The Legal Team's Role in M&A

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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. Hey welcome everybody to M and A Science Live. Putting together companies is complicated, and taking them apart is even more complicated. In this podcast series, we interview leading M and A practitioners to learn lessons from their experience. Learning proven techniques is key to optimizing your M and A practice. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter. I'm your host Kisan Patel, CEO and Founder of M and A Science and Deal Room. Today I'm here with Andrew Gratz, Associate General Counsel at lyondale Bissell, a $30 billion publicly traded petrochemical company with over 19,000 employees located across 32 countries. Andrew manages a seven member legal team that's responsible for supporting Lyondell Bissell's global mergers and acquisitions, divestitures and other strategic transactions. Today we're going to talk about what role legal teams play in M and A and how their function interacts with the corporate development team. Andrew, if you wouldn't mind kicking things off telling me a little bit about your background and some of the recent deals you've been working on.

Sure. Well, first and foremost, thanks for having me. Looking forward to this conversation. The most recent deal at the end of last year is line entered into $2 billion joint venture with Sasol. Sasol built a significant petrochemical complex in Lake Charles, Louisiana, was looking to divest part of its equity in that joint venture and lined up SL acquired it a few years ago. I was also involved in line SL's acquisition of a Showman, which was a publicly traded specialty chemical company. That was the first major acquisition that lined up SL had done for 10 plus years. Why that was important for numerous reasons is lyendub. SL has an interesting history where as soon as Lyondell chemical and Bissell, one US one European company, merged in 2008, very quickly thereafter due to the Financial crisis and other reasons, filed for bankruptcy. So that Ace Schulman acquisition I mentioned a few minutes ago was the first major transaction the company had pursued and accomplished post bankruptcies. Two transactions. I'm very proud of a lot of kicking tires and other smaller transactions, but I thought I would highlight those two since those over the last few years have taken a significant amount of my time.

They aren't smart deals. You're talking billion or so, right?

The SASO joint venture was 2 billion. The other one was 2.25 billion. So both 2 plus, not a big deal.

Little peanuts. Let's get into it. What role does Legal play in M and A?

If done correctly, we are there from the very beginning. If there's any advice I can give to those on different business development teams that may be listening in is bring your legal team in as soon as possible. We have a very strong business development team here at Lined Up a Sell and thankfully they bring in legal from the beginning. My team and I are involved in looking at different targets, seeing if those targets are the right fit. And the reason why it's so important to bring legal in as quickly as possible is my primary role as an attorney for the company is to understand the regulatory and legal and jurisdictional issues and obstacles that may present themselves with any transaction. Are we going to have issues going into a certain country, into a certain industry? Are we going to have antitrust concerns, national security issues? You want those issues highlighted and flagged sooner rather than later. Because the worst thing that could happen for the company as a whole is you spend a lot of time and money looking at a transaction and then at the very last moment, bring Legal in. And then we, whoa, slow down. We have to do X, Y and Z. To understand whatever obstacles lay ahead from the very beginning is key. Legal also helps align on strategy. One of the things I tell my team all the time, and they're probably sick of hearing it, is if you don't understand the why, you can't effectively develop the how. Here's what I mean by that. Whether you're in legal, business, commercial finance, tax, hr, name your function. If you don't understand why the transaction is being pursued, how can you develop the appropriate vehicles, agreements, arrangements that advance that goal? If the goal is simply I want to buy, I want to sell, is it to pursue and build up those businesses you think are going to grow in the future? Is it to divest of a business that you don't think fits in your portfolio anymore? Is it simply to get your toes wet into A certain industry and country. So you better understand what's out there. It is the business development team, their obligation to get every function, especially legal, aligned on what the strategy is. Because if you don't understand that strategy, you're operating in the dark and you're not getting what you need to get or what you should get from your legal finance business teams. The third area where legal, I think, assists greatly is keeping the team focused on the strategy. Every agreement, every action, every decision has to advance the strategy. Going back a few years, when I started my career, it was actually in politics, and I ran political campaigns. With a political campaign, it's clear every dollar you spend, every action you take, every comment you share with potential voters has one goal and one goal in mind to get the candidate elected. And that's the same approach I brought to M and A guys. What is the strategy? Does the goal and the transaction match up? In other words, is a transaction aligned with the strategy? Whether you're negotiating the agreement or in the midst of deciding, do I give this? Do I take that? What will it take for me to do the deal? Or what will it take for me to not walk away? If I make this decision, am I still advancing the goal that I had when I first started? And I'm sure we'll talk about this in a few minutes. One of the things legal can do is to make sure deal fever doesn't consume everybody. It's happened more often than I can count that a business team will get so far into the deal and they spent hundreds, if not thousands of hours looking at it. Hundreds, if not thousands, sometimes millions of dollars looking at a deal. At what point are they willing to walk away? And sometimes deal fever consumes you, and you execute deals that should never have been executed. So where legal can serve an important role is being that calm in the storm, questioning the team. Are we still doing this for the right reasons? Does this decision advance or detract from the goal we have in mind?

