Photo by Laura Barisonzi.
The M&A lawyers selected for our annual Lawdragon 500 guides are the types who stay busy almost regardless of what the economy is doing, and Paul Schnell is among the more striking examples. The Skadden partner in New York has played a role in a number of large deals in recent years, even as the M&A market has been slow to enter into a post-crisis boom.
Schnell represented Pfizer in the nearly $12B purchase of its nutritional business by Nestle, and he also handled Anheuser-Busch InBev's $20B acquisition of Grupo Modelo, among other high-profile matters.
Lawdragon: Can you share a few thoughts on why the slowness of the M&A market stuck around even as we moved away from the crisis?
Paul Schnell: Market participants often have too short a memory, but the 2008 financial crisis was traumatic enough that people still can't put it behind them. While the economy and the M&A market have slowly improved since the crisis, there's still some unease about the health of the global economy and wariness in boardrooms about making big acquisitions. A board needs to make a leap of faith when it decides to pay an acquisition premium in a transaction; the premium represents a bet that the target company has strong future prospects and is likely to achieve them. If the board doesn't have enough confidence about the future, it won't take the chance.
LD: What's ahead in the next few years? Do you see the pace and size of deals picking up, or is it still too difficult to predict?
PS: There is every reason to think we will see a gradual increase in M&A activity, though not as quickly or evenly as anyone would like. As conditions improve, you'll see bigger strategic deals and more private equity activity. We've already had two PE-like deals in the $25 billion range this year — Dell and Heinz. These acquisitions are several times larger than the biggest private equity deals we have seen since the 2008 crisis. Naysayers say that Dell and Heinz are not indicative of an improving trend because those deals involved unique circumstances. But, any $25-billion deal is encouraging.
There's still a lot of interest in the emerging markets. Companies see growth opportunities there that they can't find at home. The BRICs and other countries such as Turkey, Mexico and Indonesia are on the M&A radar screens of many companies and investors.
We'll see some setbacks along the way because it takes relatively little for nervousness to return to the market — Cyprus, of all places, being the most recent example.
Of course, I don't place any real value on these predictions about the future of M&A. In talking about the future, I am certain of only one thing, which is that you can't know where things are headed. Maybe I should have made that point first so your readers could have skipped straight to the next question.
LD: Backing up a ways, I read in the recent Times article that you were a philosophy major. What led you to law school? How did you start to develop an interest in handling big deals for a living?
PS: Philosophy is terrific training for the law. It teaches you to be a better, more rigorous thinker. I find myself thinking through legal issues much the same way I did philosophical questions. But, while the thought process is vey similar, there's a big difference in the end result. In philosophy you don't worry about coming up with the answer, there often isn't one; in the law, you of course need to come up with an answer, a solution, for your client.
I've always liked the drama of M&A transactions. Many areas of law are as intellectually exciting as M&A, but few involve as much drama. In M&A, you get to work with companies, investors and individuals engaged in transactions that are truly transformative for them: a 100-year old company may cease to exist as an independent entity; a CEO's career may be defined by the success or failure of the transaction. It's fascinating seeing how "bet the company" deals can bring out the best in really talented people, and occasionally the worst.
LD: As you developed as a lawyer in the early years of your practice, who was a key mentor for you? Can you share a key lesson you learned from him or her or them?
PS: I've had the best mentors in the world over the years — Joe Flom, Jim Freund, Roger Aaron, Peter Atkins, Bill Frank and Barry Garfinkel, to name a few. I could write a book about what I've learned from them, though Jim Freund has written ten books over his career so you can read it directly from him. Their advice focused on the basic, and they taught by example in the most compelling, accomplished and inspiring ways: always demand the most you can from yourself — integrity in everything you do, the highest quality work, creativity, team play, tenacity, total dedication to your client — and always have as much fun as you can along the way.
LD: It’s not only an uncertain time for deal activity, but also for the value of a legal education, at least according to some commentary. What advice would you have for law students interested in pursuing the type of career you have had?
PS: It's a cliché, but become a lawyer only if you have a passion for it. I worry about law students who say they went to law school because they were smart and verbal and there was nothing else they could think of doing. The job is challenging enough even if you love it. If it doesn't excite you, find something else that does.
LD: Perhaps on a related note, what does it take to rise to the top of an M&A practice? When you think about young lawyers at the firm, what traits do you look for that you feel identifies them as likely to successfully replace the top Skadden veterans one day?
PS: I think there's a strong correlation between being a successful M&A lawyer and the speed with which you return phone calls, emails, etc. Seriously, it says a great deal about the person.
Try to work with a range of lawyers who you admire. Lawyers have different ways of doing things and it's good to see various styles as you develop a way of lawyering that fits you the best.
LD: With all the lawyers at other firms who you come across, can you share one or a few that you like, or don't like, to see on the other side of the negotiating table? Or a few outside of Skadden that you particularly admire?
PS: I would get myself into trouble if I named names. The bad ones take themselves too seriously, are lazy thinkers and service providers, approach deals as if there can be only one winner, and don't listen closely enough to anyone — their client, the party on the other side, other advisors. The great ones do the opposite.
LD: In addition to your practice, what outside-the-firm activities are you working on these days in terms of the not-for-profit groups you are associated with?
PS: Educational, arts and social justice organizations. They provide the most refreshing contrast to what I do the rest of the day. The New Museum of Contemporary Art, the Ethical Culture Fieldston School, Opportunity Network and many others over the years.
Also, I've really enjoyed teaching at law schools. I wish I had time to do more of it.