Failed Legal Strategy in Staples-Office Depot Deal? How To Successfully Negotiate Your Way Through JV Agreements & Mergers

The proposed merger of Staples and Office Depot was a bold move. The #1 and #2 office supply big box chains confessed from the start that the consolidation would suppress market competition. In fact, the F.T.C. already blocked this merger in 1997. Nevertheless, it took a new decision passed down by a federal judge’s order last month to end what was sure to be a violation of consumer-, if not also anti-trust.

So why did these two business behemoths think they could get away with it this time?

First, the two box chain clients claimed that while a merger would, in fact, reduce competition in some ways, it would also expand competition via growing the overall market. Through this merger, Staples asserted that it could invest more completely in online businesses, going head-to-head with companies like Amazon, for example.

Second, the Staples-Office Depot legal team relied heavily on its hired gun (her firm calls her a “hired bazooka”) Diane Sullivan to make their case. The New York Times pointed out that more puzzling than the court’s decision was Sullivan’s, who rested her defense without presenting any evidence or calling any witnesses.

So, in the end, the merger—which would have created a company 15 times larger than its nearest competitor—was put to a stop. But not before Judge Emmet G. Sullivan of the Federal District Court for the District of Columbia released a written opinion emphasizing the importance of competition and antitrust in a world of big money and big mergers.

If there’s a lesson for lawyers, it’s that presenting evidence to defend your case (and this would seem obvious) is necessary for such high-stakes claims. Joint ventures offer companies the opportunity to quickly gain access to new markets or technologies. But recent legal opinion pushes a pro-enforcement stance on “market definition,” where experts via art or science describe the competitive effects of an action, like mergers and JVs.

Before your firm even reaches the courtroom, failure to carefully negotiate and structure a JV can create problems and legal liabilities for all parties down the road.

Do you know how to effectively negotiate, draft and structure joint ventures that best protect your client from the changes that occur over the life of the relationship?

If you can’t answer that question, consider taking C4CM’s audio course, “Joint Venture Agreements: Advanced Structuring, Drafting and Negotiating Strategies,” on Wednesday, June 29, 2016 from 2:00 PM To 3:15 PM Eastern.

During this information-packed CLE webinar, David L. Forney, Partner with K&L Gates LLP, and J Andrew Watson III, Shareholder at Maynard, Cooper, Gale–will explain key legal issues you should consider at the formation of a JV, and how to:

  • minimize risk for the parties
  • determine the proper legal structure
  • establish governance and control protocol
  • create exit strategies
  • address key issues surrounding disputes, resolution, and damages

Additional topics will include:

  • experience with specific joint ventures
  • competition issues
  • understanding the importance of the business plan
  • developing representations, warranties, and covenants
  • understanding the importance of ancillary documents

Staples ditched their last tag line “That was easy,” in favor of, “Make more happen”: advice that the Staples-Office Depot legal team needed to apply to their merger strategy.

 

-WB

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