These are great points. So get legal involved early. A lot of the stuff that may be the obvious blockers around jurisdictions and things like that, regulatory things that you want to be in the loop about right away and start understanding the strategy itself, because you're going to need to draw terms out that align with this, that facilitate that, and then keeping the team focused as well. The deal fever part, can you unpack that a little bit? Because I always thought this was an interesting one. I had a conversation earlier around the same thing with actually a CEO of a large organization, and he didn't have a clear answer for me in terms of how do you prevent that? Because especially you go through a deal, you start doing diligence, you got time put in there, maybe you've hired some external folks to get involved, starting to spend some money into it. It gets tough to walk away from a deal. Then you become the bad guy. If you're the one shooting it down, absolutely.

And you're right, you do run the risk of being the bad guy by always second guessing and injecting doubt into the deal. Because frankly, if you've invested so much time and money into anything, you want to get it done, and that wave of deal fever definitely overcomes many. You want to build a trust with the team. When I say the team, I mean from the C suite to the finance organization, to every function that's involved that you can have that type of challenging conversation. Are we still doing it for the right reason? One of the things I've suggested, and it's very simplistic, is every time you have a conversation, whether it's around the table or at least in the COVID world, through teams or zoom, you have a strategy moment. The first few moments of every discussion around the deal talk about why you're doing the deal, it checks everybody. Oh, yeah, that's why we're doing it. Because what I've noticed, especially when I was in private practice, while we're doing the deal tends to get lost the closer you get to actually sign the deal. And that's unfortunate. And that's usually what in those circumstances where deal fever is the highest because people don't want to check themselves. And so by having what I'll call a strategy moment, having the first slide of any deck, discussing the deal, repeat, reiterate the strategy, or having a moment prior to any conversation discussing a deal checks everyone in the room and hopefully breaks the fever.

It's almost like creating this cycle of validation that you're going to go back and double check. Does this go in line with our strategy that we started with?

Yes, absolutely.

When you say get Legal involved early, how early are we talking about beginning what?

I would suggest even determining the strategy of the company. The words acquisition, divestiture, joint venture should not come out of anyone's lips until a strategy is formed. Transaction follows a strategy, not vice versa. And why Legal should be involved in the strategy formation is because there are some strategies that have inherent legal risk. If you're looking at being acquired by entities in certain countries, there's going to be national security risk. Legal, for Good, bad or indifferent permeates everything we do and as a result should be part of the strategy discussion from the beginning. What you don't want to happen is the strategy is baked and then it lands on legal's desk. Paper it up. Paper up the transaction that advances the strategy. That may not be on a sound legal footing. Very beginning legal and business development team should work hand in hand and honestly, there should be no sunlight between them because that will truly ensure the company succeeds. The company appropriately mitigates risk, ultimately advances the goals of management and the board.

Yeah, it's a great view. Really gets you involved. Think about the risks earlier than later. What are the key milestones in a deal where legal gets involved?

