100 Issues to Clarify with your M&A Counsel_Fletcher-Gottfried_ACC_ACC Docket_May_2011
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You are in-house counsel at ACME Manufacturing Corporation,
a leading publicly held manufacturer of widgets based in
California’s Silicon Valley with close to a $1 billion in market
capitalization. As the only other in-house counsel at ACME
other than the general counsel, your responsibilities include
securities compliance, corporate governance and board matters.
In addition, to the extent that ACME considers or pursues any
mergers and acquisitions (M&A) transactions, given your past
experience as an up-and-coming M&A lawyer with a prominent
law ﬁrm based in New York City, you are also responsible for
shepherding any such transaction and addressing the many
legal issues that arise in connection therewith. Assuming that
the M&A transaction goes further than a draft letter of intent
or term sheet, you may also be responsible for managing the
outside counsel that would be retained to represent ACME in
connection with the potential M&A transaction.
53 May 2011
the advantage of providing ACME’s shareholders with
a liquidity event earlier, and generally provides greater
certainty of closing, than a one-step cash merger. While
ACME’s board of directors wants to move quickly, the
sale of ACME will likely be a complicated and lengthy
MA process. The GC has told you that you will be the
legal “quarterback” during this process, and will need to
take an active role in overseeing all legal aspects of it and
the possible transaction. For the next few months, this
MA process, and any transaction that is derived from
it, will be your highest priority.
You ﬁnally have your “bet the company” transaction,
which means that allowing your MA counsel to go on
“auto-pilot” is no longer appropriate. For the ﬁrst time
since coming to ACME, you may actually need to draw
on your extensive MA experience as you seek to manage your MA counsel — making sure that there is a
clear understanding of ACME’s goals and objectives, and
the most optimal path to accomplish them. ACME cannot risk having its sales process collapse because MA
counsel got hung up on deal points that are insigniﬁcant
or irrelevant to ACME. The contemplated transaction is
also relatively complicated, and given that this is a large
public company transaction, there are ﬁduciary duty,
SEC compliance and regulatory approval issues that will
all need to be carefully and timely addressed. You are
naturally concerned that the outside lawyers who have
handled ACME’s MA work in the past may not have the
appropriate depth and experience for the contemplated
transaction. Given the complexity of the contemplated
transaction, the MA counsel deal team, which consisted
of a few lawyers in the past, would likely be signiﬁcantly
larger as you will need to draw on lawyers from various
specialties. There is also the possibility that no transaction may ever get done, and the company still ends up
with a huge legal bill. As such, careful management of
legal fees should also be addressed.
This scenario may seem familiar to many of you. Like
the fictional counsel for ACME, there are few situations that are more demanding and taxing on in-house
counsel than a “bet the company” or significant MA
transaction. There are also few situations where outside counsel is required to develop a closer and more
intimate relationship with its corporate client and
in-house counsel than a significant MA transaction.
While in-house counsel will typically be dependent on
outside MA counsel for most of the day-to-day drafting and negotiating of transaction agreements, and the
preparation of related SEC and other regulatory filings,
it is important that the relationship between in-house
and outside MA counsel be appropriately clarified and
calibrated. This way, there is a clear understanding of
— among other things — roles, responsibilities, expectations, goals and objectives.
Based on our past MA experiences, we have prepared
a list of 100 issues that should be clariﬁed sooner rather
than later with outside MA counsel, but are often not addressed, becoming silent “elephants in the room.”
Assessing qualiﬁcations of MA counsel
1. Understand whether MA counsel have the
necessary competency, experience and depth for
the transaction you are contemplating. Ascertain
whether MA counsel have experience with the type
of transaction structures that you are considering.
2. Understand whether MA counsel have not only the
appropriate MA expertise, but also the appropriate
expertise in any applicable specialty areas, such
as tax, antitrust, litigation, intellectual property,
government contracts and employee beneﬁts.
