episode 

The Legal Team’s Role in M&A

Andrew Gratz

In this episode, Andrew shares why the legal team's involvement early in the deal process is important and the different key milestones in a deal they are responsible for. He also talks about the dangers of deal fever, working with corporate development teams, and more.

Jeff Desroches
VP of Corporate Development at Atlas Copco
Ivan Golubic
Former VP Corporate Development at Goodyear
Erik Levy
Group Head Corp Dev and M&A at DMGT PLC
Kison Patel
CEO at DealRoom

The Legal Team’s Role in M&A

7 Apr
with 
Andrew Gratz
Or Listen On:

The Legal Team’s Role in M&A

The Legal Team’s Role in M&A

The legal team needs to be involved from the beginning of the M&A process. Some strategies have inherent legal risks, and it is the legal team's job to understand the regulatory, legal, and jurisdictional issues and obstacles that may be present in the transaction. The worst thing that could happen is you spend a lot of money and time looking at a transaction that you shouldn't even be looking at in the first place.

"If you don't understand the why you can't effectively develop the how." - Andrew Gratz.

Key milestones that the Legal Team is responsible for

  1. Non-Disclosure Agreements - Whether you are a buyer or seller, it is in your best interest to have an NDA. There are also a lot of things that go into an NDA. Your legal team needs to provide or detect the correct language to protect you from litigation or any other unwanted obligation that you might get yourself into.
  2. Letter of Intent - Whether it's binding or non-binding, this is your very first chance to make a pitch as to why the seller should choose you as the buyer. Drafting your LOI thoughtfully and methodically will help you secure the transaction.
  3. Diligence - It is the legal team's duty to confirm if the seller has the proper ownership of the asset that you are buying. Do they have the correct licenses, intellectual property, and the proper documentation needed for that asset to be sold.
  4. Purchase Sale Agreement - The legal team is the one that finalizes the sale. The Purchase Sale Agreement should include what you are buying and what you are not buying.
  5. Deal Fever - Executing a bad deal can be devastating for the company. Deal fever tends to lead certain companies to assume risk disproportionate to the reward. The legal team can help mitigate deal fever by detecting liabilities that you might unintentionally assume.

special guests

Andrew Gratz
Assoicate General Counsel

special guests

Andrew Gratz
Assoicate General Counsel

Hosted by

Kison Patel
episode 

Episode Transcript

Intro

I'm your host, Keystone Patel, CEO, and Founder of M&A Science and Dealroom. Today I'm here with Andrew Gratz, Associate General Counsel at LyondellBasell a $30 billion publicly-traded petrochemical company with over 19,000 employees located across 32 countries.

Andrew manages a seven-member legal team that's responsible for supporting LyondellBasell's global mergers and acquisitions, divestitures, and other strategic transactions. 

Today we’re going to talk about what role legal teams play in M&A, and how their function interacts with the corporate development team.

Andrew, if you wouldn't mind kicking things off, telling me a little bit about your background and some of the recent deals that you've been working on. 

The most recent deal at the end of last year is LyondellBasell entered into a $2 billion joint venture with Sasol. Sasol built a significant petrochemical complex in Lake Charles, Louisiana.

Sasol was looking to divest part of its equity in that joint venture and LyondellBasell acquired it. A few years ago, I was also involved in LyondellBasell's acquisition of A Schulman which was a publicly-traded specialty chemical company. 

That was the first major acquisition that LyondellBasell had done for 10 plus years. Why that was important for numerous reasons is LyondellBasell has an interesting history where as soon as Lyondell, chemical and Basell, one US, one European company merged in 2008. 

Very quickly thereafter, due to the financial crisis and other reasons filed for bankruptcy. So that a showman acquisition I mentioned a few minutes ago was the first major transaction the company had pursued and accomplished post-bankruptcy. 

Two transactions I'm very proud of a lot of kicking tires and other smaller transactions, but I thought I would highlight those two. Since those over the last few years have taken a significant amount of my time. 

What role does legal play in M&A? 

