Deal size vs volume - associate development Forum

[Vastrow1]

Question for the community and particularly those who have been in practice for a few years: what do you think is the ideal deal
sheet for a corporate/M&A attorney as it relates to volume of transactions vs. size?

Perhaps distinguishing between a junior associate who works on 3-4 mega transactions/year and 1-2 smaller deals vs. one that works on 9-10 middle-market transactions and maybe 1-2 larger deals? Not sure if these numbers are really reflective.

How do you think about potential factors in favor of volume, such as:
- greater opportunity to develop substantive skills at an earlier stage in one’s career
- more repetitions from seeing more deals from start to finish
- developing perhaps closer relationships with the client

And the potential factors in favor of deal size, such as:
- Perhaps working with more advisors on transactions at the top of their fields (legal, banking, accounting, etc.)
- “Prestige”? Does this impact down-steam recruiting?
- Exposure to issues that might come up more-so in large public transactions (securities regulation, antitrust, managing PR and leaks)

And do you think deal size is a proxy for complexity?

Any thoughts and perspectives on this theme would be very much appreciated. Thank you!

[Sackboy]

There is no ideal deal sheet. It all depends on the type of work you want to do. Want to leave to a middle market PE shop? Want to leave to a Pubco? Want to leave to a firm that does 80% Pubco work? Want to leave to a firm that is 50-50 between PE and Pubco? Well, then your deal sheet should look like the workflow of those shops, unless you know they have a particular need to add a role where they're week (e.g. 80% Pubco shop advertising that they're trying to aggressively grow their PE business).

[notinbiglaw]

There is no ideal deal sheet. It all depends on the type of work you want to do. Want to leave to a middle market PE shop? Want to leave to a Pubco? Want to leave to a firm that does 80% Pubco work? Want to leave to a firm that is 50-50 between PE and Pubco? Well, then your deal sheet should look like the workflow of those shops, unless you know they have a particular need to add a role where they're week (e.g. 80% Pubco shop advertising that they're trying to aggressively grow their PE business).

TCR.

There is also the complication of what you actually get to work on within deals.

[malibustacy]

Without knowing specifics, probably more reps in smaller deals.

The big deals you tend to get lost in the huge forest, doing your small part as a junior associate. The high level stuff is pretty complicated, so you're not actually absorbing anything.

[Pro Era]

In my experience as an M&A midlevel, there's an inverse relationship between deal size and complexity. The most difficult, complex, and overall pain-in-the-ass transactions I've worked on have been small, buy-side PE deals where you uncover bizarre things in diligence, transaction structures are often atypical and frequently change to accommodate new tax considerations, and the client is sensitive to legal spend given the deal size. Big PubCo deals are difficult in the sense that there's generally a larger volume of paper to push, you have to deal with the SEC, and there's more coordination among third party advisors, but the companies are generally pretty boring from a legal perspective and you can leverage public filings to get work done efficiently. The transaction structures are also usually vanilla and you don't see the same extensive negotiation over all aspects of the purchase agreement (e.g., no indemnity in public company deals) and in my experience there are fewer ancillary documents to draft/negotiate.

[ChairmanKaga]

In my experience as an M&A midlevel, there's an inverse relationship between deal size and complexity.

If by "complexity" you mean "legal complexity", that's in line with my experience. The megadeals are normally public, the materiality threshold is so high that 90% of issues sail under it and the overall process is so tightly regulated that at the junior/mid-level it's quite rote. The most technically capable deal lawyers I know in BigLaw are small/mid-cap private M&A guys who spent their first few years negotiating 100 completely different agreements. The great public M&A guys have more in common with bankers, e.g. focusing on strategy/tactics/optics and managing boardrooms.

[target_corp]

Without knowing specifics, probably more reps in smaller deals.

The big deals you tend to get lost in the huge forest, doing your small part as a junior associate. The high level stuff is pretty complicated, so you're not actually absorbing anything.

Malibustacy's point is probably the most you can generalize in this area. Deal work is so contingent on a number of points, but the ideal situation is more complexity, substance and leading negotiations and drafting, unless we're talking about extremely small deals, then the preference probably flips a bit.

[dentist]

That is really helpful - thank you for all the perspectives. Does anyone have perspective on any correlation between deal size and legal fees? I understand that WLRK is an exception in that they command a percentage of deal size as their fee, in which case for them larger transactions surely means more profits.

But setting WLRK aside, would a large Public M&A matter necessarily command more revenue/profits compared to a mid-market/large PE deal? If the inverse relationship between deal size and complexity holds up, on the traditional billable hour model, it sounds like deal size might not be a proxy for legal fees.