Let’s get some disclosures out of the way. I’m not a lawyer lover and I’m pretty stingy with professional services in my P&L. But, I also advocate for being audited when you don’t have to and doing R&D tax studies—so there are professional services investments I do believe deliver value. Allow me to qualify the ‘lawyer lover’ statement—it’s nothing personal. I just don’t like anything that overcomplicates a process or communication. I like keeping everything as simple as possible, and in my experience, that’s not a lawyer’s strong suit.
Our attorneys were always responsive, articulate and sensitive to our bootstrapped ways. We worked with the same amazing corporate and intellectual property firms for two decades. That’s a long time, and there’s good reason for our loyalty. They were good. And they were perfect for us. When it came time to exit, the assumption was that we would use our same team. They were experienced in M&A and we had a close, effective relationship.
When it was time to negotiate a letter of intent, I engaged with our longtime counsel. Over the years, we worked well together and made the most out of several different LOI negotiations. Again, once we had a final, countersigned LOI, the assumption was that we would continue on the purchase agreement with our longtime firm.
All deals have eccentricities that ideally would be negotiated by people with prior, specific experience. Our most recent deal had more than its fair share of highly, super-duper, mega-specific complexities. Our bankers (remember, I described them as ‘well matched’) understood these factors and surfaced the idea that we may want to consider a firm with experience specific to our deal. I was, quite frankly, not into that. I already had a trustworthy, valuable relationship that I felt trumped specific experience.
Specific Deal Complexities
As the LOI flowed into diligence, more of the complexities became clearer to me and I began to feel like I needed a sounding board that had been there and done that. Again, the bankers surfaced some options. This time, I exchanged some emails and had some intro calls. It was clear there were reasons the bankers thought it was a good idea for me to have these conversations. My biggest concern at that point was not hiring someone who would complexicate (no, it’s not a word) my life, deal and timeline. Our bankers (who only get paid when we get paid) had ingrained one phrase in my head “time kills deals”. When it comes to attorneys, time also costs money—they get paid, closing or no closing.
The challenge with a hitter who has been there and done that is cold, hard, cash. Our deal had outsized complexities and corresponding outsized legal estimates. I got a fee range that made my head explode. I also understood the reason it was so high, was the very same reason I needed to do it. So, we hired the pros who had been there and done that within the specific characteristics of our deal. Hence my description of our chosen attorneys as ‘deal-matched’.
It certainly wasn’t personal for me to choose total strangers over longtime, trusted confidants. It also wasn’t the exit in general. It was all about specifics. And, if the deal was different, the attorneys would be different. We chose a firm that had previously done everything we needed.
In retrospect, we made the right choice. What prompted me to write this post was someone asking me some very pointed questions about my experience with our attorneys. Answering those questions caused me to reflect on the decision as well as on the sad fact that I haven‘t spoken to our longtime counsel since. In the end, our deal only got more complex as the purchase agreement was negotiated. The devil is in the details of all of this stuff, but how those details get pushed through is dictated by the high-level choice of who’s doing the pushing.
Credibility Drives to the Finish Line
A significant factor in M&A is credibility. If the seller’s team doesn’t stack up to the buyer’s team, it undermines the seller’s willingness to stand firm on market ground. I saw this play out again and again. Our team was up to the task and absorbed and volleyed back challenges with authority. Even in the face of the most senior participation on the seller’s side, we stood firm when and where we needed to. That was a function of our team’s cred.
To have made an emotional, sentimental or expense-averse decision would have been a huge mistake with costs running much deeper than cash. Post-closing, only a fool would say they wouldn’t change anything about their deal. Time and hindsight are too illuminating for that. I will say that we earned a high B or an A with a team that had all the deal-matched experience we could muster. I won’t pontificate on what would have happened had we chosen other attorneys, but I will say I’m confident we wouldn’t have done better.