain with him a bit before you get to the ideal outcome. But he's not expecting you to accept everything because he knows that his requests are a bit pie in the sky to a certain extent.

Culture, language.

Culture, language. Absolutely, absolutely. And the culture plays itself out in so many different ways throughout a negotiation. How long a negotiation takes. Everyone begins every deal saying it's urgent and we have to close this within 48 hours or the sky will fall in.

Is that every deal?

It's. For some reason it seems that way. And that's fine. We're all used to living with it. Our goal as service providers is to try to meet the unreasonable expectations of our clients. And that's fine. But often there are external factors that make it simply impossible to meet those deadlines. And, and then again, the question is, how do you deal with the disappointment of things taking longer than they should? And here certainly when you're the intermediary, when you're one of the advisors, the client says to you, I want to get this done in 48 hours. You say, we will make every effort to do so and you will make every effort to do so. But at the same time, you need to try to highlight him. What are some of the obstacles that may cause you not to hit that very demanding deadline? Because you don't want them to be so disappointed that they walk away from the deal when they find out that their 48 hour deadline is simply impossible because they need to get 30 different consents from 30 different people who have no reason to meet their deadlines. That's a big part of it, is tempering expectations. And again, that's true on both Sides. Not that long ago I worked with a major Japanese company that was buying an Israeli company and the client was very helpful to me and said, you have to understand what it means to work for a. They were my client. But to work for a large Japanese company, that decisions are made in a certain way and we will come here and negotiate, but we will not sign anything on this first visit because we have no authority. We have to go back to our committee back in Japan. Only after we bring them the results of this negotiation and where we think we can get will they instruct us how far we can go to sign. We have to communicate that to the other side and make sure they understand that. We're sitting here today in a meeting room for three days, but we're not going to leave with a signed term sheet even. We're going to leave maybe with a draft term sheet that we think will work. My clients have to check it with the higher ups and we'll come back to you. Each country has their own way of doing business. Each company has their own way of doing business. And there's no right and wrong here. They've all succeeded in their own way, but you have to learn how to adapt.

That seems like a whole big challenge of its own. Just the way you describe it. I won for very little patience. And I couldn't imagine myself running through a whole lemonade process with that much time. Intervals in between every step.

Exactly. That's the worst thing is when you sat there for three days and negotiated a term sheet which you haven't signed because they aren't authorized to sign. And now you're told, okay, you will not hear from us for the next three weeks because we have internal corporate approvals. There's nothing on earth that anyone can do to shorten that three week process because there's a committee that meets every three weeks and its schedule was set two years in advance. And it's not going to change because it's some small deal here in Israel and everyone says sit back and wait and keep running their business and moving forward because life is dynamic and businesses don't sit and wait three weeks. They keep going forward and you hope that they'll go in a good direction, but that's the only way you're going to do business with that company. You have to accept it.

You get those deals done.

Exactly. It took a few months and they were told but. But it got done.

We have cultural differences. What about like nuances and local laws? Isn't that a big challenge?

I want to Take you back to one other difference first, because again, you're here from the US and this is my chance. I know for a lot of your audience is in the US Let me give you a really basic difference that you might think is obvious, but some of our friends in the US don't. There are time zone differences between the US and the rest of the world. Most of us know that. Right? Most of us do know that. But because the US is so big and so powerful and so dominant, they think the whole world is America sometimes. And they may not realize that there's a time difference. And if they're in California and they want to set up a call with people in Israel, they have to be sensitive to that. Now most lawyers I deal with are very sensitive. In fact, California attorneys are some of the best about getting up early their time to do calls so they can accommodate other time zones. But I can tell you just recently I got an email from an attorney in Los Angeles that he sent at 1:30 in the afternoon his time saying we need your answer on this by the close of business today. Now there's a 10 hour time difference between Los Angeles and Tel Aviv. So that email that he sent at 1:30 in the afternoon his time was I received at 11:30 at night, my time. Why I was looking at emails and I have no good excuse, I don't defend myself for that. But I can assure you when I saw an email at 11:30 at night saying I need an answer by the end of close the business today, I'm thinking, listen buddy, the close of my business ended a long time ago today. You're not getting an answer by closing. And this guy obviously in San had no Idea there's a 10 hour time difference. He just didn't care. Again, some of the simplest, most basic differences and it's not a cultural difference, not a language difference, people are sometimes just totally insensitive to. But you asked me about legal differences. That's of course a key thing. I mentioned before, labor law and labor law is one area in particular which really varies throughout the world in terms of employee protection. And it's crucial. You're buying a company, you may want to make significant changes to that company. You may be interested only in one division and you may want to sell off another division, you may want to close down another division. All those are legitimate goals within an M and A deal, but they may be very different to implement in different countries. Europe, for example, the EU has as many laws that apply throughout the eu, but each country of the EU has its own labor laws. Attorneys there are very sensitive to the fact that when they're dealing with people in a different country, they have to. The first question will be, what can I do on a labor front? What changes can I make if I want to reduce this guy's salary? How do I do that? On the American side, it's different. Much more of a Wild west generally. Much more of a free market, which is wonderful for those of us who grew up there. And you generally have freedom of contract to. To do what you want with your employees. You have certain risks of getting sued, but they tend to be on the margin. So when you're coming into a foreign country like Israel and you're looking at a target company, you have to understand what are the limits of what kind of changes can I make. As a practical matter, Israel is much easier than many European countries in particular in that while we do have many protections for employees at the same time, at the end of the day, the employer usually is able to make the decisions he wants to make as long as he does them in the right way. The example I gave before of if you want to let someone go, you don't send them an email to do that. Here, you will get sued. There's a procedure. You have to tell him, we're thinking of letting you go. This is why we're thinking of letting you go. You have to invite him to a meeting. They call it a hearing, where you explain to him in person why you want to let him go and give him a chance to respond to that. And only after you've given him that chance, then you make decision. It's a simple process. It doesn't delay things really significantly, but. But if you don't follow properly, you've got exposure. There's all kinds of other employee benefits that an Israeli employee is entitled to get. Severance pay. Every employee who's let go gets one month's salary for every year that he worked at the company. That's an obligation. So when you're looking at the financial statements, you have to look for that obligation to make sure it's been fully funded, which most companies do. But again, it's an obligation. You'd have no idea existed if you haven't done business in that country before. On the other hand, in the US you have a lot of exposure from pension funds because a company will contribute, an employer will contribute to a pension fund, and if something goes wrong with that fund, the employer may have liability for that. In Israel, you have much less exposure. Each employee has their own personal fund. The employer contributes to it. As long as the employer makes their contributions every month as required by law, the fund is in the hand of the employee and the employer has no exposure for it. So all these are very different legal environment on the labor front that you have to have someone to walk you through it. And the key is you have to ask the questions. Ideally, your advisor will know in advance that these are things you may not understand exist. And therefore we'll raise them with you at the first opportunity to try to explain to you what the limitations are in the local jurisdiction.

