Steven Tonsfeldt, former Heller Ehrman partner
Image: Christine Jegan/The Recorder
At 8:30 on a morning in early January, former Heller Ehrman partner Steven Tonsfeldt sat in his parked car outside a prominent law firm's Menlo Park, Calif., offices, cooling his heels before beginning several days of scheduled interviews. Three months after he helped the rest of his West Coast corporate practice find a new home at Cooley Godward Kronish, Tonsfeldt, 48, was finally getting around to finding a permanent position for himself.
In an autumn notable for financial pain, Tonsfeldt had weathered a double dose of it. In September, credit market storms threatened to capsize a $3 billion deal he was handling for client Foundry Networks, Inc. Around that time, Heller -- and his team -- dissolved.
Last spring, when Tonsfeldt was tapped by Foundry to handle a proposed merger with competitor Brocade Communications Systems, Inc., there was no hint of the chaos to come. The deal looked like a win for both sides. A merger agreement was signed in July. By early September a dozen Heller lawyers were punching time on the deal.
All that changed that month, as banks panicked, the companies' share prices went into a nosedive, and Heller dissolved. Soon Tonsfeldt was zigzagging between Foundry's boardroom and pitches at a half-dozen firms, seeking a home for Heller's corporate practice.
On Oct. 3 the West Coast corporate group landed safely at Cooley. But Tonsfeldt faced a textbook conflict: Cooley was representing Brocade on the Foundry deal. He couldn't make the trip. Instead, he and a junior partner, Kristen Kercher, remained at Heller a few more weeks, working out of the nearly abandoned Menlo Park office. Around them a skeletal administrative staff tended to final bill collection and file-forwarding tasks. From time to time a real estate agent would swing through showing the space to other firms.
Tonsfeldt's life became even more complicated in October, when Brocade's CFO informed Foundry that Brocade's financing looked shaky. From that point on, Foundry's board met almost daily, deliberating the company's next move. Suddenly, Tonsfeldt needed a lot of backup.
Concerned that a competitor would grab the deal, Tonsfeldt quickly worked out an arrangement with Foundry to enlist DLA Piper -- its regular outside litigation counsel -- as co-counsel. That allowed Tonsfeldt to stay in the boardroom, while DLA lawyers could do some of the support work.
In late October, Foundry agreed -- under pressure from Brocade -- to postpone a vote on the deal. In the brief pause that followed, Tonsfeldt and Kercher drove to their soon-to-be-shuttered office to pack up. Their next port of call: a temporary "of counsel" berth at a 15-lawyer transactional firm, White & Lee, founded by a law school classmate of Tonsfeldt's.
The move didn't take long. Outside of a few boxes of mementos, "my whole practice is sitting on a 2-inch thumbdrive," Tonsfeldt says. "It holds 15 gigabytes, and I'm sure I didn't even use a fraction of it."
The days that followed, Tonsfeldt recalls, were a blur. Ultimately, in December, after another dozen board meetings, endless back-and-forth negotiations, and a second delay on a shareholder vote, concessions were made, mostly by Foundry. The deal closed. It was one of the year's few big tech merger success stories.
But for Tonsfeldt, the experience dredged up too many ghosts. Just a decade ago, he was a Brobeck, Phleger & Harrison lawyer who joined the Venture Law Group as Brobeck began to splinter. As part of VLG, he enjoyed a wild ride -- Yahoo was and is a big client -- up the dot-com market.
That bubble, like this one, burst. Tonsfeldt's firm had a bumpy landing, and was ultimately absorbed by Heller in 2003. Gone, as well, is much of his optimism, his sense of infinite possibility. But he can still do a deal, even in the worst of circumstances, as he proved to Foundry.