If done correctly, we are there from the very beginning. If there's any advice I can give to those on different business development teams that may be listening in, bring your legal team in as soon as possible. 

We have a very strong business development team here at LyondellBasell and thankfully they bring in legal from the beginning. 

Looking at different targets

My team and I are involved and looking at different targets, thinking if those targets are the right fit. 

And the reason why it's so important to bring legal in as quickly as possible is my primary role as attorney for the company is to understand the regulatory, legal, and jurisdictional issues and obstacles that may present themselves with any transaction. 

  • Are we going to have issues going to a certain new country?
  • Into a certain industry? Are we going to have antitrust concerns?
  • National security issues? 

You want those issues highlighted and flagged sooner rather than later. Understanding whatever obstacles that lay ahead from the very beginning are key. 

Helping to get aligned with the strategy

One of the things I tell my team all the time, and they're probably sick of hearing it is if you don't understand the, why you can't effectively develop the, how.

Here's what I mean by that, whether you're in legal business, commercial, finance, tax, HR, name, your function. If you don't understand why the transaction is being pursued, how can you develop the appropriate vehicles, agreements, arrangements that advance that goal? 

If the goal is simply I want to buy, I want to sell, is it to pursue and build up those businesses you think are going to grow in the future? Is it to divest a business that you don't think fits in your portfolio anymore? 

Is it simply to get your toes wet into a certain industry and country so you better understand what's out there. It is the business development team's obligation to get every function, especially legal aligned on what the strategy is. 

Because if you don't understand that strategy, you're operating in the dark and you're not getting what you need to get or what you should get from your legal finance business teams.

Keep the team focused on the strategy

Every agreement, every action, every decision has to advance the strategy. 

When I started my career, I was actually in politics and I ran political campaigns. With a political campaign, it's clear every dollar you spent, every action you take, every comment you share with potential voters has one goal, and one goal in mind to get the candidate elected. 

And that's the same approach I've brought to M&A. What is a strategy? Does the goal and the transaction match up? 

In other words, is a transaction aligned with the strategy, whether you're negotiating the agreement or in the midst of deciding, do I give this, I take that, what will it take for me to do the deal? Or what will it take for me to not walk away? 

If I make this decision am I still advancing the goal that I had when I first started? One of the things that legal can do is to make sure deal fever doesn't consume everybody. 

It happens more often than I can count that a business team will get so far into the deal and they spend hundreds if not, thousands of hours looking at it. Hundreds, if not, thousands, sometimes millions of dollars looking at a deal. 

At what point are they willing to walk away? And sometimes deal fever consumes you and you execute deals that should never have been executed. So we're legal and serve an important role as being that calm in the storm.

Questioning the team, are we still doing this for the right reasons? Does this decision advance or detract from the goal we have in mind?

The deal fever part, can you impact that a little bit? It gets tough to walk away from a deal. Then you become the bad guy. If you're the one shooting it down. 

Absolutely, and you're right. You do run the risk of being the bad guy by always second-guessing and injecting doubt into the deal. Because frankly, If you've invested so much time and money into anything you want to get it done. 

And that wave of deal fever definitely overcomes many. You want to build trust with the team. When I say the team, I mean, from the C-suite to the finance organization, to every function that's involved, that you can have that type of challenging conversation.  

Are we still doing it for the right reasons? One of the things I've suggested and it's very simplistic is every time you have a conversation, whether it's around the table or at least in the COVID world through teams or zoom, you have a strategy moment. 

The first few moments of every discussion around the deal talk about why are you doing the deal? It checks everybody. Oh yeah, that's why we're doing the deal. 

Because what I've noticed, especially when I was in private practice while I was doing the deal, tends to get lost the closer you get to actually sign the deal and that's unfortunate. 

And that's usually what happens in those circumstances where deal fever is the highest because people don't want to check themselves.

And so by having what I'll call a strategy moment, having the first slide of any deck, discussing the deal, repeat, reiterate the strategy, or having a moment prior to any conversation discussing a deal checks everyone in the room and hopefully breaks the fever. 

When you say get legal involved early, how early are we talking about? 

