What is the value of a lawyer to your business team? Lawyers are viewed differently. Some businesses see their legal department as a valuable team player in every business decision of the organization, while others see lawyers as blockers who may not really understand what the business is trying to do. Yet others appoint lawyers in-house just to satisfy some sector specific requirement for a legal role in the company’s business in, for instance, pension, insurance, financial services, capital market, oil and gas, etc.
However, from the boardroom to the frontline, the role of lawyers in consummating new business ventures and mergers cannot be overstated. It is out of place to view commercial lawyers as deal killers or transactional killjoy rather than a real business partner. Lawyers help to structure deals for beneficial purposes, provide necessary guidance to maximize value, spot future risks and highlight areas of danger that could spell trouble for the business. Organizations around the world are recognizing that a business strategy without legal role is a significant hamper to sustainable growth and are taking steps to bolster capabilities.
There are obvious advantages for including a lawyer in a strategy team of every business venture; the following are, in our experience, apposite:
– Negotiation Power: Legal due diligence has long-term commercial value. The immediate advantage is its potential to enhance the bargaining powers of a well-advised transaction party. Negotiating business deals without a legal team is damaging to the strength of an inexperienced party at the table. In mergers and takeovers, for instance, the commercial parties often find themselves negotiating various commercial terms, including the price, intellectual property rights and contingent liabilities, employees’ benefits and claims, allocation of risks, covenants, control and management structure of the merger. A legal review of the transaction documents including incorporation documents, minutes of meetings, board resolutions, policy manuals and bank accounts may reveal some deficiencies that otherwise explain why a party needs the proposed deal more desperately than the other party. Also, with a team of savvy commercial lawyers on hand, businessmen are in a stronger position to negotiate more attractive terms on new business acquisitions and maximize value for their investments.
– Regulatory Compliance: Compliance is now everyone’s job, irrespective of seniority or area of responsibility, partly because of the possibility of risks in all aspects of business and, more importantly, violations of law hardly fall neatly on the desk of an individual staff or in a single department of a company. Nigerian regulators are increasingly empowered by their enabling laws and capabilities to connect the dots, however randomly placed. There is a huge risk in acquiring a new business and negotiating a merger with a company, which is non-compliant with the laws on corporate governance, tax, anti-competition, anti-corruption, anti-money laundering, statutory returns and other regulatory filings. Authorities can now hold companies and certain senior staff members to account for failing to prevent non-compliant activity in their organization. Therefore, conducting vertical and horizontal risk audits by lawyers helps in many great ways to uncover compliance gaps early while they are still easier to manage, and to focus on the important transaction issues for better business decisions. Failure to adequately conduct due diligence and assessment of compliance liabilities of a potential business ventures does not only create an exposure to additional risks, including loss of operational licenses, reputational damage, criminal and civil fines, or even imprisonment; but it also removes any potential leverage for negotiating a better price or terms of a business deal.
– Good Deal Structure and Corporate Governance: Embedding a functional legal team into a business team fosters collaboration and understanding in ensuring not only a good deal structure for tax and other legal purposes but also a sound corporate structure and good governance after the deal closes. A lot of high growth companies, especially in financial services, recognize that in order to be compliant with the relevant laws, there is a need for a strong corporate culture— which cannot be guaranteed with mere introduction of new policies and strategies. Creating corporate policies is of little help especially where the workforce does not fully understand how the policies apply. Also, sometimes, it can be problematic to place a high degree of responsibility on the management staff to self-manage legal and regulatory compliance matters, given the possibility of glitches in the chains of corporate structure, which may not, unless with proper guidance of the lawyers, fully appreciate the compliance rules or have the tools to identify potential risk indicators.
– Reduced Costs: There is a cost to every business decision. Investments in new ventures or business takeovers come with their consequential assets and liabilities. Drafting of letter of intent, memorandum of understanding, acquisition agreements, employment contracts and other legal documents in a merger or takeover transaction are roles which are not only better reserved for lawyers; they are also technical documents from which uncontemplated future liabilities may arise if not well drafted. A lot of organizations have made investments in non-compliant businesses without proper legal risk audits, only to have to live with the consequences after the fact, ranging from regulatory sanctions, prosecutions to multiple litigations.