So after the strategy has been formed and everyone follows my advice, strategy is done. Now we look at the transaction. The first document one needs to think about is a non disclosure agreement, an NDA. If you're the buyer, the NDA is important because you don't want the whole world to know you may be looking at targets. If you're the seller, it's probably even more important because you don't want the whole world to know you're looking at divesting a company or a business line. Think about the number of ME issues that come up when you're selling a business. Your folks may wonder if they're going to have a job next week. Your folks may be anxious whether or not the new company will take care of them like you have. These are the types of issues that you do not want to inject unnecessary anxiety angst in your workforce. 1. It affects the bottom line. If people are focused on the issues, they're not focused on selling product. 2. It's going to have an adverse impact on the success of the deal because if the business you're trying to sell is distracted, is preoccupied, they will not make as much money which will eventually impact your sales price. Moreover, if the deal goes away because let's be honest, most M and A doesn't happen. A lot of kicking tires, few far deals, but it make it to the finish line you've now communicated to your team. We don't see a future with you. So there is a reason the NDA and so that's why you have an NDA. But let me talk about a few of the things that's important to include in your NDA. First and foremost, confidentiality driver for the document in the first place. 2. A requirement that the buyer or sellers outside professionals keep the information quiet as well. It is not uncommon that both the Buyer and seller will need external lawyers, external finance help, and that's great that the party itself is keeping things quiet. But you also want the party's external advisors doing the same. You also want a clear and conspicuous disclaimer on the NDA that says just because we signed this document doesn't mean we have a deal. It is the beginning of the deal and your legal team should be able to provide that language for you. We have seen case law where an NDA doesn't have the right type of language or the language goes beyond the confines of an NDA and talks about a partnership or talks about a long standing relationship and that has gone to litigation where one party claims we've got a deal. So you want to avoid that gray zone and get rid of any ambiguity and have that conspicuous language. Some watch outs in the NDA non solicit that I have seen sellers try to slip in in their NDAs. Well, you can't hire my employees. Well, if all I'm doing is looking at this target and kicking tires, do I want to assume that responsibility of not hiring employees from that company for two years? No. Or maybe yes, we should have that discussion because especially if there's only two or three players in that industry, you've now cut off a third of your potential employees. Exclusivity. If you're in a sales process, you want to be able to talk to as many buyers as possible, to pretty much apply pressure to each and to extract the highest bid. If you agree to exclusivity, then the potential buyer has you. Now all the leverage has shifted to that buyer. You want to make sure if you're running an auction process or any type of process, you don't include any type of exclusivity provision. Those are the two watch outs I would advise any team to look at in your NDA. Your next step, you've done the NDA, you've received documents on the target and you realize, wow, this might be a good complement to our business. I want to explore this further. Well, in a typical process, you would develop either a non binding letter of intent or a non binding indication of interest. Let me underscore the term non binding. We haven't negotiated the definitive document yet. First and foremost, conspicuous clear language. This is non binding. But here's the difference I've seen between successful buyers and unsuccessful buyers. The unsuccessful buyers will put so much weight on the non binding language that, that they'll basically throw together a few paragraphs, throw out a range and submit it to the seller. The Thoughtful, methodical, meticulous buyer will start making its case. It's not binding to both buyers. It's not binding to the two scenarios I've just presented. But I can tell you, when I've been in the seller's chair, seeing a letter that's thoughtful, carefully considered, one that starts making the case why this particular buyer is the right fit, will go a lot further and will be better received than the buyer who's clearly not putting much thought and effort into it. So while non binding, it is your first opportunity as the buyer to start making the case, while you as the buyer make the most sense. Once that's complete, you'll proceed to diligence. And this is where the legal team really jumps in and hopefully earns its paycheck. Diligence, in my view, is the most important aspect of any deal because you're confirming what you think you're buying. You're confirming that what you're buying advances your strategy. The strategy must drive the diligence. I'll give you a great example. A few years back we read that Disney bought LucasArts and clearly they've been incredibly successful with that. Billions made from the movies, from amusement parks, et cetera. We all see the shows popping up on Disney. But let's think about that. Why did Disney buy lucasart? Was it so they could sell Darth Vader and Chewbacca toys? Or was it because LucasArts May owned a few warehouses in Pasadena, California? But we know the answer to that. They wanted to own Darth Vader. They wanted to own the intellectual property. If I was running that deal, that's where my diligence would focus on. Does LucasArts have the right licenses? Do they own title? Do the assets I feel are most important, are they protected, and am I truly acquiring them through the transaction? If Lucas owns a few Buicks and Fords in their parking lot, I don't care. That doesn't drive my strategy. Strategy drives the diligence. And the diligence, and we'll get to this in a second, also drives the documentation. And so after diligence, you start developing the purchase and sale agreement. And as any practitioner knows, more likely than not, your purchase and sale agreement will have language that says whatever was said before, whatever emails went back and forth are meaningless. I'm paraphrasing here, but it's an important lesson that many deal teams forget. What matters at the end of the day is what's in those four corners of that agreement. What are you repping? You own, what are you warranting? What are you selling and what am I paying for it? And the diligence will drive what we call the schedules that will be attached to the purchase and sale agreement to make sure here's what I'm buying and as importantly, here's what I'm not buying. I may not be buying your legacy litigation, I may not be buying certain assets, I may not be buying your huge environmental issues that you've had for years, or I may be the document needs to make that clear. And that's where diligence is key to drive the creation and eventual execution of the document. Very long winded answer to your question. But those are the pillars of the deal where legal plays an important role in each.