Beginning, what I would suggest even determining the strategy of the company. The words, acquisition, divestiture, joint venture should not come out of anyone's lips until a strategy is formed. 

Transaction follows a strategy, not vice versa. And why legal should be involved in the strategy formation is because there are some strategies that have inherent legal risks.

If you're looking at being acquired by entities in certain countries, there's going to be a national security risk. Legal for good, bad, or indifferent permeates everything we do. 

And as a result, should be part of the strategy discussion from the beginning. What you don't want to happen is the strategy is baked and then it lands on the legal's desk, paper it up. 

Paper up the transaction that advances the strategy that may not be on a sound legal footing, the very beginning legal and business development team should work hand in hand. 

And honestly, there should be no sunlight between them because that will truly ensure the company succeeds and the company properly mitigates risk. Ultimately, advances the goals of management and the board. 

What are the key milestones in a deal where legal gets involved? 

So after the strategy has been formed and everyone follows my advice strategy is done, now, we look at the transaction.  The first document one needs to think about is a non-disclosure agreement, an NDA. 

Non Disclosure Agreements

If you're the buyer the NDA is important because you don't want the whole world to know you may be looking at targets. If you're the seller, it's probably even more important because you don't want the whole world to know you're looking at divesting a company or a business line.

Think about the number of ‘me’ issues that come up when you're selling a business. Your folks may wonder if they're going to have a job next week, your folks may be anxious, whether or not the new company will take care of them like you have. 

These are the types of issues that you do not want to inject unnecessary anxiety and angst into your workforce. 

  • It affects the bottom line. If people are focused on the issues,  they're not focused on selling products.
  • It's going to have an adverse impact on the success of the deal. Because if the business you're trying to sell is distracted, it's preoccupied, they will not make as much money, which will eventually impact your sales price.
  • If the deal goes away, because let's be honest, most M&A doesn't happen. A lot of kicking tires, a few and far deals, but they make it to the finish line. You've now communicated to your team. We don't see a future with you. 

Things that are important to include in your NDA.

  • Confidentiality driver for the document in the first place. 
  • A requirement that the buyer or sellers outside professionals keep the information quiet as well. It is not uncommon that both the buyer and seller will need external lawyers, external finance help and that's great that the party itself is keeping things quiet, but you also want the parties, external advisors during the same. 
  • You also want a clear and conspicuous disclaimer on the NDA that says just because we signed this document, doesn't mean we have a deal. It is the beginning of the deal and your legal team should be able to provide that language for you. 

We have seen case law where an NDA doesn't have the right type of language or the language goes beyond the confines of an NDA and talks about a partnership or talks about a longstanding relationship. 

And that has gone to litigation where one party claims we've got a deal. So you want to avoid that gray zone and get rid of any ambiguity and have that conspicuous language. 

Some watch-outs in the NDA

  • Non-solicit that I've seen sellers try to slip in, in their NDAs.Well, you can't hire my employees. Well, if all I'm doing is looking at this target and kicking tires, do I want to assume that responsibility of not hiring employees from that company for two years? 

No. Or maybe yes, we should have that discussion because especially if there are only two or three players in that industry, you've now cut off a third of your potential employees.

  • Exclusivity, if you're in a sales process, you want to be able to talk to as many buyers as possible, to pretty much apply pressure to each and to extract the highest bid. If you agree to exclusivity, then the potential buyer has you now, all the leverage has shifted to that buyer. 

You want to make sure if you're running an auction process or any type of process, you don't include any type of exclusive prevention. 

Your next step, you've done the NDA, you've received documents on the target and you realize, wow, this might be a good complement to our business. I want to explore this further. 

Non-binding letter of intent or a non-binding indication of interest

Let me underscore the term, non-binding. We haven't negotiated the definitive document yet. First and foremost, conspicuous clear language is non-binding. But here's the difference I've seen between successful buyers and unsuccessful buyers. 

The unsuccessful buyers will put so much weight on the non-binding language that doesn’t basically throw together a few paragraphs, throw out a range and submit it to the seller.