Most of the deals happening in Israel, stock asset deals.

It's overwhelmingly stock deals. It's just more simple and straightforward. Certainly if it's a public company, it's almost always going to be a stock deal. Although the vast majority of Israeli M and A deals, and this is something about the local market, are private companies. The nature of the Israeli market has been we succeed well with startup companies that may develop a product, an idea, a technology. They won't be as strong in marketing and growing. They'll get them to a certain point, but then they'll be bought up by a bigger company from abroad that wants to integrate that product or technology in their products. So intensely private companies, it almost always is stock deals, but not necessarily. If it's an asset deal, you're going to have to. The buyer will have to set up their own Israeli company to buy those assets because they're going to want to maintain operations in Israel. So they would still need an Israeli company. So that then tends to be the way to do it. There are sometimes tax advantages, as in the US to doing an asset deal. So we do see them sometimes. Usually that's a reflection of a buyer who has a little more bargaining power and they can force that onto the sellers.

It sounds like a lot of these deals you're seeing are based on acquiring a capability that can be expanded through distribution of acquirer. Is that specific to any sector or do you see that across industries?

Pretty much. I would say it's overwhelmingly high tech, but all different technology industries, whether it's telecom or software or cyber. And we do see that throughout, I would say, not to say in a different industry. For a long time, the vast majority of Israeli M and A deals were strategic M and A deals like I described, of a larger company buying a smaller company for integrated. In recent years we've seen far more private equity M and A where large private equity funds come and buy Israeli companies sometimes to integrate it into one of their existing portfolio companies, but often to run it as a. As an independent company because they think that company can be taken on its own to a new level and then sold at a later date. Obviously, a private equity fund is looking to buy for the purpose of reselling, as opposed to a strategic purchaser who's usually looking to buy for the purpose of integrating. So we've seen far more of the private equity deals lately than we had before, although there's always been a significant number of strategic acquisitions.

Also, we talked about some of these challenges across border deals. There's obviously local laws, big emphasis on culture. How do we mitigate these risks? Is it purely on getting the best representation locally? Is there any other factors involved?

First of all, if you're the principal, go into it with an open mind. Like I say, don't assume everything is the way you're used to seeing. Obviously, you're interested in the company because it's got some commercial value to you, and you have to make sure that value is there, is protected, that the intellectual property is protected and all that. But at the same time, you have to be more flexible about what the legal restrictions are going to be, what the cultural restrictions are going to be, and how the negotiation will be different. You have to be willing to flow with what you see locally because you're not going to be able to change certain things. We sat with a client from the Far East a few years ago who had just bought an Israeli company. And then we were talking about the local holidays. Here we have in Israel, we have a large number of local holidays that come out every year in the fall, right after the summer. And these are holidays that are on the calendar. They're in the law. They're not going to change. They actually have biblical origins. They haven't changed for thousands of years. And so the client listened to all these holidays he's gonna have to close down his company for. And while on the one hand he was quite shocked, on the other end, he took it in good cheer and said, maybe I should move to Israel. I would enjoy having those holidays. So I appreciated his recognition that he's going to have to work within those local constraints. And the company is very successful even with the holidays that the local holidays have. And in the end, they're not so much worse than other countries. They just tend to be a little more concentrated in his country. But I always say another situation I remember very well in terms of having to be a little flexible in terms of the negotiation process. As I mentioned before, negotiation is almost always conducted in English as the international language of business. But I can remember working on one negotiation that was with a local company that was not at all a high tech company. It was very much a basic industry company. And that was important because the managers of that local company were not at all familiar with most business concepts, certainly M and A. Concepts that a U.S. person in the field would see all the time. If you're in the high tech business, even from your first investment, you're going to know what M and A is. You're going to know what registration rights are, co sale rights and all that. But this was a local Israeli company that a U.S. private equity fund had taken interest in. They didn't speak the same language, not just in terms of Hebrew versus English, but in terms of concepts. The Americans would sit there and say, we want to have a rofer on that for their right of first refusal. And the Israeli looked at his lawyers and what is a rofer? What, Wait, I know English, I know, but what does that mean? And the negotiation was very difficult and strained only because they were so far apart and understanding each other conceptually. And I can remember very well in one of the sessions, which was going slower than everyone wanted, I turned to my. I was representing the US private equity fund and I turned to them, I just went like this, hold off a second. And I turned to their Israeli counterpart and I started speaking in Hebrew. And we then had about a 20 minute discussion in Hebrew and then we went back to English and I apologized to my clients. Afterwards. I said, I know it's very rude when you're here and everyone understands English for me to conduct a negotiation in Hebrew, but I really felt at that moment it was necessary to get past the roadblocks that we were facing. And the clients, they looked at me and they smiled. They said, no, it was no problem. We noticed as soon as you switched to Hebrew, two things happen. First, the volume went way up because you Israelis are, you're high strung. This is the Mediterranean. You start, you're screaming at each other. But second, we saw things went much quicker. Getting past the language gap allowed us to move much more and more quickly. So they had the good sense to let me take that off and leave them sitting there staring at the ceiling for 20 minutes, not understanding a word, but realizing that it was the best thing for the deal at that time.

