Business Law Currents: Can you give our readers a little background on your practice and how you became a transactional lawyer?
SK: I’ve always been interested in business. I spent a couple summers in college working in Paris at Cargill’s trading desk and at the U.S. Embassy doing market research, and then worked as a stockbroker for a couple years after college before deciding to go to law school. I kept working as a stockbroker during law school, and then when I graduated and got my first law firm job, transactional work seemed like the best fit for me.
Most of my time is spent on strategic transactions like M&A, licensing, and distribution agreements, but I also spend a fair amount of time on financings, corporate governance matters, employment agreements, cash and equity incentive arrangements, and other general corporate matters.
Business Law Currents: You spent time in large law firms and inside the corporate counsel’s office. Can you provide a sense of the similarities and differences with each experience?
SK: They’re actually similar in a lot of ways. Many of the same skills you need to succeed at a law firm are the same as in-house. You generally need to be able to think quickly, demonstrate good analytical skills, communicate clearly, work hard, and build strong relationships.
The biggest differences relate to the nature of those relationships and timing matters. At a firm, you need to cultivate relationships within the firm, but as you advance in your career, you increasingly need to do so outside of the firm as well. In a corporate legal department, on the other hand, all of your key constituents are within the company, and those are the relationships you need to focus on.
There are also a couple elements of timing that are different in a law firm versus a corporate legal department. For one thing, at a law firm you’re often going to work more hours than in-house. In both jobs you may need to be available to answer emails and phone calls at any time when you’re not in the office, but the total amount of time spent working generally tends to be higher in law firms. Some of that is due to spending more time doing legal work, but a significant portion of it can also be a result of time spent developing business.
Another aspect of timing relates to the times at which you work. When you’re in-house and you have a tight deadline to meet but need to leave the office before the project is completed, you can call outside counsel to work into the night to get the project done. When you’re in a law firm, you’re on the other end of the line, so you’re the one that’s working late.
The final difference around timing relates to the amount of time that you typically have to focus on projects. In a law firm – at least at the more junior levels – attorneys often have time to research an issue and think about it, and maybe even prepare a memo in which they further develop their thinking before giving advice to the client. When you’re in-house, on the other hand, your clients typically expect answers right away, so you don’t have the luxury of time to do research and analysis.
Business Law Currents: What did you do during your time as in-house counsel?
SK: At both St. Jude Medical, where I was the associate general counsel responsible for M&A, securities and corporate governance, and at Secure Computing, where I was general counsel, I spent much of my time on corporate governance, M&A and securities matters. In particular, I was responsible for board meeting materials, committee charters, principles of corporate governance, and proxy statements. I was also responsible for the legal side of some significant M&A activity, including the $1.3 billion acquisition by St. Jude Medical of Advanced Neuromodulation Systems and the sale of Secure Computing to McAfee for $500 million.
As general counsel, of course, I fielded questions in many other areas, oftentimes one right after another. It felt a little like running so fast that you never knew when you were going to lose control and fall down!
Business Law Currents: Now you’re with Briggs and Morgan, a well-respected large regional law firm in the Midwest. Can you explain the advantages that a large regional firm offers its clients?
SK: In our case, we are a large enough firm that our lawyers have been able to specialize and develop deep expertise in their areas of practice. At the same time, because we have chosen to retain a smaller footprint than other firms, we have kept our overhead down, along with our rates, and are able to provide great value to our clients.
Business Law Currents: One of the areas that you focus on is the M&A space. Are there recent deals that have been particularly interesting?
SK: The deals I find the most interesting right now are the ones that are getting done! [laugh] I focus primarily on companies in medtech, information technology and private equity, and these have been active areas. For instance, we just closed a deal where we sold a computer network performance management firm to a private equity firm. We’ve also been engaged recently to work on three other IT deals, at least one of which will likely include a PE buyer. On the medtech side, we’re still seeing a lot of M&A activity, with many medtech firms being acquired in just the last six months.
Business Law Currents: What type of trends are you seeing in the M&A world?
Industry drivers of deals appear to be in place for the foreseeable future. IT has been a source of constant innovation and efficiency improvements. With ever-increasing amounts of data and data storage needs, performance management needs and cost-reduction initiatives, along with the great scalability that many software solutions offer, we expect to see substantial continued investment in this space.
And, despite the regulatory uncertainty in the U.S. and increasingly in the EU, we’re still seeing a lot of companies being acquired in the medtech space. We think that trend will continue as the larger medtech players like Medtronic, St. Jude Medical and Boston Scientific bolster their revenue growth with acquisitions of new products and technologies. They not only have the desire to do those deals, but also have substantial amounts of cash on their balance sheets and generally have access to cheap capital to finance larger deals.
Similarly, in the PE space there are a large number of firms with substantial amounts of capital to deploy. We’re seeing an increasing amount of that capital fund acquisitions in the IT and medtech industries, and expect to see that trend continue as both of those industries continue to provide opportunities for high growth and EBITDA margins.
Business Law Currents: Are there any trends you’re seeing in M&A specifically in regard to the attorneys handling the deals?
SK: One trend I see across the board is that good M&A counsel are, thanks to companies like ThomsonReuters and the deal information they provide, becoming better informed about what is being done in other deals. As a result, in deals where both sides are represented by good counsel, what we’re seeing is a convergence toward what is perceived as “market” on a wide variety of deal points, whether they be survival periods, escrow amounts, termination fees, reps and warranties or other provisions of purchase agreements.
On the other hand, where one side of a transaction is not as well advised, you’ll find that they – unsurprisingly – are ending up with terms that are less advantageous to them than market.
Business Law Currents: What impact has the sovereign debt crises had on domestic M&A, if any?
SK: I think that sovereign debt crises abroad have had a significant impact on M&A activity here in the U.S. Anything that dampens the confidence that buyers have in their ability to make money off of an acquisition hurts M&A activity. So when sovereign debt crises hit in Europe, and markets around the world are rattled, including in the U.S., buyer optimism drops and M&A activity slows. We’ve certainly seen that over the first half of this year.
Business Law Currents: Finally, I know that you are fluent in French, and an avid competitive biker. Have you biked the Tour de France route in France? Was it the most grueling ride you have ever been on?
SK: That’s a good one! I’ve biked portions of the Tour, but definitely not as much as I’d like to. As far as grueling rides go, it seems like every century ride I’ve done has been plenty grueling.
The most memorable hard ride I’ve done was a couple years ago when we and three other families traveled to Southern France, near Avignon. One morning we rode up Mount Ventoux – about 15 miles at an average grade of 7-8%. There comes a point when you get so high that plants no longer grow and the mountain is nothing but rock, with no trees to shelter you from some amazing winds. Although the temperature at the bottom was probably around 70 degrees, at the top it was much colder, with a wind chill that must have been around freezing. We only averaged about 8 miles an hour going up, but as soon as we celebrated for a few brief moments in the freezing air at the top, took the obligatory photos and turned our bikes back down the hill, we were going 50 almost immediately!
This interview was conducted by Christopher Longley, a Senior Relationship Director at Thomson Reuters.
Steve Kozachok is the head of Briggs and Morgan’s MedTech Practice Group and a member of the firm’s Business Law Section. Steve has extensive corporate and securities law experience, and specializes in M&A, financings, strategic relationships, corporate governance and commercial contracting, among other areas. A more detailed biography is available on the firm’s website.
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