When a large public company decides to go private—as Dell Inc. has decided to do—the legal department is juggling an almost overwhelming list of legal issues, according to two former general counsel familiar with such transactions.
“But the largest issue in these types of transactions is ensuring that the fiduciary duty to shareholders and others are adequately protected,” said Joseph La Barge, former GC and chief compliance officer of the biotech company Tengion Inc.
La Barge, now of counsel with Ballard Spahr in Philadelphia, told CorpCounsel.com Wednesday that protecting that duty is especially significant when the buyout group taking the company private includes the public company’s chief executive, as it does at Dell.
Dell announced Monday that it has agreed to be acquired by a group that includes investment firm Silver Lake, along with Michael Dell, the company’s founder, chairman, and CEO. The $24 billion deal is expected to close by mid-2014.
Dell general counsel Lawrence Tu declined a request for an interview. In declining, Jess Blackburn, of Dell’s corporate media department, said, “We remain a public company now and wouldn’t want to speculate on the environment of a private company.”
La Barge, who said he helped handle one “go-private” transaction, suggested that in a case like Dell’s, the general counsel would advise setting up a committee of independent directors with their own outside counsel.
And Round Rock, Texas-based Dell said in its announcement that it had done just that.
The special committee was formed last August and retained independent legal advisers Debevoise & Plimpton. It also engaged its own financial advisers and a leading management consulting firm to conduct an independent analysis.
“The in-house counsel will be juggling a variety of issues,” La Barge noted, “from making sure the parties that require access to diligence materials get it, to constructing some Chinese walls so information is shared only with the appropriate parties.”
Kelly Howes, the former general counsel of Janus Capital Group, said she sees two major issues for a GC doing a go-private: advising the board and hiring the most qualified outside counsel you can.
Howes, now of counsel with Morrison & Foerster in Denver, said the legal department must ensure “that you and your outside counsel are checking every box, looking at any potential exposure to the organization, starting with being comfortable with the price.”
The transaction, Howes explained, is a huge logistical challenge.
“You are looking at not just a corporate and securities transaction, but issues involving real estate issues and taxes; business and employment contracts; employee benefit plans. There are all these different moving parts that have to come together at the same time.”
Howes continued, “So you and your board want to have the best possible outside counsel that you can. And if you look at the Dell roster, those are all-stars.”
Hogan Lovells is advising Dell on the deal, while Wachtell, Lipton, Rosen & Katz is representing Michael Dell, and Simpson, Thacher & Bartlett is serving as Silver Lake's outside counsel.
Howes said she has never done a go-private, but she was part of a Janus team that helped a private company go public. For her, “making sure the board has enough quality information that it can make the decisions it needs to make, that’s our biggest job.”
See also: "Seven Firms Land Roles on $24.4 Billion Dell Buyout," The AmLaw Daily, February 2013.
