Junior Associate #11 - Closings, part 2
Following yesterday's post, here is the second part of my experience in a closing. Please bear in mind that this is a transaction under Spanish law and thus most of the issues that you will read are civil-law countries specific.
"Clear eyes, we're closing"
Following the delivery of the due-diligence report (i.e. what the client is buying and what is wrong with it), the contract "dance" started. This was a "sale & leaseback" transaction of a building in Spain. The concept of the transaction seemed quite odd to me.
Why would a company sell and then pay rent? Well, it turns out that most companies are not in the business of owning buildings and they think that they can do way better with cash-in-hand now for other investments. Fair enough.
If you see the transaction from the outside, you could say: well, the transaction cannot be that difficult. Draft a sale and purchase deed (this is one of the specific things) and a lease agreement and you're good to go. Well yes, but no.
Necessary elements of a deed of sale and purchase: (i) parties, (ii) object and (iii) prize/consideration.
Actual sections of a deed of sale and purchase: (i) parties; (ii) definitions -which are highly negotiated-; (iii) object; (iv) existing contract termination; (v) execution of new contracts -suppliers, management, maintenance, etc.-; (vi) prize/consideration; (vii) payment of the prize/consideration; (viii) object inspection; (ix) property transfer; (xi) reps and warranties; (x) latent defects liability -this is Spanish law specific-; (xi) assignment of claims; (xii) jurisdiction; (xiii) contract termination, etc...
All of them are highly negotiated and you need to be strategic on that because a lot of money is on the table and your client needs protection and to get the best deal. Also bear in mind that this is only the deed of sale and purchase. We still need to draft, negotiate and close the lease agreement, operations agreement and security...
But what do you do as a junior associate? ANNEXES AND SCHEDULES...the fre***ing annexes and schedules. In these transactions more than half of the contracts and deeds will be annexes.
As a friend of mine would tell me in the office (also a Junior Associate): "While partners and seniors are discussing "grown up" stuff, we're left with the kids play". In this case, the Annexes and Schedules included the plans of the building, the list of inventory, the contracts assigned, etc. And everything is urgent. Because other people are handling "big boys" stuff and they don't want to bother with your stuff.
The night before signing, on a more than Spartan quote, my counsel told me: "I hope you've rested well because tonight, we'll dine at the office!" (not that we haven't been dining at the office the entire last week, but he wanted to sound like one of the 300).
The thing is that the week before the closing you start to believe that everything is quite done. Most of the contracts are almost finished and you start thinking you'll be able to get good 8 hour sleeps every day. Not really...
Last two days are full of "proposed change-include-review-mark up and resend". As a junior some time you're a bit lost because of the amount of information and it´s important that you learn how to filter to focus on what's your duty: annexes and schedules.
Also, the client was not Spanish, so we had to negotiate everything both in Spanish and in English (a bigger mess...). Around 9-10 pm I received a call:
- "Hey man, look, we're close to a final agreement. In 5 minutes I'll send you the last version of the English version of the agreements. Include them in the Spanish version and tomorrow first thing in the morning you call the Notary Public (another Spanish law issue) to make sure he includes all the changes while you're on the phone with him"
So this happened:
1.30 am: I receive the English version
3.30 am: You finish to include all changes in the Spanish version and send it around
3.36 am: you receive an email: "Oh, and update the annexes and schedules" - the frea**ing schedules!!
5.00 am: you send the annexes and schedules around
5.01 am: another email: "Thanks man, don´t forget to call the Notary Public tomorrow morning"
9.00 am: "Hi, the Notary Public? Let me go with you through the last agreed changes..."
By noon next day the transaction is closed. The client and your partner are happy. So is the entire team. Getting to work in one of these transactions and have some kind of an important role (in Spanish some junior associates wouldn´t even include changes in the main documentation) is a great experience and great responsibility. Your work long hours, but you also learn a lot.
Then the closing celebration lunch happens and you also get to stay late, but for totally different reasons.