3. Understand whether MA counsel will need to
draw on additional legal resources from outside
their ﬁrm (e.g., local counsel, regulatory counsel,
Delaware counsel, international counsel, etc.).
4. Understand whether your MA counsel have the
necessary industry expertise for the transaction
you are contemplating. If not, consider whether
industry expertise is relevant to your transaction.
5. Ask for copies of publicly-ﬁled deal documents
(deﬁnitive acquisition agreements, SEC ﬁlings, etc.)
for precedent MA transactions that members
of the proposed “deal team” have prepared.
6. Ask your investment bankers (if already retained)
whether they think your MA counsel would
be a good ﬁt for the contemplated transaction.
If the answer is no, ask them to recommend
a number of law ﬁrms for you to consider.
7. Understand how familiar your intended MA
counsel is with your company. If historical
knowledge of the company is critical,
consider creating a role in the transaction
for your historical corporate counsel.
8. Conﬁrm that MA counsel have cleared conﬂicts
with respect to not just the company, but to all
third parties that may express an interest in a
transaction with the company as well. Also, conﬁrm
that they have cleared conﬂicts with respect to
each director and ofﬁcer of the company.
Stafﬁng the transaction
9. Understand how MA counsel intends to staff
the transaction, for example, the mix of associates
and partners and the various legal specialties
that will be called upon from time to time.
56 May 2011
23. Understand how often MA counsel
will invoice you.
24. Clarify with MA counsel how often you
expect to receive updates of fees incurred
(weekly, biweekly, monthly, etc.).
25. Consider whether to have your CFO meet with
MA counsel to discuss anticipated legal fees.
Consider also that the more involved your CFO is
in the retention and fee negotiation process, the
less chance that you as in-house counsel can be
reasonably accused of blindsiding the executive
team with unanticipated costs. Also, your CFO
may be able to play the role of “bad cop” and
can put the “hammer down” for cost controls.
26. Consider whether to have MA counsel
provide a forecast or budget for legal fees to be
incurred in connection with the transaction or
particular stages thereof (e.g., due diligence,
conﬁdentiality and other preliminary agreements,
deﬁnitive agreements, SEC ﬁlings, closing of
the transaction, etc.). Would such a forecast or
budget be helpful? Would MA counsel be held
accountable to such a forecast or budget?
27. Discuss with MA counsel partnering opportunities
with your legal department as a way to reduce
fees and expenses.
28. Discuss with MA counsel partnering opportunities
with your day-to-day corporate counsel, such that
any learning curve issues (and the fees that would
be incurred as a result thereof) can be avoided.
29. Discuss with MA counsel whether it or the
company should consider retaining temporary
or contract attorneys as a way to reduce fees
and expenses. This could help to avoid unduly
consuming internal legal resources otherwise
needed to close the business transactions
that keep your company in business.
Retention of other advisors
30. Discuss with MA counsel the need for the
company to retain any other external advisors
(e.g., investment bankers, accountants
and auditors, valuation experts, etc.).
31. Discuss with MA counsel who will be responsible
for reviewing and commenting on the engagement
letter agreements with other external advisors.
32. Explain to MA counsel what the company’s
expectations are with respect to timing (e.g.,
timing of negotiations, board and other
internal approvals, signing of deﬁnitive
agreements, closing of transaction, etc.).
33. Discuss with MA counsel whether the company’s
timing expectations are reasonable and/or realistic.
If not, discuss strategies for communicating
that to the board and/or management.
34. Consider whether to ask MA counsel for
a detailed week-by-week timetable for the
completion of the transaction. Ask MA counsel
to footnote any such timetable with a discussion
of circumstances under which such a timetable
may not be met. Discuss how often the detailed
timetable should be updated and circulated.
35. Discuss with MA counsel how deviations
from the projected timetable will be
communicated and addressed.
36. Discuss with MA counsel the protocols
for communications between MA
counsel and in-house counsel.
