For corporate counsel, work related to mergers and acquisitions can be equal parts challenging and incredibly rewarding. Two experienced GCs discuss the key roles they play in M&A transactions, and the skills that are required.
When a company undertakes an M&A transaction, the role that the general counsel and their team play is critical. And when a company has acquisitions in its DNA – as many in Asia do – having the skills to execute these deals smoothly becomes an essential part of an in-house role.
M&A work from an in-house perspective can be challenging and involve a great deal of coordination and legwork, but the payoff at the end – a perfectly executed transaction – can make it all worth it.
So what are the essential components of an M&A transaction for an in-house lawyer, what roles do they play, and what are the key skills they need?
For Mark Tan, the Singapore-based managing director and general counsel at Global Logistic Properties (GLP), one of the unique features about M&A transactions is that the parties need to continue to be able to work together following the closure of the transaction.
Tan was involved in Asia’s biggest private equity buyout last year, when an international consortium’s acquired GLP, Asia’s largest warehouse operator, for $11.6 billion.
“A successful M&A transaction is one that continues to be a success following closing of the transaction, and this requires addressing the immediate needs of both parties but also being sustainable and workable on a longer time horizon,” he notes.
Spending more time up front to ensure there is clarity and agreement on how the relationship will work going forward often pays enormous dividends afterwards, he adds.
“The factors that can impact long-term success include the economics of the transaction, operational factors such as the degree of involvement in decision-making, how integration will be achieved and how each party is expected to handle unexpected changes going forward, including changes to the macro environment,” he explains.
One of the key roles that the in-house team has to play in his process is achieving a balance between looking out for the long-term interests of the company while meeting the immediate needs of any given transaction.
BEING THE ‘FACE’
One of the biggest challenges faced by in-house counsel in an M&A transaction is being the “face” of the firm during negotiation, is how a company, including its advisors, is perceived during negotiations can have a long-term impact on the success of a transaction once it closes.
“It is important being able to be aligned with stakeholders and recognising that for many deals, there are many different stakeholders. These can range from the board of directors to senior management to individual business units,” says Tan.
“Achieving alignment with all stakeholders, or understanding how the needs of different stakeholders should be prioritised, is critical as this will dictate what should be achieved in any transaction and where there will be flexibility,” he adds. “Being the ‘face’ of the company should not detract from advocating strongly but this can only be done with a clear understanding of priorities.”
In order to be an effective in-house counsel, it is important to avoid being too lawyerly, he adds. “Often, when this characterization is made, it is because there is a perception that issues that are not important to the overall transaction are being unduly prioritised.”
“If there are technical points that are important, then communicate those to the appropriate stakeholders to ensure they are prioritised,” he advises. “If there are commercial points that are important, it is also important to understand these and also to understand what the drivers of these points are.”
PICK YOUR BATTLES
An attitude of winning every point at all costs is rarely beneficial in the long run, Tan warns. However, at the same time, it is important to advocate strongly and zealously for issues that are important.
“Fighting on every point detracts from the ability to win the points that are important to the company and, importantly, it shows a lack of understanding of what both sides are trying to achieve,” he says. “This doesn’t mean that one needs to always ‘leave something on the table’ but often being able to achieve your goals requires being flexible where you are able to.”
“M&A transactions survive past the closing of negotiations and the deal. To achieve long-term success, both parties should come away comfortable that they are now partners,” Tan adds.
The primary role of in-house counsel in any M&A transaction is ensuring that both the immediate and long-term issues that are important to the company and its stakeholders are addressed.
For the GLP GC, one of the keys to success in an M&A transaction is being able to achieve this while simultaneously not adversely affecting the perception of the company during negotiations.
“This involves careful coordination of all aspects of the negotiation as well as careful coordination of all external advisors – whether they be legal, financial or otherwise – to ensure that all parties are working towards the same goal,” he says.
One of the key drivers of success in any negotiation is also recognizing the need to pivot at key moments in any given negotiation.
“Priorities for both sides change as negotiations progress and being able to recognize changes in priorities is often the key to overcoming roadblocks and stalemates,” he notes. “Showing creativity and thinking outside of the box (and encouraging all parties to do the same) can ensure that a transaction is successful instead of being aborted.”
CONFIDENTIAL COMMUNICATION
Gordon Chan, the Hong Kong-based vice president of legal and corporate affairs of Asia Pacific at Hyatt Hotels & Resorts, emphasizes the importance of communication for in-house counsels in an M&A deal.
For starters, in-house counsel need to guide external counsel as to what the focus should be. “It should not be generic – for example, checking the change of control and the termination clauses – but a deeper instruction on what you are looking for in your due diligence or M&A transaction,” Chan says.
“External counsel will not know exactly what you are looking for and will just look at the usual things, like the new change of control clause, termination, any penalty or compensation charges. Those things like that they may look at, but they may look at it from a different angle of what you're trying to achieve.”
There should also be professionals assisting in-house counsels with the communication, such as professional translations as well as public relations. “Have a point person in PR to handle media,” he advises.
This is especially important for public companies or a disclosable transaction as there will be a proper format for the statements to follow. “You will need to have the designated PR person to help with it, and then the legal team need to review it. So I will review it, and then we have standard clauses that we use for the disclaimer for PR statements,” Chan says.
And finally, and one of the most important, is keeping the deal confidential until it’s done. “You need to be very disciplined,” Chan emphasized. “In case you suspect leakage of information, you really need to make sure that you have a backup plan and work with the PR firm and the media team within your company regarding how to react.”
