Hiring an M&A attorney can be an intricate process.
For those who don’t know their Silver Circles from their Seven Sisters, it may seem like the only way to differentiate between them is by hourly free.
This is a mistake.
Experience across hundreds of deals has shown DealRoom that just as when choosing investment banks, the selection of an M&A attorney is an important first step for your M&A process, where significant value is added.
Let’s begin by asking what M&A attorneys actually do.
Bear in mind also that the biggest law firms will have dozens of blue chip companies spread across a number of industries, giving them direct access to these companies and insight into industries.
Value is therefore added almost everywhere along the M&A process value chain.
And when it comes to valuations, the M&A attorney will usually have an in-house specialist or can call in an investment bank to perform some of the heavier liftings on financials (note that many of the large M&A attorneys work in tandem with investment banks).
The DealRoom point of view
As much as many would like to state otherwise, your M&A attorney’s experience – personal and professional – will significantly impact how they approach deals.
Even small details count here.
Attorneys can be clannish – check which schools they went to. It’s common for attorneys to use this as an icebreaker (‘I am a fellow Cornell alumnus’).
Previous professional experiences and workplaces will also have a bearing on where doors can be opened. In essence, we’re saying pay attention to details. After all, that’s what attorneys do with everybody else.
Questions to ask before hiring
As for a list of questions companies should be asking an M&A attorney, here is a detailed overview:
1. What is your law firm’s culture?
Culture, as always, should be a high priority when hiring an M&A attorney.
In fact, how the attorney answers this question will dictate how most of the other questions on this list are answered.
Essentially what you’re asking here is how the company manages its relationships with the client, the target (or buying) company, and indeed, its own team of attorneys.
2. How do you envision our long-term relationship?
Similar to the culture question, this question will inform much of the M&A process, so it is important to ask.
- Is this purely a transaction for the M&A attorney or is there potential for developing a long-term relationship, where this is just one of a series of transactions?
- If it’s the latter rather than the former, how will this impact fees?
- And how active will the law firm be in helping your company develop its M&A strategy going forward?
3. When and how do you get involved in the transaction?
Understanding at what stage the attorney’s firm becomes involved in the M&A process allows your company to plan better.
Some M&A attorneys take a more proactive approach, helping companies to draw up shortlists of potential targets.
Others are more standoffish, waiting until a shortlist has been developed before making initial contact.
The difference is important to understand, particularly if you don’t have a certain target in mind for a transaction.
4. What do you expect from our firm in the M&A process?
How collaborative is the approach going to be?
There are M&A attorneys that treat the M&A process as a hand-holding exercise, slowly walking client companies through the deal from beginning to end.
For example, if you’re on the sell side, one M&A attorney will take your financials and provide a valuation that they’re happy to work with. Another will ask you to provide a valuation.
Likewise, some M&A attorneys have an in-house auditor for your financial statements. Others will require you to hire one.
These are important differences to ascertain at the outset.
5. What’s your approach to due diligence?
In asking this question, you’re trying to find out what resources are devoted to the due diligence process.
- Will several people be working on due diligence at once, or will it take place more organically?
- Also, how long does it typically take?
- And at what stage of the deal does the M&A attorney begin the due diligence process?
6. Are there any deal breakers for you in M&A?
This question is a good one to understand your M&A attorney’s red lines, both from your company and the other side of the transaction.
Some M&A attorneys will be unwilling to get involved in hostile transactions, for example.
Asking this question may also provide some insights for you as to where the M&A attorney already foresees some risks for your deal, conveniently leading you to your next question.
7. What do you see as the biggest risks we face in M&A?
The answers to this question are likely to be generic (overpaying, cultural issues, integration challenges, funding the deal, etc.), but it’s still worth asking.
Likewise, the more M&A attorneys you ask this question of, the greater your chances of identifying the real risks for your deal before it even occurs.
When M&A attorneys have worked on several deals in your space and can identify one risk that may undermine your deal, it’s worth paying particular attention to.
8. Are you deals proprietary or through a bank process?
Good M&A attorneys will have access to an array of deals, often introduced to them by partner law firms or their own clients.
By virtue of the fact that they’ve worked on hundreds of M&A transactions in the past, they should also have direct contact with the decision makers at other firms, not falling into their client list.
Some M&A attorneys will also work on auction processes for a transaction, but they will typically call in investment bankers to work on those deals.
9. What deals have you worked on in our space?
Understanding the M&A attorney’s experience in your area is crucial for obvious reasons.
The more deals they’ve closed for companies in your space, the more they’re likely to understand your industry’s dynamics and the more insight they’re likely to bring to the process.
Most M&A attorneys will be quite cagey about giving too much away on previous deals owing to confidentiality restrictions, but the deals that they’ve worked on are generally in the public domain.
Conclusion and takeaways
Understanding the nuances of the legal profession can be difficult for those on the outside, so it is highly important that any company hiring an M&A attorney asks questions before collaborating on a deal.
That said, these questions form just a small part of a company’s legal M&A playbook, with several more aspects that should be addressed.
DealRoom has a comprehensive legal M&A playbook for those undertaking this journey. Talk to us today about how you can use this playbook to maximize your company’s M&A transactions.