Nanette C Heide
Duane Morris, New York
ncheide@duanemorris.com

Report on a session of the IBA Corporate and M&A Law Committee at the 19th Annual International Mergers and Acquisitions Conference in New York

Wednesday 15 June 2022

Session Chair

Valentina Cassata Vice President & Lead M&A Counsel, Standard Industries, New York; Diversity and Inclusion Officer, IBA Corporate and M&A Law Committee

Speakers

Natasha Gopaul Managing Director, Legal & Compliance, The Blackstone Group, New York

Kendall Handler Executive Vice President and Chief Legal Officer, IAC, New York

Diane Lazzaris Executive Vice President & General Counsel, WESCO, Pittsburgh

Janet L Raimondo Head Legal M&A and Strategic Transactions, Novartis, Basel

Introduction

The panel of general counsels discussed their perspective on the most pressing issues they face, how they partner with outside counsel to resolve those issues and how they future proof their organisations. The panel focused on three specific areas: (1) deal making; (2) risk management; and (3) new skills and expertise expected of legal teams.

Deal making in the Covid-19 environment and the post-Covid-19 working environment

Diane Lazzaris discussed a large strategic transaction her company had entered into at the beginning of the pandemic in 2020. This transaction was essentially a merger of equals. Part of this transaction involved raising a large amount of equity and all of the work had to be conducted virtually. Lazzaris commented that everyone working on the deal transaction was available and efficient, which created a good workflow.

Natasha Gopaul explained that Blackstone continued deal-making in the Covid-19 environment and maintained their discipline. Gopaul highlighted the shift to focusing on capital preservation for the portfolio companies, which in 2021 moved to exits rather than capital deployment. Gopaul noted that post-pandemic, the investment focus is on viability, with regulatory issues as a big component.

Kendal Handler added that there was constant uncertainty during the pandemic. IAC was focused on building its business as well as creativity and modifying its transaction model. IAC particularly sought out opportunities for strategic add-ons. Handler commented that the remote environment allowed the deal teams to create more personal relationships, however there was a strain on resources and teams became less in sync with each other. Handler also became concerned that junior associates at firms were not being trained.

Janet Raimondo joined Novartis in June 2020 and operations at the company remained virtual until August 2021. Raimondo noted the contrast between the two business locations – New Jersey (NJ) and Switzerland. In NJ, very few people have returned to the office. However, in Basel, many people had returned to the office, likely due to better commuting conditions. Raimondo sees the post-Covid-19 environment as a unique challenge. Novartis has adopted a ‘choose with responsibility’ approach. Raimondo explained that when conducting deals, it is important to include those people working virtually alongside others who are there in-person. With respect to conducting transactions, Raimondo values outside counsel coming to visit as it allows for more personnel interactions.

Gopaul said that Blackstone has requested that everyone return to work full time and has adopted a ‘better together’ approach. There is information exchanged among team members both pre and post the Zoom interactions. The deal teams also meet in-person with the management teams of the portfolio companies. The deal teams can work remotely if needed and it is no longer a concern if someone needs to work remotely. Gopaul also emphasised that there has been growth in the company's internal groups, and it is important for outside counsel to meet new people.

Handler stated that IAC allows employees to work remotely but that in-person meetings do allow for more nuances to be appreciated regarding the information being shared. She also stated that they also value in-person interactions.

Risk management

Gopaul emphasised that reputational risk assessment is an important component of Blackstone's process. Environmental, social and governance (ESG) is a factor that is considered, and they appreciate outside counsel who can help them understand what is in the market. Gopaul seeks creative solutions to address legal and reputational issues and noted that Blackstone has created protocols to manage risk when it's identified.

Raimondo stated that outside counsel can be instructive by providing information on solutions that their other clients use, which is then useful to resolve issues in risk situations.

ESG and the deal-making process

Gopaul explained that ESG is an important component and rapid changes have been made in order to address mandated ESG. Blackstone’s mission is to deliver strong returns to its investors. ESG is a broad topic that involves operational cycle integration. Gopaul noted that there is a strong focus on the environment component of ESG especially as it relates to carbon emissions. Legal counsel needs to provide guidance on the ‘S’ and ‘G’ aspects of ESG; items regarding social and governance need to be included in the due diligence checklist.

In Handler's view, ESG is risk management. As ESG changes, Handler needs her advisers to understand how it applies to the business activities of the company. Legal counsel should recommend approaches for the business rather than just highlight the issues at hand. Raimondo added that ESG is top of mind for Novartis and that investors need to understand the company's commitment to ESG. Raimondo noted that there is a focus on reputational risk such as animal rights and human rights. There is also a focus on sanctions that may have been issued as part of due diligence.

New skills needed from outside counsel – digital transformation and crypto

Raimondo explained that Novartis is acting like a technology company and transferring processes to technology. Raimondo stated that outside legal counsel needs to look at digital issues and the data collection of its clients, not just data privacy issues. Data of a client is an asset that needs to be protected. Raimondo noted that outside counsel needs digital legal skills as it relates to the industry.

Handler said that law firms can use technology to do their jobs better. Firms can evaluate using AI tools and other technology enabled providers to help clients. With respect to crypto issues, Handler stated that IAC is paying attention to crypto.

Gopaul noted that advisers should be able to educate the client with a basic understanding of crypto and the related issues it presents.

M&A counsel selection

Lazzaris stated that she chooses the person from the firm to do the transaction. Lazzaris appreciates personable counsel. Raimondo added that she looks for outside counsel who are good at project management, not just on the matter at hand but the issues in the future too. Gopaul commented that her focus is securing outside counsel who function like an outside consulting firm with project management capabilities. Gopaul also appreciates outside firms that will team up with other firms when specific subject-matter expertise is needed. Valentina Cassata stated that she appreciates a relationship manager at the firm who can look at the issues holistically.

Diversity and inclusion

Lazzaris stated that WESCO's goal is to be 50 per cent diverse and she expects her outside legal teams to look at diversity issues. Raimondo stated that Novartis has internal commitments on diversity and inclusion and outside legal counsel also must be diverse and inclusive.

Conclusion

During Covid-19, conducting transactions was challenging. In-house counsel had to address stabilising investments, manage transactions in a remote working environment, and then assess strategies going forward. Another challenging component is risk management. One of the most pressing issues is ESG and its influence on transactions. Outside counsel need to advise in-house counsel of ESG components that can drive deal value. Outside counsel should also be diverse. An important challenge is the ability to understand crypto and its effect on transactions. Finally, in choosing outside counsel, the in-house lawyer is seeking lawyers who can manage the project and interact personably with the in-house legal team, as well as provide deal value.