37. Discuss with MA counsel the protocols
for communications between MA counsel
and the company’s non-legal personnel.
38. Discuss with MA counsel how the internal and
external deal teams should best communicate
with each other and collaborate (weekly
conference calls, email, online document
work spaces, instant messaging, etc.).
39. Discuss with MA counsel whether they should be
contacting individuals inside your company without
going through in-house counsel. At a minimum,
you should be copied on all such communications.
40. Discuss with MA counsel whether they
should be communicating directly with your
CEO or CFO. At a minimum, you should
be copied on all such communications.
Chain of command
41. Discuss with MA counsel the chain of
command from the company to the outside
counsel, and clarify who outside counsel
should be taking its marching orders from.
42. Discuss with MA counsel how the
chain of command will be communicated
to all involved parties.
58 May 2011
43. Clarify with MA counsel who should be
perceived as the transaction’s quarterback —
the outside counsel or the in-house counsel.
55. Communicate to MA counsel the extent that
time is of the essence, and explain why.
Roles and responsibilities
44. Discuss with MA counsel how roles and
responsibilities will be divided between
in-house and outside counsel.
45. Discuss with MA counsel whether valuation/
price discussions will be handled by an experienced
in-house team, the investment bankers, executive
management, specialized advisors or MA counsel.
46. Discuss with MA counsel who will have
responsibility for setting up and maintaining
the electronic data room –– outside or inside
counsel, paralegals or investment bankers.
47. Discuss with MA counsel what documents
will be needed for the preliminary stages
of the transaction (e.g., conﬁdentiality and
exclusivity agreements, term sheets and letters
of intent), and clarify who has ownership
over the initial drafting of those documents
and the timing for the preparation thereof.
Visibility of MA counsel
48. Discuss with MA counsel how visible they should
be to the other side and when they should be
invisible. If the company has an experienced deal
team, then it might be reasonable for the in-house
team to be “front and center.” If the in-house deal
team is less experienced, then it might be reasonable
for MA counsel to take a more prominent role.
49. Discuss with MA counsel how visibility or
presence on a telephone call or meeting could
affect the dynamics of the discussions.
Goals and objectives
50. Discuss the goals and objectives
of the transaction early.
51. Clarify with MA counsel why the
company is pursuing this transaction.
52. Clarify with MA counsel how the
proposed transaction syncs with the
company’s business strategy.
53. Clarify with MA counsel what would need
to occur to make the proposed transaction
less attractive to the company and less of a
ﬁt with the company’s business strategy.
54. Clarify with MA counsel the extent to which
timing of the transaction affects, if at all, the
goals and objectives of the transaction.
56. Discuss with MA counsel the risks
(legal and business) to the company
of pursuing the transaction.
57. Discuss with MA counsel the potential
litigation risks to the company (and the
board) of pursuing a transaction and the
risks of not pursuing a transaction.
58. Discuss with MA counsel various strategies for
mitigating the anticipated risks to the transaction.
59. Discuss with MA counsel whether any
insurance should be considered to mitigate
any legal risks of the transaction (e.g.,
representation and warranty insurance).
60. Discuss with MA counsel the risks to the
company in pursuing a transaction. If a sale of the
company is being pursued, there is the possibility
of talent leakage as the process continues. This
can be mitigated, to some extent, by the adoption
and implementation of retention plans.
61. Discuss with MA counsel the potential harm to the
company if the transaction is not completed. This
includes the fact that the acquiring company might
be a potential competitor, and during the course
of the due diligence process, your company might
provide very sensitive and conﬁdential information,
which could affect the company’s ability to compete
with such competition if the deal is not completed.
62. Discuss with MA counsel the hurdles that the
transaction may need to surmount, including, but
not limited to, regulatory approvals, stockholder
approvals, third-party consents, SEC, etc.
63. Discuss with MA counsel the potential
“showstoppers” that could cause
the transaction not to occur.
