While opportunities for global expansion are unparalleled in today's business environment, cross-border transactions also bring a high level of complexity and a greater need for transparency. During a Wednesday discussion at the 2018 Global Women's Leadership Summit, panelists analyzed the evolving role of the legal department in navigating global transactions.
Here are some key takeaways from this discussion.
As a general counsel, it is crucial to have a solid understanding of the business rationale for an acquisition the company is considering. In-house lawyers are no longer relegated solely to the task of providing legal advice, but rather are expected to take on the role of business strategists as well. Is the organization considering the acquisition because it will help increase market share? Is it due to the opportunity to bring on a particular management team? Thinking about these questions and their answers is an important part of understanding whether the risks involved in the transaction are worth taking.
A flash poll conducted during the panel found that most female GCs in attendance considered regulatory and financial risks to be the most prominent in global transactions, while reputational risks and risks related to HR and employment issues ranked lower as areas of concern. However, panelists pointed out, integrating people and cultures during an acquisition can be some of the most difficult elements of a cross-border M&A transaction. For example, different cultures have different ways of doing business, and in some countries, employees may be more likely to tell the GC what they think she wants to hear, rather than what she needs to know.
Reputational risk is another potential danger that legal departments should not underestimate. Performing "robust due diligence" on management teams that the company plans to bring on board is essential to ensure the organization is not going to buy or inherit a problem that could surface later and mar the company's image.
The bottom line
At the end of the day, a GC's client is the company and its stakeholders, and it is important to remember that in making a recommendation for or against proceeding with a transaction. As the "connector of the dots" in the organization, as one panelist put it, the general counsel needs to understand and articulate to the board why the deal is or is not in the best interest of the organization.