Editor: We traditionally think of mergers and acquisitions as an area where it's very difficult to predict or control the process and expense. Is Eversheds suggesting an alternative view?
Halpin: Yes. We have designed an approach to corporate transactions used throughout Eversheds globally, called DealTrack. A key objective of the methodology is to provide clients with greater cost predictability. The lack of cost predictability in the past has been due to the lack of careful planning, and planning with the client is a fundamental distinction in our approach.
DealTrack requires a discipline of scoping the transaction that results in the identification of issues from the outset. With corporate transactions increasingly involving more than one or two jurisdictions, the scoping is increasingly important so that the entire team has clear guidelines. It helps to avoid the last minute panics and allows the job to be resourced correctly.
Our DealTrack approach demands that we work with the client to clarify the issues at the very beginning which in turns allows us to give our clients a prediction of the legal cost of the entire transaction.
By scoping fully with client involvement, we can explore issues with the client which require input from the client. Let's assume that the initial cost estimate is higher than a client expected. This provokes a useful discussion about what level of investigation is really needed. A very simplistic example: a target in an M&A transaction which has a vast number of real estate premises. The client may decide against a detailed investigation on each of the premises as most are of no strategic importance and will, in any event, be covered by the warranties and indemnities. We will then limit our detailed title investigations to the most important premises agreed with the client. In this way due diligence is customized at the very beginning and saves time and cost.
The largest expense in any cross border transaction is the due diligence, and it doesn't always get the attention it requires. Things can and do go seriously awry - both in terms of timetable and cost. It is critical at the very beginning of the DealTrack process to scope and plan due diligence with the client and its other advisors, including accountants.
Editor: Is DealTrack a project management system?
Halpin : It is more than that - it is an approach, or style, that we adopt on corporate transactions. The most important feature of DealTrack is that it gives the client control over the whole of the transaction. Control includes the ability to set the time table, identify key issues and set a budget. And, on an ongoing basis, it provides the client with complete transparency with respect to tracking actual costs as they are incurred against budget so the client is in complete control.
We have spent a few years developing this approach and perfecting it for global transactions. It has proven to be very well suited to matters of all types, not just M&A. Ingrained within DealTrack is client service excellence and best practice principles as well as tools and systems to support time and cost management.
We have been running DealTrack for over three years. Every corporate lawyer in our local offices throughout the world has been trained to use the process. The training goes beyond due diligence or project management to understanding the commercial aspects of a transaction and asking the right questions. Such as: Why are you doing this acquisition? What are the key drivers in the business being acquired? If you understand the commercial drivers, it is much easier to customize the work around key client concerns and deliver a better service.
Above all, DealTrack is about delivering client service excellence across all aspects of the transaction. Global companies working with us thus find a consistent approach across many jurisdictions, which gives them more predictability and control and makes their lives easier.
Editor: Tell us about the ability of the firm to handle cross-border corporate transactions.
Halpin: In terms of deal volume we are in the top ten of the European M&A league tables regularly acting on cross border M&A transactions for the likes of DuPont, Parker Hannifin, SPX, Teleflex and Cardinal Health. Although most of our work is still Euro-centric, increasingly we are involved in M&A transactions covering jurisdictions in Africa, the Middle East and Asia and we presently have offices in the Gulf States, China and Malaysia.
In the Gulf, we have an office in Qatar and expect to open an office in Abu Dhabi in May. The Gulf States have significant Sovereign Wealth Investment Funds and are very active investors, not just in their own region but increasingly around the globe.
Our network of 32 offices stretches across Europe, Africa and Asia, but of course many of the M&A transactions we handle involve jurisdictions in North and South America. There we can call on a best friends' network of firms that are accustomed to working with us.
Editor: Would your local office be the focal point of service in connection with a transaction to be consummated in a particular country or would I be dealing with the people in London?
Halpin: Like all key decisions, we let clients decide what is best for them. In the case of a transaction focused on Italy, for example, our Milan office has lots of experience using DealTrack. Certain clients would prefer to go directly to our Milan office and have the Milan office run the deal. Other clients, particularly Americans, seem to prefer the project management to be conducted out of the UK with one of the experienced corporate partners managing it for them.
What we have done is to make sure that our lawyers internationally are as steeped in DealTrack as those in the UK. There should not be any difference between using someone in our London office and someone in our Munich office, for example.
We have very strong relationships between the various corporate teams, wherever located, and they work incredibly well together.
Editor: Corporate counsel in the U.S. pride themselves on their in-house talent for transactional work. How can a global firm like Eversheds complement rather than duplicate their expertise?
Halpin: Generally, American corporate counsel are very experienced in M&A, and yet sometimes they want our team to do the legwork. We start by asking them in what way they want to work with us. Notwithstanding their technical expertise, we can frequently add value by alerting American corporate counsel to cultural and legal differences in various countries of which they may not be as experienced and which are quite different from what one would normally find in a North American corporate transaction.
