Real estate lawyers and M&A lawyers wear different goggles to see the world. I wear both sets of goggles, which either gives me some insight to the differences or has totally screwed up my vision. While you could be forgiven for thinking there would be plenty of overlap in what is essentially documenting a sale of an asset in both types of deals, tradition dictates that real estate and M&A attorneys each do it differently. Quelle difference?
Timing. The first thing you notice is the timing is all different. Real estate purchase agreements are drafted, negotiated, finalized, and signed within days. M&A lawyers would gag on that timing. In the middle to small market M&A world, definitive agreements are to be nurtured and massaged over multiple drafts with ever-increasing nuance until, after a good month or, better yet, two months of hard labor, they are deemed worthy of signature. Nothing makes an M&A lawyer smile more than the prospect of diving into a document which opens with a good eighteen to twenty pages of definitions, all the better if it renders the agreement virtually unreadable. Meanwhile, well before the M&A attorney has turned the first draft, the real estate lawyer has not only finalized the purchase agreement, she might very well have it sent for off-site storage.
Due Diligence and Schedules. In M&A, due diligence is done, and schedules are produced well before signing, and it all occurs while the drafts of the definitive agreement bounce back and forth endlessly between counsel. Real estate attorneys don’t know what a schedule is beyond a legal description and a list of leases. Anything more than that, and it can wait a few weeks or more until after the contract is signed.
Earnest Money. Every real estate since the dawn of time has it; M&A attorneys have never heard of it and, once they do, are visibly uncomfortable with it. Your average M&A attorney is much more likely to propose that the seller pay the buyer a break-up fee if a deal goes south rather than a buyer showing some financial good will with an upfront deposit.
Holdback. Virtually all M&A deals have some purchase price that is held back for post-closing claims of the buyer against the seller, escrows on all cash deals and promissory notes and the like when the seller holds some paper. And this is true even if the due diligence comes up crystal clear. A real estate lawyer won’t even think about it short of some clearly identified issue, like a structural repair or environmental issue.
Indemnification. This is where the M&A attorney shines. Baskets, mini- and otherwise, qualifiers, scrapes, caps, survival, fundamentals, carve-outs, and exclusivity all make for multiple conference calls and much soul searching for the M&A attorney while the real estate lawyer knocks indemnification out over her first cup coffee.
Simultaneous vs. Deferred Closing. First, a real estate lawyer has never said the word simultaneously, at least within the confines of her practice. M&A lawyers do it all the time, and the prospect of a deferred closing makes them wince at the thought of actually reading those pre-closing covenants and conditions.
I could go on. But kidding aside, where this becomes important is when real estate is a key asset in an M&A transaction. To properly address the legal aspects of real estate in an M&A context, M&A and real estate lawyers need to actually take the time to understand each other. That requires true teamwork. Here, at our daily M&A deal rundown, our real estate lawyers are always there and working with our M&A attorneys to make sure that real estate concerns are properly documented and addressed.