Once you get through diligence, it goes into negotiations and really ironing out the terms of the deal. Use the term ioi, which is essentially early on, you're maybe running an auction process. And I'm curious, is it typically used in the auction process primarily as a stage gate just to gather interested parties and have a little bit of a document in terms of clarifying the interest? Is it typically used in that auction process before they move into letter of intent?

I've seen it done all different ways. The most common as you've described is the auction process. To get to that next round, you want to provide the non binding indication of interest to demonstrate to the buyer, I'm interested in this asset, I think I would be a good acquirer of this asset. So please bring me into that next round. I've also seen it bilateral where even if you're outside the auction process to make sure as you're in one of these one on one negotiations, are the parties in the same ballpark? Because every company is rightfully so concerned about costs and concerned about unnecessarily wasting their folks time. I have encouraged our teams, even in private practice, to use letters of intent to really lay out the deal in broad strokes. So the other side looks at it, soaks on it and decides, you know what, we're close and it's worthy of further discussion or you know what, this thing's not going to happen and we wish you the best of luck.

That's an indicator of interest you'll typically see. Is it a certain number or typically a range, what's usually on there?

Yeah, you'll typically put a range and the reason for that, and I know I skipped ahead a little bit in talking about diligence, more likely than not, you're submitting that indication of interest very early on in the process. Very early on in the discussions, you may have preliminary financials, maybe not even audited financials, and a high level overview of the assets you're looking at. Well, diligence really hasn't started in full. So how are you going to, as the buyer, put a specific price? And so what one should do and what I strongly recommend is a range. Here's the low end, here's the high end, all subject to additional diligence. And you want to make that very clear in your I.O.I. that this here's the bid, non binding, subject to X, Y and Z. And one of those conditions has to be a robust diligence process to make sure one, that range is justified and two, where eventually you'll land in that range.

Then from there you'd move into an LOI as another stage, possibly or quickly.

Proceed to diligence, depending on how many stages in the auction process I have found in these days, most are IOI diligence and then possibly binding letter of intent or you go straight to the documentation.

Okay, interesting. So there's a lot of ways you can sort of skin this.

Absolutely, absolutely. To your point, there are so many different ways to approach it, which is why having your legal team close to the process at every single step is so important to advise. Well, if you go this direction, you may be sacrificing other options. Or if you go that direction, here are the advantages it presents.

Some of this stuff fluctuates. I'm thinking of real estate deals as opposed to even by industry size, et cetera. Is there a difference between letter of intent and term sheet?

I've seen the terminology used interchangeably. I would say a letter of intent is more formal and allows one to begin stating their case. What I talked about earlier of here's why I'm a good buyer, here's why I am worthy of your attention and to be brought into that next round. A term sheet. So pretty self explanatory, the terms. What I typically do and what I typically encourage is that term sheet is incorporated into the overall letter of intent, at least in the broad strokes. As you get closer to actually documenting the deal, proceeding along the negotiation auction process life cycle, you'll see more and more terms be fleshed out to make sure once again the parties are in the same ballpark.