The thoughtful, methodical, meticulous buyer will start making its case. It's non-binding to both buyers. It's non-binding to the two scenarios I've just presented. 

But I can tell you when I've been in the seller's chair seeing a letter that's thoughtful, carefully considered, one that starts making the case, why this particular buyer is the right fit will go a lot further and will be better received than the buyer who's clearly not putting much thought and effort into it. 

So while non-binding is your first opportunity as the buyer, just start making the case while you, as the buyer make the most sense. 

Diligence

Once that's complete, you'll proceed to diligence. And this is where the legal team really jumps in and hopefully earns its paycheck. 

Diligence in my view is the most important aspect of any deal because you are confirming what you think you're buying. You're confirming that what you're buying advances, your strategy. 

The strategy must drive the diligence. I'll give you a great example. A few years back, we read that Disney bought Lucas Arts, and clearly, they've been fairly successful with that. Billions made from the movies, from amusement parks, etcetera. 

We all see the show is popping up in Disney plus, but let's think about that. Why did Disney buy Lucas Art? Was it so they could sell Darth Vader and Chewbacca toys? Was it because Lucas arts may own a few warehouses in Pasadena, California? 

Well, we know the answer to that. They wanted to own Darth Vader.They wanted to own the intellectual property. If I was running that deal, that's where my diligence would focus.

Does Lucas Arts have the right licenses? Do they own a title? Do the assets I feel are most important, are they protected? And am I truly acquiring them through the transaction? 

If Lucas owns a few Buicks and a Fords in their parking lot, I don't care.That doesn't drive my strategy. Strategy drives the diligence and the diligence and we'll get to this in a second, also drives the documentation. 

Purchase and Sale Agreement

And so after diligence, you start developing the purchase and sale agreement. 

As any practitioner knows, more likely than not, your purchase and sale agreement will have language that says whatever was said before, whatever emails went back and forth are meaningless.

I'm paraphrasing here, but it's an important lesson that many deal teams forget. What matters at the end of the day is what's in those four corners of that agreement. 

  • What are you repping your own?
  • What are you warranting? 
  • What are you selling? 
  • And what am I paying for it? 

And the diligence will drive what we call the schedules that will be attached to the purchase and sale agreement to make sure here is what I'm buying.

And as importantly, here's what I'm not buying. I may not be buying your legacy litigation. I may not be buying certain assets. I may not be buying your huge environmental issues that you've had for years, or I may be? 

The document needs to make that clear. And that's where diligence is key to drive the creation and eventual execution of the document.

Very long-winded answer to your question, but those are the pillars of the deal where legal plays an important role in each. 

Use the term IOI, and I'm curious, if it’s typically used an auction process primarily at the stage to gather interested parties and have a little bit of a document in terms of clarifying the interest? Is it typically used in that auction process before they move into a letter of intent?

I’ve seen it done all different ways. The most common as you've described is the auction process. To get to that next round you want to provide the non-binding indication of interest to demonstrate to the buyer I'm interested in this asset. 

I think I would be a good acquirer of this asset so please bring me into that next round. 

I've also seen it bilateral where even if you're outside the auction process, to make sure as you're in one of these one-on-one negotiations, are the parties in the same ballpark? 

Because every company is rightfully so concerned about costs and concerned about unnecessarily wasting their folk’s time.

I have encouraged our teams. Even in private practice to use letters of intent to really lay out the deal in broad strokes. 

So the other side looks at it, soaks on it, and decides, you know what, we're close and it's worthy of further discussion or you know what, this thing's not going to happen. And we wish you the best of luck.

That's an indicator of interest. You'll typically see, is this a certain number or typically range what's usually on there? 

You'll typically put a range. And the reason for that, and I know I skipped ahead a little bit and talking about diligence more likely than not you're submitting that indication of interest very early on in the process, very early on in the discussions. 

You may have preliminary financials, maybe not even audited financials, and a high-level overview of the assets you're looking at. Well, diligence really hasn't started in full. So, how are you going to, as the buyer put a specific price? 

