Corporate Finance Fees and Quality of Service | Round Table Discussion

Neil Ackroyd

So we’re going to move onto our second question which is, a very similar question but really with corporate lawyers, so what should we expect in terms of service and role from corporate lawyers? Bob?

Bob McNaughton

Well I think there are a lot of similarities, it comes down to experience and capability rather than qualifications. I think it is about a personal relationship, I’ve worked with Chris over many years and that is because it has always been a successful relationship. How did I choose him in the first place, because he was able to demonstrate that he had experience in the areas I was interested in, he demonstrated that and it became a successful, long term relationship.

Neil Ackroyd

Right okay, super, and Chris?

Chris Williams

I think that personal relationship is even more important, or the closeness of the relationship with your lawyer is even more important than with a lead advisor. I mean sometimes with a lead advisor I might appoint because they’ve got sector knowledge or they know the potential buyer universe. With lawyers, and I’ve worked with Chris a lot over the last 20 years, I want somebody who really understands me, understands what’s important to me and can help us to deliver it efficiently and effectively. And again, I think the lawyers are absolutely at the cutting edge in terms of, you know, of the depth of the transaction when you’re staying up all night in the middle of tough negotiations, being able to help you judge what is really important and what isn’t so important and helping you through that process. I always turn to my lawyer.

Neil Ackroyd

Yes, and I guess in my experience as well, the lawyers do get into a much much greater level of detail on the SPA negotiations for example than the corporate finance advisor, just by necessity because, you know, they’re lawyers, they’re drafting that document and they’re negotiating every bit of it.

Chris Hale

Yes I think as a deal progresses the lawyer’s role becomes more and more important, as you get into the execution phase. In the early stage then the lead corporate finance advisor will be the most important of the advisors, choosing the tactics for selling the business, the community of potential purchasers they’re going to go out to, selling the business to them once you get into that phase. But once you’ve got two or three purchasers on the hook and in particular, once you’ve got one on the hook you’re then into the documentary phase of it in an intense way and the importance of the lawyer then becomes paramount. And that’s when corporate finance advisors can get in the way.

Neil Ackroyd

Not good corporate finance advisors.

Chris Hale

No, no not good ones.

Bob McNaughton

No that documentary phase, the performance of your lawyers during that period is very revealing because there you are, you think you’re working very hard, 16, 18 hour days, you’re finishing at midnight with a whole bunch of negotiations. Various things have got to be reflected in an SPA, you come back to work at 7 o clock the next morning and there’s a whole draft of documents that have reflected all of that and it amazes me that they always seem to have to do this work overnight and in this intensive period, and that’s when the strength of a relationship is established. That you know that you’ve got someone you can depend on, you can rely on and will do a good job. And at the same time they are there, very much involved in the commercial negotiations of the transaction.

Chris Hale

And one important thing when you’re appointing lawyers for the first time is to ensure that those that you’re seeing are the ones that are actually going to do the deal, that you’re not dealing with the marketing team and somebody you haven’t seen is going to appear to actually do the work once they’re appointed. And it’s very important, at least I think, for the lead lawyer, the lead partner to be intensively involved at the most difficult moments of the deal. Another feature of some firms and some advisors is that they are there at the beginning and the end but actually you’re dealing with somebody else in the middle, and the middle bit is the vital bit.

Neil Ackroyd

Yes I think it’s interesting. We’ve got kind of five top tips to appointing a corporate lawyer on the website and you know, you’ve hit on kind of two of them right there. The first one is, you know, is your lawyer a corporate lawyer and the other one is have you met all of their team, and make sure that up front you have met all, because you’re right, the lead partner should be involved in the key negotiations and the relationships and all that sort of good stuff. But it’s unrealistic to think that somebody of kind of Chris’ calibre is going to be drafting a disclosure document. You know, so you want to make sure that you’ve met, you know, all of that team and I guess the point that we haven’t really discussed that much is, certainly on the smaller transactions. I mean Chris, you mentioned it earlier, just making sure that it’s not, you know, your old family lawyer that’s on the transaction. Corporate finance, even the best and highest quality corporate lawyers have to spend 36 hours straight drafting a document because there’s that much to get through. And that’s with them having experience of it, if you then throw that into a, you know a qualified lawyer will be one that does other areas, maybe pensions or whatever then it just does become a complete nightmare. Would you agree?

Chris Hale

Yes, and what you need is a lead lawyer who knows what he’s doing, who’s experienced, who’s been round the block and few times but a lead lawyer with a team around him, and Bob touched on this, he won’t be doing the whole thing on his own. I mean you have big teams on a lot of these deals and you need to ensure that the firm has the resource and has the resource at the moment you need it, to apply to your deal.

Bob McNaughton

You need an employment lawyer at 2 o clock in the morning, it has been known.

Neil Ackroyd

Yes absolutely.