In-house lawyers’ role in a deal is just beginning after they get a contract across the finish line, Enlace Health General Counsel Robert Ball said in a podcast with Linksquares CLO Tim Parilla. That’s a big change for them if they’re coming from an outside counsel role.
“As lawyers, we think once the ink’s dry on the contract our work is done, but you need a new mindset,” said Ball, who’s worked both in-house and for outside counsel. “For the business, getting the contact [across the finish line] is day one.”
Making that mental switch about the scope of the work is crucial for in-house counsel because, while their role is to protect the company from legal risk, they are there to help their company find a way to get a deal done if the deal is seen as important for growth.
“There are two types of lawyers — dealmakers and deal breakers,” said Ball, whose previous work included being the first in-house lawyer for Akamai Technologies, when it was a startup in the early 2000s. The company is now a public cloud computing company with some $4 billion in annual revenue. “The company doesn’t want you to prevent it from growing, so you have to take that mentality that you’re not there to prevent the company from getting something done.”
Helping to get a contract closed can be tricky if, from a legal standpoint, it doesn't seem to be a good deal for the company. When he comes across problematic deals, Ball said, he tries to make it better through the way the terms are written. But if the deal is simply a bad one, in-house counsel that ask the right questions about the terms can help company leadership come around to the view that the deal isn’t worth the risk.
“If you keep asking the questions, and you’re being thorough, if it’s a bad deal it’s going to come out,” he said. “The ones that are tougher sometimes are the bad deals that don’t appear as bad deals at the beginning.”
In-house counsel are generally at a negotiating disadvantage if they’re representing the smaller of the two companies in a transaction, especially if they’re at a startup that badly wants the business. As the smaller company, it might be tempting to take a deal on unfavorable terms. That makes it important for in-house counsel to leverage their expertise in contract terms.
“You’re going to face a lot of [pressure from the larger company] that this is the way we do it, so therefore you should accept it,” Ball said.
The hidden strength of the smaller-company lawyer is the business and technology knowledge that the big-company lawyers won’t necessarily have. That’s because the big-company lawyers are more likely going to be contract specialists, not generalists who understand the broader strategy the company is trying to execute.
“If you understand the business and the technology and how to use the technology, you have an advantage because quite often the people on the other side don’t have that level of knowledge or the desire to know,” he said.
In-house counsel can also help their leadership by sharing with them what they learn from how the other side negotiates.
“What is it that you can glean from that interaction that you can pass back to the company?” he said. Based on how the other side acts, getting them to give in on one term or another might not be a win if it exposes that the company is unlikely to be a good partner.
“Let them see that,” he said. “If we can get some deal terms that we can live with, that may still not be the best outcome,” he said.
A startup is almost always going to enter into bad deals in the early years, he said. Even here, though, the company can emerge stronger as a result, because it helps clarify what terms work for, and against, the company over the long-term.
“You have to deal with the here and now, but it’s within the context of where you’re going to go,” he said.
