External legal counsel – what do to when they block the deal.

How do you deal with the other side’s external lawyers when a) the external lawyers don’t really understand the deal, and b) the people that you are trying to do the deal with won’t take control of their lawyers?

How do you deal with the other side’s external lawyers when a) the external lawyers don’t really understand the deal, and b) the people that you are trying to do the deal with won’t take control of their lawyers?

This scenario comes round much more often that you think. Usually, it’s a combination of two factors. 

Factor A: the external lawyers that don’t really understand business, or the nature of the deal or, equally bad, just want to do the minimum. It’s so much easier to retrieve a template from the template library, make a few tweaks, and send it out again. (Note: this is rarely an issue with in-house lawyers.  They are in-house precisely because they do understand business and feel more comfortable in that environment).

Factor B: the clients are intimidated by their lawyers.  For reasons that escape me, there are people out there that think that lawyers have some particular inside track on the real world and therefore defer to their judgement.  Is it a question of appetite for risk?  I don’t think so.  For some people, lawyers have a special mystique.  (Full disclosure: I’m a lawyer, and I’m really grateful if people think I’ve got mystique).  Spoiler alert: lawyers don’t have an inside track on the real world. In fact, there’s quite a few lawyers out there that don’t have a good handle on the business world at all.  Don’t blame them: it’s their training.

Here’s my most recent experience of external-lawyers-are-blocking-the-deal.  My client was in a hurry to do the deal, the other side’s business people were in a hurry to the deal (for a number of reasons, there was a ticking clock). The other side’s external lawyers produced the first draft contract.  It was pretty useless: either the lawyer had not asked the right questions, or had been poorly briefed (or, had let themselves be poorly briefed), and big chunks were missing from the contract that were needed to make the transaction work.

There was no point in going back with a marked-up version of the document.  There was clearly a lack of alignment on the other side.  A marked-up version of the document would have just created a storm of redlining, which is usually pretty unproductive, plus we had a clock ticking.  What we really needed was a meeting of legal and commercial on both sides so that we could validate alignment on the deal and highlight any areas were the parties were not in sync  So, we decided to go back with a heads of terms: ie. a much shorter document setting our understanding of all the key terms, the basic premise being – we think this is the deal we are trying to do together, do you agree? On the back of the draft heads, we would have a meeting, and the draft heads would effectively provide an agenda to work through.

We had received the first draft on a Thursday or Friday, we produced an internal version of the heads over the weekend, we had a call over the weekend to make sure everyone on our side was happy with them, and sent them across on Monday.

Silence.

It then turns out the other side’s external lawyer didn’t want a meeting (don’t ask me why), and was going to produce another draft.  We tried to persuade our commercial contacts on the other side that this was not an efficient approach, but they felt they couldn’t overrule their lawyer. (Presumably, this was something to do with legal mystique – see above).

A week later, another draft appears. It was a bit better than the previous one, but not by much.  The external lawyer still did not understand the commercials and was just taking a wild guess at what they should be. 

Plan A having failed, we switch to plan B: marking-up the draft.  We did this in double-quick time (the clock is ticking), we have an internal call to make sure everyone’s happy with it, and off it goes.

Luckily, our commercial guys manage to get on a call with their opposite numbers (without the lawyer present) and take them through the changes we’ve made.  It all makes sense to them : they agree to put a call in to their external lawyers and tell them that they are ok with the changes, and that we have passed the point for more mark-ups.

A few days later, we get the latest draft.  All our changes have been accepted: there are some changes, but nothing we can’t live with.  The contract gets signed.

So what’s the lesson behind all this? Firstly, that most of the time, using external lawyers works well.  Most lawyers (external or in-house) are client-focused and want to provide a good service.  Secondly, it’s always better to have a discussion (even remotely) than swap emails: it’s a much higher bandwidth of communication, and more gets done and faster (and there’s a lot less room for misunderstanding).  Thirdly, on those occasions when the other side is using external lawyers and those lawyers are acting as brakes on the deal, you have to be flexible in your approach. Most likely you will have to try a few different approaches until you find one that works.  You need to be able to recognise quickly when it’s time to change.

More generally, if you are looking to buy legal services (or just to improve your experience with lawyers), how do you know who is good and who isn’t?  First, recognise that not all lawyers, and not all law firms, are created equal.  Some are better than others: it’s as simple as that.  Second, be clear about what you want from your lawyer.  If you want a purely legal view, then that’s one kind of lawyer.  If you want a lawyer that can combine legal analysis and legal advice with a commercial view, and make an actionable recommendation based on that combination, that’s a different (and rarer) kind of lawyer.  I recently won a new client (start-up, second round of money, SaaS tech using a lot of AI) who had already been through two sets of lawyers, and was unhappy with the quality of the service he had received.  As he put it: I don’t need someone to tell me what the risks are – I’m only too aware of them – what I need to know is what’s the best way to handle the risks.  Thirdly, and this is key, if it doesn’t feel right, then it probably isn’t right. (And it’s not you, it’s them). Gut instinct is rarely wrong. So, if it doesn’t feel right, do something about.

 

Does the idea of a lawyer that can combine legal analysis with a commercial view, and make an actionable recommendation based on that combination, sound appealing to you? If Yes, Contact Me.

First, recognise that not all lawyers, and not all law firms, are created equal.  Some are better than others: it’s as simple as that.  Second, be clear about what you want from your lawyer.