Private Equity Pulse Check

February 8, 2008 | Filed Under Deals, Private Equity

The New York Times DealBook scored a coup when it landed Prof. Steven Davidoff to write “The Deal Professor.”

This good professor is certainly prolific, and his entry of this past Monday really caught my eye. Entitled “Is M&A Dead?“, quite a few private equity deals gone sideways are explored, deal point by deal point. A few examples:

* Reasonable Best Efforts Clause: The Alliance Data Services litigation has highlighted the legal ambiguity and uncertain meaning in the requirement a buyer use “best efforts” to obtain regulatory approvals and take other steps to complete a deal.

* Contract Drafting generally. URI/Cerberus highlighted the problems of overly-complex and short-hand drafting. The general distrust in the market has led to overparsing and scrutiny of contract wording for fatal ambiguity.

This is great stuff, and topics such as these allow business-inclined readers of the Times into dip a toe into the icy waters of corporate and contract law without the head-first dive of law school. I would imagine they’d be great in the classroom, taking students into the deals of the day and away (for a moment) from the musty cases of yesteryear.

The best part for me, however, was this closing observation of the state of deal forms in general:

But forms are slow to change. The person who typically keeps them is an overworked senior associate. In the interim and even beyond, I would also suspect that the distrust left by private equity firms has caused lawyers to tend towards overnegotiating language on an ad hoc basis. Risk-averseness can do that.

All I can say is amen.

Prof. Davidoff formerly practiced at Shearman & Sterling and Freshfields Bruckhaus Deringer, and now teaches law at my alma mater.

Google and Microsoft GCs work Super Bowl Sunday

February 4, 2008 | Filed Under Deals, In the News

Yesterday, most of us were watching one long commercial interrupted by snippets of football. Not the GC of Microsoft, Brad Smith, or the CLO of Google, David Drummond, however.

Clearly deeply involved in the hostile offer for Yahoo, Mr. Smith struck first yesterday with a press release, noting that a Microsoft-Yahoo merger would be a welcome competitor to Google in paid advertising and search, and offer additional benefits:

Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals.

Not to let that comment just hang there in the ether unchallenged, Mr. Drummond followed up shortly with this posting in the Google corporate blog:

Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet?

Later in the day, according to press reports, Google CEO Eric Schmidt “reached out” to Yahoo CEO Jerry Yang and offered to “help.”

A deal of this size is good for a flagging legal economy, at the very least.

Let the real games begin…

Let the games begin!

Amorphous Support Services

January 30, 2008 | Filed Under The Client Speaks, Legal Resources

Sometimes outside counsel ask me why so many GCs seem preoccupied with costs. What about results? What about the best in legal services? What about covering your @ss?

Well, I submit as Exhibit A an opinion piece in the Financial Times by Luke Johnson, chairman of UK’s Channel 4 and founder of Risk Capital Partners, a private equity firm.

Mr. Johnson’s article is entitled “The truth about the HR department,” and at first blush it appears as yet another screed against the intrepid souls in HR:

The brilliant Avis boss Robert Townsend in his book Up the Organisation suggests firing the entire personnel department. Indeed, I have radically downsized HR in several companies I have run, and business has gone all the better for it.

But before in-house counsel can get complacent, Mr. Johnson expands his field of view:

HR is like many parts of modern businesses: a simple expense, and a burden on the backs of the productive workers. Other divisions that can become the enemy include IT, legal and marketing. They don’t sell or produce: they consume. They are the amorphous support services.

Ouch.

To complete the connect-the-dots exercise on operating-related legal services: to someone with Mr. Johnson’s DNA, if you are retained by one of the “amorphous support services,” guess what you are by association?

So if your friendly neighborhood GC seems like a one-note-band on costs (and trying to master another note, demonstrating value), try to be a little understanding. Mr. Johnson may be the CEO in the office down the hall. And he just called that very GC into his office after reading the revised forecast for outside services.

What if the Law were more like Lego?

January 28, 2008 | Filed Under Law 2.0, In the News

I realized this morning that I’m almost as old as Lego (R); today is the 50th anniversary of the little brick that sticks.

I was weaned on the old-school Lego, and my sons spent many a lazy afternoon with slightly upgraded versions as well (although they preferred the basic stuff). Today’s varieties are almost unrecognizable from where things started.

As you’d expect, Lego’s lawyers are watchful over those who would copy these iconic products.

So I got to thinking: what would the law be like if it were more like Lego? Here’s my top seven:

1. All the pieces would fit together.

2. You could share parts of it with others and it would always work.

3. The best things resulted when you didn’t follow the directions.

4. If you spent hours with it, it wouldn’t cost any more.

5. It worked as well alone or in a group.

6. You could extend it easily in new and creative ways.

7. And you could just as easily tear it apart and start over.

I did learn early on that the big red ones just look like hard candy.

Even Google today is getting into the act:

The origianl point and click...