How would you contrast the differences when it comes to negotiations between what you've experienced in the US versus Israel?

Like I say, a lot of differences in terms of how people conduct Themselves. And as I said before, Israelis are direct and they can be demanding and at the same time they're expecting the other side to react the same way. So they'll expect what might be a long process. They'll say that we want to get the deal done in 48 hours, but they're going to negotiate like they've got. Like it's going to take forever. So often it takes longer than it should just because of those different expectations, different. And people. Sometimes people get offended and walk out when they shouldn't, or sometimes they won't get offended, but they'll make it look like they're offended and walk out because it's just a tactic which I don't like. But it does happen. I would say in terms of other aspects of the negotiation process, it's improved immensely because of Verona pushing us all to work on Zoom. And we're finding out that we can get a lot more done in virtual discussions than we thought we could. And that's been a big improvement over the last three years. Deals that would have been done by meetings, that would have added so much time to the whole process. Having to get on a plane and travel and go to your hotel. And people are realizing that they can work virtually, if not 100% as well, 90% as well. And that's good enough to save you the burden of the traveling. That's especially crucial with international deals. If you're all sitting in Chicago in offices that are not far from each other, it's not a big deal to get into a taxi and go visit the other guy. But when you're doing deals at a cross border basis and you're very far from each other, the ability to get things done in virtual meetings is crucial to save that time. So that's been a big change I've seen in the last few years, which is not going to, you know, it's not going to go away. People still do have face to face meetings, but it's like they give it thought, why do I need to do that face to face meeting? What's the extra advantage? Does it really justify the extra cost and time that's going to be required for that?

Is it that you net an increase of interactions through all these Zoom calls that you're able to get more comfortable, get a better understanding the cultural differences, things like that?

People will get to know each other more quickly that way because they can speak more frequently. It can drive me crazy when deals will have instead of weekly catch up calls, let's speak three every Monday Wednesday, Friday, see where we're holding, because we can. And so it takes a lot of time there. But on the other hand, they're getting more familiar with each other. So people who've never met each other face to face will still feel that they know the other person, and they do know the other person. They spent enough time with them that even though they're from very different cultures and different backgrounds and never sat in the same room, they can can find a very good, you know, common modus operandi to get something done.

It sounds like Israeli companies are usually on the acquiree side as opposed to being the acquirer. But I was curious to know if there is a difference between the way you do, Lois, the way you present offers. I don't know if you've seen any differences country to country.

It's interesting. So, first of all, certainly you're right. As I mentioned earlier, Israeli companies are more likely to be the target in the acquisition rather than the purchaser. I still hear deals sometimes where people say, this not an acquisition of one by the other. It's a merger. We're equals. But there's no equality in an M and A deal. It's just a slogan you sell to the target's employees so they'll feel that they're not being swallowed up by someone else. And so letter of intent is a key part of the process. Obviously, the letters of intent almost always originate with the purchaser to that extent. We see them dictated by the foreign purchaser, by the US or UK or European, wherever they're coming from. And they're probably not that different from what you see in domestic deals in the US the one exception is we do see sometimes auction deals where the Israeli company is the target on the one hand. The other hand, they're running the process because they've made a decision that it's the right time to be sold, and they've hired a banker and asked that banker to run an auction for them. And so with an auction, then it's the target who's really dictating the terms. They're saying, these are the terms on which we're willing to be sold. You come back to us, you various purchasers, and give us your dollar value that you're willing to place on these terms and then we'll consider it. You may want to try to change the terms also, but we may not accept that and we may not be willing to listen to even accept your bid if you've changed too much. So we do see some of those deals with the Auctions. But even then, to the credit of the Israeli companies, they tend to take an international banker to advise them on those auctions. So they try. They do fall within the parameters that the foreign purchasers are used to seeing. So in that sense it's a relatively sophisticated market.

Okay, so it sounds like there's pretty general key terms that get negotiated in a similar way. What about the pricing negotiation, the real heart of this stuff?

Yeah.

Is there some key differences you see there?

