Businesses are not consulting in-house legal expertise when setting up deals, a new study has found.
The tendency for in-house legal teams to have a low appetite for risk and to sometimes lose sight of commercial drivers means that they are often not consulted for legal advice when businesses are making deals, a survey has found.
The Eversheds Global M&A report revealed that businesses are reluctant to utilise legal advice until after a deal has already been made, but with GCs not consulted during the process in-house lawyers are often left to clean up the mess.
More than two-thirds of in-house lawyers said they experienced tensions or significant differences with colleagues when planning a divestment, and shaking hands on a deal before any legal issues were resolved was a common source of frustration for in-house teams, reported News Locker.
Many in-house counsels also said that they felt the business often failed to explain their commercial decisions effectively.
According to the report, the best value a lawyer can add to a deal is not legal advice but through drafting a contract that contains sufficient flexibility to accommodate changing circumstances for sellers. Only a third of GCs surveyed considered legal or technical expertise as adding the most value to divestment deals.
“It is clear from the report that businesses need to look closely at their current processes around managing divestments to ensure they maximise the benefit of such deals, rather than tying themselves up in separation knots further down the line which could have been avoided at an earlier stage,” said Eversheds partner, Robin Johnson.
The Eversheds study surveyed 159 people from 34 different countries, with general counsel or senior in-house lawyers making up 80 percent of respondents and CEOs and other senior executives involved in M&A transactions accounting for the remaining 20 percent.
