How to be practical in M&A Deals: Three questions with KO Partner Jennifer Rosenthal

Merger and acquisition (M&A) deal volume hit an all-time high in the first six months of 2021. Fueled by economic growth, low capital costs and the reopening of society in many places, this trend shows no sign of slowing down before year end. Consider this: according to Refinitiv, one of the world’s largest providers of financial markets data, the first half of 2021 saw private equity firms announcing more than 6,500 deals totaling $533.3 billion worldwide.

2021 was even dubbed the year of “dry powder” by the Denver Business Journal because of the high volume of liquid assets investors need to either spend or return to backers.

But even for companies with a strong foundation, a proven customer base and off-the-charts growth, a pragmatic approach and deep business knowledge is essential to navigate these fast-moving, complex opportunities in the current deal environment.

“In what was a rapid, but very nuanced transaction process, we would like to take the opportunity to expressly acknowledge the immense efforts and practiced guidance delivered by Jennifer Rosenthal and the team at Koenig, Oelsner, Taylor, Schoenfeld & Gaddis PC, who have served as counsel to Web Deals Direct on multiple corporate transactions,” said GulfStar Group Managing Director Scott Winship of the recently completed purchase of Web Deals Direct by Perch.

We asked KO Partner Jennifer Rosenthal to share her approach to being practical in M&A deals, including what to expect from your legal counsel.

KO Firm: How do you help clients negotiate favorable M&A deals?

Jennifer Rosenthal: Above all else, we get to know your business in and out. Every M&A deal is unique and nuanced, with a number of stakeholders protecting their own interests. Being intimately familiar with your business, its financials and its growth projections will allow us to negotiate deal terms tailored to your company’s needs.

Further, we are focused on your specific goals: are they financial? Or are there other factors that may be more important to your business? For example, many sellers prioritize the valuation of their company above all else. But some also feel strongly about minimizing the amount of time they will be required to work for the buyer after closing, while others care about requirements not to compete or how employees will be compensated after the close.

KO: The amount of time and resources an M&A deal can take can vary widely. How can engaging with legal counsel help to ensure these transactions are as efficient as possible?

JR: Good legal counsel will work with you in advance to discuss the material issues that are likely to come up as part of the transaction, based on your business circumstances so you are prepared to react to those issues as they come up in the deal. For example, does your business have deferred revenue? If so, how do we want it to be treated?  What is your risk tolerance around indemnification terms?

This allows your counsel to take a practical approach that avoids spending capital, resources and time debating issues that aren’t applicable to you or are well within your risk tolerance.

KO: How can all parties get the best out of current market conditions?

JR: Know your goals and what you need for it to be a favorable transaction, and let your deal team advocate fiercely for them. But, at the same time, don’t resist finding common ground with the other parties involved — even in an M&A deal, there are things both parties can agree on that help mitigate risk, like obtaining representations and warranties insurance.

Don’t assume that every decision is one in which the involved parties will want different outcomes; some can be a win-win.

We expect the rest of 2021 to continue to be a robust M&A year, but a practical, measured approach and good deal fundamentals are always a smart move

Jennifer Rosenthal is a corporate partner at Koenig, Oelsner, Taylor, Schoenfeld & Gaddis PC (KO Law Firm), an innovative corporate and commercial law firm with a team of experienced lawyers and a practical, efficient, business-focused approach. Founded in 2003 on the philosophy that a different approach delivers better value, our business-first legal and industry expertise helps established brands and emerging companies achieve meaningful business outcomes. KO is headquartered in Denver and Boulder, Colo., and serves the software and SaaS, retail and manufacturing, professional services, energy, food, beverage and consumer goods, eCommerce and internet, healthcare and life science and ancillary cannabis industries. Reach Jennifer at [email protected].