Editor: Turning to international disputes, how would you diagnose the current situation in global litigation and dispute management?
Heaps: Traditionally companies have dealt with disputes on a piecemeal basis using local advice when it is needed, reacting to each problem as it arises and submitting to the complexities and idiosyncrasies of the local legal system. Law firms have simply reacted to such requirements and as a consequence have rarely looked strategically at the issues their clients face or approach problem solving on anything other than a case by case basis.
This leads to a number of difficulties, especially as companies globalize. Disputes take too long to resolve, cause unnecessary additional legal expense and damage business relationships. Companies fail to learn from past errors or to appreciate the potential damage to their reputation that a local problem can cause. Companies lack the ability to develop global strategies to address the conflicts and risks that arise and tend to leap across borders. All this ultimately translates into weaker financial performance and a negative impact on profitability.
Editor: How is Eversheds' approach to litigation and dispute resolution different?
Heaps : For both disputes and transactional matters, companies often tell us that they are interested in better coverage, metrics that allow them to continually improve, and more predictability on costs.
They don't want to be bogged down in litigation for three years. They want solutions to their commercial problems. We approach solutions to disputes with project management skills used in many other business contexts.
The outside lawyer's role is to work with the in-house team and apply legal expertise to the facts of the situation, and advise how to achieve the desired outcome. It's essential to be briefed by the client about goals and the commercial context. As an obvious example, the lawyer needs to know if the problem relates to a key customer or supplier whose good will may be important, or whether there are other special commercial considerations.
By working together in this way there is clarity about the real objective of the exercise; what we term the Best Practical Outcome.
Editor: What's the role of project management in this approach?
Heaps: First, Eversheds has designed a unique methodology, called RAPID Resolution, for handling our clients' disputes. It helps clients reach better quality decisions about their problems and it ensures that if a particular dispute cannot be resolved without litigation or arbitration, we ensure that as far as can be achieved, the matter is handled in accordance with agreed timescales and agreed budgets. The RAPID Resolution system is heavily based on Project Management disciplines.
Secondly, Eversheds has built a network of offices throughout Europe, the Middle East and Asia that are close to the markets that our clients serve. The lawyers in these offices are entirely in tune with this approach to conflict and risk management and are trained in RAPID Resolution techniques.
This integrated network means that our clients' problems are addressed in a coordinated manner consistent with the policies and agreements we have established together. RAPID Resolution contributes to the coordination of our work because it overcomes the language and cultural barriers that would otherwise exist. In addition to high quality support, we believe this gives our clients greater control and predictability of disputes, both in relation to the outcome and in relation to the costs incurred.
Editor: Outside counsel have been wary about their ability to provide a reasonably accurate forecast of the cost of litigation or arbitration. Why do you think you can provide your clients with a better picture of what a case will cost?
Heaps: Over the last few years we have adopted two approaches that help us forecast costs:
First, we have created a methodology for breaking the cost of litigation into its constituent parts, and this includes stages where we work with the client to make certain decisions going forward. While not particularly revolutionary, it has not been done very well by others. We have improved our basic budgeting skills. We spend considerable time and effort training our lawyers in how to operate what we call a "cost matrix tool."
Second, instead of losing all the data on cases after they are consigned to the warehouse, we make a concerted effort to analyze the thousands of cases we handle a year. We get valuable data and metrics from them, which provide us with the knowledge, experience and, ultimately, the confidence to predict what might happen in any particular case that we are asked to handle.
Editor: How do you measure the success of RAPID resolution?
Heaps: At the end of each dispute we handle that involves fees in excess of £40,000 we bring in an independent research firm that interviews our clients concerning their experiences and our handling of their cases. The survey includes rating the client's satisfaction with our handling of the dispute with the highest satisfaction rating being seven points. Over the last two years, we have been rated as 6.0 or 7.0 over 70 percent of the time.
But the measurement takes place throughout the dispute, not just at the end. With RAPID Resolution's cost benefit analysis we propose and agree with the client on the best practical outcome and then benchmark our performance against the steps required to achieve that outcome.
The RAPID Report sets out the factual, legal, financial, and commercial issues; lays out what the client is seeking to achieve, a strategy for how to get there and a budget for implementing it. It may be High Court proceedings, international arbitration or it may be settlement negotiations. Finally, we have our own metrics to show if we are coming in on budget for cases that we have handled.
Editor: How does Eversheds deal with the complexity of global disputes and litigation?
Heaps: We try to help our clients acquire a deeper understanding of challenges across the whole of their global businesses so that they can more effectively handle problems that arise. We hope that our activities will provide knowledge to anticipate and prevent some of those problems arising in the first place. What you might regard at first as a minor problem in a particular local market could lead to a serious reputation risk for a company that could manifest itself throughout the business and cause major damage elsewhere. By applying project management skills throughout our international offices with lawyers trained in applying RAPID's methodology, we can help our clients understand not just the local environment but get a better handle on their broader strategic risks and concerns.
Published May 1, 2008.
