Counsel to Counsel - May 2008 - (Page 16)

in the spotlight ©iStockphoto.com/Alexey Klementiev AdverseChanges By Steven Andersen Think Ahead in a Strained M&A Market the process as much as possible, because the longer it runs in the current market, the more chance there is that something is going to break.” Counsel need to foresee as many obstacles as possible and provide suitors with a complete and comprehensive package. This reduces the time buyers need for due diligence, and, consequently, the number of things that can slow the process down. Also, lenders increasingly want to perform due diligence of their own, and the more organized your information, the better your company will look to them. “The more you can hand all this to your buyer on a platter,” O’Connell explains, “the smoother and faster the process will be, and that matters a lot more than it used to.” Sellers are wise to investigate the buyer as well. Financing problems are among the chief reasons deals fall apart, so find out if your buyer has enough money before entering into an agreement not to talk to other potential buyers. Make sure you understand the details of the buyer’s financing arrangements, too, because lenders can invoke material adverse change (MAC) clauses and other loopholes of their own. The seller cannot affect these terms, LexisNexis® Martindale-Hubbell® R eached at his desk in Kansas City, Gary D. Gilson sounds busy. His firm has recently completed a merger to form Husch Blackwell Sanders LLP and as with , any merger, sorting out the integration issues takes time. “It’s given me even more empathy for our clients who go through this all the time,” says the M&A partner. Not that he’s complaining. In the current market, the number of deals that never make it to closing is on the rise. (See On the Rocks.) Gilson says that in his experience, 10 percent to 15 percent of proposed deals break up. Some reports have that figure up to 20 percent in 2007, he says, and you can expect that volatility to continue. The increase in failed deals is due directly to the credit crunch and worsening concerns of recession. On one side of the coin, lenders have to devote much of their capital to covering subprime losses, shrinking the pool of available funds. On the other side, performance is slipping as the overall economy stumbles, reducing the attractiveness of deals. It’s a harsh combination. “The economics of the typical transaction have changed,” Gilson explains. “When you can’t leverage it as much, obviously you have to put in more equity, and you really have to pump up performance to get the rates of return that private equity sponsors want.” That means more broken deals, more damage to reputation and value, and more litigation. But there are things corporate counsel can do to moderate the risk. On a Platter “We’re advising clients who want to sell to prepare in advance—before they put their company on the market,” cautions Mary Anne O’Connell, a Husch Blackwell Sanders partner in St. Louis. “You want to shorten “ oureallydon’twant Y togetinthesituation whereyou’vetold everybodythatyou haveadealgoing on—yourcustomers, yourworkforce,your banks—andthenallofa suddenitbreaks.Trying topickupthosepieces canbeverydifficult.” 16 http://www.iStockphoto.com/Alexey

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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