Ever since we have launched our new course on Diploma in Mergers and Acquisitions, Institutional Finance and Investment Laws (Last Date for Enrollment: 30th June 2018), we have been flooded with queries from law students and lawyers about the practical challenges in M&A laws. This article talks about the big challenges you may face when you intern or begin your M&A practice.
“Seeing a new world with a microscopic lens,” that’s how someone once described the world of mergers and acquisitions in a webcast I was watching.
I, of course, did not understand the enormity of the truth behind the statement until I recalled my experience with M&A. As an intern, I used to be bogged down with review work, preparing documentation, and drafting contracts, without knowing much about the transactional aspect of the deal. I was asking questions pertinent to me, but not necessarily the right ones it seems.
The webinar answered so many unasked questions about the laws regarding M&A, its practice and challenges. I almost considered revisiting one of the most in-demand career options for a lawyer, once again.
However, this time I need to be more prepared.
I am one of those who needs to grow, learn new skills. I feel it makes me sharp. Keep them brain cells from dying, I suppose. This is primarily why I picked up writing after a gap of six years after quitting my cushioned job. I wanted to learn something new everyday. Once the learning stopped for me, I knew I had outgrown my environment.
If things are not changing, would you do something? You must do something. So did I.
I decided not to dive back into the ‘new world’ without being prepared. I will do the legwork. If I don’t know the how’s and why’s, I’ll take up a course online, write relevant articles, network better. I’ll do the whole shebang. If I am investing my money, time and energy into something, I better be doing the work!
M&A as a career is a lucrative opportunity. Law firms and companies pay good money to hire experts in the field. The question is how do you get through the door? Is knowledge, hard work and diligence enough?
So I looked back at my internship to figure out what needs to be fixed in my learning. Where had I gone wrong? This question led me to the struggles and challenges that I faced while working with on M&A transactions.
1. Transactional Understanding
I was an intern. They are the bottom of the legal food chain. That also meant that I did not have access or knowledge to the actual task of the transaction. I was usually given a specific query and asked to research on it. Sometimes I was given contracts and asked to review them for vulnerabilities. The point is I never knew the whole picture. I was looking for a solution through the narrow lens!
I asked questions which seemed pertinent to me. Such as, what is the nature of transactions, who are the parties and their details (or I looked for them online), what is the client’s specific requirements from the deal? Is it a foreign company?
What is the company looking to acquire-shares or asset? I used to take lots of notes whenever my mentor was available. This helped me keep track of the things to do and specific instructions like ask X for the list of IP registrations.
The biggest challenge is that you might not know what the actual work you’re doing is for. You spend time without knowing the precise query. You get to do only a part of a significant task. So, you need clarity from time to time. You need to find a suitable time and ask questions of your mentor.
2. Due Diligence
The second big part of the assignment was due diligence. My mentor needed me to review a hundred pages long contracts and make a report of my findings. Usually, he gave me an outline of the transaction at this stage.
What helped me was a list of my findings. I used to keep a tab in my notebook or a document as I went about with it. One has to review contracts, filings, books of the company, registers maintained and so on.
Due diligence requires you to go through a lot of pages and data, so it may get monotonous from time to time. The challenge here is to identify the uniqueness of the transaction involved and build your report for the same.
It is advised to maintain a thorough requisition list which helps to know which documents are required for the due diligence and whom to obtain it from. In due diligence process, you can analyse data and identify things like the pending fine, any violation of law, ongoing litigations, etc. Then research on the applicable laws need to be done, i.e. what needs to go in the report, its implications, your inferences. All this helps while preparing the due diligence report.
3. Applicability of Laws
Although some of the applicable laws may be common like labour laws, tax laws, etc., several sectoral laws need to be researched into.
The challenge here is to find out which are the applicable laws. For instance, if the company is a non-manufacturing one, then registrations need to be done accordingly. The tax laws may differ depending on the nature of the industry, state, number of employees, etc. It helps to refer to the labour law manual, IP law manual, SEBI website to be able to keep up with the updated laws.
Another challenge is to find out the local laws which may be inaccessible in many office libraries or may be in the vernacular version. For example, the stamp duty may differ from state to state. Once you figure out a way to do this, it becomes much easier to prepare a sound contract.
4. Drafting Reports and Transactional Documents
I had to prepare notes and reports on my review of contracts. At the time I did not know what that report was or what for. Turns out it factors into the due diligence report!
I was preparing the report, noting down my observations, the action points, findings, and then suggesting manners to fix the open issues. This was being used to build the recommendations for the due diligence report.
The biggest challenge was the turnaround time for these documents. I remember asking my mentor when he needed the report or whether I was to do it on priority. He said, ‘I needed this yesterday!’ Translation: Do it fast!
Initially, I tried to do the review fast, but I missed points which defeated the whole point of a due diligence review. Thereafter, I started finding out the observations, making notes, turning it into a document for discussion and refining the report.
The biggest challenge for me was drafting the transactional documents. The material contract for a company, the risks for the business model, etc. have to be reviewed. I was given a template and asked to modify the changes and incorporate them as per the briefings. However, these transactions are a long term.
There were times when requirements used to change overnight and had to be reworked again. I tried my best to insert the relevant clauses and language. It was tough! Initially, I made such a mess, my mentor had a rough time untangling it, and had to rework the whole thing! It was an uphill task.
5. Taking The Onus
The biggest and probably most difficult to accept challenge is, taking the onus of the job.
Even if you’re doing the job with incomplete information or let’s say you are doing it for the first time, it is no excuse to do substandard work. The fact that you’re given an assignment which may go to different superiors and be fine-tuned is no excuse for you to become lax.
You need to take the onus of your work done. You need to do it as if it is your own company or as though you are the final person to authorise it. The work has to be detail oriented and thorough. Your client or company may have compliances to adhere to, possible violations of regulations. But they don’t want to know about the problems alone. The clients want a fix- how to avoid paying damages, or how to comply with the regulations in time.
Is there a need to fear the challenges that M&A poses to lawyers as well as law students? Certainly not! They are manageable with knowledge, hard work and diligence.
You can begin today.
There is much to learn about the industry and the job. How do you best articulate the commercial aspects of the transaction most suitably? Can you conceptualize and implement variations if the deal structure or negotiations changes? Do you know the necessary procedural elements and stakeholders’ interests?
Learn how to structure the deal, the execution and implementation based on the transaction. That’s the job in a nutshell. And you must know how to do it!
How do you go about it?
Start learning hands-on with the best available resources! You need to put in the work if you want to make the switch or start a career in M&A. There is no shortcut to learning, but there are easier ways to build your knowledge base and practical skills required through readily available online courses, reading as well as writing well-researched articles, updating yourself with laws and keeping a tab on the latest news in the field!
The logic for learning about M&A is simple. You went to law school to study law and work hard so that you can become a lawyer. You need to do the same thing to be a successful M&A lawyer. Study about M&A (law school barely covered it), learn the practical skills from the best minds in the industry, work hard and make your career in M&A! You need to invest the time and energy to go after what you want and make it happen!
I know you’re pressed for time, but you’ve got to make time! We don’t need to make the same mistakes on our own, and you can always learn from mine. Don’t waste more time and take action.
Today is the day.