If I look back to my previous life as an attorney in the US working primarily on domestic deals, we were working on deals with very large companies. They don't need their lawyers to assist them in the pricing negotiation. And they generally won't even call the lawyer till they've agreed the price. And by the time they pick up the phone and call their lawyer and start incurring legal fees, the key terms have already been agreed. The key commercial terms. The lawyers may not be a part of that process. In Israel, it's different, especially if you're on the target side, because you're dealing with companies that the management has never been party to an M and A deal before. It's often a founder who created the startup company and took it to a certain level and now he's selling it. And this is his first M and A deal ever. So he'll want his advisors to be with him from the very start of the process, throughout, even at the basic price negotiation. So we get to see more of that here, which is more interesting from the legal side, not just to fight about the indemnities and the representations, but also to watch the price negotiation. Ultimately, I don't know that it's that different. Price at the end of the day is a bottom line dollar figure. And either you can reach agreement on it or you can't. You might have certain ways of bridging that gap with things like earnouts, which we do see quite frequently where the target's saying we're worth 100 million. And the purchasing, I only see 80 million based on reasonable projections. And the target says, but my projections show much more. So the purchaser says, fine, let's do an earn out. And if you really meet those higher projections, you'll get the full 100 million because we'll structure it that way. And if I'm right and you're not going to meet those projections, then you'll get the 80 million. That theoretically works to, in a commercial sense, to bridge that gap. From a legal perspective, it's very challenging to make that work properly. Because once the target company is sold it's the purchaser who's running it. And they may not achieve the targets because. Because the purchaser didn't run it so well. Or maybe the purchaser changed his mind, decided he didn't want to focus on that field. So there's a lot of negotiation over that. But it can often be used to bridge the gap.

I hear are not the gateway to litigation.

Yes. And by the way in a cross border deal that's one of the key negotiation points from very early on you're worried it's going to end up in litigation is what's the governing law. If a New York company buys an Israeli company is the deal going to be governed by New York law? By Israeli law? If you reach a dispute is it going to go to New York courts or Israeli courts? And those are different questions. We might agree that it's going to be New York law. But if there's a dispute it goes to the Israeli courts because the Israeli courts will rule on New York law. Or it could do the opposite. We could say Israeli law but it'll go to New York courts. And they will be willing to rule on Israeli law if they have to. They get legal opinions or should we go to arbitration. And these become crucial issues for targets. In particular an Israeli company that their greatest fear is they have to go to court in the United States. They're convinced that the expenses will be so great that if they're sued there they will it's an immediate loss that they won't have the ability to contest the litigation there. And therefore they will lose. So they will stand firm very often on having Israeli courts resolve any disputes. They're convinced in Israel they can their lawyers. They know what the costs are and they can control them.

So what's market when it comes to jurisdiction?

So market is to fight about it. Market is who's got greater bargaining power.

Wow.

But those issues are often addressed at the very beginning. They're in the term sheet. The term sheet. We usually say what's governing law. So we discussed those early on. But you have to see who cares more who wants the deal more and to and ultimately it always gets resolved. But there's no set formula there for that.

Tell me more of the stereotypes you hear from Israeli companies about American acquirers. Investors. Let's shake it out. This will help our listeners most of.

The world and I realize I'm generalizing here. The world wants to be America. America is the greatest success story ever. No one looks down at America. We all from a consumer society, from telecommunications, media. Everyone is influenced by what goes on in America and everyone wants to be like America. So when you come here as an American, my sense is you're generally pretty well respected here. I hope you felt that way in your stay in Tel Aviv. They're glad to see foreigners coming here, they're glad to see Americans here. So I think Americans get well treated in the negotiation. There are some Israelis who will think they can outsmart everyone and they'll certainly think that they can outsmart the American. If you get the sense you're dealing with someone like that, I'd stay away from them with a 10 meter pole because they're probably not the right person to do business with. But for the most part, as an American doing business in Israel, you're coming with a lot of credibility is my sense, and generally will be respected.

All right.

By the way, I'll just add one more thing there which I do. Tell US clients, if they end up in court in Israel, let's say there is a lawsuit, let's say they did agree to Israeli jurisdiction because the an American obviously has his own reason to fear going to court in a foreign country. And one thing I tend to tell my American clients is that there's no real home field advantage in Israeli courts. You may think if you're having a dispute with a local company before an Israeli judge that that Israeli judge will favor the Israeli party, but that's not necessarily the case. We don't see that at all. We see courts who are very glad, the judges are glad to see that foreigners are doing business here. And as long as they, they think that they're respectable individuals, we'll give them very much a fair shake in the local courts. So that's a key part of the business environment here, is that the courts function well.

What's like the timeframe of the way the courts get done? Because I know you take India for example, like you're not going to live to see India.

You're talking 20 years, I've heard for.

Yeah, I think we're talking three generations. I don't think your kids will even see the outcomes.

Yeah, so we have some cases like that here that do go on forever. Some famous criminal cases that have gone on for, or are going on for many years. But for the most part it will take longer than the U.S. certainly longer than some jurisdictions in the U.S. which have very good efficient courts. I tell someone, you're sued, you're not going to get a verdict for two years, which could easily be the case that may cause fear, it may not. They may be very happy to stretch it out, depending on the type of litigation. But usually it will get resolved. It will take longer than they'd want it to, longer than it should. But often in most cases it will never come to a verdict anyway because the effect of that process will be to push the SARS to a settlement. Just like you see in the vast majority of US Cases. One of the changes the courts have made recently is to require parties to engage, at least consider engaging in mediation at an early stage in the dispute. And if you have a good mediator, they can often help parties reach an accommodation without having to go through the whole litigation process. And I've seen some very good examples of that where mediators were able to find the point of overlap between parties that are far apart and resolve disputes more quickly.

So that's a good option using like a third party intermediary.

People use arbitration too, but that can never be forced on someone. We do often include arbitration clauses in agreements, even if there wasn't one. The parties can agree at a later date to arbitrate and that can be much more quick and efficient. But again that requires their agreeing to go that route.

What other comes up from the legal side that's nuanced to cross border deals and jurisdiction is obviously a huge one. But what are other ones?

There are issues of indemnification and how long you're going to have exposure.

There are big differences around.

