Interviewer

Established in 1877, Tollers Solicitors operates outside London. The Company has 20 partners and specialises in deals between £1m and £10m. Joining us today is Matthew Crosse, a Partner at Tollers Solicitors, specialising in Corporate Finance and Recovery. Also here with us is Neil Ackroyd, founder of Corporate Finance TV and a corporate financier himself with over 14 years experience.
Matthew you have been in this market for about 15 years, lawyers generally get involved in a deal after the Heads of Terms have been agreed, what happens next to take it to completion?

Matthew Crosse

Well it is really a question of what's in the Heads, taking the commercial terms of the deal and putting it into a legally binding document which is fair to both parties, the buyer and the seller. There is also legal due diligence which will be conducted as well and it's a case really of the lawyer helping the client in terms of ascertaining what information, what documentation, they need to provide in order to satisfy the due diligence.
Interviewer
Neil, presumably in your experience that stage when the lawyers get involved is a critical stage.

Neil Ackroyd

Fundamentally, it is often forgotten in a corporate finance transaction, people get to the Heads of Terms and they think that we have shook hands on the deal and now it is just a question of writing a little document but actually there is a lot more to it than that. It is a lot more in depth and also over the last 6 or 7 years, the market has tightened and got a lot tougher. People are a lot more cautious and a lot more careful and there is a much greater risk that a deal might fall over post Heads and it's a very key stage.

Interviewer

Matthew, what can go wrong?

Matthew Crosse

A number of things can go wrong, probably one of the most common is not having the right type of advisors working on the deal where on one side you tend to find that possibly one of the advisors hasn't go the right expertises or skills to be able to deal with the transaction of this nature and it has a knock on effect and can cause some quite big issues. I think the other thing to remember is certainly that people looking to sell their business, not only will they have to manage their business keep their customers and suppliers happy but also they will have to devote some time to the deal process itself which can be quite time consuming.

Interviewer

Is that your experience as well Neil, in terms of things going wrong?

Neil Ackroyd

That completely tallies with my experience. Two very good points . It is a common misconception that if you get an inexperienced advisor on the other side of the transaction that you are going to have a really good time, it is actually worse. If you have a lawyer who is experienced and a lawyer on the other side who although is a qualified lawyer doesn't have experience in corporate finance then what they do is just argue about a huge myriad of points that would normally just be agreed because they are standard so the deal just takes longer, there is an issue that their client might be taking their advice and therefore failing out over points that should never not be agreed on a deal. So that is a very important point and the point about clients having to split their time between various aspects of the transaction again it is fundamental for a client to understand that post Heads they will need to spend a lot of time in the deal where their advisors prior to Heads can really take a lot of the negotiation and the commercial points and take a lot of the weight off that. Post Heads they really need to read the documents, they need to have a lot of input into the warranties and things like that. It is key that you have enough resource.

Interviewer

Matthew what would you say are the keys to solving these problems?

Matthew Crosse

I think that on the whole it is taking a pragmatic approach and I think its listening to your advisors and I think that it is forward planning. I think that part of what good advisors should do is very early on isolate those issues or those problems that are going to take time to solve and make sure that everybody working on the deal is aware of those and that they are given priority so that they are sorted out as soon as possible.

Neil Ackroyd

Matthew, you are talking about lawyers and the potential for a lawyer not to have the right experience, but would you not think that was exasperated, at least the lawyers as regulated by the Law Society and it's a very stringent form of regulation and at Corporate Finance TV we are very concerned about the influx of unregulated advice in the corporate finance advisory sector. Would you say that in your experience you have come across a lot of corporate finance advisors who just are out of their depth dealing with transactions?

Matthew Crosse

Unfortunately I have and that has had a couple of impacts on the deal both in terms of timescale and the amount of additional work that certainly myself and the client end up doing were certainly the two consequences of doing that.

Interviewer

How can someone prepare for this sort of thing?

Matthew Crosse

Well I think in a way, its almost turning it around and looking at it from the buyers point of you and say here's my business, is everything as it should be, are all the loose ends tied up for example if you have some key employees that it is important for the business that they stay, are the signed up to proper employment contracts? If you rely on Intellectual Property is that all properly protected. Do you have a valid license to use it? Are any renewal fees paid up to date? Its really making sure that all the bits of paper that should be there are there and can be shown to the buyer.

Interviewer

Neil in your experience is preparation key then?

Neil Ackroyd

Preparation for the legal stage is fundamental to getting a deal over the line in a timely fashion and we all know having been involved in deals, that time kills deals. I had one deal that fell over because the phasing plant got strike by lightening in the middle of the night you just never know what is going to happen. The longer a deal goes on for the more likely it is to fall over. So getting that preparation done earlier in the transaction maybe talking to lawyers pre Heads and maybe engaging to start doing that preparatory stuff is very key.

Interviewer

So if I could sum up Matthew, what you are really saying is that it is important to have sensible, pragmatic advice, to have the right advisors with the right experience and preparation and resource are also key.

Matthew Crosse

Yes, absolutely.