How Practitioners Can Apply Legal Project Management to M&A: New Tools for New Times

About the Authors:

Byron S. Kalogerou is a partner with McDermott, Will & Emery LLP in Boston. Dennis J. White is a partner with Verrill Dana, LLP in Boston. They are co-chairs of the Legal Project Management Task Force of the M&A Committee of the Business Law Section of the ABA.

Managing a complex project with multiple interested parties and specialists, often across borders and time zones, while subject to time and budgetary pressures, is a challenging exercise. It demands special skills, techniques, and tools. Just ask any manager involved in developing the next jetliner, or smart phone, or power plant. Or you can ask an M&A lawyer. 

The fact of the matter is, however, that most M&A lawyers do not see themselves in such a light. Until recently, most business lawyers had not even heard the words “project management” uttered in connection with M&A. 

The Old Way

There is little wonder why this is the case. Under the “classic” approach, a lawyer would receive a hurried (and sometimes harried) phone call from the client reporting that a business deal had been struck, providing the lawyer with only a skeletal outline of terms. Along with such bare bones information, the lawyer would be asked: how quickly can you turn out the documents? Sometimes, the client would also ask an important, but uncomfortable question: how much will it cost? 

With the classic approach, there was little discussion regarding business objectives, priorities, allocation of responsibilities, optimum resources, deal and operational risks, budgeting, and so on. 

Why the Old Way No Longer Works 

Such a modus operandi might have been the accepted, even prevailing practice in the last millennium. However, in the still evolving new age of deal lawyering, such a seat-of-the-pants approach can place a lawyer at a serious competitive disadvantage, make the work unprofitable and even risk the loss of the client relationship. A number of factors are converging to fundamentally transform the legal landscape and make legal project management techniques essential in handling M&A transactions, including the following:

  • increasingly sophisticated clients who demand more transparency, better communication, effective containment of risk, and more predictability with fewer surprises;
  • heightened sensitivity to the size and variability of legal fees;
  • an oversupply of lawyers relative to the amount of available work; and
  • disaggregation of legal services, with increasing use of outsourcing and alternative service providers. 

In Altman Weil’s 2014 Annual Survey of Law Firms in Transition, 94 percent of law firm leaders surveyed agreed that a focus on improved practice efficiency will remain a permanent feature of the legal market. That same survey noted that partners have only a “moderate” awareness of the challenges of the new legal market and a corresponding level of adaptability to change. The same survey found in firms of over 250 lawyers, legal project management is one of the primary ways firm management is responding to the client’s mandate for value and efficiency. 

Lawyers are relatively late adopters of project management practices. For example, the medical profession has for some time embraced these techniques with excellent results. In his ground-breaking 2009 bestseller, The Checklist Manifesto: How to Get Things Right, Dr. Atul Gawande promoted the use of checklists (such as those used by pilots as standard operating procedure) in hospital operating rooms. To be sure, there was initial pushback from veteran surgeons who regarded checklists as undercutting their autonomy and questioning their judgment. However, the approach was validated when hospitals saw adverse event rates plummet following the adoption of checklists. 

When lawyers first hear of legal project management, or LPM, they react much like those surgeons who resisted operating room checklists: “Why do we need to do this? This is not the way that I have always practiced. This encroaches on my autonomy. I know all these punchlist items already – this is a colossal waste of time.” 

Increasingly, however, sophisticated general counsel and purchasers of legal services, either individually or through their organizations, have become converts when it comes to LPM and are insisting that firms adopt and adhere to LPM techniques and protocols. It is evidenced by the RFPs they circulate and their responses to client satisfaction surveys. 

Benefits of the New Way 

What are the objectives of those adopting LPM? Among other things, they wish to accomplish the following:

  • reduce errors;
  • improve efficiency and reduce “deal friction”;
  • better allocate resources;
  • increase accountability, transparency, consistency, and predictability; and
  • establish a basis for more accurate budgeting and predictable reporting. 