I say we're not an auction process, we're just going straightforward proprietary deal. I'm in the impression that it's more common to do letter of intent, maybe non binding. Additionally, what do you typically.

Absolutely. With a bilateral type of discussion. You might as well get as many details out on the table as possible and as quickly as possible. Once again being cognizant that you don't want to waste either party's time. The idea being let's get a term sheet out there. You don't really need to sell yourself at that point going back to the benefits of a letter of intent because you're dealing one on one across the negotiation table. But here are the terms I'm presenting to you as the buyer. I have found there's no point in hiding the ball at that point when you're in bilateral discussions. Because what I think will create a lot of ill will and a lot of wasted time, energy and money is, is if you know you want something as the buyer or the seller and you hide it to the eve of signing, I've never seen that work out. Get it out there, be very transparent if the other party is willing. Fantastic. There's going to be plenty to negotiate and there's going to be plenty of hiccups along the way. So you might as well get all the material issues out there for consideration as quickly as possible then.

Difference between binding letter of intent, non binding letter of intent and when do you use those?

Yes, profound difference. Non binding is pretty self explanatory. It's I get to pull this as quickly as possible. Or I may say this stands for one week, two weeks, one month, depending on the diligence process, depending on if you've engaged in exclusivity. A lot of time where a binding letter of intent comes in handy is if you're going to insist on exclusivity, where you got to give something in return. If I'm going to forsake all other bidders, I want you, the bidder that I'm negotiating with, to put some skin in the game. And so there may be provisions in that letter that are binding, maybe a deposit, certainly confidentiality, maybe a fee if you walk away or some type of skin in the game where it makes sense for me to forsake all the other bidders. And then of course, if you want an overall binding term seat, let's get the material terms on a piece of paper price assets, maybe what employees stick around, which ones don't, Especially for your smaller companies where you want the management team to stay on, depending on the stage of the deal and how many people are still involved in the process is where I would pivot from non binding to binding.

How do legal and the corporate development teams encourage one another to look at Risk and reward.

Going back to the need to have no sunlight between them, there's also a flip side of that. Having a tremendous amount of trust between the two teams because you need to have the trust to have the challenging conversation. I have found that good lawyers see risk and appreciate risk. Unfortunately, some lawyers, that's all they see. That's all they see is risk and they want to eliminate risk. Those are not the type of lawyers I want on my team because life is risk. Flip that, they're business development team. There are some on certain business development teams that all they see is reward and they don't appreciate or understand the risk. I don't want them on the team either because they will jump at anything and sign anything. The great teams pair a legal team that sees the risk and reward and a business development team that sees it one clearly prioritized reward over risk and the other team prioritizes risk of reward. And there is that natural tension and that natural tension is needed. But where I go back to having the challenging conversation is sitting down legal feeling respected enough and confident enough in the trust they've built with their business development team to say, I'm concerned about X, Y and Z. And the business development team saying, I understand it, how can we mitigate it? And here's why I'm willing to assume it because of these rewards. When you get a team like that, there's no stopping them. And that's how the teams can work together the best to serve the company's goals.

This kind of ties back to not holding back on some of the surprises till the end. Addressing this stuff early. So if you see some of these potential risks, address it early as part of that culture you want to embed in that deal team.

And going back to the strategy, if legal and the business development team are aligned on strategy from the beginning, they pretty much by that point of the deal know how much risk is going to be assumed and what the promised reward should be. And by getting aligned on strategy from the beginning lessens that tension. So that's why it's so important as well.

How do you try to educate the corporate development team on the nuances of law?