64. Discuss with MA counsel strategies to
mitigate and avoid any “showstoppers.”
65. Provide MA counsel (and any other external
advisors) with an update on the company’s industry
and recent developments with respect thereto.
60 May 2011
66. Provide MA counsel (and any other external
advisors) with an update on the company, its
products and services, go-to-market strategy, MA,
corporate development, and other growth plans
and recent developments with respect thereto.
(e.g., reluctance of some private equity ﬁrms
to commit to two-step tender offers and their
preference for one-step merger transactions).
71. Discuss with MA counsel what internal
and external approval processes the
transaction may be subject to.
72. Discuss with MA counsel what internal approvals
are required before proceeding (CEO, CFO, board,
signiﬁcant or controlling stockholders, etc.).
73. Discuss with MA counsel possible steps
that could be taken in advance to make
these approvals easier to obtain.
74. Discuss with MA counsel whether the transaction
will be subject to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR).
75. Discuss with MA counsel whether any HSR
issues can be addressed up front to make sure
the deal is not delayed due to HSR issues.
76. Discuss with MA counsel the timing and
mechanics for stockholder approvals (e.g.,
preparation and ﬁling of a proxy statement).
67. Clarify with MA counsel the various transaction
structures that can potentially satisfy the company’s
objectives. Consider whether to involve other
C-level executives in these discussions (e.g.,
CFO, treasurer, corporate development, etc.).
68. Understand from MA counsel the tax
consequences of the various transaction
structures under consideration.
69. Discuss with MA counsel how the various
transaction structures under consideration
affect the timing of the transaction.
70. Discuss with MA counsel how the various
transaction structures under consideration would
affect the ability of the company to attract a buyer
Mergers and Acquisitions
Product Liability Defense
Energy and Agribusiness
Employment and Benefits
61 May 2011
ACC Extras on… Issues to Clarify with Your MA Counsel
• Distressed Acquisitions: How You Can Create Value
During Difﬁcult Times (April 2010). Read this article to
learn how to reshape the business with a well-structured
acquisition and restructured relationships with key
• Bet the Company: Litigation from a Policyholder’s
Perspective (May 2009). This article empowers policyholders
and offers guidance on how to persevere when litigation
• Look Before You Leap (Oct. 2010). This third edition of
Deloitte’s “Look Before You Leap” survey focuses on the
use of background/integrity checks when considering a
business relationship, investment or acquisition outside
of the United States. www.acc.com/look-leap_oct10
• Top Things to Know About MA Involving Intel
Companies (April 2010). This article discusses the
top things to understand when undertaking the
acquisition of an intelligence agency contractor.
• Top Ten Indemniﬁcation Concerns in MA Transactions
(Mar 2009). This ACC Top Ten focuses on the more
complicated side of indemniﬁcation concerns, which usually
is the business buyer’s side, of mergers and acquisitions.
77. Discuss with MA counsel whether any
regulatory approvals or notiﬁcations will need
to be obtained or made in connection with
the transaction, and the timing thereof.
78. Discuss with MA counsel whether any
third-party consents or notices will need
to be obtained or given in connection with
the transaction, and the timing thereof.
Board and governance issues
79. Discuss with MA counsel what board of
directors and governance issues will need to be
addressed as the transaction unfolds (the need
for board and/or committee meetings, board
presentations, board authorizations, etc.).
80. Discuss with MA counsel the current schedule for
board and/or committee meetings and determine
the need for any special meetings to be scheduled.
81. Discuss with MA counsel what ﬁduciary duties
will be applicable to members of the company’s
board of directors and what steps will need to
be taken to ensure that board members comply
with their ﬁduciary duties under applicable law.
• ACC Compliance Training Portal. The ACC Compliance
Training Portal provides information and resources
on a wide range of compliance issues that affect your
everyday professional life. With this helpful online
tool, you can provide the best ethics and compliance
advice to your client. www.ethicsxchange.com
ACC has more material on this subject on our website.