Ryan Stafford, vice president of Littelfuse, a global manufacturer of components used in consumer electronics to automobiles, commercial vehicles, and industrial equipment, represents the views of many general counsel when he observes: “We are expected to deliver acquisitions on time and within budget. I expect no less from our law firms and I expect them to take concrete actions to drive efficiency and cost savings into the way they do deals with us.” 

Specific New Tools and How They Can Help 

The buzz surrounding LPM has been growing exponentially. Every lawyer’s electronic inbox has been inundated of late with a barrage of e-mails announcing webinars, seminars, books, and articles on the topic. The ABA has published several books on LPM as well. 

However, few of these programs and materials focus on applying LPM specifically to the handling of M&A transactions. That reality drove the formation two years ago of the Legal Project Management Task Force of the M&A Committee of the Business Law Section of the ABA. Comprised of practicing attorneys, general counsel, legal consultants and academics, the Task Force is taking a fresh look at how business lawyers handle M&A transactions, and developing a menu of tools and approaches to drive and promote the adoption of LPM. 

In its short period of existence, the LPM Task Force has begun developing a variety of checklists, guides, and templates that transactional lawyers can readily use to manage M&A transactions. The overall objective is not to promulgate and then impose a uniform set of best practices that practitioners are expected to use in all circumstances. Rather, the Task Force is seeking to produce a menu of tools that deal lawyers can customize and utilize when and to the extent they deem appropriate, depending on the transaction and the parties involved. 

We have organized the tools by four deal phases, namely, pre-deal, deal, post-closing and billing, and by user, be it the client ("C"), client’s counsel ("CC"), and opposing counsel ("OC") as shown in the following table and described in more detail in the notes following the table. We have also included two billing tools. 

Deal Phase

LPM Tool

Parties

Pre-deal-1

Acquisition Task Checklist

C & CC

Pre-deal-2

Initial Attorney/Client Scoping Discussion Outline

C & CC

Pre-deal-3

Formal Attorney/Client Scoping Letter

C & CC

Pre-deal-4

Deal Management Discussion Outline

C & CC

Pre-deal-5

Deal Counsel Compact

C, CC & OC

Pre-deal-6

Kickoff Meeting Agenda

C, CC & OC

Deal-1

Deal Issues Drafting Guide

C & CC

Deal-2

Deal Issues Negotiating Tool*

C, CC & OC

Deal-3

Roles and Responsibilities Tool: Leading/Assisting/Consulting/Informed

Chart

C & CC

Deal-4

Status Report

C & CC

Post-closing-1

After Action Assessment Checklist*

C & CC

Billing-1

M&A Phase Billing Codes

C & CC

Billing-2

Value Based M&A Billing Arrangements*

C & CC

While many of the tools have been completed, at least for road-testing purposes, others, as noted with an asterisk (*), are still in preparation. 

Pre-deal-1. Acquisition Task List: This tool is equivalent of a “pre-flight checklist” for an M&A deal. It is intended to help ensure nothing falls through the cracks, and that all the myriad tasks associated with a typical M&A transaction are covered and coordinated.

Pre-deal-2. Outline of Initial Attorney/Client Conversation Scoping Discussion Outline: “Plans are worthless, but planning is everything,” is a famous quote ascribed to General Dwight D. Eisenhower. This particular LPM tool builds on that notion. It provides a script for an early stage conversation between the client and the attorney regarding important background information on the deal (e.g., deal structure, industry, business objectives, timing, etc.), key issues likely to arise, and the scope of work to be undertaken by the law firm. In addition to aiding the client and attorney in organizing and coordinating their respective responsibilities, this up front information provides a baseline for the lawyer to prepare a budget or furnish a fee estimate by defining what work the attorney is expected to do.

Pre-deal-3. Formal Attorney/Client Scoping Letter: Lawyers ask clients to sign engagement letters all the time. However, apart from some boilerplate, these letters focus principally on billing rates and fee arrangements and speak in only the most general terms about what is expected of the lawyer. This project involves developing a formal scoping letter on a standalone basis or as an addendum to the engagement letter detailing what the lawyer is expected to do, and just as importantly, what the lawyer is not expected to do, the resources to be employed, and how client and counsel will collaborate.

