Much of the recent blogosphere discussion of stratification in the legal market has alluded to the “bet the farm” and “law factory” law-firm models. (Mad props to Ron Friedmann and Toby Brown for offering those terms in this post.) But the two models perhaps don’t represent as clear a dichotomy as you might think.
For one thing, “bet the farm” suggests a level of quality that, when it comes to big-time M&A contract drafting, isn’t matched in reality. See, for example, my “Legal Rebel” interview with the ABA Journal, in particular my four-minute deconstruction of two short bits of the Oracle–Sun Microsystems merger agreement (beginning at the 2:45 mark).
And paradoxically enough, M&A drafting of the “bet the farm” variety would benefit from a stiff dose of the “law factory” approach. That’s because M&A drafting is ripe for commoditization. The result would be contracts that are drafted far more quickly and that are clearer, more concise, and better reflect the deal.
It’s not a new idea. Consider what I say in the concluding portion of my February 2008 NYLJ article on the litigation between Cerberus and United Rentals (go here for a PDF copy):
[I]n a recent sponsored article, Robert A. Profusek and Lyle G. Ganske, co-chairs of Jones day’s M&A practice, in effect suggest that deal-making has become a sterile exercise in scrivening, and that instead lawyers should focus on what really matters in a deal.
In their article, Profusek and Ganske refer to a multifirm “initiative to rethink deal documentation fundamentally,” the goal being to “come up with standardized base documents, and common language, that can be used in any transaction, whether it’s a merger, a loan, or a capital markets event.”
Well, three years have passed and I’ve seen no sign of such an initiative. But it’s readily achievable, as all the elements are in place. At the risk of sounding like a cheesy ’70s TV show, I will say that—
- we have the technology, namely ContractExpress
- we have the contract-language guidelines, namely A Manual of Style for Contract Drafting
- we have the framework, as expounded in my book The Structure of M&A Contracts (have I said lately that it’s the most rigorous analysis of the subject?)
What would be required in addition would be all the language required to flesh out the framework. Coming up with that language would be time-consuming but straightforward.
Sure, you’d end up with a lengthy ContractExpress questionnaire. But the questionnaire has to be comprehensive—otherwise, the questionnaire designer would be making deal decisions for the drafter. And as I explained in this blog post, a lengthy questionnaire doesn’t represent much of a burden:
- If a given issue isn’t relevant for a transaction, the questions relating to that issue won’t appear in the questionnaire.
- Once you’re used to a questionnaire, you can zip through it.
- If you’re doing a new deal that resembles a previous one, you can simply “relaunch” the questionnaire for the previous deal and make only whatever changes are required to reflect the differences in the deals.
If I were to work with a small team and a broader committee drawn from a clutch of law firms, I could put together within six months a set of comprehensive M&A templates. The costs would be modest; the subsequent efficiencies would be significant.
But I don’t know whether BigLaw is interested, at least for purposes of “bet the farm” work. If the client is unlikely to squawk too much about the bill, there’s less incentive to commoditize, even though doing so would make the process so much more efficient.
And I’m not sure how many BigLaw partners are in a commoditization frame of mind. For every M&A practitioner who has responded positively to The Structure of M&A Contracts, another has made it clear that they’re not interested in the marketplace of ideas.
At any rate, BigLaw, if you are in fact interested, have your people call my people.
And you, the client, what do you think?
4 thoughts on “Commoditizing M&A Drafting: Does BigLaw Have the Stomach for It?”
Nice post, Ken. I agree with with what you are saying. Of course, there are aspects of any deal document that are customized and heavily negotiated but there are also plenty of provisions that are standard. Firms should not be reinventing the wheel to create the starting point – ready access to that starting point should be a given. I think back to my days as an associate and wonder how much time was spent just putting together the first draft based on “version 27” of a completed deal doc on the system.
Clients are expecting more from firms these days and the firms that take smarter, more efficient approaches to matters will, and are, coming out ahead.
Ian: No surprise that you agree with me—you’re one of the converted! That this post hasn’t attracted any other comments reinforces my sense that this is an issue that deal lawyers would rather ignore. Ken
Ken, it’s been a long time since I was part of BigLaw but I see many of the same issues in my practice in small and middle-market M&A transactions. Efficiency will eventually be forced on all of us, and properly so. But it takes two to tango and there have been plenty of times that I came up with a fairly efficiently drafted agreement, only to be swamped with petty language changes from attorneys on the other side. When Ian mentions “version 27” in his comment, I doubt that his firm alone was responsible for reaching that lofty number.