And so what one should do and what I strongly recommend is a range. Here's the low end, here's the high end, all subject to additional diligence. And you want to make that very clear in your IOI that this here's the bid, non-binding subject to X, Y, and Z. 

And one of those conditions has to be a robust diligence process to make sure one, that range is justified and two, where eventually you'll land in that range?

Is there a difference between letter of intent and term sheet? 

I've seen the terminology used interchangeably. I would say a letter of intent is more formal and allows one to begin stating their case. What I talked about earlier here's why I'm a good buyer. Here's why I am worthy of your attention and to be brought into the next round.

A term sheet, so pretty self-explanatory. The terms, what I typically do, and what I typically encourage is the term sheet is incorporated into the overall letter of intent, at least in the broad strokes.

As you get closer to actually documenting the deal proceeding along the negotiation auction process lifecycle, you'll see more and more terms be fleshed out to make sure it once again, the parties are in the same ballpark. 

I would say we're not an auction process. We're just going straight forward, proprietary deals. I'm in the impression that's more common to do a letter of intent, maybe non-binding? What do you typically do? 

With a bilateral type of discussion, you might as well get as many details out on the table as possible and as quickly as possible, once again, being cognizant that you don't want to waste either party's time.

The idea being, let's get a term sheet out there. You don't really need to sell yourself at that point, going back to the benefits of a letter of intent because you're dealing one-on-one across the negotiation table, but here are the terms I’m presenting to you as the buyer. 

I have found there's no point in hiding the ball at that point when you're in bilateral discussions. 

Because what I think will create a lot of ill will and a lot of waste of time, energy and money is if you know you want something as the buyer or the seller and you hide it to the Eve of signing, I've never seen that workout. 

Head it out there be very transparent. If the other party is willing, fantastic. There are gonna be plenty to negotiate. There's gonna be plenty of hiccups along the way. So you might as well get all the material issues out there for consideration as quickly as possible. 

What’s the difference between binding letter of intent, non-binding letter of intent. And when do you use those?

Yes, profound difference. Non-binding is pretty self-explanatory .I get to pull this as quickly as possible, or I may say this stands for one week, two weeks, one month, depending on the diligence process, depending on if you've engaged in exclusivity. 

A lot of times where a binding letter of intent comes in handy is if you're going to insist on exclusivity, well you got to give something in return. If I'm going to forsake all other bidders I want you, the bidder that I'm negotiating with to put some skin in the game. 

And so there may be provisions in that letter that are binding. Maybe a deposit, certainly confidentiality, maybe a fee if you walk away or some type of get in the game where it makes sense for me to forsake all the other bidders.

And then of course, if you want an overall binding term sheet, let's get the material terms on a piece of paper. Price, assets, maybe what employees stick around, which ones don't, especially for your smaller companies, where you want the management team to stay on.

Depending on the stage of the deal and how many people are still involved in the process is where I would pivot from non-binding to binding.

How do legal and corporate development teams encourage one another to look at risk and reward? 

Going back to the need to have no sunlight between them there's also a flip side of that. Having a tremendous amount of trust between the two teams, because you need to have the trust to have a challenging conversation.

I have found that good lawyers see risk and appreciate risk. Unfortunately, some lawyers, that's all they say, that's all they see is risk and they want to eliminate risk. Those are not the type of lawyers I want on my team because life is a risk.

Flip that, their business development team, there are some on certain business development teams that all they see is reward and they don't appreciate or understand the risk. I don't want them on the team either because they will jump at anything and sign anything. 

The great teams care, a legal team that sees the risk and reward, and the business development team that sees it. One clearly prioritized reward over risk and the other team prioritized risk over reward. And there's that natural tension and a natural tension is needed.

But when I go back to having the challenging conversation is sitting down legal feeling respected enough and confident enough in the trust they've built with their business development team to say, I'm concerned about X, Y, and Z, and the business development team saying, I understand it. 

How can we mitigate it? And here's why I'm willing to assume it because of these rewards. When you get a team like that, there's no stopping them. And that's how the teams can work together the best to serve the company's goals. 

