Claire Consoli is an Associate in the Corporate Team at Skadden, Arps, Slate, Meagher & Flom (UK) LLP.
In a nutshell, solicitors who specialise in M&A (mergers and acquisitions) advise clients on the sale and purchase of companies or their assets. The sectors and types of transactions involved vary greatly, from complex multibillion-dollar cross-border mergers involving the combination of multinational conglomerates, to start-ups undertaking smaller domestic acquisitions or disposals.
What is M&A?
An M&A practice at a law firm generally forms part of the broader corporate department, which might also include capital markets, private equity and restructuring teams. It’s a transactional practice area, which means that you won’t find M&A lawyers in court (except to obtain the court’s approval for certain transactions) or appearing before tribunals; they will be busy negotiating and executing deals.
M&A practitioners often choose to specialise in either public M&A (which involves public companies whose shares are listed and traded on a stock exchange) or private M&A (relating to private companies whose shares are not publicly traded, but rather held by a more limited number of entities or individuals). Trainee solicitors and junior lawyers are usually encouraged to gain experience in both areas to ensure they have had an opportunity to work on a healthy variety of transactions at the outset of their careers.
What do M&A lawyers do?
There will often be numerous advisers and parties involved in an M&A transaction, including investment banks, financial advisers, tax advisers, accountants, PR consultancy firms and, of course, at least two law firms (one acting for the buyer and another acting for the seller). M&A lawyers often help to manage and co-ordinate the various parties and workstreams, and will be primarily responsible for drafting and negotiating the principal transaction documents for the deal and liaising with specialist teams, such as tax, pensions, employment, data protection, competition/antitrust and regulatory. If the transaction involves jurisdictions outside the UK, the M&A team will also coordinate with legal counsel in the relevant countries; trainees are often heavily involved in this process.
When a new deal kicks off, trainees can expect to carry out legal due diligence (or DD), which will likely involve contract review to check for potentially problematic clauses, verifying the corporate structure and ownership of a target group, summarising any material litigation, and co-ordinating input from other specialists. The DD process is critical in helping the client and the rest of the deal team understand key legal risks to be addressed.
Sometimes an M&A solicitor might be working on four or five different transactions at any one time (some buy-side, some sell-side, and most likely all at different stages of development), but other times one large transaction may demand 100% of a solicitor’s capacity. Similarly, the size of the team and the number of specialists dedicated to a particular deal may vary depending on the timeline, complexity, sector, regulatory and political environment and scale of the particular transaction.
What makes a successful M&A lawyer?
Being a successful M&A lawyer is not just about ‘getting the deal done’ (although completion is certainly one of the most exciting and rewarding aspects of the job) – building a strong foundation of core skills is as important for an M&A lawyer as in any other discipline. Some of the most important qualities include:
Knowing the law: although project management is a big part of a transactional lawyer’s job, it’s not all paper pushing! Having a firm grasp of the law is equally, if not more, important. An M&A lawyer will need to be able to navigate and advise on contract law, company law and the myriad rules and regulations that impact companies and the transactions they are undertaking. M&A lawyers also acquire a solid understanding of other areas of law over time, which allows them to effectively ‘issue spot’ potential problems in other practice areas, so that they know which specialists to involve.
Effective time management: the ability to juggle more than one matter, with competing priorities, is a key skill for any transactional lawyer. The best starting point for trainees is to be well organised from day one – the volume of documents can be overwhelming, so keeping track of each document and its status is critical.
Commercial awareness: this doesn’t just mean keeping up to date with market and social trends, global events and the headlines in the FT, but rather the ability to understand your client’s business and operating environment to be able to identify potential issues and to tailor the advice you provide to best suit your client’s needs.
People skills: working effectively in a team is critically important for M&A lawyers, as transactional work is never a solo pursuit. Even though the final terms of the deal will be negotiated by the respective law firms on either side of the transaction, and each from the same objective of agreeing the best deal for their client, all parties are generally working towards the same goal. It’s therefore important to always treat the other side with respect.
Realities of the job
While it is fair to say that late nights and weekend work are par for the course at critical points in the lifecycle of a transaction (signing and completion are crunch times), there are ‘peaks and troughs’, with busier periods often followed by quieter times with normal working hours. The demanding and sometimes unpredictable hours on cross-border transactions spanning multiple time zones can be challenging, but are often required of trainees and junior lawyers because they are so heavily involved in the transaction. It is this early responsibility and high degree of involvement that helps make this practice area so professionally rewarding. There is also a great sense of accomplishment in helping clients achieve their goals, whether it is a transformative ‘once in a generation’ transaction, or a simple divestiture.
M&A cycles tend to correlate with economic cycles. It should therefore come as no surprise that the economic shockwaves caused by the Covid-19 global pandemic have had a significant impact on M&A activity in the first half of 2020. The first quarter of this year saw a 39% decrease by deal value, while deal volume dropped by 25%, according to MergerMarket. Predictions for the second half of the year are also pessimistic.
Looking back to 2019, M&A faced some robust headwinds from macroeconomic risks including Brexit and the US-China trade war. Global M&A activity fell 6.9% on 2018’s healthy US$3.33tn across 19,322 deals, as reported by MergerMarket. Some sectors remained resilient, a trend that has continued into 2020. The technology sector in particular has been very active, with technology companies seeking to consolidate and expand their footprints through strategic acquisitions, while non-tech companies are also keen to invest in new technology to keep pace with a rapidly evolving market. Bid activity for public M&A transactions in the UK also increased significantly compared to 2018 levels, with a notable rise in private equity-backed take private transactions; another trend we expect to continue when greater certainty returns to markets, with PE firms likely to be eager to put their cash reserves kept on hand to use.
Even during times of depressed volumes, M&A practitioners are kept busy helping clients to review the terms of historic transactions and assess future opportunities, servicing the needs of portfolio companies and advising on defence strategies for companies that may be particularly vulnerable to the threat of activist investors. We also expect that deal making during these unprecedented times will shape the way transactions are implemented in the future, with less global travel and better use of new technologies to improve efficiency and make cost savings for clients.
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden provides legal services to the business, financial and governmental communities around the world in a wide range of high-profile transactions, regulatory matters and litigation issues. Our clients range from a variety of small, entrepreneurial companies to a substantial number of the 500 largest U.S. corporations and many leading global companies. The firm has more than 50 practice areas and advises clients in matters involving, among others, M&A, litigation and arbitration, corporate finance, corporate restructuring, banking, project finance, energy, antitrust, tax and intellectual property.