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Managing the Merger: The View from Corporate Counsel

Fortnightly Magazine - January 15 1999

all of the transactions, but interacted among them. For example, the transfer of assets in the OneOK strategic alliance created an issue with respect to whether the KCPL merger could be accounted for as a pooling of interests (the restructuring rendered that point moot). In fact, with every transaction we asked whether pooling would be jeopardized. The interaction of these two transactions also posed issues under the Public Utility Holding Company Act, which ultimately dictated the structure of both.

Compliance with the various Securities and Exchange Commission shareholder disclosure rules became particularly complex as transactions multiplied while Western was in registration and in the middle of its proxy battles (essentially from the beginning of 1996 to mid-1998). Since multiple law firms, accounting firms, investment bankers and consultants were involved in the various deals, their activities had to be carefully coordinated to avoid lapses in disclosure compliance.

Three transactions - KCPL, Westinghouse and ADT - also involved litigation. This meant retaining local law firms in California, Texas, Florida, Kansas, Missouri, Bermuda and the United Kingdom to assist firms working on the deals. Litigation can affect the outcome of the transactions themselves, transactions being pursued at the same time, shareholder votes and the regulatory process surrounding some of the transactions. The flow of information connected with securities law disclosures, regulatory review and litigation increased the sensitivity of the process and the diligence required not simply by counsel, but by everyone involved both inside and outside the company.

This coordination came primarily from the top. Western's chairman and CEO, John E. Hayes Jr., demonstrated constant commitment to every project throughout the period, including the hiring of David Wittig. Wittig, an investment banker with expertise in mergers and acquisitions who is now president and CEO, helped spearhead the program of growth and restructuring. Executive management met frequently with outside advisors, sometimes daily when the action was particularly heated.

The advice of outside legal, accounting and other experts was absolutely essential to the process because of the amount of work and variety of disciplines involved. At least six consulting firms, three investment bankers and 19 law firms worked on various issues of one or more of the major projects. Meetings did not include all of these outside advisors, but drew them in as needed to address particular problems. Everyone was urged to provide relevant information and raise pertinent questions as soon as they became known. Few items of importance escaped attention long.

The use of so many advisors, while potentially cumbersome, achieved a critically important result. Every advisor contributed expertise and experience to the process that otherwise would have been unavailable to a hard-pressed management team. That left management free to do the coordination and run the rest of the business.

The 90-hour Weeks

Even with the help of advisors, the process created a hectic pace. Many in the working groups put in 80- and 90-hour weeks, week after week for two years, to reach the point where the company could say it had truly restructured itself. From January 1996 to November 1997 in particular, the pace