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Managing the Merger: The View from Corporate Counsel

Fortnightly Magazine - January 15 1999

of transactions and related litigation was virtually non-stop. Anyone going on vacation took a cellular phone, portable computer and fax machine, and spent a good deal of time on the phone.

This is the kind of commitment required to undergo the change Western contemplated. However, even in less complex programs such as a single major transaction, success often depends on commitment, focus and organization. Given these attributes and the willingness of managers to seek the outside advice of those who have been there, it is surprising what can be accomplished.

Commitment must be coupled with the appointment of someone within the working group to serve as the organizer-coordinator - someone who understands, at least generally, the myriad aspects of the transaction and can see the interrelationships among them. The organizer-coordinator must, therefore, know the legal requirements, where they fit into the business, regulatory, accounting and public/ investor relations aspects of the transaction and how to marshal necessary resources.

While there may be different individuals in charge of public relations, investor relations, finance, legal and other functions, each making decisions in his own area in coordination with the others, corporate counsel is in the unique position of reviewing all of these areas to make sure there is no lapse of legal compliance. Such lapses might include the violation of securities laws through public relations strategies.

At the top must be an executive with dedication to the project and the ability to make ultimate decisions for the group. Absent this type of clearly understood arrangement, two serious problems can arise: decisions don't get made or conflicting decisions are made. Both problems can arise within the same project. The larger the working group, the greater the potential problems and the tighter the organization must be. Allowing these problems to persist easily can doom the project.

Working groups should be no larger than necessary, but, as we have seen, the number and diversity of issues and disciplines involved in a highly complex project or set of projects may require a considerable talent pool. Whether the project is complex or ultra-complex, it is best to begin organizing the group and identifying the issues as early as possible. Discovering issues late in a project increases the risk of failure, and causes a great deal of anxiety for chief executives and those who report to them.

Deciding When to "Lose"

The entire working group must, of course, understand the objectives of the project. This is more than simply the completion of a particular transaction. As noted, each transaction affects the existing business and other transactions. Each group member must understand what the company hopes to achieve and what it wants to avoid.

Western Resources might have been able to win the battle for ADT at a price, but it kept in mind the goal of keeping the company financially strong. Thus, the company accepted a "loss," but in so doing created value for the company, allowing it to grow in far more economical ways. A "win" was possible, but it could have left the company without financial flexibility for