Underwriter representation in M&A

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expat
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Underwriter representation in M&A

Postby expat » Fri Mar 15, 2013 6:53 pm

Can anyone here expound on the differences in representing an underwriter vs. target/buyer in an M&A transaction? Is this basically just capital markets work that happens to be related to a specific M&A deal, or is there more to it?

Anonymous User
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Re: Underwriter representation in M&A

Postby Anonymous User » Sat Mar 23, 2013 4:03 am

Bump. I'm really curious about this as well. Ty to anyone that chooses to respond!!

imchuckbass58
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Joined: Mon Mar 16, 2009 3:24 pm

Re: Underwriter representation in M&A

Postby imchuckbass58 » Sat Mar 23, 2013 9:44 am

Do you mean being underwriter's counsel in a capital markets transaction? Or representing the financial advisors in an M&A transaction?

Typically, when people talk about a firm acting as "underwriter's counsel," they're talking about capital markets (i.e., debt or equity issuance). Of course, you can issue debt in connection with an M&A transaction, but really that's just a capital markets transaction where the issuer is using the proceeds to acquire another company. Underwriters acting as such usually aren't directly involved as principals in negotiating the main transaction agreements for the M&A deal.

Assuming you mean the former, here's the difference between representing an issuer and an underwriter: The issuer's counsel will usually do the bulk of the heavy lifting, i.e., drafting the prospectus, ancillary agreements, etc. The reason underwriters have counsel is they are effectively vouching for the accuracy of the prospectus and the other transaction documents when they try to resell the securities to third party investors. So underwriter's counsel's job is largely to conduct due diligence to ensure the accuracy of the documents that the banks are putting their name to. In an M&A context, the prospectus for the securities will contain details on the M&A transaction, so underwriter's counsel will get involved in reviewing the details of a deal in that sense.

Firms who represent underwriters typically have a smaller role on each transaction, but their clients do tons of transactions, so it's a greater amount of work in aggregate. By contrast, issuer's counsel will really "drive" the transaction from a legal perspective and do more drafting, but an issuer typically issues securities relatively infrequently. Substantively, some would argue you will "do more" as issuer's counsel since you really have to dig into the business and describe it accurately when drafting a prospectus, whereas your job as underwriter's counsel is more to check things and attempt to rein in the issuer where you think they're being too optimistic / boastful in the prospectus.

expat
Posts: 53
Joined: Mon Jan 11, 2010 3:56 am

Re: Underwriter representation in M&A

Postby expat » Sat Mar 23, 2013 12:03 pm

Thank you, that's really helpful. Is the latter category (representing the financial advisors to an M&A transaction) a major role for transactional lawyers? I guess I just assumed they wouldn't need their own counsel, except maybe to advise on litigation risk these days.

On a related note, if I read a deal announcement that says "Cravath advised Buyer X, Skadden advised Target Y, Davis Polk advised JP Morgan" is it possible that this is DPW's M&A lawyers working with JPM's M&A bankers rather than capital markets folks from both sides?

imchuckbass58
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Joined: Mon Mar 16, 2009 3:24 pm

Re: Underwriter representation in M&A

Postby imchuckbass58 » Sat Mar 23, 2013 11:11 pm

expat wrote:Thank you, that's really helpful. Is the latter category (representing the financial advisors to an M&A transaction) a major role for transactional lawyers? I guess I just assumed they wouldn't need their own counsel, except maybe to advise on litigation risk these days.

On a related note, if I read a deal announcement that says "Cravath advised Buyer X, Skadden advised Target Y, Davis Polk advised JP Morgan" is it possible that this is DPW's M&A lawyers working with JPM's M&A bankers rather than capital markets folks from both sides?


So, to be perfectly honest I'm less familiar with the latter category (so someone please correct me if I'm wrong). But my understanding is while it is less common (i.e., not every transaction will have a firm representing the financial advisors as such), it does happen from time to time. The two most common contexts I've heard of it happening is (1) when a financial advisor is representing the special committee of the board tasked with responding to an unsolicited offer, and (2) when the financial advisor is representing a bankrupt debtor in its restructuring. In both cases, the board committee / debtor will have their own counsel, but the financial advisor may also have counsel to help them tailor their advice, since both situations are legally fraught with fiduciary duties / bankruptcy rules.

As for your deal announcement example, that can mean many things. It may mean DPW represented JP Morgan as underwriter's counsel, it may mean DPW represented JPM as financial advisor (i.e., worked with the M&A bankers), or it may mean DPW did both. I imagine the last case is probably pretty common - you're mainly representing JPM as underwriter's counsel, but within the scope of the engagement you're happy to get one of your M&A partners on the phone if one of the JPM bankers has a question regarding whether they can structure the transaction in a certain way without triggering adverse legal consequences.

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seespotrun
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Re: Underwriter representation in M&A

Postby seespotrun » Sun Mar 24, 2013 5:03 pm

imchuckbass58 wrote:
expat wrote:Thank you, that's really helpful. Is the latter category (representing the financial advisors to an M&A transaction) a major role for transactional lawyers? I guess I just assumed they wouldn't need their own counsel, except maybe to advise on litigation risk these days.

On a related note, if I read a deal announcement that says "Cravath advised Buyer X, Skadden advised Target Y, Davis Polk advised JP Morgan" is it possible that this is DPW's M&A lawyers working with JPM's M&A bankers rather than capital markets folks from both sides?


So, to be perfectly honest I'm less familiar with the latter category (so someone please correct me if I'm wrong). But my understanding is while it is less common (i.e., not every transaction will have a firm representing the financial advisors as such), it does happen from time to time. The two most common contexts I've heard of it happening is (1) when a financial advisor is representing the special committee of the board tasked with responding to an unsolicited offer, and (2) when the financial advisor is representing a bankrupt debtor in its restructuring. In both cases, the board committee / debtor will have their own counsel, but the financial advisor may also have counsel to help them tailor their advice, since both situations are legally fraught with fiduciary duties / bankruptcy rules.

As for your deal announcement example, that can mean many things. It may mean DPW represented JP Morgan as underwriter's counsel, it may mean DPW represented JPM as financial advisor (i.e., worked with the M&A bankers), or it may mean DPW did both. I imagine the last case is probably pretty common - you're mainly representing JPM as underwriter's counsel, but within the scope of the engagement you're happy to get one of your M&A partners on the phone if one of the JPM bankers has a question regarding whether they can structure the transaction in a certain way without triggering adverse legal consequences.

If a bank renders a fairness opinion, then they will have their own counsel (think: virtually every public deal). This is not my practice (though, I work in a related area), but I know that, at the very least, banker's counsel advises on disclosures concerning the work underlying fairness opinions.




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