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Valued at about $140 million, the acquisition of Mountain View’s BeVocal Inc. by Nuance Communications Inc., announced late last month, may not have been the biggest by dollar amount. But Alan Denenberg, the lead Davis Polk & Wardwell partner representing BeVocal, said the deal had fair-sized complications. In addition to 8.3 million shares of Nuance stock worth $14.98 each, and a cash payment of about $15 million, the companies also negotiated an earnout worth up to $60 million in cash. Denenberg said that structuring that earnout was the most complicated aspect of the deal. Although the parties had negotiated a two-page term sheet, in which they outlined the overarching terms of the agreement, Denenberg said the devil turned out to be in the details. Because the earnout hinged on the acquired company’s business performance, lawyers had to help the companies define BeVocal’s growth targets and build in protections for both sides, which can at times have competing interests. “You have to reach agreement between the buyer, who has to be comfortable that it can run the business in a way that makes sense for it, and the seller, who is getting the earnout, who needs to feel comfortable enough that there are protections in place so that it has a fair opportunity to get the earnout,” Denenberg said. That entails thinking into the future, including how the business is likely to evolve over the course of the year, how the buyer will run the new company, and how it will integrate it into its own business. “You have to think about things like, what if the buyer has a product that can be competitive with the seller’s product,” Denenberg said. Those details lingered throughout the transaction, which took several months, he said. Denenberg said he inherited BeVocal as a client from Wilson Sonsini Goodrich & Rosati partner Anthony Jeffries. Before the acquisition, WSGR represented both BeVocal and Nuance, Denenberg said, and had to give one up. “I got a call from Tony Jeffries, who had recommended me to the company, as well as [from] Goldman Sachs, who recommended me,” Denenberg said. “It was very nice. I appreciate it.” The Davis Polk team also included partners Julia Cowles, Rachel Kleinberg and Steven Weiner, and associates Sam Kelso, Robert Maynes and Cynthia Akard, all from the Menlo Park office. Wilson Sonsini represented Nuance, which is based in Burlington, Mass. The team was led by New York partner Robert Sanchez and was comprised of Palo Alto partner Marc Gottschalk, San Diego partner Ralph Barry, Palo Alto associates Christina Bye and Richard Melnyk, San Francisco associate Madeleine Boshart and a number of partners and associates in the firm’s other offices.

Petra Pasternak

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