Reflections on the 1-2-3's of the Mediation of a Merger & Acquisition Dispute

5 Min Read By: Leslie Ann Berkoff, John Levitske

On April 6 and 7, 2017, during the ABA Business Law Section Spring meeting in New Orleans, the Dispute Resolution Committee presented a dynamic three-part program entitled “The 1-2-3s of Mediation of a Merger & Acquisition Dispute” that reviewed the anatomy of a mediation from the earliest planning stages through settlement.

This article shares some thoughts from several of the participants concerning the value of preparing for, as well as fully participating in, a mediation to obtain the best results for your clients and your clients’ companies.

Judge Elizabeth Stong, a U.S. Bankruptcy Court judge in the Eastern District of New York, served as the “mediator” during the program and shared her advice for advocates, clients, and mediators. First, she noted that advocates and clients should be “focused on being prepared in every conceivable way—of course on the law and the facts,” but that this is only the starting point in a successful mediation. She wisely pointed out that participants should not disregard the “business context, including any future opportunities or issues and also . . . the opportunity to agree to something that is outside the narrow scope of what a judge could decide.” Thus, the parties should look both “backwards (to assess the parties’ positions and rights) and forward (to see future opportunities)” in evaluating the range of ways to resolve the pending dispute. Further, she noted that it is important to examine “how the situation looks from every other seat at the table, including that of your adversary’s counsel and their client, as well as any other affected party.”

As for advice to the neutral conducting the mediation, Judge Stong remarked that the program reminded her how important it is for the neutral “to be prepared as well in all the same ways noted above for counsel and clients,” and she commented that it is also important to remember that parties sometimes need a third-party neutral to create an opportunity to think outside the box—and to encourage them to work as hard at working things out as they have been working to fight and win the case.”

Along these same lines, Michele Johnson, a partner in the litigation department at Latham & Watkins LLP in their Orange County, California, office, served as one of the advocates and highlighted all the various issues that “come into play in a mediation, outside of legal theories of plaintiff and defendant.” She pointed to just a few examples, including “the timing of other unrelated business endeavors; the personalities of the parties and how they view the distractions of litigation; and how the decision-makers for the litigation can change with the signing or closing of a strategic transaction.”

Maureen Beyers of Beyers Farrell PLLC in Phoenix, Arizona, served as the “settlement counsel” during this program and reminded all of us that “the clock should not dictate the success of a mediation.” Setting an internal clock for how long a party may choose to buy into the mediation process not only can be a distraction, but also can serve to derail the process, if the parties believe that if the matter does not resolve in a certain time frame, it never will. Ms. Beyers also reminded us that it was important for every party at the mediation, both mediator and participant, to “understand the various hats each party is wearing and roles each party is playing at the mediation and in the underlying transaction as well.”

Since the mediation during the program focused on M&A transactions, Sophie Lamonde, a partner at Stikeman Elliott LLP and head of the firm’s mergers and acquisition practice in Montreal, noted that when engaging in a transaction, if you feel a deal is going sideways, then “there is only upside in involving your litigators early on . . . , [as] the better off you may be.” David Cellitti, a partner in the Chicago office of Quarles & Brady LLP and a member of the firm’s Business Law Practice Group, pointed out that as part of a team, he tries to ascertain what his client’s interests and goals are so that perhaps a deal can be “salvaged by . . . rebuilding trust that may have been lost during the course of the dispute by trying to be reasonable and by being practical as a deal-maker.” He noted that his role as M&A counsel is often to help both “the client and co-counsel by sharing the history of the negotiations to aid them in building a record, making an assessment of the case, and prepare for the mediation; this way all of the facts have been developed.”

Finally, both Ryan McLeod, a partner in the litigation department of the New York firm of Wachtell, Lipton, Rosen & Katz, and David Lorry, managing director and senior counsel of Versa Capital Management LLC in Philadelphia, focused on the potential flexibility and creativity in the mediation process.

Ryan highlighted that while “busted deals can be complicated and sensitive,” the best part of mediation is that “parties can customize the mediation process so that it suits their needs—needs that will vary, based upon a multitude of factors.” He contrasted this with litigation in which the court must make a more narrowly focused decision. David noted that “parties to a commercial transaction should consider alternative dispute resolution as an option to achieve an outcome, as opposed to investing in a process—litigation—with an uncertain outcome and the risk of an unfavorable decision by a judge.” He added that “parties tend to drink their own Kool-Aid, and introducing a neutral party may allow them to become more reflective (or creative) and accepting of alternative structures or approaches they had not otherwise considered, which will allow both sides to realize positive results.”

What lessons can be gleaned from these insights for those of us serving as clients, advocates, or neutrals in the dispute-resolution process? First, always ensure that you look beyond the dispute at hand and consider the bigger context for the companies and individuals on all sides of the dispute. Second, remember that the negotiation may look very different from each seat at the table. Third, consider how you can work to creatively carve a path to resolution that addresses the parties’ interests, rather than a narrower decision that may come from a court.

ABOUT THE AUTHORS

Garden City, NY

Leslie Ann Berkoff

Leslie A. Berkoff is a Partner with Moritt Hock & Hamroff LLP where she serves as Chair of the firm’s Bankruptcy Practice Group, as well as Advisory Co-Chair of the firm’s Diversity & Inclusion…

Chicago, IL

John Levitske

Business Valuation and Complex Financial Disputes Expert.  John Levitske is a Senior Managing Director at Ankura, focused on business valuation and complex financial disputes. He has served as a senior…

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