One of the things we've done and we've been really successful with is developing a guidebook and training program we have developed here at LinewSL Strategic Transactions 101 and a guidebook that complements that training program. And we have been very successful about when people join our business development team onboarding them of saying, here's what indemnification means. Here's what warranty means. Here are the issues that you need to watch out on. NDAs, you know, some of the ones we only talked about a few minutes ago and the different checkpoints in the deal cycle and the negotiation cycle. We've been really successful in onboarding the team in terms of thinking and understanding the documents and nomenclature they will encounter now that they've joined our business development team. And it's something I would encourage every legal team to do, whether it's external or internal, is think about how can I educate my clients so they understand what I'm trying to address. I'm not suggesting you send all of them to law school because then we would be out of a job, but simply getting them comfortable with the nomenclature. The same way the legal team has an obligation to get familiar with accounting terms and business terms. Both parties should train themselves up so they can at least issue spot when needed.

Give me some depth on this. What's the expectation? Do you expect corp dev to know how to read a PA agreement? What are some of the things your expectations would be or you'd want to set?

Let me talk about expectations for my team and I and then I'll talk about corp dev, your business development team. Here's your expectations for your legal team. They should understand the business. They should understand the business that's being acquired and being sold. For example, to better serve my clients, years ago I went and got an mba. And I'm not suggesting every lawyer on my team needs to get an mba, but there are plenty of opportunities to enroll in MBA for lawyers, a one to two day program. You should be able to read a financial statement. As a lawyer, you should be able to understand the difference between this kind of cash flow irr what's accretive. You should understand that if you don't understand the business you're serving and the clients you're serving, you're not contributing what you need to to the team. First and foremost, I encourage my team to look at ourselves. How can we up our game now? Let me answer your question on business development team. Yeah. They should be able to look, especially our leadership in those groups. They should be able to look and review and understand a purchase and sale agreement. They should understand what liabilities we're assuming in a purchase deal or what we're shedding in a divestiture. Do they need to understand every single word? No, but they should be able to issue spot whereby if they're in a negotiation without us or in an email exchange where legal may not be cc'd. They know those red and yellow flags. They've been coached up enough to realize, wait a second, I better not agree to this or disagree with this before I loop in the legal team.

Very helpful. How does the legal team preserve value post close?

We think backwards. From a commercial legal finance perspective, when you're looking at a transaction, you should immediately go, what does this look like after we've closed the deal? Where are the employees going to sit? Who is going to provide the computers, the SAP system? If that's a factor, who is going to going back to senior management? Who's going to stay, who's going to go? And what representation warranties obligations are in the agreement that advance our strategy. And here's something where the legal team and the business development team need to have a thoughtful discussion around. If there's a time difference between sign and close, if it's not simultaneous, what actions can the seller take between those two points? Can they enter into any contract they want? Can they depart with very nice golden parachutes? No. The answer is no, because you're not getting the value you assumed. And so you want to have that discussion of how do I ensure the business I signed up for is the same business I acquire or divest at closing? Those types of behavioral and structural considerations should be captured in the agreement. And that's where the legal team plays a pivotal role in memorializing and capturing those obligations. Another area where legal plays a incredibly important role are the schedules I talked about going back to the document I represent that you are assuming these litigation matters. I represent you are assuming title to this IP and other rights, and I'm also representing you. Not if I list those exceptions. Legal should be working with the commercial and business development teams to make sure we're getting what we're paying for, we're getting what advances our strategy. And it all goes back to what I said earlier. If the legal team can't read a balance sheet, doesn't understand the strategy or the business that's buying or selling, it's not adding value. And the key for any legal team is to add that value.

We talked a lot about risk. It sounds like a lot of this comes back to reducing risk. And interesting perspective on looking at it from reverse and sort of building it out that way. What are the dangers? I know we talked a little bit about this, but dangers of deal fever from a legal standpoint, making sure your.

Legal team is respected enough to one, have a seat at the table. And if you have your seat at the table, you're going to be there from the beginning and two, checking everybody. So deal fever tends to lead certain companies to assume risk disproportionate to the reward. Take a look in any Wall Street Journal, New York Times, there are deals that have been devastating for the company. Most companies that go under, frankly are a result of a cycle of bad deal making. And whether or not you didn't diligence well enough and you assumed environmental or other liabilities that you had no clue you were assuming, we saw that many years ago with the asbestos litigation buyer in Monsanto. That was significant a year or so or two years back. Always be aware of what you're buying and as importantly, know what you need to exclude from that acquisition. On the flip side, if you're trying to shed certain liabilities, you better make sure those liabilities are explicitly listed in the sales agreement because the worst thing you can do is sell it for a steal. Because your strategy was to get rid of certain liabilities and because your lawyers did a poor job, you lost the good assets and you're still stuck with the bad ones. And I've seen that happen as well, and we all have. If we've read a local Wall Street Journal, that's where deal fever had a profound and dangerous impact on companies. By muting the discussion that needs to happen, is this deal advancing our strategy? Is this deal advancing our goals? If we mute that discussion, then it's not good for anybody and it will probably cost a few, possibly thousands, their jobs.

