Sunday, September 14, 2008

Lehman, AIG, and now Merrill? Think there are some busy lawyers?

First Barclay's walks from Lehman -- yet another suitor gone, and liquidationsville of some sort is being predicted. That is unless another angel comes to the table. AIG is looking to restructure itself, too -- they have rejected a private equity infusion and are apparently turning to the Fed. And now we are all reading that B of A and Merrill are looking to merge as well.

If Lehman really goes bye-bye, I will miss it. They did a good job on every deal in which I was involved. But the market is what it is, and some say this is the way Bear should have ended too. In this case, though, Lehman's world's end would be with a bang, not a whimper.

People are scared. As Matt Heaton put it over on ActiveRain, it is getting surreal. And will this panic the market tomorrow? I guess we'll see what Asia and Europe do tonight. I may have to cancel some meetings for tomorrow or at least keep an eye on the TV or radio.

The dirt angle of this is huge, too, in my opinion. These guys are all lenders, JV partners or owners of significant (to put it mildly) assets or mortgages. Where does this all go, how and for how much? There are predictions that the better capitalized investors may make a killing here, buying assets for a fraction of their total value. I had a client that was able to do that with a dotcom, and it was nice to get some of my money back since I actually bought some of that dotcom at the top of its ride, only to see it go bust a year later.

If there is an auction, or if companies have to dump dirt to stay alive, and the debt markets are completely fouled up, assets could be going quickly and cheaply. And that will mean armies of lawyers working crazy hours, not just on the corporate side but on the dirt side, too. Due diligence? Good luck. Careful analysis? As someone I knew in college had a habit of saying, "I doubt that."

The key here, in my extremely humble (for once) opinion, is to try not to get too badly hurt on the legal side while making the best business deal possible, either with the owner or the trustee. Lawyers do not like hearing that, but the reality is that you have to hold your nose for the right price when ordinarily, with time and analysis, you would not do so. Luckily most of the deals are probably not too hairy from a dirt lawyering perspective, but you cannot say that for sure until you look them all over. And if the timeframes are short, that means too much work and too little time in which to do it. Been there, done that.

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