Law360 - 8/15/2014
D. Franklin is a partner with Bradley Arant Boult Cummings LLP in Birmingham, Alabama. He advises clients on a broad range of issues, including mergers and acquisitions, finance transactions, and federal and state securities matters. Franklin has assisted a number of clients in private and public offerings of debt and equity securities, including initial public offerings, and regularly counsels companies and their boards with respect to corporate governance and compliance issues. His clients operate in a broad range of industry sectors, including information services, construction and engineering, distribution and service, construction materials, transportation, technology, and manufacturing.
Franklin regularly counsels emerging growth companies on formation and funding, and has worked with a number of such clients from inception through venture capital funding and initial public offering or sale. He regularly advises clients regarding their operations and acquisitions outside the United States.
As a participant in Law360's Q&A series with dealmaking movers and shakers, D. Franklin shared his perspective on five questions:
Q: What’s the most challenging deal you’ve worked on, and why?
A: The formation of two joint ventures between Cemex and our client Ready Mix USA was the most challenging deal I have worked on. The transaction required negotiating and drafting partnership agreements that involved complex governance considerations and meant we had to envision the business relationship for many years into the future. The deal also involved a put option in favor of our client that provided an exit at a formula price. Not surprisingly, the formula was heavily negotiated.
Once the joint ventures were formed, the parties contributed many millions of dollars in assets located in several states. The volume of assets to be moved into the JVs — contracts, real estate, rolling stock, inventory — was tremendous. For example, the transfers of hundreds of titles to ready mix trucks alone took days. Although it was a complex transaction, the parties and professionals kept the endgame in sight, worked well together and ended up with a successful end result. We did a number of follow-on acquisitions through the Ready Mix USA joint venture that were very successful. Ultimately, our client sold its interest to Cemex. We were all very pleased that the put option mechanics worked as planned.
Q: What aspects of regulation affecting your practice are in need of reform, and why?
A: Although some of my clients are in regulated industries, most of my deals are not impacted directly by governmental regulations in a significant way. We very often have to meet Hart-Scott requirements, but that is simply part of the process. Most of my clients are private companies that rarely issue equity as deal consideration, which means we are not registering shares and do not have that added layer of regulation. The regulations that affect my practice are those that make doing business more difficult and expensive for my clients. More money spent on understanding and complying with new regulations means less money to spend doing deals. And there have been plenty of new regulations in recent years.
Q: What upcoming trends or under-the-radar areas of deal activity do you anticipate, and why?
A: We are certainly seeing more “big players,” both buyers and law firms, moving into the middle-market space. Competition for good acquisition targets over the last few years has become fierce, with buyers seeing better opportunities in the middle-market area. Bankers also seem to be pursuing these deals more aggressively. We are seeing more acquisitions of manufacturers in the Southeast. Manufacturing, especially specialty manufacturing, is profitable and attractive. Our firm has really benefited from these trends. It also appears that bank M&A activity is on the verge of taking off again. I expect we will see activity in this area.
Q: What advice would you give an aspiring dealmaker?
A: Listen hard. Work hard. Find a great mentor and pay attention. Most young M&A lawyers have great resumes and drive. They want to jump right in. That is a great attribute, but you have so much to learn when starting out. I had the benefit of working extensively with four partners when I began my practice. They all expected 100 percent commitment from their proteges, but were very willing to teach. Each had different ways of getting the deal done. I watched and listened and worked hard. With that came confidence and opportunities. I also encourage our young lawyers to get out of the office. Being involved in our community provides great opportunities to connect with other aspiring dealmakers.
Q: Outside your firm, name a dealmaker who has impressed you, and tell us why.
A: Most of the dealmakers who have impressed me have been businesspeople, not lawyers (though some of them were “recovering lawyers”). One, in particular, is Jim Stephens, former CEO of EBSCO Industries, a conglomerate and serial acquirer. As CEO and chief dealmaker, Jim had an amazing way of connecting and building rapport with the owners of the companies EBSCO was interested in. He was a great listener and was very successful in communicating the vision of EBSCO to sellers. Jim has a quick and curious mind. He never tired of mining information that uncovered value in the targets.
The M&A lawyers who have impressed me over the years have been those who take the deal seriously, but don’t take themselves too seriously. The work we do can be difficult with plenty of intense negotiations and complicated issues. The vast majority of lawyers we encounter are well-educated and very capable, but many lose sight of the objective (getting a deal done for the mutual benefit of both parties — the best deal for all) and spend their efforts trying to “win.” A recent example of a deal lawyer who impressed me was Bruce Zivian at Perkins Coie in Chicago. Bruce represented Chicago Metallic Corp. last year in their sale to our client Rockwool International. Bruce was a tough negotiator and had a very good understanding of his client's business and objectives, but never seemed to lose sight of the fact that both of our clients wanted to get the deal done. And, throughout the process, he and his colleagues were consummate professionals.
Republished with permission from Law360 (2014). This article first appeared in Law360 on August 15, 2014.