Outside Counsel Can Make a Deal Easier for Clients at Every Step

The many components of a complex contract can form an intricate puzzle—each piece interacting with and building on the next. While in-house counsel and outside counsel working together on a deal are trying to solve the same puzzle, the contract negotiation experience through an in-house lawyer’s eyes can look very different than through that of their outside counsel.

Keeping these differences in mind can help secure the best terms for the client, enable outside counsel to partner more effectively with the in-house legal team, and provide an enhanced experience for all.

Deal Initiation

At the outset of any contract negotiation, it’s critical to understand the client’s goals and what success looks like.

For instance, is the deal necessary to continue an existing part of the client’s business, or is it intended to be a springboard to launch a new initiative or business model? Is it purely a one-off transaction to settle a dispute, or is it a first step in a long-term alliance? Answers to these questions are highly informative for the negotiation strategy, and in-house counsel will likely have these goals top of mind.

With varying degrees of formality, an in-house contracts team will often have an intake form that employees in other parts of the organization can populate to request a contract, and this intake form makes the legal team aware of the goals, priorities, and sensitivities associated with the contract.

Outside counsel can adopt a similar practice for its purposes and during a kick-off call can ask well-crafted questions to get the knowledge that in-house counsel has about a deal. This little bit of time taken upfront can pay huge dividends down the road.

READ MORE: Understanding Demands on Clients Helps Firms Give Turnkey Advice

Drafting and Negotiation

The bulk of outside counsel’s responsibilities reside in the drafting and negotiation phase. The initial draft and early rounds of negotiation often require large amounts of dedicated time with the contract documentation and input from attorneys in specialized fields.

Outside counsel should bear in mind that for the in-house legal team, there are considerations that travel in parallel with the negotiation of the contract itself. A few common examples include:

• Are summaries or status updates needed for internal meetings?
• Are there any differences of opinion about the deal within the c-suite?
• Does the contract have any interplay with existing third-party relationships?
• What documentation will be needed to gain internal approvals for signing?

While these are internal deliverables for the in-house legal team, outside counsel can provide support in several ways. For instance, the need to translate complex issues under negotiation into concise and plain English explanations cuts across many of the examples.

Given this, outside counsel should provide a thorough analysis of a negotiation point, and also preface the detailed explanation with summative bullet points that in-house counsel can use when advising a management team.

Additionally, while outside counsel usually receives directives from a unified source (the in-house legal team), an in-house lawyer may have to balance competing opinions and priorities as part of the deal negotiation. For example, in negotiating a commercial partnership, the chief commercial officer may want the partner to freely promote and generate interest in the product, while the chief medical officer requires approval rights for any promotion to avoid unsubstantiated claims.

Outside counsel can help by providing multiple options for a particular deal term, ranging from low to medium to higher risk, and can also provide benchmarking to identify the “market” position for that term. This gives the in-house legal team several arrows in their quiver to bridge any internal divides.

Post-Signing Implementation

After signing the new deal, the job for in-house counsel is in some ways just beginning because the operationalization of a contract can be just as important as the negotiation itself. This is another instance where outside counsel should pause to view the world through the lens of an in-house lawyer. Notable post-signing responsibilities include:

• Education and Training. Implementation of an executed contract often involves many functional teams within the company, and most of those employees wouldn’t have been involved in the negotiation.In-house legal teams may be responsible for preparing and presenting streamlined and actionable training materials for those teams to ensure the contract terms are understood and complied with.
  
• Infrastructure and SOPs. A new contract can sometimes require bespoke or modified processes and infrastructure to enable compliance with its terms, as well as key performance indicators when desired. For example, if the contract has a non-compete provision or a most favored nation pricing clause, certain controls should be implemented.
  
• On-Going Advice and Counseling. While a contract negotiation team tries to futureproof the agreed upon terms, there will inevitably be new facts and circumstances that arise and pose difficult questions in terms of strategy and compliance.

In-house legal teams will likely be well equipped to handle many of these responsibilities, but outside counsel can and should serve as a resource for any additional support that may be needed. If outside counsel had these post-signing activities in mind during the negotiation phase, much of the work product already generated (e.g., summaries, slide decks, etc.) can be repurposed to provide at least a good starting point for the in-house team.

At every stage of a transaction, outside counsel has the chance to be a true partner to in-house counsel by stepping back from the everyday responsibilities and thinking how the in-house team is experiencing the deal workflow. For outside counsel that have previously served as in-house counsel, having that mindset is second nature.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Joe Michaels is a partner in Sidley Austin’s M&A practice, advising public and private companies, private equity sponsors, and boards on complex domestic and cross-border mergers, acquisitions, and strategic transactions.

Adam Welland is counsel in Sidley’s technology and life sciences transactions practice, where he advises technology, life sciences, and growth-stage companies on complex commercial, licensing, data, and strategic transactions.

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