“Where is everybody?” Locke asked. “It’s two minutes to nine and no one’s here.”
“Don’t worry, they will be soon enough,” Juliana replied. “Can you check on the breakfast order? It should be here by now. I ordered enough coffee and Danish and orange juice for the Panama occupation forces.”
As she spoke, Ed Sharett, a vice president, and Jeanne Horan, an assistant treasurer, of First Fiduciary Bank arrived, with their lawyer, Angelica Post, a partner in the firm of Rudenstine & Fried. Juliana greeted Sharett and Horan cordially. First Fiduciary was normally a client of Chase & Ward, and Juliana, in her first assignment as a young associate, had worked on its problems. She had gotten to know Sharett, an amiable and able loan officer whose rubicund face concealed that he was approaching fifty. His short companion with the ready smile and freckles, Jeanne Horan, had begun work at the Bank about the same time that Merriman had started at Chase & Ward. They had entered an unspoken mutual defense pact, less out of some kind of feminine bonding than a shared realization that they were both profoundly ignorant about commercial banking.
The bankers were present as potential acquisition lenders to Applications, Chase & Ward’s new client. Because of the conflict, the Rudenstine firm had been retained by First Fiduciary for the transaction. The irony was that Sharett and Horan knew Merriman much better than they did their own lawyer.
“Where do you want us, Julie?” Sharett asked.
“Well, I guess you’ve got more in common with us than with them,” she replied. “How about down at the end on this side?”
The next wave of newcomers made a noisy whirl as they entered. It was the Wylie brothers, their investment bankers and their lawyers together, indicating that they were coming from a preliminary caucus of their forces. The only member of the contingent Julie knew was Harvey Rawson, from the mergers and acquisitions department at Schoonmaker & Co. She had met him in her first assignment under Bill Richardson when she had been part of a team representing the lenders to Steadfast, Limited, in its hostile takeover of Merlin Industries.
Merriman knew that Rawson was still an underling, albeit a highly ambitious one, in the Schoonmaker M&A group. But she had not really expected one of the firm’s wheeling-and-dealing superstars, since the combined assets of Applications/On-Line were a mere $460 million, far less than the multibillion-dollar threshold the firm’s big players were used to. On the other hand, the financial press had been full of stories about an impending “bloodletting” at Schoonmaker, with large cuts in staff predicted, so that Rawson might be eager to enhance his reputation with his employer by bringing off the On-Line transaction successfully.
Rawson, who typically looked in the mood for an argument, was prematurely bald, with only an ever-shrinking fringe of brown hair around the back and sides of his head. He wore the conventional M&A specialist uniform, including an Hermès tie, a striped shirt with white collar and cuffs and (as would soon be apparent when he stripped off his suit jacket for action) red suspenders. His voice was surprisingly high-pitched, though the lack of timbre was compensated for by the general rudeness, and often mean-spiritedness, of what he said.
If Rawson was a model of yuppie fashion, his colleague, Jim Lewis, was not. His reputation had preceded him—Juliana had heard colleagues talk about the legendary “Fats” Lewis often. He was messily obese, his necktie loose at his neck, his pants loose at his stomach. Even before he was introduced to Juliana, he demanded to know where the coffee was.
Rawson presented the Wylie brothers: Herbert, the eldest and the chairman of the board of On-Line; Glenn, the president; and Ian, the youngest and On-Line’s executive vice president. The three were obviously brothers, but even on first look differences were apparent. Herbert, or Herb, as he asked to be called, tugged at his necktie and not only took off his coat but rolled up his shirtsleeves, ever so uncomfortable in city clothes. Glenn wore a three-piece brown suit and kept both his vest and jacket firmly buttoned. Ian, or Skip, wore a wide-striped, tightly cut suit, much more luxurious than the raiment of either of his brothers, set off with a large gold ring on his right hand, a Rolex watch on one wrist and an elephant-hair bracelet on the other. He was taller and, though fleshy, more athletic-appearing than his older siblings; he gave the impression of wanting to burst out of his clothes and into swim trunks, with gold chains around his neck (which was, in reality, exactly what he did want to do).