Going back to the strategy,  if legal and the business development team are aligned on strategy from the beginning they pretty much by that point of the deal know how much risk is going to be assumed and what the promised reward should be.

And by getting aligned on strategy from the beginning lessons, that tension. So that's why it's so important as well. 

How do you try to educate the corporate development team on the nuances of law? 

One of the things we've done and we've been really successful with is developing a guidebook and training program.

We have developed here at LyondellBasell strategic transactions 101 and a guidebook that compliments that training program. 

And we have been very successful about when people join our business development team, onboarding them of saying here's what indemnification means. Here's what a warranty means, here are the issues that you need to watch out for on NDAs and the different checkpoints in the deal cycle and the negotiation cycle. 

We've been really successful in onboarding the team in terms of thinking and understanding the documents and nomenclature they will encounter now that they've joined our business development team.

And it's something I would encourage every legal team to do whether it's external or internal is to think about how I can educate my clients so they understand what I'm trying to address. 

I'm not suggesting you send all of them to law school. Because then we would be out of a job, but simply getting them comfortable with the nomenclature, the same way the legal team has an obligation to get familiar with accounting terms and business terms.

Both parties should train themselves up so they can at least issue spots when needed. 

Give me some depth on this. What's the expectation? Do you expect Corp dev to know how to read a PA agreement, but what are some of the things your expectations would be, or you'd want to set? 

Let me talk about expectations for my team and I and then I'll talk about Corp dev. 

Your business development team here’s your expectations for your legal team. They should understand the business. They should understand the business that's being acquired and being sold. 

For example, to better serve my clients years ago, I went and got an MBA and I'm not suggesting every lawyer on my team needs to get an MBA, but there are plenty of opportunities to enroll in an MBA for lawyers, a one to two-day program.

You should be able to read a financial statement as a lawyer, you should be able to understand the difference between this kind of cash flow, IRR, what's accretive? You should understand that.

If you don't understand the business you're serving and the clients you're serving, you're not contributing what you need to do to the team.

First and foremost, I encourage my team to look at ourselves. How can we up our game? 

Now let me answer your question about the business development team. They should be able to look especially, our leadership in those groups. 

They should be able to look and review and understand purchase and sell agreement. They should understand what liabilities we're assuming in a purchase deal or what we're shedding in a divestiture.

Do they need to understand every single word? No, but they should be able to issue a spot if they're in a negotiation without us or in an email exchange where legal may not be CC'd. 

They know those red and yellow flags they've been coached up enough to realize, wait a second, I better not agree to this or disagree with this before I loop in the legal team.


How does the legal team preserve value post-close? 

We think backwards from a commercial legal finance perspective. When you're looking at a transaction, you should immediately go:

  • What does this look like after we've closed the deal?
  • Where are the employees going to sit? 
  • Who is going to provide the computers?
  • The SAP system if that's a factor? 
  • Who is going to go back to senior management
  • Who's going to stay, who's going to go?
  • What representation, warranties, obligations are in the agreement that advances our strategy. 

And here's something where the legal team and the business development team need to have a thoughtful discussion around if there's a time difference between sign and close if it's not simultaneous. 

What actions can a seller take between those two points? Can they enter into any contract that they want? Can they depart with very nice golden parachutes? No, the answer is no, because you're not getting the value you assumed. 

And so you want to have that discussion of how do I ensure the business I signed up for is the same business I acquire or divest at closing.

Those types of behavioral and structural considerations should be captured in the agreement. And that's where the legal team plays a pivotal role in memorializing and capturing those obligations. 

Another area where legal plays an incredibly important role are the schedules I talked about. Going back to the document, I represent that you are assuming these litigation matters. I represent you are assuming title to this IP and other rights. 

If I list those exceptions, legal should be working with the commercial and business development teams to make sure we're getting what we're paying for or getting what advances our strategy. And it all goes back to what I said earlier.

If the legal team can't read a balance sheet, doesn't understand a bit of the strategy, or the business that's buying or selling, it's not adding value. And the key for any legal team is to add that value. 

