As Palm + HP closing approaches, let's hear it for the lawyers (seriously) 28

To most of us, this HP/Palm merger is taking forever; to a trained eye, however, it's moving along at a heady clip. Here's why.

After months of announcements, law suits, hypothesizing and just plain waiting, the long-awaited acquisition of Palm by HP is expected to close this week. For those who have not been involved in the world of corporate mergers and acquisitions, it may not be clear exactly what a closing is, why it has taken so long to get to this point, or what is happening in these final few days. As someone who started his legal career as a corporate associate, I thought it might be helpful to demystify the process a bit.

Essentially, a closing is that moment when the deal actually happens; in this case, upon closing, Palm will cease to be a standalone publicly traded company, and will become a wholly-owned business unit of HP. All the Palm stock previously held by investment firms and individuals will be sold to HP for $5.70/share (or a total of $1.2 billion), Palm’s remaining employees will become HP employees, and anything owned (or owed) by Palm will then be owned (or owed) by HP. Also, all contracts that Palm has entered into must either be cancelled or transferred (“assigned”) to HP, so it can stand in Palm’s place to benefit from (and perform) the contracts.

As you can imagine, there is a lot of information and paper that must be exchanged leading up to and at a closing like this one. The actual contract for the deal, the acquisition agreement, will have been carefully negotiated, drafted, edited, renegotiated, reedited, and so forth, and will likely be tens or even hundreds of pages in length by the time it’s signed by the relevant people at Palm and HP. Every important contract, every record of a corporate meeting, and all proof of legal compliance from both companies must have been produced, reviewed, investigated, proven and dealt with to make sure there are no conflicts, a process called “due diligence,” and many of those will have to be part of the closing too. Senior executives with employment agreements who are staying will likely have those agreements included in the closing documents, and benefits plans (with all their complexity) will need to be addressed as well.

Why not just sign a single contract and be done? Mostly because, if anything goes wrong (or anything incorrect was said and believed), HP’s shareholders (and Palm’s former shareholders) will both bring immediate, costly and deal-destroying lawsuits. It’s also crucial that nothing get missed; imagine if, for example, HP forgot to take over Palm’s Verizon Wireless contract; it might not be able to sell its post-merger devices through VZW without extensive (and expensive) renegotiations. Considering that, even in a simple real estate deal like a house purchase, closings include title searches, insurance documents, certificates of occupancy and the various checks, it’s no surprise that a billion-dollar acquisition of a company with many employees and assets by a company with many more of both will generate and require much more paper.

Who is responsible for collecting, reviewing and managing these thousands of pages and hundreds of documents? Most likely, the attorneys for both companies. If this deal is similar to others I have worked on or watched over the years, outside counsel will probably do most of the legwork, with any in-house lawyers managing the process, since law firms usually have more available bodies than typically lean in-house legal departments. And given the economics, the major share of the actual work will be done not by the partners or senior associates, but by the junior associates in the law firms. These young attorneys will be reading and summarizing the contracts, checking (or producing) the necessary corporate minutes, researching any needed points of law or regulation, and ultimately producing and monitoring the all-important closing checklist, the final list of documents which must be signed and exchanged to make the magic (aka the acquisition) happen. (See a sample closing checklist here.) While those young attorneys are probably paid fairly well, at least on a yearly basis, the number of billable and total hours they must work to keep those jobs is so high that they may earn less per hour than the HVAC tech and electrician keeping the firm’s offices cool and bright during those numerous late night (or even overnight) due diligence and drafting sessions. (Believe me, as the closing deadline approaches, the tension mounts and supervising partners become less patient, those other jobs look more and more inviting.)

Ideally, when the Palm/HP closing finally happens, the junior associates will have done such a great job that everything will go smoothly, all the documents will get signed and filed, the checks will be exchanged, and the former Palm employees will go out to celebrate with their new colleagues and the law firm partners. Perhaps the partners will invite the junior associates to come along, or instead they will head to their rarely-seen homes for a well-deserved rest. Either way, let us in the PreCentral community acknowledge and show our appreciation for the hardworking young lawyers who even now are burning the proverbial (or literal) midnight oil to bring us our eagerly-awaited next step for Palm and webOS.