Getting Up to Speed on Legal Diligence
Any recommendations on how to master SPAs, RWI, and other legal-related workstreams? This is an area that MDs at my fund typically lead but I’d love to get any tips on how to get up to speed quicker. My plan is to review some of these docs from some of our existing portfolio companies (as well as credit agreements). Just started a VP gig out of b school a few months back and would like to be well-armed before deal flow picks up again. Thanks in advance.
Do you have any friends or family in big law? I’m just a first year analyst but had a friend in M&A big law give me a quick run through that was helpful and I’m sure more experienced lawyers could get you up to speed on the big stuff quickly.
Honestly sounds like a solid idea, no family but have a few friends in law (not sure about supporting M&A / PE) but worth asking. Thanks for the suggestion.
Bump
Typically for negotiating an SPA, you want to make sure you’re clear on what key issues are and where your party stands with regards to things like survival periods on reps or expense caps for go-forward operations or understanding limitations on activities during the interim operating period between signing and closing. These issues usually are best organized on a list by section and then discussed one by one counsel or counsel once the business has made its position clear. So yes reading precedent docs will be helpful but it might be more helpful to sit with the VP or Dir who quarterbacked it and talk through how they arrived at each point and whether there were any particular points of contention that stood out during the negotiations.
I’ll add that while the high level points relating to structure and price might be done by the MDs, the finer points are done by the mid level bankers on the deal typically
What are some specific examples of finer legal points a VP might handle?
I'd recommend Practical Law. Goes into detail on documentation, diligence, financing and structuring a buyout.
ask someone from your network that is in biglaw to sit with you someday and explain it to you or otherwise just find a professional and pay for such "crashcourse"
the easiest starting point is to understand what tends to be standard and formalities in a contract (e.g. competency and capacity) and what are the fine points that were most negotiated (e.g. if you're buying a Tech company expect the IP/Systems R&W being the ones most discussed). I would also ask the firm/lawyers that worked on that precise document to either send you correspondance or to send you a memo laying down why certain clauses were drafted in a certain way (clearly if your company would be ok with havint he pay some hundred dollars for the billable hour it takes for the lawyer to do this).
do it for some contracts and then you'll get a broader idea of how it works
A good book I recommend is the LexisNexis M&A Practical Guide. It is written by a bunch of Gibson Dunn lawyers. It is very much meant to be for lawyers from non-M&A fields to get a summary-level understanding of the legal considerations in M&A, which is also perfect for someone in your position.
It isn’t the cheapest but it is a good tool for getting familiar with the legal elements deal work
Woah what is this and how much does this cost?
Good book
So best approach to ask VP or the person who had quarterbacked deliverables to walk through stuff is my takeaway
Need to learn a lot of the aspects of this stage of the deal process as well, and many people on my deal team have recently left the group
In my experience, there really is no substitute to learning this skill set in a live deal setting. Earlier in my career, I would sit in on every legal call and read all the docs even though I wasn’t leading diligence in these areas. As others have mentioned, most firms have house views on certain topics so talking to your colleagues can help learn you learn the house view. Finally, I would emphasize while certain issues are common in a lot of deals, every deal is bespoke. Learning what points are material and what doesn’t matter is part of the art of the job. Understanding your sellers motivation and what is important to them is a crucial part of your early diligence meetings. Some managers have very long relationships with certain law firms, and I think this can make the process go smoothly. I use two firms for most of my work and then will bring in a specialist if there is certain expertise needed in an industry.
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