We're very influenced by the US in particular and how long there's exposure. But one of the tough things is that we have in Israel a different statute of limitations. Most contract claims and other exposure is a seven year statute of limitations.

Wow.

Now that causes fear in the eyes of a purchaser. They may normally be willing to take indemnification that lasts for 18 months or two years. Three years is a long time. But when you tell them you're going to have three years of indemnification coverage, but, but you may get sued for something five years later. There was. They're not gonna be covered because let's say there was a claim for breach of contract that dates back to before the acquisition and you had three years of indemnification, but those three years have passed and now you get sued for something happened five years ago and it's within statute of limitations and you're not covered. You're totally exposed there. Now I think a seven year statute of limitations is crazy, but no one's asked me here to change the law, but that is what we live with. On the other hand, it's highly unusual for a claim to show up five years later, even though legally it can show up then. It's highly unusual for that to happen because no one has an incentive to wait that long if they have a claim they'll want to bring in as soon as possible. So usually we see those claims much earlier than waiting the five years. And then one other point that's important to mention in this context that I know the US has been doing this for a long time, which is reps and warranties. Insurance in M and A deals to simply take the identification discussion pretty much off the table by having a third party insurer take responsibility for those reps and warranties. And Israel has very much caught up with the US and the London markets in terms of getting that insurance available. And that's gone a long way towards easing some of the negotiation process. When at the end of the day, both sides know what their exposure is. They've put it off to a third party to the extent possible.

I admire the insurance companies. They know how to innovate. It can find a product to fill.

A need in a sense. Really they're making up for the failures of the attorneys that we sit and negotiate these indemnities for a long time and put fear in our clients on both sides when it's a practical matter, most of the time, the vast majority of times nothing happens, which is what the insurance companies realize. They say there's not that much exposure. We can buy that exposure for the few cases where claims are filed and we'll come out ahead with the premiums we get on the vast majority of cases where there are no claims filed.

Makes a good bet and both sides are happy.

Yeah, yeah. And that's the nature of insurance, of course, is to play on the uncertainty and the fear that each side has. Each side is risk averse. So the insurance company knows how to modulate that risk much better.

We talked about jurisdiction, we talked about identifications. What else can I learn from you?

I'll tell you one thing again. On the cultural side is confidentiality. In any M and A deal, it's often crucial. Let the negotiation process be done in a sterile, confidential environment without any leaks. If you're a target company and employees find out that you're negotiating to be sold, that can create a lot of uncertainty. People may get worried about their job certainty. They may start sending out resumes. You may lose some good people because of that getting out. On the commercial side if your customers hear rumors that you're going to be acquired by someone who may be a competitor of theirs, they may walk away from you. Even though that deal is only rumored, it doesn't happen in the end. So it's very important to keep things quiet. And unfortunately, in Israel, we're a society that is riddled with leaks often. And it's not just the business environment, it's politically, it's the judicial environment. Everything we have, unfortunately, too much of our share of leaks. Now, that can be very hard for doing business in an M and A deal. A client from abroad, he's used to everyone keeping things totally quiet. And then he'll find out suddenly that the letter of intent that he sent and marked confidential and made it very clear to the target, that's confidential, that there's a report in the local press. Actually, I can very much remember this in the old days when a major client from the us, a major multinational, contacted me, they sent me this goes way back. I remember getting a fax from them saying, we're looking at this Israeli company, Please check conflicts. But it's super confidential, make sure that no one finds out. And I wrote back to them, sent them back a fax saying, thank you very much for your inquiry, we'd love to represent you. And we will, of course, keep this confidential, as in all our client communications. But I'm attaching a copy of a story that appeared in local press today with all the details of the deal you want to do. Of course, they had no idea. We translated it for them and they were shocked. That goes back 25 years, but things haven't changed that much. And if anything, it's gotten worse because of the ability to leak things in so many ways. And so then you have to ask, why is someone leaking? Sometimes they're leaking because they think they're going to get some negotiation advantage. Sometimes they're leaking just because they enjoy it. And sometimes it could be someone who just feels powerful having information and sharing it with a friend who's a reporter. And there's no real logic to it. That can be very difficult to get used to. And again, I can remember working with a multinational corporation that was negotiating to buy a company that was a subsidiary of an Israeli public company. And unfortunately, the Israeli public company, the management there, was leaking every stage of the negotiation, presumably because it raised their stock price every time there was a leak that they were about to sell the subsidiary. And it drove my client crazy. And to the point we were actually once sitting in a negotiation room this was a physical negotiation pre corona in London. And we take a break from the negotiation to caucus each side. And as we're taking the break, someone looks online on their phone and sees a news report about where the negotiations are holding, literally reporting it live. Almost as we're sitting there in London, it's showing up in the Hebrew press in Israel on a business website. And we confronted the other side and we sent a message to their banker saying, this has to stop, we can't go on negotiating with you. Everything's going to be leaked. The banker knew exactly what was going on, but nevertheless did what his client said. Sent us back a message saying, you're absolutely right. We are sick and tired of you guys leaking everything that's going on here. You must stop. And we knew where the leaks were from. They knew where the leaks were from. We had no way of proving it. And so that was their way of dealing with it, telling us to stop leaking. That was an extreme case. Wow.

Yeah, those are some big cultural differences.

Yeah.

Anything around doing diligence on deals that.

