A value-add role for GC in M&A transactions: three key differentiators
The role of General Counsel in M&A transactions has changed significantly since the last M&A peak in 2007. This change to a large extent stems from the evolved approach towards due diligence and realization of post-merger synergies and the increased focus on compliance.
We look at three key differentiators that can help General Counsel navigate the demands from all stakeholders and materialize the value they can add to an M&A process.
1. Efficient project management focussed at managing costs
In large cross-border legal diligence exercises that accompany M&A deals, it can be difficult to control costs in an efficient manner. Standardized processes can help keep costs down without compromising on quality. External counsel will be able to help put together information request lists tailored to the business and market expectations to facilitate an efficient cross-border data collection process. Ideally, the general counsel and in-house team together with external counsel assess what can be done internally and what external help is required. Some tools that can help keep the process efficient:
- Kick-off meeting with internal process managers and external advisors to discuss deal rationale, agree scope of work and set schedule for regular progress checks;
- See if there is scope for a management interview between external legal counsel and the management team of the target to flush out any material issues at the start. This will facilitate a much more focussed and value-add approach towards legal diligence;
- For large cross-border deals it is generally more efficient to have one external law firm coordinate with local counsel and take overall responsibility for quality and timing;
- Consider whether external local counsel needs to be engaged in every jurisdiction or if a ‘common sense’ approach may be sufficient as a starting point. This may save considerable costs;
2. Relationship management with all stakeholders
Relationship management is a core component to the success and effectiveness of the general counsel both in- and outside an M&A process. Within an M&A process, the lack of these relationships can lead to delays in, or failures of, the deal because of lack of knowledge of key concerns and mismatches in expectations. By having knowledge of the various positions of all stakeholders and by maintaining a neutral role between the stakeholders, general counsel may be able to mediate and help align interests.
Equally important and related to effectively managing relationships with stakeholders, is the communication towards the internal stakeholders, including works council and employees. Most major transactions will need a mix of in-house counsel who knows the business and the ‘wish lists’ of internal stakeholders, as well as external expertise based on sector or jurisdictional knowledge. A good example where this mix is vital and careful communication can be crucial, is dealing with local employee representative bodies and the process around consultation rights that these bodies may have in the context of an M&A transaction.
3. Focus on post-deal integration from the onset of the transaction
In many cases, potential synergies for the consolidated entities are the driver of an M&A process. General counsel can play an important role in delivering these synergies by focussing throughout the process on post-deal integration and bringing the different organizational cultures together. Some key aspects to bear in mind:
- Understanding of the key organizational and cultural differences between the merging entities as well of the preferred future DNA of the combined entity;
- Set up a post-deal integration plan already during the deal, which includes a communication plan towards all internal and external stakeholders that is aimed at embedding the new DNA. Execution of the plan can kick-off immediately after the deal closes.
- Address retention and other employment related concerns early on in the process;
- Perform a post-deal review with all relevant internal and external parties involved to learn from the process and develop ‘best practices’ for future deals.
Over de auteur:
Floor van der Steenstraten is counsel in de Corporate/M&A praktijk van Clifford Chance LLP in Amsterdam. Floor adviseert nationale en internationale cliënten in M&A-transacties, bij het opzetten van joint ventures en over corporate governance aspecten.