Day 43 - That call (Thurs 6.45pm)
The story starts on a Thursday afternoon at 6.30pm. It’s almost the end of the week and I’m looking forward to going to dinner with some other Trainees. You know how it is, late in the week. Even the most conscientious person starts making plans for the weekend. And then it happens. The call comes through that changes everything. Alpha Coffee, the UK’s third largest chain of coffee shops, is up for sale and Linklaters has been asked to advise.
The Partner rings an Associate and they call me, and suddenly I’m on the team. Although we’ve a longstanding relationship with Alpha Coffee, we can’t automatically work on the deal. First we need to carry out a conflict check. This is to ensure that acting for Alpha won’t create a conflict of interest with our work for other clients. We have to work fast because the client is waiting, but our global deal database has all the information we need. If any potential conflict does show up, the Partner will make a quick call to the lawyers involved to clarify the position. Fortunately on this one, we’re clear to go.
Day 42 - Setting up (Fri 9.30am)
While the Partner is writing to the client to explain that we would be 'delighted to act', the Managing Associate has been starting to pull the team together. The Managing Associate and I get things rolling while the Associate and the Partner join on the Monday. There's a system to the team selection: a Work Allocation Partner is responsible for allocating people to deals in the practice area. As well as monitoring and balancing workloads, they help Trainees broaden their experience. In this case, I’d worked on a couple of IPOs (that’s 'Initial Public Offering' or a float), so the Work Allocation Partner felt it would be a good idea for me to work on a big sale. Also, the Managing Associate on the deal was my Principal so it made sense to get involved.
Alongside the corporate team, there are also colleagues from other parts of the firm – Real Estate, Intellectual Property, Competition, Employment Law – as well as lawyers from other offices around the world. You quite often find yourself working with friends who are Trainees in other departments which is good fun. As part of the set up, we provide a list of contacts for the client, including our mobile numbers in case the client needs us urgently. Because the coffee or retail sectors are not industry sectors some of the team have worked in before, I research the coffee shop industry, so that everyone properly understands the client’s business. The firm is split into sector teams as well as by geography and practice area, so we will call the retail sector team on Monday to get the lowdown.
Day 39 - Data room (Mon 12.45pm)
We ask the library to send us emails each morning forwarding any news or rumours about Alpha appearing in the morning’s press. One of the first jobs is to help the client draft the information memorandum, which is a statement of the intention to sell the business and includes the basic dimensions of what’s on offer and of the assets and risks of the business. The Managing Associate and Associates work on this together alongside the teams from Alpha and their investment bank.
My first big job is to help to build the data room. This is a real or virtual collection of all the relevant documents relating to the business. Potential buyers scrutinise them as part of the due diligence process. Before a buyer enters into a contractual commitment to buy the target business or company, they want to acquire as much information about it as possible.
The aim of due diligence is for the buyer to gather detailed information about the target, including information not publicly available, to enable the buyer to decide whether or not to go ahead with the proposed acquisition and, if so, on what terms, and for what price. We send a questionnaire to the client in advance to check what they might want to include in the room. Then we go to meet them, to discuss the business and collect all the relevant contracts and documents, from leases and supplier agreements to employment contracts and pension scheme details. So as a Trainee, even in my first seat, I find myself dealing directly with the Chief Executive Officer (CEO) and Financial Director (FD) of the client. The Associate is with me, so I can’t really go wrong, but it's quite nerve-wracking, nonetheless. It’s not a question of piling up documents, there’s a real satisfaction in building the big picture of the business in its entirety and getting a feel for what’s really being sold – and why!
When the data room is set up in one of our meeting rooms, we can start making plans for interested buyers to come and review the documents. In reality, there will often be more than one data room, so that we can maintain the confidentiality of potential buyers by letting different teams visit different rooms. After all, we can’t let the various teams even see each other, so it takes careful management. We’ve also got decisions to make such as whether they can take copies of documents and how much time should we give them.
Day 38 - Due Diligence starts (Tue 12pm)
Day 22 - Indicative Offer deadline (Thurs 5.45pm)
At the same time that due diligence is being completed, we draft the sale contract, feeding in intelligence based on questions coming back from the buyer. It means we can head off any problems before they arise.
For me, the excitement is in the teamwork. We’re working incredibly hard to make a lot of different things happen at once; we need to liaise carefully between people so all the different workstreams and threads work seamlessly and everything happens on time. Having narrowed down the number of potential buyers during the process, the client now needs to select the bidder of choice. And that is rarely made just according to price.