How do you remedy that? If people are in that mindset, it's sort of, hey, let's keep the lawyers out of this as long as we can because they'll screw everything up.

Well, I think that's probably another discussion that I'm happy to have of how does the legal team build trust with their clients.

It's like, does it take a deal.

To realize that you know what, and you're right, the time to build that trust is not in the middle of the deal. And I say that, and that advice applies to in house as well as outside counsel. You should be building that relationship and instilling that trust. When the deal is not happening, when I was in private practice or even now when I'm at a company, if the business leaders, if my business development team doesn't look at me as a value add, doesn't appreciate what I bring to the table, when there's not a deal going on, then certainly when in the midst of a deal, your all nighters, your days, your weekends, the pressure from the Board. The pressure from the street is crushing at them. They're certainly not going to come to me. Build the trust every hour of every day. And so when the real decisions have to be made, they're calling you and they're trusting your view.

I like the examples you shared just from this conversation because I feel like that's helped me develop a newfound appreciation for MIT attorneys.

Yeah, well, thank you.

Maybe some of that can be surfaced as well to help facilitate some of that trust. And saying, hey, here's things that I can show you goes back to the training as well. I got a question here that's regarding the deal strategy. Do you participate in any kind of post mortem to grade the organization on how well it met the, the acquisition strategy objective?

Absolutely. We have a great business development team here at Lineup Sell that does that. I strongly encourage every company to do that. It's a best practice. No deal will ever go right. And if anyone's promising you that I can navigate you through the perfect deal, they're lying. Hang up the phone. Frankly, every deal has its hiccups, every deal has its mistakes. And so there is a absolute best practice which we follow, which I encourage others to follow, of looking at what did we do well and where we. Where can we improve next time? Absolutely. And legal plays a part in that. I'll give you after every major deal, I call my CEO, I call my cfo, I call my commercial lead. I ask them two simple questions. What did we do well and where can we improve? I always get answers for both and I appreciate that feedback.

Have you ever done these during a deal? In software development, we call them retrospectives. So you sort of have maybe a little bit more of a frequent check in to see if there's opportunities to course correct a little bit or improve your processes while you're still doing the project or deal.

In this case, I'll give you now the typical legal answer. It depends. It depends on the time crunch. If a negotiation is going on and on and has different permeations, usually you'll see that it's an auction process. I'll do the check in. If it's, we got three weeks to get this done, go then really there's no time for that discussion. But there's always time postmortem. And going back to the other question that I just answered, you gotta have that, you gotta have that postmortem review. That's the only way you improve.

Makes a lot of sense. What's the hardest part of your job?

Balancing the risk and Reward. The thing with lawyers is we're designed and trained from the first day in law school to see risk everywhere. And while I pride myself in understanding you can eliminate risk, since that is our primary function is to partner with the business and bring our acumen and skillset to mitigate risk in a perfect world, I probably want to eliminate risk more than our commercial or business development leaders. So it's balancing the different views and the different priorities of every deal.

You never notice a cultural difference in how we look at risk from our country and other countries. After working on deals in other countries, realizing and appreciating how laxed we are, when I've seen some others that look at every possible thing that could possibly go wrong, no matter the possibility or probability of it ever happening.