The Wylies were uncertain where to sit until one of their lawyers, Frank Martin, directed them to seats across from where Juliana was standing. Martin, a senior partner in the Hoboken firm of Greene, Reed, Martin, Shea & Poletti, passed out his business card to those around the table, joking that you needed the card to remember the name of his firm. He was a jaunty bantam of a man, wispy white hair shooting off at odd angles from the top of his head.
“We change our name every couple of weeks,” he said. It was an exaggeration, but not too much of one. He had been the Wylies’ lawyer for many years and had today brought with him an associate from his firm, Craig Webber. Webber was very young, his youth underscored by an unfortunate case of acne.
Martin’s gesture set off a flurry of card exchanges. As they took place, Juliana wondered nervously where her client was.
Mercifully, the breakfast order arrived and time was taken up as everyone queued up to help themselves. Including Fats Lewis, who loaded up a paper plate with three Danish pastries.
Herbert Wylie, who turned out to have the geniality of a successful salesman, tried to liven things up as the group drank coffee and waited for Lovett.
“Where’s our new boss?” he asked.
“I’m sure he’ll be here soon,” Merriman said. “He was having breakfast over at Harrick, Millstein, across town. But he knew this meeting was at nine.”
“We don’t need him anyway,” Herb said, smiling paternally at Juliana. “We’ve got the bankers here. Why don’t they just give us the money and we can all go home? No legal fees, no investment banking fees. Very simple.”
The others laughed weakly.
“Say, Mr. Sharett. That is the name isn’t it?” Herb asked, turning toward the Fiduciary vice president. “You look like Phil Spitalny and his all-girl orchestra over there!”
Juliana looked around quickly. Sharett was indeed the only man on what had become the Applications side of the table. Was Herb Wylie’s remark deliberately sexist? Juliana had sensitive antennae, finely tuned by experience. She knew real sexism when she heard it—naughty big boys who raised the count of four-letter words in meetings when a woman was present, for example. She did not think this was the real, ugly thing, but rather a benign observation on the unusual coincidence that the girls, temporarily, outnumbered the boys on one of the merger teams. But Herb would bear watching.
The vamping ended as Lovett, his banker, Lawrence Bonner, and Applications’ in-house lawyer, Harold Lane, appeared, full of apologies. The cast was now complete, since Applications’ accountants, Price Waterhouse, had already been dispatched to New Jersey to start conferring with On-Line’s CPAs and to begin the process of examining On-Line’s books.
Merriman knew there was no point in waiting for Bill Richardson. He was scheduled to fly to Detroit that afternoon and had called her over the weekend to tell her that he had much homework to do before he left. He had said that he would try to drop by the meeting for the sake of goodwill, but had warned that it would be a “cameo appearance.”
Juliana was about to call the group to order when Harvey Rawson did it for her. “I want to thank you all for coming here this morning. I guess this meeting was my idea. Jim Lewis,” he said, turning to his colleague, still wolfing down his second breakfast, “and I thought it would be good for everybody to get acquainted. We’ve also got a time constraint, as I think most of you know. On-Line has substantial tax-loss carryforwards that expire at the end of the calendar year so we have to do the deal before then. Otherwise, we’re told, it’s just not attractive enough to Mr. Lovett at the price we’re
talking about. Correct?”
“That’s right,” Lovett said from across the table, looking to Lawrence Bonner for confirmation as he did so.
“Okay. So today’s November twenty-eighth and we’ve got to do this by Friday, December thirtieth, the last day of the year the banks are open.” Rawson took out his pocket engagement calendar as he spoke. “Now, we all know what a pain in the butt it is to try and close anything the week between Christmas and New Year’s. And the days right before Christmas are just as bad. So I propose that we try to wrap this deal up and close it on Thursday, December fifteenth. That’s almost three weeks from now and we’ll get the whole thing done before the holidays get in the way.”