What are the dangers of deal fever from a legal standpoint? 

Making sure your legal team is respected enough to one, have a seat at the table. And if you have to sit at a table, you're gonna be there from the beginning and two, checking everybody.

So deal fever tends to lead certain companies to assume risk disproportionate to the reward. Take a look in any Wall Street Journal, New York times, there are deals that have been devastating for the company. 

Most companies that go under frankly, are a result of a cycle of bad deal-making, and whether or not you didn't diligence well enough and you assumed environmental or other liabilities that you had no clue you were assuming. 

We saw that many years ago, with the Asbestos litigation, Bayer and Monsanto, that was significant a year or so, or two years back. Always be aware of what you're buying. And as importantly, know what you need to exclude from that acquisition.

On the flip side, if you're trying to shed certain liabilities, you better make sure that those liabilities are explicitly listed in the sales agreement because the worst thing you can do is sell it for a steal because your strategy was to get rid of certain liabilities. 

And because your lawyers did a poor job, you lost good assets and you're still stuck with the bad ones. And I've seen that happen as well. And we all have if we've read a local Wall Street Journal. 

That's where deal fever had a profound and dangerous impact on companies by muting the discussion that needs to happen or is this deal advancing our strategy? Is this deal advancing our goals? 

If we mute that discussion then it's not good for anybody and it will probably cost a few, possibly thousands, their jobs. 

How do you remedy that? There are people who are in that mindset. It's sort of, Hey, let's keep the lawyers out of this as long as we can, because they'll screw everything up. 

I think that's probably another discussion that I'm happy to have. How does the legal team build trust with their clients? 

The time to build that trust is not in the middle of the deal.That advice applies to in-house as well as outside counsel, you should be building that relationship and instilling that trust when a deal is not happening. 

When I was in private practice, or even now when I'm at a company, if the business leaders, if my business development team doesn't look at me as a value add, doesn't appreciate what I bring to the table when there's not a deal going on.

Then certainly when in the midst of a deal, you're all-nighters, your days, your weekends, the pressure from the board, the pressure from the street is crushing at them. They're certainly not the company. 

Build trust every hour of every day. And so when the real decisions have to be made they're calling you and they're trusting your view.


Do you participate in any kind of post-mortem to grade the organization on how well it met the acquisition strategy objective? 

We have a great business development team here at LyondellBasell that does that. I strongly encourage every company to do that. It's a best practice. 

No deal will ever go right. And if anyone's promising you that I can navigate you for the perfect deal, you're lying. Hang up the phone, frankly.

Every deal has its hiccups. Every deal has its mistakes. And so there is an absolute best practice which we follow, which I encourage others to follow of looking at what did we do well and where can we improve next time? Absolutely. 

And legal plays a part. After every major deal. I call my CEO, I call my CFO, I call my commercial lead. I asked them two simple questions. What did we do well, and where can we improve? I always get answers for both. And I appreciate that feedback. 

Have you ever done these during a deal? In software development, we call them retrospectives. 

I'll give you the typical legal answer. It very much depends. It depends on the time crunch. If negotiation is going on and on and has different permeations, usually you're going to see this in the auction process, I'll do the check-in. 

If it's we got three weeks to get this done, go, then really there's no time for that discussion, but there's always time post-mortem. 

You got to have that post-mortem review. That's the only way you improve. 

What's the hardest part of your job? 

Balancing the risk and reward. This thing with lawyers is, we're designed and trained from the first day in law school to see risk everywhere. 

And while I pride myself in understanding you can't eliminate risk since that is our primary function is to partner with the business and bring our acumen and skillset to mitigate risk. 

In a perfect world, I probably want to eliminate risk more than our commercial or business development leaders. So it's balancing the different views and the different priorities of every deal.

Do you ever notice a cultural difference in how we look at risks from our country and other countries? 

Absolutely, and you have now truly brought the conversation full circle, because of the need to bring legal in to discuss the jurisdictional legal regulatory issues. 

There are certain countries where the party on the other side will sign anything you put in front of them, and it doesn't matter if it's completely one-sided for you, they'll sign whatever.

