ABA Section of Business Law
ABA Section of Business Law
Business Law Today
September/October 1999
Speaking volumes
A deal maker talks about the M&A game
By Bruce Wasserstein
Reviewed by James R. Silkenat
Silkenat is a partner at Winthrop, Stimson, Putnam & Roberts in New York City.
Although the M&A booms of the 1980s and 1990s were generally thought to affect only large-firm lawyers in big cities around the world, the impact actually has been far more pervasive. Legal work on acquisitions, corporate restructurings and asset sales is now frequently also being done by sole practitioners and lawyers from small and medium-sized firms.
It remains true, however, that the media and the popular mind have remained focused on the major participants in the M&A firmament: the big companies, the investment banks and their outside counsel that weave and unweave corporate America and the world. It is these outsized transactions, with outsized individual and corporate participants, that are the subject of Bruce Wasserstein’s stimulating book: Big Deal: The Battle for Control of America’s Leading Corporations.
For a practicing lawyer, the most valuable portion of this volume is the concluding section in which discrete chapters focus on different aspects of implementing an M&A transaction, from offensive and defensive techniques to descriptions of the government’s role in merger activity and the roles that law firms, investment banks and accountants play.
The writing is almost painfully well organized. There are "five pillars" of M&A contracts (pricing terms, representations, covenants, conditions and indemnities) and there are "three options" for the acquiring company (negotiate a friendly transaction, pursue a bear-hug approach or launch a hostile takeover). Outside the context of the book, these lists sound somewhat simplistic, but in print they convey a significant sense of structure and purpose to a dizzyingly complex field of legal and business expertise.
Wasserstein has been a potent player in the M&A game for more than 20 years. A good example of his ability to bring into sharp focus the complexities of a difficult fact situation appears at the end of his chapter on defensive techniques for corporations wanting to avoid unwelcome suitors. After analyzing different types of poison pills, shark repellants and other exotica, Wasserstein closes with some practical wisdom:
All of these defensive devices have their limits. The battlements can become their own Maginot Line, building in an undeserved complacency. Performance by a company is the substance of defense.
And, even with that, he acknowledges that despite all the preparation and corporate economic performance in the world, not even the largest companies are immune from being put in play under the right circumstances.
The first portion of the book presents the historic background of the current wave of merger transactions in the United States and shows how prior waves have been similar to, or different from, what is happening today. How did the tactics and transactions of Carnegie, Harriman and Cooke differ from those of Pickens, Perelman and Kravis?
The second section of the book deals with M&A developments within specific business sectors of the economy: energy, banking and financial services, telecommunications, technology and media, and health care. The recent range of combinations, mergers and failed transactions within these sectors is catalogued and critiqued. Considerable effort is devoted to show how M&A developments in one sector often bleed over into other sectors.
One of the few disappointments of this book is that the author is basically silent about suggestions for reform of M&A law and practice. His focus is not on improving the laws and regulations shaping the process, but rather on how to deal with (and occasionally avoid) the rules that already exist.
Despite all of the courtroom arguments, structural strategies and managerial maneuverings, the ultimate issue in any acquisition or merger, Wasserstein correctly points out, is price. Does this deal make sense at the price that is being offered or asked? Wasserstein’s analogy here is probably the best I have heard:
Buying companies is like participating in an art auction. At the end of the day, the losers think the winner overpaid and, if there are ten potential buyers, the bidder in fifth place seems the most reasonable. Of course, he hasn’t bought anything. Meanwhile the losers often spend time denigrating the wisdom of the buyer.
This description reveals much about the M&A business and probably even more about the book’s author. Just playing the game is not enough. More frequently than not, you want to go home with the ball. Being on the prevailing side in a transaction is what establishes and fuels a career. It is what sets one player apart from the others. And, as Wasserstein points out elsewhere in the book in a different context, "sizzle sells."
Warner Books (1998), 820 pages.
