Transaction management: Lessons for business owners from an abortive company sale and purchase transaction
Corporate lawyers like to close deals. Not at any price, however. No deal really is better than a bad deal, sometimes – although, we will not get bogged down in politics and situations where one party views an existing deal as very generous, but the other party perceives it to be a bad deal.
We recently acted for one party in relation to an abortive fintech merger. While we pride ourselves on getting the deal done, we couldn’t get this one over the line for our client. Such is life in the ever-evolving world of corporate deals. Our client took a view that certain risks associated with the transaction outweighed the apparent opportunity originally envisaged. No closing and no champagne celebrations is always disappointing. In this matter, our disappointment was compounded by having to deliver our client a significant bill – barrage of lawyer jokes expected at this juncture!
Our client is gracious about our bill and we applied an abort discount to share in their pain. The most galling thing about the matter, and our client concedes such, revolves around good transaction management. On the plus side, our client involved us early, so we could assist in settling the heads of agreement between the parties. This is always good practice and allowed us to highlight the potential pitfalls and sticking points likely to arise during the sale and purchase process. We were not, however, involved in certain aspects of the due diligence exercise and elements of the commercial negotiations that spilled over into the legal realm.
Had we been more intimately involved with the due diligence exercise, we could have insisted on further drafting costs not arising before key diligence concerns, which ultimately killed the deal, had been resolved. Needless to say, this would have saved our client considerable lost costs.
If we had been brought in at certain points during the commercial negotiations, we could have deterred our client from making some of the other side’s corporate restructuring issues, our client’s issues. Our client was keen to make the deal work and agreed to underwrite certain legal costs of the other party. While this is sometimes required to get deals done, it needs to be handled sensitively. If structured incorrectly costs underwrites can result in loss of negotiating leverage, when one party ultimately has less ‘skin in the game’ (notwithstanding the expression being awful).
Having closed hundreds of transactions with deal values ranging from a few hundred thousand pounds through to a billion US dollars, it is the one that gets away that sticks in our craw, especially when our client suffers.
The economic environment has been undoubtedly hard for the last year or so and legal costs are never welcome. Cutting back on good advice can often prove a false economy, however. With this in mind, we are always available to discuss fixed fee and other bespoke arrangements for transactional work and other business law services. Our experience proves that it is in our clients’ best interests to have us involved as early as possible in any process. On that basis, we will never charge for any initial exploratory conversations to see where we can add value and protect your interests. After all, we like to close (and hear the corks pop!).
If you have specific queries about a merger or acquisition, or any other commercial or corporate matters, please contact Richard Baxter on 020 7412 0050 or firstname.lastname@example.org.