A new report exposes the frustrations that arise in dealings between in-house lawyers and corporate executives.
The appeal, and challenge, of being an in-house lawyer is being able to apply one’s skills on the ground in day-to-day business situations.
Private practice lawyers are consulted for their legal skills but in-house expectations are wider. They are expected to show a good understanding of their employer’s business and the market in which it operates, its competitors and key players, so they can always contribute in a way that is commercially focused.
But are these expectations being met? A global M&A report published this week from international firm Eversheds, which spoke to general counsel and senior in-house lawyers on divestment deals, suggests they are not.
More than two-thirds of in-house respondents highlighted significant tension between legal and commercial priorities.
The tendency of business executives to shake hands on a deal before legal issues were raised or resolved was a common source of frustration for lawyers. Involving in-house lawyers at an earlier stage of the divestment process can provide counsel with greater foresight of the issues that are likely to arise during the transaction. In-house lawyers noted that legal and execution difficulties facing smaller-value deals frequently outweighed the commercial gains.
However, a number of senior executives believed legal teams with a low appetite for risk end up overcomplicating deals and lose sight of commercial drivers.
Reducing the tension between business and legal clearly requires effort on both sides. Senior executives need to realise the potential commercial value their in-house teams can bring to the table at an earlier stage, even if that occasionally means saying ‘no’ to a deal. But in-house lawyers need to learn not to automatically say ‘no’ to everything they come across that involves some degree of risk.
Identifying risks is one thing. Identifying risks but suggesting ways around managing them (should the benefits outweigh the risks) is another.
As important as it is to provide legal advice, in-house lawyers must become business advisers. Indeed, the Eversheds report shows only a third of in-house lawyers citing legal exertise as helping to increase deal value or certainty. (Project management and good communication were just as important.)
Until then, in-house lawyers will be seen as an obstacle to the organisation’s commercial ambitions and risk divesting themselves from the rest of the business.
Monidipa Fouzder is a Gazette reporter