“Harvey, that’s impossible,” Juliana Merriman said. “We can’t do our due diligence in that time—”
“Due diligence? What due diligence? The price is already set,” Rawson countered.
“Come on, Harvey, you know better than that. This isn’t one of your hostile tender offers where you plunge ahead blind and take your chances. We’ve got a friendly deal—no public stockholders, no Securities Act, no Williams Act—only the people right here in this room. The exchange ratio my client’s been talking about is predicated upon the On-Line business being what we think it is. We’re only going to know that if we send our people in and have a look—if we do our due diligence.”
“Julie, I don’t want to start off with a big debate, but I thought the price was cast in stone. A three-for-one exchange for the On-Line stock the brothers own, and eight dollars cash for each share held by the Wylie Foundation—”
“Subject to our exercising due diligence. Applications is not going to sign a merger agreement until we’re satisfied. Period.”
Alan Lovett tried to maintain an impassive expression as his lawyer sparred with Rawson, but his irregular eye movements betrayed his nervousness. The On-Line merger was important to him; he did not want it to flounder on technicalities.
“That’s not how we understood the situation at all,” Rawson said, glumly.
“Besides, Harvey, don’t forget we’ve got Hart-Scott-Rodino to worry about,” Merriman said.
“In this deal?”
“Sure. On-Line’s got more than a hundred million in sales, so we have to make a pre-merger filing with Justice and the Federal Trade Commission.”
“Christ, they haven’t turned down a merger since before Reagan.”
“I agree with that, but the law still says you have to make the filing.”
“You mean statistics on the industry, lines of business, all that crap?”
“All that crap,” Merriman said. “It may be ridiculous, at least while the Republicans are down there, but you still have to do it.”
“What’s the timing on Hart-Scott?” Lawrence Bonner asked.
“It’s real tight, Larry,” Merriman said. “The normal waiting period is thirty days from the date of filing, which the Feds can extend if they want more information.”
“Jesus, that practically sinks us right there,” Rawson said. “We’d have to file by Wednesday to make December thirtieth.”
“Relax, Harvey, I think we’ve got the problem under control,” Merriman told him. “There’re people working on the application right now, out in Palo Alto and over in Jersey. They hope to have the stuff to Washington to file tomorrow or at the latest Wednesday.”
Harold Lane, Applications’ house lawyer, got up from his place near the end of the table and went over to confer in a whisper with Merriman. He had never worked for a law firm, but had always been employed inside the bureaucracy at a succession of corporations, Applications being the most recent and the first where he had been the chief (and in Applications’ case, only) lawyer. It had never troubled him that he had not achieved success in private practice. The undemanding routine duties he performed in his lowly corporate positions, and the humiliations that often went with them, were fine with him, since he was fundamentally lazy.
Lane was out of his depth in a merger transaction, especially one being done in such a hurry, and he knew it. Although twenty-two years older than Merriman, who was thirty-two, he was perfectly happy to defer to her. Chase & Ward would get paid plenty for representing Applications; let them take the responsibility—and do the work. If he was left out of the negotiations, and operated as a fifth wheel, well, so be it.
“Mr. Lane just told me they were almost finished with the Applications part when he left on Saturday,” Merriman explained. “How is On-Line coming?”
“I think we’re on target,” Frank Martin said, though, in reality, preparing a Hart-Scott filing was a black legal art he knew little about and the work was actually being done by a Chase & Ward associate.
“We can check that later,” Merriman said. “Meanwhile, take a look at this. It’s a time schedule that assumes we make the Hart-Scott filing in time to close on Thursday, December twenty-ninth.”
“I thought you could apply for early termination of the Hart-Scott period,” Rawson said, an accusing note in his voice.
“You can, and we’ll do that,” Merriman replied. “We fully expect it will be granted, but I wanted to make our schedule conservative to allow for the possibility we don’t get it—and to enable us to finish our due diligence.”
“I should think a better way would be to assume we get early termination by, say, the twentieth and close on the twenty-first.”