You see different with the legal differences, you have to know. You may not know what to look for if you don't know where there's exposure. In Israel, Israeli companies law is very focused on related party transactions. For example, we've had an unfortunate history when Israeli companies first started going public and they often had a controlling shareholder. There was 100% owned company that would issue 25% of his shares. You'd have a 75% shareholder. And in the bad old days, that 75% shareholder might use that position just to benefit himself at the expense of the public shareholder. So we have a lot of very strict legal protections built into the law now for minority shareholders, and that's important. But it can also drive you crazy when you're doing a deal, an M and a deal coming from abroad, you may have no reason to suspect that. You say, listen, I'm going to buy this company for X dollars a share. We're going to do a separate deal with the controlling shareholder because they've got a control premium or we want to keep them as a partner or whatever. Those raised huge issues. Under Israeli law, you won't expect it. And if you haven't called your attorney at an early enough stage in the negotiation of the term sheet, you may miss those issues. I mentioned labor law, which I keep coming back to because it's crucial how different it is. But other things are. For example, land law in the U.S. we're certainly well known to focus on things like environmental exposures. If the company owns real property with some with dumb chemicals there in Israel, it's a different story. In Israel, the vast majority of the land is owned by the government. And the people who, quote unquote own it really have long term leases from the government. And when a foreigner comes and buys that company, they may have to get consent of the government under the terms of those long term leases. They'll have no idea. That's important. So again, totally different. And there's all kinds of historical reasons why the government owns the land here. They don't really make much sense anymore, but that doesn't change things. So you have to help the clients with that. Again, we still have. Not every target company is a technology company. Often they often the land assets, the real property assets are a key part of it. So they have to understand what are they really getting, what kind of title are they getting, what kind of rights will they have? All kinds of other issues of different ways of doing business that will not be readily apparent to the foreigner coming to that country.

Get counseling early.

Yeah, you can never get them in too early in these situations.

Let's say I'm buying an infosec company here in Israel. It's almost like I should get the lawyer before I talk to the target company. What's the right time? Do I get this initial conversation going and see that it's steering towards us putting an alloy together and then, hey, let me give a call.

Yeah, I would definitely get the local counseling before the LOI for the first draft of the LOI ascent.

So maybe we're heading towards drafting an loi, right?

We've met with the guy, we've shaken hands, we exchanged a lot of business information, we signed an NDA. That's all fine, bearing in mind what I said before about leaks, but nevertheless, you've signed the NDA. And then when you think you're ready to move to the step of let's set the terms of the deal, whether it's going to be an M and A deal or a maybe initially being an investment followed by an option to purchase, we've seen those, whatever it is, at that point, speak to your regular lawyer and get the local counsel in the picture because there'll be questions you don't know to ask even because you don't know how things are different in that foreign country.

What's like the value of an attorney's experience? I'm listening to you and you got really good responses on this stuff. And it goes back to people ask me how do I hire the right attorney? And that's my advice, right? They're always like, I'm doing a deal. Just make sure you get a good lawyer above anything. As long as you get a good lawyer, you'll get taken care of.

Fundamentally, the longer you've been practicing law, the more mistakes you've made along the way. And you don't learn from anything better than from your mistakes. Right? Because you hopefully don't make them a second time. Hopefully you're learning from others mistakes too, that you've seen. But it's again, the more situations you've been in, the more stories you've seen, the more you're ready for the unexpected.

You get the business advice value. I think that's what you end up.

Getting at the end of the day. I often say, even though I'm a lawyer, I've been doing that for a long time. In some ways I'm a glorified translator because I come back to the cultural differences and their business differences and legal differences. But your job is to be able to explain it to your client in terms he understands. Give an example from litigation. If you're working, let's say it's gone the wrong way and we're in litigation, at some point, the US client will always say, can we get summary judgment on that? And Israel doesn't have summary judgment, where you get a verdict from the judge before there's a trial. And so your lawyer has to know what summary judgment is to be able to tell you no. And here's why, and here's how it works differently here. So you've got to be able to explain everything to your client in language that they understand, in language that makes them feel comfortable that they're dealing with someone who understands where they're coming from. You have to gain your client's confidence at the end of the day.

How do I negotiate my legal fees?

Oh, you just tell what the lawyer asks and I want to deal with it. You just say, how much of a bonus are you expecting at the end?

If it goes well, it's usually hourly. But these fees have got. I feel like post Covid, the rates have just gone up here.

I'm going to put in the plug for all my fellow colleagues here in Israel that our hourly rates here are much lower than in foreign jurisdictions. Use your Israeli lawyer, whoever he or she is, to get the best deal at the end of the day. Every lawyer knows that you want a happy client. And part of a happy client is that they feel the fees that they paid were fair. No one likes to pay fees. Obviously that's fine, but that they feel that they're paying for the service they got. And a smart client knows that they're going to have to pay something to get good service. That if they're going to focus entirely on getting the best price, they're not going to get the best service offering that they need. And whenever I make a proposal to a client on fees, which is totally fine for them to ask me to talk about fees, I will always tell them, you will find someone else who will agree to do this for cheaper than I'm offering you. I'm not claiming to be the bargain basement lowest price in town, nor are the same colleagues I work with on these deals. And so if that's all you care about, then take that.

I learned early. I always use this example of my 20s when I had to do my first contracting project and negotiate like hell with the painters and end up with the worst painting results.

Exactly.

And I realized you don't want to leave negative sentiment.

And then you're going to end up paying more to get the good painter back on top of the bad job to fix it, and you're going to end up paying more to get where you could have gone in the first place.

There's always framing has been around, hey, what's, what's going to make you happy? Because it's got to work for both of us.

Got to work for both sides. A smart lawyer realizes that, and a smart client realizes that.

But do people negotiate rates often when it comes to legal fees? Because let's say it's whatever the round thousand bucks, people come in and say, can we make it 800? Does that come?

People will. And it's legitimate to talk about. Is there flexibility here? Can you give me an estimate? Can you give me a cap?

