What value do corporate lawyer brings? Forum

[Askhanar]

Q: What value do corporate lawyers bring in transactions?

I understand the value of tax lawyers (structuring deals in such a way that would allow the business to save money), but it isn't quite clear regarding corporate lawyers. On the contrary, I would even say that corporate lawyers are an expensive cost for parties. Furthermore, the majority of the contracts used in transactions could be easily drafted by the in-house legal team of both companies. Also, if both businesses have a good relationship they will directly skip spending money on lawyers.

So, how could corporate lawyers create value?

[becodalapa]

Furthermore, the majority of the contracts used in transactions could be easily drafted by the in-house legal team of both companies.

Your question rests on a bunch of faulty premises, including this one. After all, if that were actually the case, why would these in-house legal teams ever hire outside corporate lawyers?

[BrainsyK]

A decent portion of them can conjugate verbs correctly.

[Anon-non-anon]

A janitor can squish a bug, but you hire the exterminator when you have an infestation. In other words, in-house has the capability (both manpower and knowledge) to do some stuff, but lots of other, more work-intensive stuff (especially like a merger) is way beyond the capacity of an in-house department at most places. It wouldn't make sense for most companies to have an M&A team bc they do like one merger in their lifetime, or a couple of offerings total, so they hire a vendor (a law firm) to handle it at the specific times they need that knowledge / manpower.

Also, in-house lawyers may have full time responsibilities outside of special situations, so when a big project comes up, they need that extra capacity.

You're basically asking why do companies hire any vendors when they have a tech guy, a lawyer, a security guard, a janitor, etc.

Also issue spotting in contracts you've never done before for the entire future of your company might not be the best idea...

[nealric]

A janitor can squish a bug, but you hire the exterminator when you have an infestation. In other words, in-house has the capability (both manpower and knowledge) to do some stuff, but lots of other, more work-intensive stuff (especially like a merger) is way beyond the capacity of an in-house department at most places. It wouldn't make sense for most companies to have an M&A team bc they do like one merger in their lifetime, or a couple of offerings total, so they hire a vendor (a law firm) to handle it at the specific times they need that knowledge / manpower.

Also, in-house lawyers may have full time responsibilities outside of special situations, so when a big project comes up, they need that extra capacity.

You're basically asking why do companies hire any vendors when they have a tech guy, a lawyer, a security guard, a janitor, etc.

Also issue spotting in contracts you've never done before for the entire future of your company might not be the best idea...

Point of order: depends on what you mean by a "merger." Most larger companies do have an in-house M&A team, usually made up of former Biglaw M&A folks. Most M&A activity is just large asset acquisitions/dispositions. I'm in the oil/gas industry, and we typically do at least a few 9 figures deals a year. These are usually buying up /selling drilling rights or related assets, or having another company participate in developing existing rights in some manner. Some we will bring in outside counsel, some we will do in-house in that size range. It depends on the complexity as well as the dollar amount of the deal. Anything into the 10 figures + will generally have outside counsel for CYA reasons if nothing else, regardless of complexity.

Where we would absolutely bring in outside counsel is if we were purchasing, being purchased with, or doing a "merger of equals" with another public company. Like you said, most of us would only do a deal of that magnitude a few times in a lifetime. Even those that have worked on them when they are in biglaw probably hasn't done one in years, and even if we had the expertise we don't have the raw manpower for a deal of that size. It takes a large team and lots of specialized expertise for something like that.

However, bringing in outside counsel doesn't mean we don't do any work on the deal. There still a lot of work coordinating between the business side and outside counsel, and in-house counsel will still be involved in the substantive drafting (not actually writing, but comments and revisions). No matter how good outside counsel is, there are going to be unique things within your company they won't know that need to be taken into account.

Corporate law is a "cost", just as having an accounting or IT department is a "cost", but it's not a cost that is wisely avoided. An annual legal department budget can be dwarfed by a serious mistake or oversight in a contract. The business unit may be responsible for a term sheet, but getting from a term sheet to a signed deal involves a lot of detailed work. Doing it wrong may allow a counterparty to get out of a deal or get more than they bargained for. That can cost a lot more than your lawyers do.

For what it's worth, I'm in tax (not M&A), but I work side by side with the M&A folks. I sometimes joke that I could do what they do, but not the other way around. That may be true in terms of substantive knowledge (for the most part), but the truth is that there is a lot of process knowledge that is key to making a deal run smoothly that I do not have.

[aspiring0L]

Q: What value do corporate lawyers bring in transactions?

I understand the value of tax lawyers (structuring deals in such a way that would allow the business to save money), but it isn't quite clear regarding corporate lawyers. On the contrary, I would even say that corporate lawyers are an expensive cost for parties. Furthermore, the majority of the contracts used in transactions could be easily drafted by the in-house legal team of both companies. Also, if both businesses have a good relationship they will directly skip spending money on lawyers.

So, how could corporate lawyers create value?

I mean, I disagree with your question and its premise, but BernieTrump would say you are being too kind........