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That Frederick Holden is doing more and more mergers and acquisitions work these days should come as no surprise. After all, he’s a partner at San Francisco-based Brobeck, Phleger & Harrison, which caters to deal-happy technology companies. The catch is that Holden is a bankruptcy lawyer — and if he’s involved in the sale of a company, that means not everyone is happy. So what’s bringing Holden and lawyers like him to the M&A table? “There is an up-tick in companies that are seeing a sale of assets, or selected assets, because of a dry-up in funding,” Holden said. Business has picked up in recent months for bankruptcy lawyers like Holden. With the recent stock market volatility, tech companies are having a tougher time raising money from venture capitalists and IPOs. As a result, cash-starved companies are hitting the skids before finding a buyer. The fire sales that follow can threaten assets held by companies that did business with the troubled enterprise. That’s put to work lawyers like Holden, whose healthy technology clients license technology or lease equipment to now-ailing companies. And it’s signaled to bankruptcy lawyers that even while liquidation and reorganization filings are down, it’s time to staff up. Holden estimates he’s keeping tabs on eight bankruptcy cases on behalf of clients who own assets leased or licensed to troubled ventures. He said last year he may have handled one at any time — if that. And debt is becoming an issue in an increasing number of mergers and acquisitions, Holden said. Brobeck will be adding a lawyer to its 16-lawyer bankruptcy group this fall. The firm isn’t alone. Cupertino, Calif.-based bankruptcy boutique Murray & Murray will soon add its first new lawyer in about a year. The eight-lawyer firm is often called in by Palo Alto, Calif.-based Wilson Sonsini Goodrich & Rosati to pick up clients when they get into trouble. Wilson doesn’t have a bankruptcy practice. The foundation under many Internet retail start-ups started to crumble in March, said Craig Prim, a Murray & Murray partner. That’s when the technology-heavy Nasdaq began a 1,200-point decline. “It takes several months for that to work its way through the system and affect the companies that are starting to get into financial trouble,” Prim said. Prim’s client traffic has increased in the past four months. And it will likely continue to swell. Michael Ahrens, a partner at Los Angeles-based Sheppard, Mullin, Richter & Hampton, said many of the banks he represents are bemoaning loans they fear will soon go bad. And Jeffrey Pero, a Latham & Watkins partner in San Francisco, is seeing some clients trying to patch up their finances with a series of short-term loans with the hope of lasting just long enough to go public. “It’s sort of a frantic Band-Aid job. If something doesn’t happen, these companies will have a lot of lenders fighting,” Pero said. Even if predictions are true that bankruptcy lawyers are about to get as busy as their corporate colleagues, it’s not all cause for celebration. Asset-light, debt-heavy Internet companies aren’t much fun to liquidate, say bankruptcy lawyers. In many cases, there isn’t much of a company left to reorganize and almost no assets to sell or liquidate. As a result, they generate little by way of legal fees. “The real estate lease is likely to be the largest asset,” Prim said, recalling one San Francisco company that raised $500,000 to pay creditors by selling its lease back to the landlord. And even bankruptcy ventures that score a buyer can face a whole new set of challenges. Bargain hunters typically try to buy bankrupt tech companies in a rush and pressure bankruptcy courts to rubber-stamp their deal, say bankruptcy lawyers. Buyers claim that by hurrying, they’re ensuring that payroll is uninterrupted; sellers are desperate and fear the buyer could lose interest. But bankruptcy lawyers say there is a more nefarious purpose to rushing deals. It is an attempt to get around the auction-style sales encouraged in bankruptcy courts. “It was one mechanism to eliminate competition” by closing a deal quickly without giving other bidders a shot, said Nels Nelsen, a principal at Alliant Partners in Palo Alto. An investment banking boutique, Alliant often helps troubled companies find buyers and organize a sale in bankruptcy court. The San Jose, Calif., division of the U.S. Bankruptcy Court of the Northern District clamped down on the speedy deals last year, adopting guidelines stretching the timeline both to ease a case overload and to protect the sellers. But that hasn’t stopped the kind of quickie sales that give lawyers like Holden, and their clients, big headaches. Holden had to send an associate to Delaware last month on behalf of one client that feared that equipment it had leased to a bankrupt company would be used to sweeten the asset pot. Holden was called upon to retrieve the property, and the associate obtained assurances the small company wouldn’t hawk the equipment it had leased. And even when two companies are humming along and decide to do a deal, market turbulence has companies fearful they won’t get paid. Holden is often called in to do long-term planning in case a buyer goes under before it finishes making payments. After sitting out the technology gold rush for some time, bankruptcy lawyers expect the year to become much more interesting. “In the next year or two,” said Shepppard’s Ahrens, “it’s going to hit.”

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