I like the estimate caps. I think that's important.

So estimates are certainly reasonable. You know, that's to be expected. They want to have some sense. And often, especially if they're used to paying very. The very high rates that they may pay abroad, they come in afraid, which is totally legitimate. What's that bill gonna be? So they have to ask questions. At the same time, when we talk about caps, I say, so if I hit the cap, you want me to work for free at that point, Is that what you're saying? But again, caps are legitimate, but they've got to have clear assumptions built in.

That is probably good practice. We did it recently. We set up equity for a company. I remember getting the Engagement letter and heart skipping a few beats when I saw the hourly rate. But I reached out to the partners. You know, he's like, oh, don't worry. Here's our fair estimate of the time it's going to take, which was only a few hours. And I was like, okay, this.

But those are important conversations. And there's no reason for the client to be in the dark as to what the expected legal fees are. It's totally legitimate, whatever the hourly rate is. What's more important is what's it going to cost in the end? And what are you getting for your money? So those are key questions.

And then you're not going to come back and surprise me with three times.

Then comes the bill. Yeah.

Or you at least give me a heads up.

Ideally saying, hey, well, we do give an estimate. We try to say if we see it going in a different direction, we'll tell you the early opportunity. But that requires keeping your finger on the pulse, which when you get caught up in the busyness of a deal, you don't always keep your finger on that pulse. And that's not good.

I like this. So my takeaway tips for negotiating with council. Hourly rate may not be the core area to negotiate on, but there may be some room there. Otherwise, get that estimate of hours at least.

No, get regular updates. And one of the big differences between a strategic purchaser and a private equity purchaser is a strategic purchase usually billed every month, so at least they see where the fees are. Holding private equity, it may not come till the end of the deal because they're only going to raise their money from their investors for the closing, which is fine. But ask for if you want updates every week or every two weeks. That's also legitimate.

Do you see things moving to a fixed price or they're just hard with M and A?

It's very hard with ma. Exactly, because it's all over the map as to how long the deal can take. And even the most good faith estimate that we're going to get this deal done in 72 hours may take four months. It's very hard to do them on a fixed price. There are other kinds of deals. We're doing a private investment, a venture capital type investment. Those deals follow certain set patterns, and once the clients have agreed on the basic term sheet, it should be pretty clear how long it's going to take. Those are much easier to price out on a fixed price basis.

All right, the best advice on this podcast so far, Dollars and cents.

What could matter more at the end of the day.

I don't know if this question makes sense to even ask around. How do you handle integration for cross border deals? Do you get involved with that at.

All when we're on the purchaser side? Because they'll come to us after the closing and say now we want to do the following five steps. How do we implement that? Hopefully they'll come to us because again there may be issues involved that they may not have thought about as to how to implement those steps. So it's more on the technical side of how to implement those steps rather than on the commercial side of which steps they want to do. Which functions do they not need? I may not be in a position to tell them whether they need the entire finance department or can cut it back to one third of what it is now because they've got their own parent company finance department. I will tell them if they speak to me that don't think you can do that. All that fulfill that function. All from abroad. Because there are a lot of very local matters of value added tax and tax withholding and other matters. Various reporting requirements. You need to have people on the ground who can do it. So I can help them a little bit. But they're the ones who know best how they want their company. Look, post the closing.

Cool. A lot of connections I can get out of. Good counsel.

Yeah.

Telltale signs. You hired bad counsel. You should find new one.

They don't respond to your emails.

What's. What's my time limit? Is it give me responses in 24 hours.

We try to respond as quickly as possible.

Okay. So responsiveness is my number one score.

Responsiveness. And do you get the feeling that they're working with you to implement what your goals are or they constantly pushing.

Back whose team are you on Exactly.

By pushing back I would want my counsel to tell me where they expect to get resistance so that I know. But I wouldn't want them to be part of that resistance. If my client's goals are to accomplish X, Y and Z and if I can tell them this is why it's going to be very hard to get that and I can't guarantee you that but I'm your advocate to do everything humanly possible, legally possible to get you, that's what I'm going to be. But I've got to be honest with them where it's going to be difficult. But at the same time he's got to know that I'm on his team to get that done.

Okay. So responsiveness, making sure they're the same team.

Yeah. And by the way, that's a real fear because you're sitting there negotiating, you've got an Israeli counsel on your side who you've never met in person. Probably you just had your first phone call with him a few days ago, and your Israeli counsel is negotiating opposite an Israeli counsel for the other side. Those two lawyers know each other very well. There's not that many lawyers in this small country. We have a lot of lawyers, but not that many lawyers who are doing all these M and A deals. So the guy that I'm negotiating opposite is someone I've probably worked opposite 10 times in the last three or four years. I know him very well. And so you want to make sure that your lawyer, who's there representing you and barely knows you, that he's working for you and not just chumming up with the other side, who we know is much better. That's very important for the lawyer to give the client that sense that, yes, I know their counsel. It's only going to help you because I can speak to him. I can call his cell phone if I need to, and I speak to him very directly and explain things. So don't think that my friendliness with the other side is something against you. I can definitely remember in my first year in Israel negotiating on behalf of a foreign client. Again, we were negotiating in English and one of the principals on the other side yells out to me in Hebrew in the middle of the negotiation, look out for us, Cliff. Also thinking because I'm an Israeli like he is, I'm going to look out for him. Of course I smiled, whatever. But no, I'm looking out for my client. I live here like you live here. And I want to see the deal succeed. But even though we speak the same language and we live in the same country, my function here is to look out for my client. And that doesn't mean I want to harm you in any way or be adverse to you, but I want to get a deal done that works for both people. But I'm looking out for my clients interests.

