Experimental feature

Listen to this article

00:00
00:00
Experimental feature

While most lawyers are comfortable in a courtroom, deals lawyers must also feel at home in the boardroom.

Clients increasingly expect mergers and acquisitions (M&A) lawyers to help them in making decisions about business strategy. This involves having a deep knowledge of a client’s objectives.

Much of that insight comes from having direct experience of many deals, says Alan Klein, co-head of law firm Simpson Thacher & Bartlett’s M&A practice in New York. “We see more transactions in a year than most people at companies see in their lifetime so we are well placed to make an assessment on when deals make sense,” he says.

The role of M&A lawyers in dealmaking traditionally boils down to technical expertise, but many specialists think the hallmark of a great deals lawyer is business knowledge.

“It is hard to separate legal and business advice when you are advising the board of a public company on how to best satisfy their fiduciary duties,” says Eric Schiele, a corporate partner at Kirkland & Ellis in New York who has advised clients such as AbbVie and Time Warner. Mr Klein says: “If you think about it, there is nothing but business advice that we are offering.”

Dan Evans, co-head of the private equity industry group at law firm Ropes & Gray, says deals lawyers have to understand business risk. “In order to convey the advice sensibly you need to be willing to express a view on things like risk,” he says.

“[You might ask:] ‘Is this a sensible risk to take or not?’ You can’t do that without being able to express a view on something that involves business judgment.”

Cheap borrowing costs, increased boardroom confidence and the recent tax reform bill in the US have led to a flurry of activity that sent M&A transactions to a record high of $3.2tn in 2018.

Whether companies are buying trophy assets or consolidating with rivals, their primary concern is to ensure that the deal will work. This is where M&A lawyers have the potential to add value to their adviser role.

“There are plenty of good deal lawyers in the world who, when confronted with challenging facts, will tell a client that it is impossible to complete a transaction,” says Frank Aquila, a partner at law firm Sullivan & Cromwell. “The mark of an excellent deal lawyer is to be innovative and find a way that it will work”.

This is particularly important for public companies, which face more scrutiny than private counterparts. Shareholder activism has intensified this year and brought several deals under pressure from institutional shareholders.

Even old-school asset managers such as Wellington Management and Vanguard Group, which do not typically speak out against deals, have shocked many on Wall Street by being more vocal.

Mr Schiele says M&A lawyers should not be afraid to advise boards of their assessment of a potential deal, but they must not substitute their own judgment for that of the directors.

“Public company boards often have to make decisions based on imperfect information,” he says. “A good lawyer should be able to say with conviction what they would do in the board’s position and to do that they cannot answer just on a legal basis, it has to be done with management of business risk in mind.”

Mr Aquila agrees: “Sophisticated clients don’t really want pure legal advice, they want practical advice that is actionable,” he says. “But I never try to play banker and I never try to play chief executive”.

Business acumen aside, there are myriad ways that M&A lawyers can help clients get better value.

Recently firms have been in a bidding war for lawyers who can navigate US foreign investment reviews as Washington steps up its scrutiny of cross-border deals on national security grounds.

Leading global law firms have poached specialists from each other and from government agencies because so few lawyers have experience in dealing with the Committee on Foreign Investment in the US, known as Cfius.

The threat that Cfius can derail a blockbuster deal — as seen by President Donald Trump’s decision to block Singapore-registered Broadcom’s $142bn hostile bid for the US chipmaker Qualcomm — has made the process a priority for dealmakers.

“It is a new issue that you need to be tuned up [to] and it needs to be in your toolbox,” says Mr Evans. “While it is important, it is difficult to add a lot of monetary value”.

For Mr Klein, M&A lawyers add value by expecting the unexpected. “A talented M&A lawyer has to come up with creative answers to very complicated questions because they are going to run into something that they haven’t done before,” he says.

“It is like playing chess where you know what your possible moves are, you anticipate what is coming next, and you pick the least risky move”.

The tables below rank law firms for the FT Innovative Lawyers North America awards.

