HOW TO DRIVE A TRANSACTION WITHOUT IT DRIVING YOU (CRAZY)

Transcription

1 1 HOW TO DRIVE A TRANSACTION WITHOUT IT DRIVING YOU (CRAZY) How to address the Internal Transaction Ghost in the Corporate Room 2016 In House Counsel Conference

2 2 Disclaimer: THE VIEWS AND OPINIONS EXPRESSED IN TODAY S PRESENTATION ARE THOSE OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THOSE OF THE UNIVERSITY OF PENNSYLVANIA OR SAUL EWING LLP

3 3 Presenters: Mark Feingold, Associate General Counsel, University of Pennsylvania Evan Foster, Partner, Saul Ewing LLP

4 What do attorneys want when we support a commercial transaction (the ideal )? Engaged key business person/internal team Collaborative process with clear roles and responsibilities Effective leadership from key business person A business person who is a relatively skilled and practical negotiator Effective use of time and resources 4

5 What do attorneys want when we support a commercial transaction (the ideal )? Appreciation of and careful and deliberate consideration by internal team of risks Review of documents by those responsible for the transaction Timely decisions by key business person and other decisionmakers Clear communication within the internal team and to others within the organization who need to know Senior management buy-in 5

6 6 What do we too often find? No internal champion/a business person who is neither leading the transaction nor engaged A business person with very limited experience in contracting and negotiating Lack of internal alignment on the transaction (lack of alignment on key objectives) Business/sales personnel incentivized, once $ amounts addressed, to simply get the agreement signed Lack of clarity on key business terms Lack of effective process and little collaboration

7 7 What do we too often find? Lack of clarity on internal roles and responsibilities Poor communication Urgency without time to run an effective process Hurry up and wait

8 8 Leading to Substantial internal inefficiencies and wasted/misused resources Churn: more meetings, phone calls, s, etc. The wrong person doing the work (too often it s the attorney) Increased use of external resources (e.g., outside counsel) and related costs Unreasonable expectations by both parties Other party taking advantage of internal misalignment Suboptimal contract results, including incomplete, impractical or problematic contract terms and poor allocation of risk

9 9 Leading to Poor or failed contract implementation Internal and external frustrations Finger-pointing (internal and external) Contract disputes (e.g., law suits/arbitrations) Adverse impact on corporation s reputation and value; unanticipated costs

10 10 Why? Senior management doesn t understand the fundamental problem or appreciate the costs of suboptimal contracting Senior management/corporate cultural belief that anyone can work on and negotiate a contract ( What s so hard about that?) Contracting too often seen as primarily a legal function/activity (Business view that it s not my job or responsibility or that, as with litigation, contracting should be turned over primarily to the attorneys)

11 11 Why? Contracts seen merely as a means to an end or as just another hurdle to overcome so that the real work can get done Not part of the employee s job description (no hiring for the skill set and no effort to train and hold accountable) Lack of internal business experience in understanding key contract terms or effective negotiating Lack of time and desire ( I already have a daytime job ) too many competing priorities

12 12 Why? Lack of job incentives (no recognition or other reward for a job well done) Lack of corporate processes and expectations, leading to contracts being handled differently in different parts of the organization A view that both sides know what they want, are aligned and will act according even if not memorialized in writing (e.g., a written contract is superfluous)

13 13 Why? View that attorneys worry too much (we probably do) Cultural challenges (e.g., a corporate culture that accepts suboptimal contracting as the way it is; a PowerPoint corporate culture that expects that everything can be boiled down to a handful of bullet points) Key internal personnel who are incentivized to just get it done or simply don t care about addressing issues and risk (personal interests trump corporate interests)

14 14 Why? Lack of involvement seem as lack of responsibility if anything goes wrong A view that the lawyer will protect the organization no matter what and if anything goes wrong, it will be someone else s (often the attorney s) responsibility/problem ( By the time anything goes wrong, I ll be long gone ) Lack of corporate courage (the quandary of the Emperor s New Clothes ) Legal not being effectively proactive with respect to the problems Inconsistent approach among in-house attorneys, leading to attorney forum shopping

15 15 What can be done? Basket of solutions depends upon the specific problems to be addressed Best to start at the top: Senior Management buy-in is imperative Key Take-Way: Good and Effective Contracting by non-attorneys is a Learned Skill Set and Function often a paradigm shift in the corporate perspective on contracting Develop an approach to contracting where the more important the contract, the greater the allocation of resources and attention

16 16 What can be done? Develop corporate profile and understandings on accepting risk and risk allocation Be practical: Not all contracts are the same and deserve the same resources and approach (this too is an issue of risk assessment) Low dollar/low risk/run of the mill agreements could be negotiated through purchasing department (perhaps with limited oversight by legal) Develop form agreements (e.g., consulting; purchase of equipment; Business Associate Agreement) Develop and publish contract processes that define roles and responsibilities; prepare and circulate a document that sets forth obligations of a transaction manager Require transaction manager to be a business person

17 17 What can be done? Develop contract cheat sheets that explain purpose of and positions (and fallback positions) associated with specific contract terms Develop a questionnaire for business folks to complete on each proposed transaction to facilitate legal support Educate, educate, educate Decide who needs training Consider videotaping presentation so new personnel can view even if no live presentation for some time Get support for modifying job descriptions to include contract negotiations and for employees to be evaluated based on role as transaction manager/team member

18 18 What can be done? Create (with the support of senior management) a department of experienced transaction managers to work on important agreements The ultimate solution The transaction manager is responsible for leading the negotiation team, setting reasonable expectations and involving subject matter experts as needed Transaction management department needs not only to report to a senior manager but to receive effective support from senior management Need for appropriate funding (experienced and good transaction managers aren t cheap) Care is needed in hiring and overseeing Need to incent transaction managers Need quick and noticeable early wins Debrief transactions (post-mortem review)

19 19 Track, measure and communicate results Determine and measure elements of success Periodic interview of clients. Ask: What worked? What didn t work? What can we do better?

20 Need to track, measure and communicate results 20 Set targets for contract response/completion and evaluate causes when there are delays Demonstrate wins within the contracts themselves (e.g., caps on liability, indemnity, payment terms, cost containment, etc.) Publicize, celebrate and reward negotiation successes!!

21 Final Thoughts and Questions 21