Levels of Business Lawyer Involvement

The level of lawyer involvement in any business transaction can vary. Some clients wish to limit their lawyers involvement to a very basic level, while others need significant legal assistance. Sometimes this decision is based upon the type of transaction, the issues at stake, or the client’s legal budget. Many times a potential client is not aware of the different levels of assistance that are available or the value that a lawyer could add to a transaction.

Intermediate Level II - Gatekeeper Relationship

In many business transactions, the business lawyer also serves the role of the “gatekeeper” and, essentially, by engaging a business lawyer, a business “rents” the reputation of the “gatekeeper” to signal to the other side that certain standards will be respected and met in the course of conducting the transaction. For example, a reputable business lawyer will presumably not want to be involved in “taking advantage” of the other side in a manner that is not traditional and customary in the community in which the business lawyer resides. A specific example would be where a corporation is raising money from investors, and the existence of a reputable “gatekeeper” for the corporation raising money from the investors signals to the investors that, while there is no legal guarantee, it is unlikely that the business lawyer would risk his good name and reputation on being counsel to the seller of a worthless investment.

Also included in the “gatekeeper” relationship is the value added by having an extra layer between the transacting parties. The lawyer to lawyer buffer adds professionalism and can reduce the risk that a party will react rashly. By having the negotiations primarily run through the lawyers, as opposed to being between the buyer and seller directly, there is a greater ability to explore some negotiation positions without jeopardizing the transaction. The lawyer can float an idea with the caveat that “I haven’t run it by my client yet, but how about this . . ..” Similarly, a buyer can profess to fully trust the seller, but claim that “my attorney says I need to have this protection.” Experienced transactional lawyers can often pick up on the “tone” of requested changes to an agreement, which could perhaps be misinterpreted by the client. Voluminous changes which attempt to remove ambiguities or cover contingencies can be benign compared to a single word change in a definition or in an indemnification clause. An overstep in negotiating by the client can often be “saved” by the lawyers, and an overstep by the lawyer can often be “saved” by the clients. Accordingly, the strategic use of lawyer to lawyer negotiations and client to client negotiations can be very beneficial in a transaction.