Absolutely. And you have now truly brought the conversation full circle because the need to bring legal in to discuss the jurisdictional, legal, regulatory issues. There are certain countries where the party on the other side will sign anything you put in front of them and it doesn't matter if it's completely one sided for you. They'll sign whatever. And the reason for that is good luck enforcing it. And one of the things a strong legal team will highlight is, yes, we can have the most beautifully drafted document in the world. But if you can't enforce your rights within a document, it's not worth the paper it's printed on. That's why it's so important to have legal there from the very beginning. Because if you're looking at investing and entering into certain countries or certain regions of the world, then you also better be aware that your rights are not the same as you would have at a federal courthouse in the United States. Your rights are going to be diminished, if not completely eliminated, which is why some companies outside of the US Will take whatever risk is presented because they know it's not a real risk. Because good luck enforcing it.

Interesting. What do you do at that point? How do you navigate that? Are you sort of looking for localized counsel at that point to partner or work with?

Absolutely. I am A Texas trained U.S. attorney. I am not Chinese. I'm not a Chinese trained lawyer. I am not a Indian trained lawyer. I'm not. Name your favorite country. So it would be malpractice for me not to reach out to local counsel to understand not only the legal requirements, but to understand the local nuance. Here's what will be acceptable, here's what's not. Here's what's on their radar screen, here's what's not. Moreover, negotiating in different countries requires a different cultural approach. I'm negotiating with lots of parties that are not American and not Texas, which one would argue is a country in and of itself. But I need to understand what a New York and California attorney wants and the different laws that apply. Certainly if I'm looking outside the us, in China, in India, in Kenya, in countries that I may not be as familiar with, I need to hire very strong local council to help me with that.

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

A deal team that just wants to create havoc for the sake of creating havoc. It is amazing. And maybe it's the profession, maybe it's the intensity of an M and A practice. It seems to attract those who want to just scream and yell and create ill will. And I have found that to be disappointing and amusing at the same time, because if they're just screaming and yelling and pounding on the table, they're not advancing their client's strategy. And I put the business development team in that same category, that if you have a business development person who thinks that way, it's counterproductive and destructive to value. And that's the craziest thing I've seen. Because as M and A practitioners, whether it's business, legal, finance, we're supposed to be strategic and strategically minded. And when you act that way, you're none of the above.

Yeah, that's true. Losing sight of your professionalism.

Yes.

I guess that sort of brings in just letting the motions factor in. And it comes up a lot when I ask this question as well. People bring some of these personal agendas, issues and thoughts into it. Or it's just like you said, maybe the pressures of the deal get to them.

Especially in a corporate America, you will not find a field more intense than M and A because of the nights, the weekends. They need to make decisions within minutes of getting information. Many practices, whether within legal or outside of legal, have the luxury of soaking information in, of having time to think about a decision. We don't have that in the M and A field, no matter what function you're in. And so you need to make sometimes instantaneous decisions, and that creates a lot of pressure. You asked me earlier what legal can bring to the team, and I would say overall, being the calm in the storm, appreciating that, long nights, weekends, time away from your friends and family, that is a requirement of the job. And so bringing everyone down, making everyone check on. Are we still advancing our strategy? Are we checking on each other? Are we making sure we're all healthy and being clear minded about this deal and about what's important. That's another service the legal team can provide.

Very true. You still didn't tell me something really crazy. Like the most irrational thing you've seen somebody do.

To be honest, I think we see it day in, day out. You look in a newspaper and see companies pursuing deals. What are they thinking? How much debt did they just assume to do this deal? How are they going to pay off this debt? You saw a lot of that right before the financial crisis. People leveraged buyouts where people were borrowing 20 plus billion dollars. Really? Are you mad? I'm very thankful. I've never worked for or with any client that thinks that way, but maybe we're in the minority. You look in the newspaper every day, you see deals that are mind boggling. I think that would be. If there's not a podcast out there, I would encourage you maybe to do it. Case studies on deals that go horribly wrong and what they could have done to prevent that. Because there's more examples of that than anything.

Yeah, I agree. That'd have to be a roundtable discussion.

Right?

I'll let you know when we get that going. Andrew, I appreciate it.

Please do.

Thank you so much. Those of you still with us, if you're interested in learning more about MA and hearing from other practitioners, visit mascience.com, get on the newsletter and check out more of our stuff. Andrew, thanks again and here's to the deal.

Thanks. It's been a pleasure.

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