This session at Transaction Advisors M&A Conference at the University of Chicago explored a range of challenges when deal negotiations are leaked to the media, investors, or employees. During the second half of the discussion, the participants discussed the use of intentional leaks to drive specific actions and apply pressure on a target company, including process and legal issues that may apply in various jurisdictions.
Moderator Brian Hwang, Director of Strategic Business & Corporate Development at Intralinks, reported on a study his firm is conducting regarding leaks.
Provisional data reveals a nearly equal percentage of deals being completed, whether the deals were leaked ahead of completion or not. Hwang also asked the panel about Best Practices in this area.
Rachel Duggan, Associate General Counsel, Chief Strategy & M&A Counsel at Marsh & McLennan Companies, outlined a disciplined process whereby in-house deal participants e-sign a nondisclosure certification, while signing nondisclosure agreements physically when a public entity is involved.
James Harris, a Principal on the Corporate Development Integration team at Google, outlined similar use of nondisclosure agreements, and, later in the discussion, touched on when Google might conduct internal investigations after being aware of a leaked deal.
Doug Barnard, Senior Vice President, General Counsel, and Secretary at CF Industries, said about 10% of deals do leak and was willing to consider the sensitive issue of the possible motivations for such leaks.
Barnard said these include companies agreeing to work exclusively, but later regretting it; or exclusive negotiating may be taking too long or a potential buyer may not be willing to increase its offer price. In some cases, Barnard speculated, “ Pressure from the threat of competition might not hurt.”
Duggan reminded that in addition to regulatory consequence, a purposeful leak has the potential to backfire and result in unintended consequences, while Duggan and Harris noted the undesirability of building a reputation for being ethically challenged.
Barnard added that the most recent data suggest that there is not as much deal-making damage with leaks, as there are regulatory issues and damage to one’s reputation.
The panel also discussed the discipline needed by deal team members in the use of social media, as even something as seemingly innocuous as reporting one’s travel plans on Facebook could set off alarm bells; the importance of planning what to do if there is a leak, including internal communications; and regulatory reporting responsibilities should there be a leak.
By, Brian Hwang, Director of Strategic Business & Corporate Development at Intralinks; Rachael Dugan, Esq., Associate General Counsel, Chief Strategy & M&A Counsel at Marsh & McLennan Companies; James Harris, Principal on the Corporate Development Integration team at Google; and Doug Barnard, Esq., Senior Vice President, General Counsel, and Secretary at CF Industries.
Content originally from Transaction Advisors
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