How Do You Deal With the Other Side

How do you deal with the other side’s external lawyers when a) the external lawyers don’t really understand the deal, and b) the people who you are trying to do the deal with won’t take control of their lawyers?

This scenario comes round much more often than you think. Usually, it’s a combination of two factors. 

Factor A: the external lawyers don’t really understand business, or the nature of the deal or, equally bad, just want to do the minimum. It’s so much easier to retrieve a template from the template library, make a few tweaks, and send it out again. (Note: this is rarely an issue with in-house lawyers.  They are in-house precisely because they do understand business and feel more comfortable in that environment).

Factor B: the clients are intimidated by their lawyers.  For reasons that escape me, there are people out there who think that lawyers have some particular inside track on the real world and therefore defer to their judgement.  Is it a question of appetite for risk?  I don’t think so.  For some people, lawyers have a special mystique.  (Full disclosure: I’m a lawyer, and I’m really grateful if people think I’ve got mystique).  Spoiler alert: lawyers don’t have an inside track on the real world. In fact, there are quite a few lawyers out there that don’t have a good handle on the business world at all.  Don’t blame them: it’s their training.

Here’s a recent experience of external-lawyers-are-blocking-the-deal.  My client was in a hurry to do the deal and the other side’s business people were in a hurry to the deal (for a number of reasons, there was a ticking clock). The other side’s external lawyers produced the first draft contract.  It was pretty useless: either the lawyer had not asked the right questions, or had been poorly briefed (or, had let themselves be poorly briefed), and big chunks were missing from the contract that were needed to make the transaction work.

There was no point in going back with a marked-up version of the document.  There was clearly a lack of alignment on the other side.  So, we decided to go back with heads of terms: i.e. a much shorter document setting out our understanding of all the key terms, the basic premise being – we think this is the deal we are trying to do together, do you agree? On the back of the draft heads, we would have a meeting, and the draft heads would effectively provide an agenda to work through.

We received the first draft on the Thursday or Friday, we produced an internal version of the heads over the weekend, we had a call over the weekend to make sure everyone on our side was happy with them, and sent them across on Monday.

Silence.

It then turns out the other side’s external lawyer didn’t want a meeting (don’t ask me why), and was going to produce another draft.  We tried to persuade our commercial contacts on the other side that this was not an efficient approach, but they felt they couldn’t overrule their lawyer. (Presumably, this was something to do with legal mystique – see above).

A week later, another draft appears. It was a bit better than the previous one, but not by much.  The external lawyer still did not understand the commercials and was just taking a wild guess at what they should be. 

Plan A having failed, we switch to plan B: marking-up the draft.  We did this in double-quick time (the clock is ticking), we have an internal call to make sure everyone’s happy with it, and off it goes.

Luckily, our commercial guys manage to get on a call with their opposite numbers (without the lawyer present) and take them through the changes we’ve made.  It all makes sense to them: they agree to put a call in to their external lawyers and tell them that they are ok with the changes, and that we have passed the point for more mark-ups.

A few days later, we get the latest draft.  All our changes have been accepted: there are some changes, but nothing we can’t live with.  The contract gets signed.

Most of the time, using external lawyers works well.  Firstly, most lawyers (external or in-house) are client-focused and want to provide a good service.  Secondly, it is always better to have a discussion (even remotely) than swap emails: it’s a much higher bandwidth of communication, and more gets done and faster (and there’s a lot less room for misunderstanding).  Thirdly, on those occasions when the other side is using external lawyers and those lawyers are acting as brakes on the deal, you have to be flexible in your approach. Most likely you will have to try a few different approaches until you find one that works.  You need to be able to recognise quickly when it’s time to change.