Tackling an Assessment Day Case Study

contribution by Adam Hunter, President of the Law Club

For many firms, a key part of an assessment centre is a case study exercise. This will often accompany a competency or strengths-based interview and even a negotiation or written exercise on the day. Depending on the firm, they can come in a variety of different formats and I would recommend that before arriving at the assessment day you know how you are going to be assessed.

However, the basic structure of a case study exercise is that you will be given a business scenario to analyse. When analysing the scenario, you should aim to extract as many commercial issues as you can. It is important to remember these exercises are not designed to test your legal knowledge but to find candidates who can locate potential practical issues for the client and the firm. You will then have to present the issues you have found (and maybe suggest solutions) to a fee-earner.

The article below looks at an M&A scenario.  This involves one company (“the Buyer”) acquiring another (“the Seller”).  Not all case studies are centred around M&A; however, this hopefully will provide you with some starter questions to think about when reading your particular case study. Moreover, this article does not seek to provide an exhaustive list of factors to consider but rather an insight into a number of common commercial issues, which may arise. Not all the factors below will be relevant to your particular case study. Instead, the important questions you should be considering are: What are the issues for the client? How can lawyers provide a solution?

Here are the issues:

  1. TYPE OF TRANSACTION – Which type of sale would best suit the Buyer’s needs? Share purchase or asset purchase?

Share purchase sale – this involves the Buyer buying all the firm’s shares or a controlling stake. The Buyer will gain full control over the company and will also take on the Seller’s existing liabilities and obligations.

Asset purchase sale – this involves the Buyer buying specific assets owned by the Seller, such as buildings. The Buyer will not gain full control over the entire company but they will be able to cherry pick the assets they want to buy.

  1. FINANCING THE DEAL – How is the Buyer intending on raising capital (money) for the transaction?

Cash – does the company have enough money in its accounts to fund the acquisition?

Equity – are they listed on the stock market? If so, they could issue more shares. If not, they could release an Initial Public Offering (IPO).

Debt – could they get a loan from the bank or issue bonds?

Think about the advantages/disadvantages of raising money through the various methods. Which would be the best method for the client? Note:  Large businesses will usually combine multiple forms of financing in order to finance a deal, for instance issuing shares whilst also taking on multiple layers of debt from different sources (by taking loans or issuing bonds).

  1. REDUCING RISK

Lawyers for the Buyer will carry out a period of intensive investigation into the Seller’s business, called ‘due diligence’. They will then draft a Share Purchase Agreement (SPA), i.e. the contract for the deal, and this will include a number of warranties. Warranties are legally binding assurances made by the Seller that certain facts about the company are true.

  1. TAX

Is the deal taking place across more than one jurisdiction? Under which jurisdiction would it be more efficient/cost effective to conduct the transaction (e.g. Luxembourg, other tax havens)?

In most transactions, companies prefer to hold the newly acquired shares or assets using a separate legal entity. Tax lawyers will need to design a tax-efficient model and this will often involve restructuring the Buyer’s and Seller’s companies.

  1. COMPETITION

Is the transaction likely to be classed as ‘anti-competitive’? Will clearance be required by any competition authorities (such as the European Commission)? If the acquisition is deemed to be anti-competitive, the client could receive a substantial fine or the transaction may only be allowed to continue if certain conditions are met, such as the sale of certain assets.

  1. DISPUTE RESOLUTION

 Are there any ongoing or potential litigation cases involving the Seller’s company? If so, the purchase price could be reduced to account for this. Litigation may also affect brand reputation.

Dispute resolution lawyers have the task of discovering any current or potential legal claims against the Seller. If pending litigation is settled post-acquisition, the Buyer will be liable to pay any damages awarded.

  1. EMPLOYMENT

 Are there any employee exits or grievances which could lead to potential litigation?

If senior managers are leaving, a non-compete clause could be added to their exit packages, so they agree not to enter into or start a similar profession in competition with the business being acquired.

  1. IP (INTELLECTUAL PROPERTY)

 Will the buyer need to apply for patents to protect their inventions or apply for a trademark to protect their brand? Do current patents cover all the necessary jurisdictions?

  1. REAL ESTATE

As part of the acquisition, the buyer may be acquiring new real estate from the Seller’s company, such as office space or factories. They may also wish to sell some existing real estate to increase efficiency.

  1. FEE

In 2017, very few firms use hourly-based fees. There are a number of alternative fee arrangements such as fixed fee, capped fee or even value based pricing, where the client pays you an amount to reflect the value of the work you have performed.

Other factors you may wish to consider:

  • If you were asked to pitch the firm to a client, how would you make the firm stand out? Why are they the best firm for the job? Do they specialise in a particular practice area? Do they operate in all the jurisdictions involved? Recent deals? Best price?
  • Are there any specific events in the news which may affect the client? Can you cross-reference any news you have read recently, which relates to issues you have identified? Brexit? US Election? This will allow you to display your commercial awareness.

I hope this has provided a good insight to some of the potential issues, which may arise in your case study. Most importantly, ask yourself:  What are the issues for the client? How can lawyers provide a solution?

Alongside this, it is important to research the firm thoroughly.  What deals are they currently working on? What practice areas and sectors do they work in? Have a look on their website and follow news stories about the firm and their clients.

You also need to be confident and enthusiastic in your case-study interview – try to relax!

Finally, ask questions. The interview is a two-way process, so use the end of the interview as an opportunity to find out more about the firm and whether it is right for you.

Best of luck!

This contribution is part of a series of short insights, which will be posted weekly, to help you develop your commercial awareness.

Leave a comment