And the reason for that is good luck enforcing it. And one of the things a strong legal team will highlight is yes, we can have the most beautifully drafted document in the world, but if you can't enforce your rights within a document, it's not worth the paper it's printed on. 

That's why it's so important to have the legal team there from the very beginning because if you're looking at investing and entering into certain countries or certain regions of the world, then you also better be aware that your rights are not the same as you would have at a federal courthouse in the United States. 

Your rights are going to be diminished if not completely eliminated which is why some companies outside of the US will take whatever risk is presented because they know it's not a real risk because good luck enforcing it.

What did you do at that point? How do you navigate that? Are you sort of looking for localized counsel at that point to a partner to work with? 

Absolutely. I am a Texas-trained US attorney. I am not Chinese. I'm not a Chinese-trained lawyer. I'm not an Indian-trained lawyer. I'm not, name your favorite country.

So it would be malpractice for me not to reach out to local counsel to understand not only the legal requirements but to understand the local nuance. Here's what will be acceptable. Here's what's not here's what's on their radar screen. Here's what's not. 

Moreover, negotiating in different countries requires a different cultural approach. I’ve negotiated with lots of parties that are not American and not Texas, which one would argue is a country in and of itself. 

But I need to understand what a New York and California attorney wants and the different laws that apply. 

Certainly, if I'm looking outside the US, in China, in India, in Kenya, in countries that I may not be as familiar with, I need to understand, I need to hire very strong local counsel to help me with that.

What's the craziest thing you've seen in M&A? 

A deal team that just wants to create havoc for the sake of creating havoc. It is amazing and maybe it's the profession. Maybe it's the intensity of M&A practice. It seems to attract those who want to just scream and yell and create ill will. 

And I have found that to be disappointing and amusing at the same time because if they're just screaming and yelling and pounding on the table, they're not advancing their client's strategy and I put the business development team in that same category that if you have a business development person who thinks that way it's counterproductive and destructive to value. 

And that's the craziest thing I've seen because as M&A practitioners, whether it's business, legal, finance, we're supposed to be strategic and strategically minded. And when you act that way, you're none of the above. 

Especially in corporate America, you will not find a field more intense than M&A because of nights, the weekends, they need to make decisions within minutes of getting information. 

Many practices whether within legal or outside of legal, have the luxury of soaking information in of having time to think about a decision. We don't have that in the M&A field no matter what function you're in. 

And so you need to make sometimes instantaneous decisions. And that creates a lot of pressure.

You asked me earlier what legal can bring to the team? And I would say overall bring the calm in the storm, appreciating that long nights, weekends, time away from your friends and family, that is a requirement of the job. 

And so bringing everyone down, making everyone check on, are we still advancing our strategy? Are we checking on each other? 

Are we making sure we're all healthy and being clear-minded about this deal and about what's important that's another service the legal team can provide. 

You still didn't tell me something really crazy. Like the most irrational thing, you've seen somebody do. 

To be honest, I think we see it day in, day out. You look in the newspaper and see companies pursuing deals. What are they thinking? How much debt did they just assume to do this deal? How are they going to pay off this debt? 

You saw a lot of that right before the financial crisis. People leveraged buyouts where people were borrowing 20 plus billion dollars, really? Are you mad? 

I'm very thankful. I've never worked for, or with any client that thinks that way, but maybe we're in the minority. 

Look in the newspaper every day. You see deals that are mind-boggling. I think that would be, if there's not a podcast out there, I would encourage you to maybe do it. 

Case studies on deals that go horribly wrong and what they could have done to prevent that because there are more examples of that than anything.

Ending Credits

Thank you for taking the time to explore the world of M&A with our podcast, please subscribe for more content conversations with industry leaders. 

If you like our podcast, please support us by leaving a five-star review and sharing it. I enjoy hearing feedback and connecting with our listeners. You can reach me by email it's kison@dealroom.net.

M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Dealroom's blog dealroom.net/blog. Thank you again for listening to M&A Science. See you next time. 

Views and opinions expressed on M&A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.


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