“Right in the middle of the Chase & Ward Christmas party,” Merriman said, laughing.
“I think this deal is more important than your Christmas party,” Rawson snapped. “Why not plan on the twenty-first and push the date back if we have to?”
“Look, if we spend all our time debating when the closing will be, we’ll never have one,” Lawrence Bonner said to Rawson. “Let’s find out what has to be done and get on with it.”
“All right, all right,” Rawson answered, petulantly. “Just don’t come crying to me when the year runs out and the deal craters.”
“Before we go any further,” Jim Lewis interrupted, “let me pass around this pad so I can get everybody’s address and phone number.” Lewis was carrying on the tradition that one of the junior investment bankers on a transaction like the On-Line merger prepares the so-called working party list. It was a mechanical and non-controversial task that enhanced the impression the bankers were earning their fee.
“Here’s another handout,” Merriman said, once Lewis had put his yellow pad in motion. “I’ve tried to draw up a schedule of who’s supposed to do what. Beth, do you have the copies?”
The paralegal passed the three-paged document around the table. Conversation stopped as the group looked it over.
“Looks to me like Chase & Ward’s doing everything,” Rawson observed.
He exaggerated only slightly. Merriman had made sure that the firm—that is, Merriman herself—was in charge of those arrangements that might get scrambled or not done on time, such as the pre-positioning of the merger documents for filing in Delaware, where both corporations were incorporated, and drafting the Agreement of Merger and employment agreements with the Wylie brothers. (Merriman’s list magnanimously allowed Rudenstine & Fried to do the first draft of the loan agreement between First Fiduciary and Applications. She knew that the Bank, as a lender, would insist on this prerogative, so there was no point in fighting over it.)
“What about a letter of intent?” Rawson asked. “Your timetable and this schedule show that a merger agreement won’t be signed until sometime in mid-December. What have we got to go on until then? You’re going to have your people crawling all over On-Line, poking into its secrets, learning everything about it. What if you decide to walk? What protection does On-Line have?”
“I don’t think there’s any problem with a letter,” Lawrence Bonner said. “As long as Applications has the customary outs.”
“Nuclear war? Acts of God? That what you mean?” Rawson asked.
“That goes without saying,” Bonner replied. “No, that isn’t what I
mean,” he went on, slowing down his delivery for emphasis. “What I mean is an out if we go in and find a business that’s materially different—or its financials are materially different—from the one that’s been peddled to us.”
“Can I ask a question?” Herb Wylie asked. When no one replied, he went ahead anyway. “You mention a letter of intent, Harvey. What I’m hearing is that such a letter would have all kinds of outs. So what’s the point? I’ve met Mr. Lovett, my brothers have met Mr. Lovett. He seems like an honorable gentleman. We have a handshake and I don’t think he’s going to renege unless he finds something terribly wrong with our company. I know there isn’t, so that doesn’t worry me. Let’s just go ahead on our handshake. We’ll save time and we’ll save money, too, since I’m sure the lawyers could negotiate for days over a letter of intent, which doesn’t mean anything anyway. Right, Frank?”
“It’s up to you, Herb,” Martin replied, noncommittally.
“Look, we’ve never done a deal like this before,” Herb continued. “We’re just a bunch of salesmen that got lucky. All I know is my friends at the golf club tell me that letters of intent aren’t worth the paper they’re written on. Is that right or wrong?”
“A little of both, Herb,” Martin said. “If you want to proceed without one, I don’t think you’re losing much.”
“Losing much?”
“Okay, losing anything.”
“Thank you,” Herb Wylie said, satisfied that he had pinned his lawyer down to a position.
“One thing we’ve been wondering about,” Merriman said, bringing up a new subject. “This thirty-million-dollar bank loan on your balance sheet. I know Alan Lovett’s been over this with you, Mr. Wylie, but let me make sure we understand it. The loan is from Machikin Bank in Tokyo?”
“Right,” Glenn Wylie confirmed.
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