Many years ago, after completing a USD 2 billion cross-border deal, I was invited to share some of my takeaways (confidentially of course) from that transaction in a university setting on a Saturday. As the main execution person on the deal, I had to take point on steering most of the conversations that took place - from translating, managing emotions on both sides of the table and proposing negotiation strategies. I vividly remember on one of the nights (I think it was probably around 1am) when we were sitting in the client's office finalising the deal documents, we had received a competing bid on the deal and had to make a decision whether to jettison everything.
In that Saturday sharing session, I remembered that one of the biggest takeaways I'd mentioned was:
If both sides are motivated to get the deal done, it will be done.
everything else doesn't really matter.
Nearly seven years on, complexities in deal execution still never cease to amaze me, that is probably why investment banking had been such an interesting career.
Here are some additional learnings that I've consolidated below:
(1) An issue only needs to be dealt with as long as the biggest stakeholder and/or someone important thinks so.
(2) All transaction processes have unprecedented bumps and disagreements of sorts from fees to valuation, but a good negotiator knows how to play both sides of the game.
(3) The drafting of most agreements is effectively a process of managing risk, less so of governing commercial interests, especially when everyone is convinced that the pie is big enough to be shared equitably. People only start to fall back on and scrutinize these documents when shit hits the fan. They are really just a formalised set of what-ifs and everyone hopes they won't ever have to re-look at these contracts.
(4) Following on the above, most agreements are in reality like guidelines. If no real harm is caused, any violation could simply warrant a slap on the wrist. The contract basically gives either party the legal right to punish the other party if real harm has been done. In most cases and at the very bottomline, it’s all about the money, really.
(5) MOUs and term sheets - while legally non-binding in nature - are important. They are an essential framework to help guide the drafting of the final legal documents. When done properly, they eliminate ambiguity and misunderstandings, enabling both parties to save a lot of time in the documentation phase (which ironically, is not in the interests of lawyers who are billed on time). That said, there will inevitably be blind spots in the negotiations. The proverbial devil is always in the details.
(6) Engage a lawyer that:
doesn’t think like a lawyer
can dumb down complex legal concepts
is able to articulate the consequences of nuances within the agreements
can provide constructive solutions to resolve conflicts
(7) Home-ground advantage has a cost. When you are holding the pen on drafting, expect to incur higher costs - both on expenses and time. That said, you do have some upper hand when it comes down to dictating the overall flow, structure and legality of the agreements.
(8) Depending on which side of the table you are sitting, the drafting of documents that involve some kind of covenant generally comes down to two approaches:
“You can do everything, except for the following...”
“You cannot do anything, except for the following...”
(9) Some lawyers provide maps (legal opinions), some lawyers will be your guide and chaperon you for the journey (legal advice). Legal opinions don’t protect against anything, it serves only as an ‘expert opinion’ on outlining the risks and enforceability of key aspects in the transaction. Decision makers who cannot navigate the nuances in a cross-border deal or have no meaningful way of controlling the risks in a deal fall back on the ‘tightness’ of a legal opinion. Good legal advice on the other hand will tell you where the pot-holes are, the hidden corners, why you should take certain routes instead of short cuts, etc. It goes a step further, implementing the mechanisms to clearly define and safeguard relevant risks and commercial interests.
(10) The closing phase of any documentation process is almost as important as the drafting and negotiation phase.