Managing Complexity and Scale
RankLaw firmDescriptionOriginalityLeadershipImpactTotal
STANDOUTKirkland & EllisThe practice designed a deal to sell logistics client GLP's US real estate portfolio to private equity group Blackstone for $18.7bn. One of the largest-ever private real estate transactions, it involved co-ordination between three GLP funds with separate investor bases to sell 1,300 properties as a single portfolio.89825
STANDOUTShearman & SterlingRepresented Dow in the separation of DowDuPont, which was valued at $130bn, into three companies. This complex transaction required more than 1,000 ancillary agreements covering factories in 30 countries. Lawyers had to develop a working understanding of chemical engineering to make the separation work.88824
HIGHLY COMMENDEDKirkland & EllisShareholders Starboard Value, an activist investor, and Wellington Management, an investment firm, opposed the acquisition of Celgene by Bristol-Myers Squibb, represented by Kirkland & Ellis. The firm blocked the opposition and co-ordinated contingent value rights for shareholders for the $74bn deal, which closed in November.88723
HIGHLY COMMENDEDPaul HastingsThe firm helped clients Citigroup, HSBC and JPMorgan prepare a tender offer for the Mexican government to buy back $1.8bn of debt to prevent it defaulting on its $6bn loan after the cancellation of a new airport near Mexico City.78823
HIGHLY COMMENDEDDechertDechert advised on the $70bn merger of CVS Health with Aetna, which was challenged by the US Congress and resulted in an antitrust investigation. The firm convinced regulators of the benefit of the merger, which completed within 10 months.77822
HIGHLY COMMENDEDHogan LovellsThe firm helped its client, the MexCAT Ad Hoc Bondholder Group, improve the terms of a restructuring by which the Mexican government bought back debt after President Andrés Manuel López Obrador cancelled construction of a new airport in Mexico City.68822
HIGHLY COMMENDEDCadwalader, Wickersham & TaftHelped draft US legislation and guidance to support global banks and financial institutions with the move from Libor, the current benchmark for short-term interest rates, scheduled to be replaced by December 2021. It is the only law firm in the Alternative Reference Rates Committee, convened by the Federal Reserve Board and New York Fed.68721
HIGHLY COMMENDEDKing & SpaldingThe firm defended South Carolina Electric & Gas, a Scana Corporation subsidiary, in multiple lawsuits and criminal and Securities and Exchange Commission investigations after the cancellation of $9bn of construction projects. It paved the way for Scana's acquisition by Dominion Energy in January.77721
HIGHLY COMMENDEDOrrickThe firm negotiated on behalf of the Cofina Senior Bondholders Coalition to restructure Puerto Rico's sales tax debt after the territory filed for bankruptcy relief in 2017. The lawyers' work allowed new bonds to be issued exempt from tax, a move that will save its clients $1bn over the life of the bonds.76821
COMMENDEDCravath, Swaine & MoorePharmaceutical companies Mylan and Upjohn, a subsidiary of Pfizer, are expected to merge by mid-2020. Cravath, Swaine & Moore navigated Dutch, UK and US tax law to structure the deal as a “Reverse Morris Trust”, where a company spins off a unit and combines it with another group, to ensure tax benefits.78520
COMMENDEDCrowell & MoringThe firm helped military shipbuilder Huntington Ingalls Industries develop its cyber security risk framework and implement compliance management software to improve its supply chain.76720
COMMENDEDHogan LovellsHogan Lovells arranged simultaneous transactions to enable client Walmart to buy Indian ecommerce company Flipkart in a $16bn deal.76619
COMMENDEDPaul HastingsThe firm created an agreement to allow client Canopy Growth, a Canadian cannabis producer, acquire Acreage Holdings, a US cannabis company. The deal was struck despite the production and sale of cannabis being illegal on a federal level in the US. If cannabis is legalised by the end of 2026, the deal is set to give its client a dominant market position.75719
COMMENDEDWeil, Gotshal & MangesTo protect Sears from liquidation, the firm led the company's Chapter 11 restructuring, which involved the sale of about 260 stores to create a $240m “wind-down account”. The move saved 45,000 jobs and set up the sale of Sears to ESL Investments for $5.2bn.67619
Managing Complexity and Scale (in-house)
RankIn-house legal teamDescriptionOriginalityLeadershipImpactTotal
StandoutQualcommAlongside external counsel including Cravath and Quinn Emanuel, the in-house team at the telecommunications equipment company pursued injunctions against Apple in multiple jurisdictions to persuade the technology company to settle a dispute over the use of Qualcomm's modems in Apple's iPhones. The two companies have now agreed a global settlement, ending 180 lawsuits and other proceedings in the US, Europe and Asia.78823
Highly CommendedGeneral MotorsHelped the business navigate a complex restructuring of GM Korea, which included negotiating with the state-owned Korea Development Bank and brokering an innovative labour agreement while managing opposition from labour unions. It allowed GM Korea to continue operating.88622
Highly CommendedPayPalNavigated complex contractual arrangements and heavy regulations to enable the business to sell its consumer credit portfolio to Synchrony, a financial services company, for $7bn, seamlessly transferring the balance sheet without altering the PayPal customer experience.78722
Highly CommendedUnited AirlinesWorking with law firm Seyfarth Shaw, the in-house team developed a strategy to defend the company against claims that it had violated employees' biomedical privacy rights by using thumbprint data for clocking in and out.78722
CommendedAmérica MóvilUnconventionally for the telecoms industry, the company is pursuing international arbitration to challenge a $1.2bn fine by the Colombian government. At the same time, the in-house team have taken a new approach to a government-ordered reorganisation of its Mexican operations, applying an internationally inspired model based on the separation of BT and Openreach.68721
CommendedBlackstoneIn-house lawyers supported the private equity group in its acquisition of Clarus, a life sciences investment firm, in order to launch Blackstone Life Sciences. The legal and compliance team integrated Clarus into Blackstone, which plans to keep the company. 57719
CommendedOcwen FinancialWhen US mortgage provider Ocwen acquired PHH Mortgage, the in-house team supported the business in handling the merger while moving over 1m loans from Ocwen's mortgage servicing platform to PHH's.57719
CommendedSolenisThe global industrial water treatment company acquired BASF's paper wet-end and water chemicals business, which doubled the headcount without doubling the size of the legal team. The in-house team worked quickly to ensure everyone was using the same contractual standards from completion of the deal, minimising disruption to the business.57719

Get alerts on Legal services when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)
Explore the Special Report
About this Special Report

The US justice system is being politicised on all sides, at all levels. Plus: top 10 legal innovators; three ways to improve gender diversity in firms; protecting immigrants’ rights; preserving attorney-client privilege; deals lawyers’ skills

Follow the topics in this article