Yeah, that's absolutely right. Those are good points. How do you test for that? It's a little thing to just make.

Sure it's that first conversation. Does the attorney win your confidence? Do you really get the sense that they know what they're doing, that they know where you're coming from and they've had enough experience in the past of working with clients who are similarly situated to you in terms of someone sitting in the US or UK or wherever who has also looked at Israeli companies.

Before, building that trust from the beginning. You're probably getting some helpful advice right off the bat and getting a good sense.

Most general counsels are pretty. There's one thing they develop, one skill they develop very early on is how to assess whether this outside lawyer is the right person for me or not.

Got the referral.

Yeah. But also the conversation, also the impression that the person makes when they first speak to them.

Cool. What's the craziest thing you've seen in M and A?

This goes back a while. It used to be that to do a merger in Israel, you need to get court approval. It was crazy.

Wow.

For every deal, for every acquisition of a public company, there was no simple provision in the local corporate law. You'd have to go to court. There was a long procedure, and that's how we would do it. And this goes back to a time when the local economy was much less sophisticated, including the judges. Not only do you have to get court approval, you have to get approval from a judge who really has no idea what this is all about. And we had a deal that goes back a while where I was representing a U.S. company that was buying a U.S. public company, is buying an Israeli, also public company. And it was a stock deal. We were buying their company with shares of our stock. It was a big deal, was announced, $400 million deal, which at the time was shockingly high to the local economy. That was based on the stock price on the date we announced it. And then we had to go to court and get the approval. And we find ourselves before a judge who really just doesn't get it. And the judge just. He keeps calling in new sessions to understand more. And at the time, there was an accounting method of integrating companies called pooling of interests doesn't exist anymore. They use purchase accounting. The judge started making suggestions for how we should do the deal. He said, okay, so you're going to take all the shares of the target. I'm going to give them shares of your company. What if not all the shareholders want it? Maybe you'll give it a chance where in a year, if some of the shareholders don't like it, they can get their shares back in the target. Which of course is ridiculous. But one of us said to the judge, no, that would ruin the pooling of interest accounting. And the judge says, how did we get to swimming pools? It meant nothing to him and the frustration of trying to explain this. And eventually he gave the ruling, but said, you have 45 days to appeal. So My client was the foreign company. We've got a ruling, but any, he says any shareholder can appeal my ruling for the next 45 days. That was the law then. So we have to wait 45 days. I kept saying, I don't know if someone's going to appeal. If they. It's highly unlikely, and if they do, they're even less likely to win. But you can't close the deal until that 45 days has passed because you're at risk. What was going on? I told you the deal was valued at $400 million. While when we announced it, as the whole court process was going on due to other reasons, my client's stock price was dropping. And as the four months passed, the deal had shrunk from a value of $400 million to $200 million just because our stock price had gone down for reasons beyond our control. Everyone was getting very uptight on both sides. And I was the one telling my client, you can't close until the appeal time, and kept telling them that the Targets Council kept calling me and saying, oh, it's not going to happen, it's unlikely. I say, you're right, it's unlikely. What do you want me to tell them? It's not going to happen. I can't tell them. I can't predict the future. And the stock price is dropping and everyone's losing sleep. And finally the 45 days pass. I said, you can close. They closed. And then the next day, my client, the US public company, announced another deal that they were being purchased by a bigger US company in a cash deal for what was, I believe, $2 billion. That raised the value of the Israeli target way above the $400 million that had been worth its signing. So now, suddenly, having signed the deal, the Israeli company having signed the deal to be purchased for shares worth $400 million, watch the value go down to $200 million still in shares. The day after they closed and got the shares, those shares were now suddenly turned into cash worth more than the original $400 million. And only then did I understand why everyone was pressing me so hard to get this deal closed. Because they couldn't announce their acquisition in the US until we had closed this deal in Israel. So we were dealing with a difficult judge, very difficult law. It had a real happy ending for everyone, which I was very glad to see. So that was nice. I'm glad to say that the law was amended a few years later and we can do these deals without having to go to court. It still takes longer than it Should. And in Delaware, you could sign a merger agreement and announce a tender offer and get a majority of the shares and close it a month later. Here we have a built in two month process from signing to closing for a public company merger. So that can be frustrating, but at least I can tell them that usually it shouldn't take longer than that.

It's a really interesting story.

Yeah.

Do you see the government still overseeing like anti competitiveness when it comes to M and A?

We have a competitions authority. We used to be called the antitrust authority and certainly we have a law that's based on U.S. law and in a lot of ways for protecting competition. On the other hand, in the technology sector, the vast majority of the target markets are outside of Israel. It's unusual for an M and A deal involving a technology company in pretty much any sector to have a major impact on the competition. In Israel, we're less likely to be focused on the local market in that sector in all the various sectors than we are on foreign markets to see where there's an overlap. If you come in other sectors, say in telecommunications, you're looking to buy an Israeli telecommunications provider, then you're going to have serious issues on the antitrust side and you'll have to look at it closely if you've got other holdings in those fields. It varies immensely. So we do have a local regulator. They are no less aggressive when necessary than you see in the US and other jurisdictions, but it's often not relevant.

Fair enough. This has been great, Cliff. I appreciate you taking the time. It's been great for me.

Thank you. Kiesen. Great to meet you. I'm so glad you made the effort to come here to Israel. I hope you're seeing a lot of interesting companies.

I appreciate helping me become a better M and A scientist. And those of you still listening, thank you. Until next time. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple podcast. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you can already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned by or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.