Visit www.acc.com, where you can browse our resources
by practice area or search by keyword.
The new GLD button lets you click to copy, print or email
a checklist from certain ACC online resources.
82. Discuss with MA counsel any lead times
applicable to providing board and/or
committee members with brieﬁng materials
in connection with an MA transaction.
83. Discuss with MA counsel whether in-house or
outside counsel will have responsibility for preparing
materials that will be distributed to the company’s
board of directors (e.g., agreement summaries,
ﬁduciary duty memos, reasons for transaction, risks
of the transaction, proposed resolutions, etc.).
84. Discuss with MA counsel what deﬁnitive
agreements would be customary for the
transaction structure being contemplated.
85. Discuss with MA counsel whether in-house or
outside counsel will have primary responsibility
for the initial drafts of the deﬁnitive agreements.
86. Discuss with MA counsel the timing for the
preparation of the initial drafts of the deﬁnitive
87. Discuss with MA counsel what process should
be followed for having the initial drafts of the
deﬁnitive agreements reviewed and discussed
62 May 2011
with internal groups at the company. For example,
the representations and warranties with respect
to ﬁnancial statements and other ﬁnancial
information should be discussed with, and
reviewed by, the ﬁnance and accounting groups.
88. Discuss with MA counsel whether inhouse or outside counsel will have primary
responsibility for preparing the initial
draft of the disclosure schedules.
Deal protection issues
89. Understand from MA counsel what deal
protection devices are available to the
company to protect the transaction.
90. Discuss with MA counsel what the
current legal landscape is with respect to the
enforceability of deal protection devices.
91. Review with MA counsel the strategic
players that might be expected to attempt to
interfere with any signiﬁcant MA transaction
that might be pursued by the company.
92. Discuss with MA counsel who will have the lead
in negotiating the terms of the deﬁnitive agreements.
93. Discuss with MA counsel what the
negotiating approach and strategy will be.
94. Discuss with MA counsel which issues
in the deﬁnitive agreement are particularly
sensitive to the company and which are not.
95. Ensure MA counsel have clarity on the
issues that the company does not want
to allow the deal to get hung up on.
96. Clarify with MA counsel when the company
would be required to publicly disclose that
it is pursuing an MA transaction.
97. Clarify with MA counsel whether the company
or outside counsel would be responsible
for preparing press releases and other
communications related to an MA transaction.
98. Discuss with MA counsel whether in-house or
outside counsel will have primary responsibility
for preparing the initial drafts of the various
SEC documents that will need to be prepared in
connection with the transaction (e.g., Form 8-K’s,
proxy statements, tender offer documents, etc.).
99. Discuss with MA counsel what SEC clearance
processes will need to be followed in connection
with the transaction and how those processes
could affect the timing of the transaction
and the choice of transaction structure.
100. Discuss with MA counsel any open or past
SEC issues that could affect the timing of the
SEC’s review of any documents ﬁled by the
company in connection with a transaction
(e.g., unresolved comments on your
company’s annual report on Form 10-K).
Shepherding the “bet the company”
can be successful
Shepherding a signiﬁcant or “bet the company” MA
transaction can be one of the most exciting events in the
career of an in-house counsel. A tremendous amount of
additional responsibility is quickly placed at the feet of
in-house counsel, but with that responsibility comes the
opportunity to evolve and/or change the future of your
company forever, as MA often does. Given the huge
amount of legal, logistical and other work involved in
driving an MA transaction to successful completion,
it requires an intense amount of partnering between inhouse counsel and other internal colleagues, with outside
MA counsel. We hope the 100 items listed above will
provide in-house counsel with a useful roadmap for those
issues that need to be clariﬁed sooner rather than later
with outside MA counsel. Following this roadmap leads
to a clear understanding of, among other things, roles and
responsibilities, expectations and goals, and objectives.∑
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64 May 2011