Pre-deal-4. Deal Management Attorney/Client Discussion Outline: This suggested outline of a conversation between the client and the attorney addresses how the deal will be run (e.g., confidentiality concerns, communication protocols, other advisors who are involved, risk factors, closing mechanics, etc.). This discussion addresses matters that, while not affecting the scope of work to be done, do affect the deal process and quite possibly how efficiently it is conducted.

Pre-deal-5. Deal Counsel Compact: This tool is a checklist of principles and guidelines that deal principals can jointly adopt and customize at the outset of their transaction to promote a higher degree of collaboration among all parties in a M&A transaction. These suggested rules of engagement between opposing deal counsel are intended to reduce deal friction and streamline the deal making process.

Pre-deal-6. Kickoff Meeting Agenda: This tool provides a checklist for an initial all hands/all parties meeting to address communication and negotiations protocols. A staple of investment banks for initial public offerings and financings, the kickoff meeting agenda provides an opportunity for key players and their counsel to set the agenda for the deal, discuss background, structure, deal documents, parties timetables, and communications protocol. A menu of items that may be addressed during the M&A Kickoff Meeting is set forth on this checklist.

Deal-1. Deal Issues Drafting Guide: The Drafting Guide covers a wide range of issues to be considered, decided, and covered in a definitive agreement. It is intended to be used as an internal guide to drafting and negotiating deal issues. The issues are largely derived from the M&A Committee’s Deal Points Studies.

Deal-2. Deal Issues Negotiating Tool: The Negotiating Tool is intended to highlight and facilitate the negotiation of significant deal issues early in the process. Typically, many key deal issues such as indemnification baskets and caps are not reflected in a letter of intent, but are instead negotiated piecemeal or through the exchange of draft after draft of the deal documents. With the Deal Issues Negotiating Tool, counsel can exchange proposals and attempt to crystallize the more significant deal issues at an early stage.

Deal-3. Leading/Assisting/Consulting Informed Chart: This is a suggested chart for tracking the specific roles and responsibilities of individual members of the deal team in a transaction. The purpose of the chart is to make the right people accountable and ensure others are kept in the loop and positioned to provide useful input.

Deal-4. Status Report: This is a suggested chart for tracking the status and timely completion of various action items necessary to bring a transaction to a successful close. Sometimes called an “Information Radiator,” the tool is intended to provide progress updates on the status of various key tasks.

Post-closing-1. After-Action Assessment Checklist: Task Force Project Manager Aileen Leventon, President of QLex Consulting Inc., is an advocate of increased use of after-action reviews following the closing of transactions. She notes: “Post-matter debriefs have been common in other professional services firms and industries for a long time – once they realize that they need to meet a raised bar with each new matter.” Clients and law firms are beginning to implement the practice more systematically and broadly. After-action reviews focus on lessons learned and enable the firm, practice group, and client to learn by considering what went right and what went wrong, and what might be improved. This checklist guides the client and counsel through the after-action assessment process and suggests questions that may be considered to elicit lessons learned – what was right and wrong in the deal process and what the team can do to improve the handling of future deals. 

Billing-1. M&A Phase Billing Codes: The original ABA Project Code Set for non-litigation matters has not been applied consistently, nor has it produced meaningful data that improves budgeting or identifies opportunities to improve efficiency and staffing. This has been compounded by the responses of various e-billing software vendors, law firms and individual clients who have developed a hodge-podge of suggested M&A-related coding. The Task Force has developed a simple and sensible set of uniform codes with the objective that they will be widely adopted in connection with M&A transactions. The codes reflect the phases of a transaction based on temporal factors rather than tasks – in other words, the way deal lawyers think about the work that goes into a fee estimate or budget. They capture the involvement of subject matter experts that support the deal team so that there is a common vocabulary within law firms and with clients on the level of effort and costs associated with a transaction. An M&A group that consistently codes time using these codes, even where not required by the client, will also have an apples-to-apples way to compare past work when working up a fee estimate or budget for a new deal. 

