I’ve spent a good part of my career as a lawyer, many of my good friends are lawyers, and I have great respect for the work lawyers do. There’s no question that proactive, thoughtful legal advice adds value to any enterprise or deal. Very effective, strategic legal counsel can even be a competitive advantage. However, to expand on my earlier post regarding not over-lawyering term sheets – it’s equally important to manage your lawyers once definitive documents are being negotiated.
If you are fortunate, your lawyers will understand your business, your objectives, your timelines and your risk tolerance. They will work smoothly with the other side’s lawyers and help you bring the deal in on time and on acceptable terms. If you are unfortunate, your lawyers will have no business judgment, obstinate manners and lack any ability to weigh risks and opportunities. They will blow your deal up over meaningless terms, leaving you to try to pick up the pieces.
It can be tempting for non-lawyer deal guys to hand great chunks of the work on the definitive agreements over to the lawyers to work out. However, until and unless you have confidence in how your lawyers work, you’ll want to stay involved in all of those discussions, even if it just means a lot of listening. It’s equally important to make sure you have an understanding with your lawyers about who is in charge on your deals. You are. In any deal, there will be a number of points where you will need to overrule your lawyer’s advice or the position they are pressing for. This makes sense, right? The lawyer SHOULD be pressing more aggressively, and the deal guy should be doing the big picture balancing of the overall deal. Unfortunately (and I’ve run into this across the table far too often), the deal guy will shrug and defer to the attorney on stuff they should be moderating. So the deal bogs down – or derails – while you try to sort it out. While this is less of a problem in smaller companies or when using outside counsel, it can be a major problem in dealing with in-house M&A counsel at larger companies.