There are many different considerations. For example, if we have to seek competition approval from the UK or European Competition Authorities, the deal could be held up for months. The competition authorities in the UK and in Europe have created regulations to prevent the accumulation of monopolies or excessive market shares as these have an anti-competitive effect on the market. We also need to think about indemnities and protections relating to a potential deal on the purchaser’s side. It may be that these terms make one offer less attractive than another even if the first includes a higher purchase price. One of our jobs is to weigh up the legal pros and cons of each.
Day 10 - Contract Negotiation (Tues 10.30am)
The client decides to take two bidders into the next phase. This means that we have to run two sets of negotiations in parallel with two different teams – with the partner running one and the managing associate the other – and there’s a bit of good-natured rivalry between the two.
Contract negotiations continue for about two weeks; we work from an issues list - essentially a ‘to do list’ of tasks, both legal and administrative - of the most important commercial issues and, once these are resolved, we go through the rest of the contract, line by line. Documents are marked up with amendments and then reproduced in the new form. I’m not directly involved in the main negotiation, but I do go along to many of the subsidiary meetings that support it. I get to go to some of the big meetings too, although don’t say much at the beginning. There is quite an adversarial feel at some stages and the negotiation has really begun. Watching negotiations taking place is a great way of learning. During your four seats, you’ll see a lot of different negotiating styles.
Day 8 - Disclosure Letters (Thurs 2.25pm)
I also work on the disclosure letter. This is prepared by the seller’s solicitor and its purpose is to disclose matters relating to the target company and its affairs which, were they to remain undisclosed, would result in the seller being in breach of warranty. Our client has confirmed that information relating to the business are correct and the share purchase agreement is also completed. This is the document by which the parties agree to transfer the shares in a company or companies from the seller to the buyer. I get to work on some of the ancillary documents, which include the disclosure letter, employment contracts and stock transfer forms.
Day 1 - Final Offer (Thurs 10.05pm)
We get to within hours of the signing when the preferred buyer – Charlie Coffee – does something unexpected. Out of the blue, they claim that chairs and sofas from Alpha outlets were ‘worn and torn’; most of the paintwork needed re-doing, coffee machines needed upgrading and new bathroom facilities were needed in 14 of the shops. The upshot is that the CEO of Charlie Coffee wants a seven-figure reduction in the purchase price.
Our client strongly disagrees. No improvements need making to the shops. This is just a 'try on' and Charlie Coffee is trying to buy the business for less than it’s worth. It’s at this point that I realise the wisdom of taking two preferred buyers to full negotiations: we’ve got two options. Within five hours, we agree a deal with Bravo Coffee on the original terms. Everyone, except Charlie Coffee, is absolutely delighted.
The deal is to be signed and completed in a day, so, as soon as the perimeters are agreed, we go into overdrive again to finalise documentation. It’s all hands on deck! The final mark-ups are exchanged and then new, agreed copies produced. You have to prepare exactly the right number of documents for everyone to sign. I usually use Post-It notes in place to make it easier to track what needs to be done. I’m going to be responsible for making sure that everything is signed properly, so I’m quite nervous. It has to be done right. We’ve gone from the cut and thrust of negotiation to the excitement of what feels like a theatrical event. It really shows the team working together. But there are still plenty of jobs to be done, from preparing press releases to writing communications to employees and suppliers.
Day 0 - The Signing (Fri 5.00am)
The signing takes place at five in the morning. After a successful deal, you soon realise that the people you’ve been negotiating with on the other side of the table are now on your side and you’re all celebrating together.
Day +1 - Completion Party (Sat 12.45pm)
On a big deal, there's a pretty substantial cycle of celebration. We'll often have a dinner with the client, the banks, management, everyone involved in the deal. Sometimes the client will hand out tombstones to everyone. This is nicer than it sounds! A tombstone is a trophy of the deal that you keep as a memento. Trainees don't always get them, but as this was my first deal and the CEO of Alpha Coffee had dealt with me directly, I got lucky.
At the end, you feel tired but exhilarated. I'd worked with Alpha's Financial Director on this deal and we all knew that she could well be out of a job under the new owners. If so, we may lose her as a client. On the other hand, a deal like this is a great opportunity to showcase our capability, not just to our own client, but to Bravo Coffee and Charlie Coffee. If we impress them, they may well come back to us in the future to act on other matters.
Then it's all over and you're on to the next deal. The firm has a time off in lieu policy if you've been working hard and people will cut you some slack after a big deal. And that was Alpha Coffee, my first big corporate deal. But now...I'm off home.