Billing-2. Value Based M&A Billing Arrangements: While value-based fee structures are commonplace in litigation matters, clients and their external M&A counsel often struggle as to how to implement value-based fee structures for M&A deals that align client and counsel interests. We are creating a menu of value-based fee structures that are used successfully by clients and firms for transactional work. We are also creating a checklist of “good faith circuit breakers” that client and counsel can use when agreeing to these structures, especially fixed or capped arrangements. The circuit breakers are intended to outline certain scenarios where unforeseen circumstances impact all parties’ expectations and require significant expenditure of additional legal fees. 

Final Observations 

As noted above, our Task Force members have been hard at work and have collaborated to create working prototypes of many of these tools, a good number of which are currently being “road-tested” by M&A Committee members and others in the course of actual transactions. Even when finalized, these checklists and forms are not intended to serve as “one-size-fits-all” solutions. Rather, they are meant to be resources and tools that lawyers and their clients can consult, adapt, and employ when they deem appropriate. The end result will hopefully be M&A lawyers who are more adept and conscious project managers and transactions that proceed more smoothly and efficiently.

As Cornell Boggs, Dow Corning’s senior vice president and general counsel succinctly puts it, “The rules have changed in the M&A game and we are seeking counsel who are deploying the tools and resources to drive transparency, accountability and predictability into the deal process.”

Become Part of the LPM Action by Providing Feedback

The Task Force plans to make available a number of the tools it has developed for further trial and use by deal lawyers. In that regard, you can access the current version of the “Deal Counsel Compact,” “Scoping Outline,” and “M&A Phase Billing Codes” by clicking on each link. Your comments and feedback would be greatly appreciated. We believe that our clients, our practices, and our profession will benefit from the refinement and implementation of these tools. Most importantly, we hope these tools will drive adoption of a paradigm and methodology to improve efficiency and effectiveness in the way deals are handled. To provide feedback, just e-mail one of the authors, Byron Kalogerou at bkalogerou@mwe.com, Dennis White at dwhite@verrilldana.com, or Task Force Project Manager Aileen Leventon at aileen@qlexconsulting.com.

Additional Resources

For other materials on this topic, please refer to the following.  

BLS Program Materials Library 

Why So Complicated? Streamlining Lower Middle Market Deal-Making (PDF) (Audio)
2014 Spring Meeting
Presented by Middle Market and Small Business, Mergers and Acquisitions 

ABA Web Store 

Legal Project Management in One Hour for Lawyers (Print) (Ebook)
Authors: Doug Richardson, Pam Woldow
2013, 155 pages, 7 x 8.5 
Learn practical skills and methods for improving efficiency, keeping budgets under control, building strong working relationships with clients, and maximizing profitability. 
The Power of Legal Project Management (Print)
Authors: David A Rueff Jr., Susan Raridon Lambreth
2014, 571 pages, 7 x 10
This exhaustive reference will provide any lawyer with a complete and comprehensive review and discussion of legal project management (LPM), including the business case, the definitions and application, ethical considerations and the issues and constraints in implementation. You'll discover a simple, easy-to-use framework that can be applied from start to finish in any firm or practice area. 

CLE Products 

Legal Project Management: Prepare for Changes in the Practice of Law
August 18, 2014
Time: 1:00 PM - 2:30 PM ET
Credits: 1.50 General CLE Credit Hours 
The Project Management for Lawyers webinar covers the business case supporting legal project management, and all the issues surrounding implementation of LPM principles, including client communication and special issues for any lawyers implementing LPM principles, such as ethical considerations and project management functions within the organization.

The faculty will review the key elements required of a successful litigation and corporate project plan and explains how such planning creates great advantages both for clients and for lawyers serving clients. The goal is to provide tips on how to more fully empower lawyers to achieve win-win relationships with the best tools available, improve efficiencies and predictability in the legal-economic relationship, and ultimately to achieve better outcomes for the client.

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