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WHEN IT BECAME clear that Digital Impact Inc. was to be acquired, Kenneth Hirschman, the company’s general counsel, got worried for himself and his staff. He wasn’t upset that they all might be let go-after all, that’s what often happens to an acquired company’s legal department when the deal wraps up. Instead, Hirschman feared his lawyers would take off at the first whiff of acquisition news, leaving him alone with a mountain of work on a tight schedule, and just when he needed them most. The San Mateo, Calif., direct-marketing company, which was acquired by Little Rock, Ark.-based Acxiom Corp. in 2005, had a four-person legal team. “And as you can imagine, we were to be greatly impacted if we were to lose a lawyer,” Hirschman said. So with mergers and acquisitions running at a high pitch these days, what’s a GC to do? Local attorneys say there are a variety of actions GCs can take to keep their teams in place when their knowledge and hard work are perhaps at their most valuable. Some of these tactics-like giving staffers a chance to dazzle their prospective bosses-might even end up creating a space for them at the new parent company. The tasks to be done in advance of and during a transaction are daunting, many GCs say. For example, mobile software maker Good Technology, which was acquired this year by Motorola Inc., had to re-organize sales records so that Motorola could better evaluate and forecast from the data, said Ginny Coles, an attorney whom Good Technology hired specially to prepare for the transaction. Organizing data Legal staffs must also gather and organize information about the company’s intellectual property and contracts, so the acquiring company can weigh their value, said Marty Collins, general counsel for San Jose, Calif.’s Novellus. Collins is a former associate general counsel for the very acquisitive Oracle Corp., so he knows of what he speaks. Roxanne Christ, a corporate partner in the Los Angeles office of Latham & Watkins, knows the kind of turmoil that can result when an attorney at the company to be acquired drops out in the middle of a transaction. “Then you don’t have that institutional knowledge,” she said. “It can be very disruptive.” One intangible that is always positive is to have already imbued staffers with a sense of loyalty, Christ said. That’s not something that can be built overnight, but it helps, she said. It’s not unheard of for legal staffs to follow a GC from company to company through and after transactions because they love working for that person, she said. The bonus angle Usually, however, the decision to stay or go hinges on something more pragmatic-money. This is where general counsel say bonuses come in handy. For Hirschman, who worked in executive compensation before becoming a GC, creating a package of incentives wasn’t difficult. He still had to sell the board on the idea, but he succeeded, and other managers at Digital Impact ended up following his lead. If legal staffers stayed in their jobs through the closing and then ended up losing their positions, they received a severance payment, accelerated vesting of stock options and continued medical benefits for a period of time. “The idea is to keep them around as long as you need them, and to keep them also financially comfortable enough so they don’t feel like they need to find a job quickly,” Hirschman said. “For instance, many of the people who worked for me received up to a year’s worth of salary severance.” This gave them a “soft landing” that mitigated the fears of being jobless, Hirschman said. Acceleration of options vesting also helped keep staffers on board during Motorola’s acquisition of Good Technology, said Coles. Good’s legal staffers were offered 25% accelerated options vesting. “We actually had very, very little attrition since we announced [the acquisition on] Nov. 10,” she said. It also helped that Motorola was willing to guarantee jobs for everyone at Good, Coles said. She said this kind of promise is often a heavily negotiated point in acquisitions. Minus such a guarantee, legal staffers may have a better chance of keeping their jobs post-deal if they’re allowed to show off their skills to the acquiring company, Christ said. During presentations by the legal department, “give people a chance to give part of it,” she said. “Give them a chance to shine and show how good they are at what they do.” Mergers and acquisitions work has been at a fierce pace across the country for the past couple of years, and the stakes are getting higher. The average deal involving a venture-backed company was worth more in 2006 than in the previous four years, according to a study by Thomson Financial and the National Venture Capital Association. Alas, no one in Digital Impact’s legal department was able to keep his or her job after the transaction. This wasn’t surprising to Hirschman, however, because he was asked to draw up an “integration plan” and recommended axing the jobs. “It was odd to be putting together a plan that said, ‘Fire me,’ ” said Hirschman, who now works as GC and vice president of business development for Mountain View’s Goodmail Systems. “ But we accepted it.”

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