Doing A Deal Right

Dianne Sagner seems to have done everything right. As general counsel for the business consulting firm of Maryland-based FTI Consulting, she not only understood the business imperatives of a recently completed acquisition, she brought up uncomfortable red flags and delegated responsibilities among outside counsel.

That’s why now looking back over the process of acquiring Australian company Ringtail Solutions, which develops legal case management and preparation software for use with a Web browser, chairman of the board Dennis Shaughnessy says the deal went just as planned.

“In hindsight, everyone looks at this and says this is great, it was done the right way, we’re comfortable with it, we took on the issues, we understood the company well,” Shaughnessy said.

The deal featured complex ownership issues, rights to technology, distribution agreements, territorial agreements, and the target was located in a foreign country.

Sagner played the role of traffic cop, slowing down the process and bringing to the attention of the business team a handful of issues that they needed to seriously consider whether they’d be able to live with once the deal was signed.

“In a transaction like that, it really demanded that you had someone who understood enough of the business transaction to guide outside counsel, and once they got feedback, be able to guide our people to go back and double down and check the homework we did, or initiate new efforts to make sure we’re getting what we wanted,” Shaughnessy said.

“The earlier you involve in-house counsel in the process with the team, the better off you’re going to be,” Shaughnessy added. Same goes for outside counsel. Some of the earliest activities in an acquisition – framing a term sheet or letter of intent – can be the source of problems later in the deal.

“Lots of companies don’t want to run out and spend $300 to $400 per hour on outside counsel when they’re trying to frame a term sheet or letter of intent, but mistakes in a letter of intent are going to cause a lot of problems down the road or it may look like a bait-and-switch later,” he said.

Outside counsel was responsible for the research and drafting, while Sagner addressed the finer points of the documents. It helped that she had worked with the outside counsel team on a previous deal, so they were familiar with how she liked to get things done.

“Outside counsel prepared the initial draft of the purchase agreement and we went over it several times,” Sagner said. “Once the other side had it, it was back and forth between the [business teams], more than a concerted effort by the lawyers.”

There were some things Sagner kept in-house purposely. She handled issues involving employees, including such issues as stock options, rather than turn them over to outside counsel. “This was nothing you can turn over to outside counsel. These people were going to work for us,” she said.

Sagner cautions her counterparts at other companies to be prepared for remarks such as “if you make us do this it’ll blow the deal,” and “it will be your fault.”

On the management side, jumping through these hoops gets frustrating, Shaughnessy admitted. “It’s one more thing that has to get done and it seems like it’s holding up the deal and extra 30, 45 or 60 days,” he said.

“Don’t fall in love with the deal,” he advised. “You really have to be dispassionate, even if you think it’s cool and neat. Our people were incredibly excited about this. To Dianne’s credit, we needed people to slow them down.”

Sagner added: “They think this is the only deal that ever was or will be and that the sun won’t rise until the deal is done. It happens with every deal. They can’t imagine any provision they can’t have. At the end of the day, you go with what the business people are doing. You develop a relationship, and you figure out how to try to make the business people happy.”