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Law and the deal

Mergers and Acquisitions attorneys need broad skill set

Successful attorneys practicing in the area of mergers and acquisitions need a broad skill set, not all of which are taught in law school. An understanding of the business side of the deal is just as important as the legal end, attorneys say.

The current lawsuit filed against the proposed sale of Cadence Bank to a Texas company illustrates the pitfalls that can arise when one or both sides take issue with a transaction.

“It is surprising the things that can come up,” says Ken Rutherford, of counsel at the firm of Daniel, Horton & Bell. “Every deal is different, and every one has problems that require one to think outside the box and be creative.”

“You have to love the art of the deal,” says Johnny Healy III, member of Butler, Snow, O’Mara, Stevens & Cannada and co-chair of the firm’s Business Services Group. “For business lawyers, closing a deal is our successful trial verdict.”

So, did attorneys do a poor job in handling the Cadence transaction? Are the attorneys at fault for not practicing due diligence and communicating to their client the transaction’s risks?

None of the attorneys interviewed for this story were familiar with the lawsuit or the work performed by the attorneys in the Cadence deal and declined to comment specifically on the case. However, broadly they say it depends on the clients’ expectations.

“Any engagement depends on the scope of the work,” says Martin Willoughby of the Willoughby Law Group. He adds that in some M&As, the attorney functions as a mere coordinator. In others, the lawyer is the point person. “It depends on what the attorney is hired to do,” he adds.

Deals involving smaller concerns can be much tougher than working deals with larger entities. Larger companies are often more “acquisition-savvy,” requiring attorneys to simple serve as assistants. Smaller companies, on the other hand, often need more of their legal counsel, expecting them to “quarterback” the deal.

No matter the size of the entities involved, M&A attorneys are charged with proper due diligence and mitigating or spreading the risk of the deal, protecting the client from problems before, during and even after the transaction.

In the Cadence deal, the plaintiffs allege, among other things, that shareholders were not given accurate, complete information about the transaction. This is not an uncommon issue in the M&A arena. However, attorneys report other issues, some seemingly mundane, can have them working long and hard to overcome.

Rutherford, who works out of Daniel Coker’s Oxford office, gives as example a deal he previously worked for an undisclosed client. There arose a sticking point — one side were casual attire-types while the other side was more coat-and-tie folks. He said the two sides haggled at length over the post-transaction dress code. It was all about culture.

Healy, who earned a B.B.A. in banking and finance from Mississippi State University and subsequently his juris doctorate (cum laude) from Ole Miss, relates a story of a client that sold to a venture capital group, and just this year repurchased the company due to cultural differences.

“You have to understand, on the business side, the synergies and be concerned with the meshing of cultures and philosophies,” says Healy. He adds that these are skills one cannot learn in the classroom.

“That requires on-the-job training,” he says.

Steve Hendrix, a partner in the firm of Forman Perry Krutz & Trady, LLP, earned both bachelor and master degrees in accountancy from the University of Mississippi before earning his juris doctorate (cum laude) from the UM School of Law. He says having the knowledge of how to read a financial statement is an obvious plus in his M&A practice. However, even that is not enough to ensure success.

“It’s certainly more than just legal,” Hendrix says. “You have to have superior people and communication skills, particularly listening skills. In the end, it requires a lot of versatility.”

“Really, what you are working for is your client having the information to make an informed decision,” Healy said. “You have to try to reflect the terms of the deal, and the risk involved, in as clear of terms as possible. Eighty pages of legalese that no one but an attorney can understand are counterproductive. You must be able to communicate.”

Patience and perseverance are other attributes an M&A attorney must have.

“Some attorneys often earn the tag ‘deal-killer,’” Willoughby says. “To me, a ‘deal-killer’ is an attorney who, when faced with an early problem, gives up. Any deal is going to have issues and problems. Great attorneys turn these issues and problems into opportunities for their clients.”

Willoughby, who has an extensive background as a business owner and formerly worked for a large Mississippi law firm before founding Willoughby Law Group, quickly adds that effective M&A attorneys are not “yes” people. Sometimes a client is better served to walk away from a deal. “In that sense, a ‘deal-killer’ is doing his or her job,” he says.

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